Thursday, January 29, 2009
Jan. 29 (Bloomberg) -- Treasuries are moving into a “full- blown” bear market as global stimulus packages increase demand for capital, according to Citigroup Inc.
“This may sound a bit ridiculous, but we think we have begun a full-blown bear market in fixed income,” wrote Tom Fitzpatrick, Citigroup’s New York-based chief technical analyst, and London-based strategist Shyam Devani. “The commodity that is going to be the most in demand as far as the eye can see is capital. As a consequence, the cost of capital can only go one way -- up.”
The 30-year bond’s yield may rise to 5 percent by late 2009, the highest level since August 2007, according to Citigroup. The U.S. will probably borrow $2.5 trillion this fiscal year, compared with $892 billion last year, according to Goldman Sachs Group Inc. The firms are among the 17 primary dealers that trade directly with the Federal Reserve.
The bond’s yield rose 11 basis points, or 0.11 percentage point, to 3.53 percent today. It fell to 2.509 percent on Dec. 18, the lowest level since sales of the security began in 1977.
President Barack Obama’s $819 billion stimulus package, passed in the U.S. House yesterday by a 244-188 vote, is equivalent to one-quarter of the entire federal budget. Countries including the U.K., Germany and India are also increasing spending to boost economic growth.
“The most striking feeling we have as 2009 begins is that there is this wall of consensus negativity about financial markets,” the analysts wrote. “We believe this comes from the need for huge government issuance around the world competing for a scarce resource.”
Increased government spending will spur concern that inflation will accelerate, prompting the greenback to weaken and gold to rise, the analysts added.
To contact the reporter on this story: Molly Seltzer in New York at email@example.com Last Updated: January 29, 2009 15:09 EST
“Argentina has solved its rollover problem for this year and maybe the next". TNR.v, MAI.to, SAX.to, AUY, CDNX, GDX, DXY
Argentine Debt Exchange Helps Cover Financing Needs (Update2)
By Drew Benson and Lester Pimentel
Jan. 29 (Bloomberg) -- Argentina may have lined up enough financing to cover its budget needs through 2010 after creditors agreed to extend maturities on 15.1 billion pesos ($4.3 billion) of debt, Credit Suisse Group AG and Barclays Plc said.
Ninety-seven percent of locally based holders of the so- called guaranteed loans accepted the offer to take new five-year peso bonds, President Cristina Fernandez de Kirchner said yesterday. The exchange will reduce the government’s 2009 debt payments by 5.4 billion pesos, Cabinet Chief Sergio Massa said.
Argentine bonds rallied this month, sending benchmark yields to a three-month low, helped by speculation that the debt swap will enable the South American country to avert its second debt default this decade. Argentina issued the guaranteed loans -- which were initially backed by revenue from a financial transactions tax -- in a 2001 exchange that sought unsuccessfully to stave off the $95 billion default that year.
“Argentina has solved its rollover problem for this year and maybe the next,” said Igor Arsenin, an emerging-market strategist at Credit Suisse in New York. “They will muddle through. There’s still quite a bit of upside.”
The price on the government’s 8.28 percent dollar bonds due in 2033 has climbed to 34.75 cents on the dollar today from 32.25 cents on Dec. 31, according to JPMorgan Chase & Co. The yield dropped to 21.66 percent from 32.25 percent. The bonds had sunk to 22.5 cents, the lowest since they were issued in a 2005 debt restructuring, on Oct. 27 after Fernandez said she’d nationalize the pension funds. They traded at 74 cents at the end of August.
While the pension seizure hurt investor confidence, it also helped Fernandez cobble together financing by giving her access to more funds. The pensions held almost $30 billion in October.
“The main danger was a dent in confidence,” Arsenin said. “In a more narrow sense, it’s been positive. It has ensured flexibility in their short-term financing.”
Arsenin said the 2033 bonds may rally to 40 cents.
Argentina has been shut off from international markets since the 2001 default because some bondholders rejected the government’s restructuring offer and filed lawsuits in New York in a bid to recoup their money.
The government will extend the guaranteed loans swap offer next month to the 3 percent of locals who rejected it as well as to international holders of the securities, Massa said.
Carola Sandy, a New York-based economist with Credit Suisse, said in a report today that she expects participation from foreign investors to be “relatively high” because the guaranteed loans are “very illiquid instruments.”
In all, about $4 billion of the $12 billion outstanding of guaranteed loans was set to mature this year, according to Credit Suisse. Sandy estimates that yesterday’s swap will reduce Argentina’s principal payments by as much as $1.5 billion a year through 2011.
“This is the most important voluntary exchange in the history of Argentina,” Fernandez said at a ceremony last night at her residence outside of Buenos Aires.
Argentina’s financing needs climbed to $18.4 billion this year from $4.7 billion in 2008 as a six-year economic expansion fueled by commodity exports faltered amid the global credit crisis, according to Royal Bank of Scotland calculations. Growth will slow to 2 percent this year from an estimated 6.7 percent in 2008, according to the median forecast in the central bank’s most recent survey of economists. Growth topped 8 percent every year from 2003 to 2007.
The new five-year bonds will pay an interest rate of 15.4 percent in the first year and 2.75 percentage points over the Argentina’s Badlar interbank rate after that, Massa said.
The swap “sends the signal that the authorities will look for market-driven transactions rather than moving straight into unfriendly restructurings,” Barclays analysts Guillermo Mondino and Donato Guarino said in a report yesterday. They recommend investors buy Argentine dollar bonds due in 2013, known as Bonars.
To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net Last Updated: January 29, 2009 12:27 EST
Wednesday, January 28, 2009
The $5.1 billion hedge fund is buying gold for the first time amid the threat of inflation from increased government spending. GDX, AUY, SLW
By Stewart Bailey and Saijel Kishan
Jan. 28 (Bloomberg) -- Greenlight Capital Inc. founder David Einhorn, 40, is finally taking his grandfather’s advice. The $5.1 billion hedge fund is buying gold for the first time amid the threat of inflation from increased government spending.
Since Einhorn was 10 years old, his grandfather has warned him that investing in bullion and gold-mining stocks was the only “sensible” thing to do given the threat of inflation and the risks of so-called fiat currencies, New York-based Greenlight said in a Jan. 20 letter to clients. The firm had never before considered buying bullion or shares of miners.
“To everyone’s dismay, we believe some of Grandpa Ben’s predictions are playing out,” Greenlight said in the letter, a copy of which was obtained by Bloomberg News. “The size of the Fed’s balance sheet is exploding, and the currency is being debased.”
Greenlight is turning to the centuries-old currency to mitigate the effects of the economic collapse and government efforts to end it. Bullion gained for the eighth straight year in 2008 as governments in Europe and the U.S. rescued banks from collapse.
The 16-company Philadelphia Stock Exchange Gold & Silver Index gained 90 percent in the three months through yesterday while the Standard & Poor’s 500 Index fell 0.4 percent. Gold rose 21 percent in that period.
Steven Lehman, who manages Federated Investors Inc.’s $1.3 billion Federated Market Opportunity Fund, beat the S&P 500 by 30 percentage points last year. The fund, which outperformed 99 percent of its competitors last year, also has bet on the precious metal and counts Toronto-based Yamana Gold Inc. and Goldcorp Inc. among its top holdings.
‘Too Many Mistakes’
Greenlight, which Einhorn started in 1996, has returned an annual average of 20.8 percent from its Greenlight Capital LP fund. The firm said it made “too many mistakes” last year, when it posted its first annual loss.
Greenlight has added gold, call options on gold and the Market Vectors Gold Miners exchange-traded fund to its other investments.
The Federal Reserve’s policy of taking unorthodox steps to boost the supply of credit is essentially “printing money,” Greenlight said. The government’s “aggressive” fiscal policy also signals all efforts will be made to stem the effects of the current economic problems, the fund said.
To contact the reporters on this story: Stewart Bailey in New York at firstname.lastname@example.org; Saijel Kishan in New York at email@example.com. Last Updated: January 28, 2009 13:20 EST
ECB could pause next meeting: US Dollar is welcome to fall further. DXY, GDX, AUY, SLW, TNR.v, CZX.v, SST.v, OK.v, MGN.
By Simone Meier
Jan. 28 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said the bank’s next important meeting is in March, suggesting it won’t cut interest rates next week.
“I said that the next important rendez-vous is in March,” Trichet told Bloomberg Television in an interview in Davos, Switzerland, today. “In March we’ll have a lot of new information, we’ll have our own staff projections,” he said.
To contact the reporter on this story: Simone Meier in Frankfurt at firstname.lastname@example.org Last Updated: January 28, 2009 11:50 EST
Monday, January 26, 2009
Silver Wheaton to raise up to C$287,5m in bought deal financing
Published on 26th January 2009
Updated 1 hour 12 minutes ago
TORONTO (miningweekly.com) – Vancouver-based Silver Wheaton has entered an agreement with a syndicate of underwriters who will buy 31,25-million shares in the company, at C$8,00 apiece, on a bought deal basis.The financing will raise C$250-million, but this could increase to around $287,5-million in the underwriters exercise an option to buy another 4,68-million shares on the same terms.
Silver Wheaton buys silver from producers on a long-term basis, at predetermined prices, and then sells the metal at the current spot price.The company plans to use the money to repay a revolving debt facility and for “general corporate purposes”, it said, although president and CEO Peter Barnes hinted that the firm could be building an acquisition arsenal.The share sale “significantly de-leverages our balance sheet, and positions our company to take advantage of some of the high-quality acquisition opportunities that we expect to become available during 2009,” Barnes said in a statement.“Our focus going forward is to continue to grow the asset base in an accretive manner, by adding high quality silver streams from low-cost mines that are already in production."
The offering is scheduled to close on or about February 12.
2009 OUTLOOK REAFFIRMED
The company said on Monday that it still expects silver sales to be between 15-million and 17-million ounces in 2009, increasing to approximately 30-million ounces by 2013.
In the fourth quarter of 2008, silver production attributable to the company was in line with previous guidance, at around 3-million ounces.
However, silver sales during the quarter were only 2,7-million ounces, because the timing of shipments meant that some sales will only be accounted for in the first-quarter statements.
The firm expects to report total silver sales for 2008 of about 11,1-million ounces, at an estimated total cash cost of $3,94/oz of silver.
However, the company warned that expects to record a noncash writedown of its long-term investments of as much as $65-million in its fourth-quarter financial statements.
Silver Wheaton shares rose 0,71% on Monday, to C$8,53 a share by 16:19 in Toronto.
Editor: Liezel Hill
Traders said that investors, particularly in continental Europe and the UK, were pouring money into gold exchange-traded funds – a popular way to gain access to the metal – and also noted strong buying of physical gold, from coins to bars.
Edel Tully at Mitsui & Co Precious Metals in London said gold was the “obvious shelter” for safe-haven investors.
In London, spot gold rose to $915.30 an ounce, up from New York’s last quote on Friday of $898.40. The precious metal also hit an all-time high in both sterling at £661.55 an ounce, and in euros, at €701.55 an ounce.
The total amount of gold held by the world’s gold ETFs last week rose for the first time above the 40m ounce level. Together, such investment vehicles are now the largest holders of physical gold after the official reserves of the US, Germany, the International Monetary Fund, France and Italy.
“The aggressive appreciation in the ETF contracts ... is the clearest signal to date this year that gold is one of the limited assets that investors want exposure to during these frantic times,” Ms Tully said.
John Reade, a precious metal strategist at UBS in London, added that the change in ETF gold holdings so far this month, at plus 2.5m ounces, was “impressive”, but he warned that the figure fell short of the 6m ounces achieved in mid-October, following the collapse of Lehman Brothers.
ETF Securities, which provides commodity-based exchange-traded funds, said it saw record inflows last week, with $500m invested in its products in just two days.
Hector McNeil, managing director at ETF Securities, said that about 60 per cent of those inflows were into the yellow metal. “Gold is set to rise dramatically,” he said.
Tanaka Kikinzoku Kogyo, Japan’s biggest bullion house, said on Monday that sales of gold coins jumped 121 per cent last year as investors flocked to the safe-haven metal.
Traders and strategists cautioned, however, that jewellery demand was weak and noted that old gold in the form of scrap was returning to the market, particularly in India, potentially capping any price gain.
James Steel, a precious metals analyst at HSBC in New York, added that the global economy risked falling into deflation, a situation in which “historically, gold has never rallied for a sustained period”.
Mr Steel forecast gold prices at $825 an ounce on average in 2009, with any rally towards $1,000 an ounce short-lived.
In the short term, traders said gold was likely to consolidate above $900 an ounce this week and could test the $930 an ounce level previously touched in October.
Spot gold in London, the market’s benchmark, hit an all-time high of $1,030.80 in March.
Sunday, January 25, 2009
Junior Miners CDNX Surreal Experience of the Desert before the Tropical Rain. CDNX, TNR.v, CZX.v, RMK.v, SAX.to, SBB.v, MGN, RVM.to, CNU.v, SST.v
Technically our previous observations are confirmed by breaking up MA200 and pronouncing BUll is back! Downtreand line is broken to the Upside. MACD is at Buy with a cross over, RSI is strong in plus, STO is going Up. Retest of a break out will be in play, but it is a different message to the market place. No more uncertainty about the Gold Bull. It is well alive and ready to rock again.
Panic Indicator VIX is signaling Greed. DIA, SPY, QQQQ, TSX, GDX, CDNX, CZX.v, TNR.v, SST.v, MGN, RMK.v.
Treasuries are selling off, markets are trying to rally, but the most important is the break up in gold above MA200. Technically we are positioned for a break down from recent counter rally in USD on Daily:
Eric deCarbonnelJanuary 20, 2009
What You Need to Know About Gold
"Gold shined in 2008. Could 2009 be as bright?
Of all the major assets -- stocks, corporate bonds, cash and others -- gold was one of last year's few standouts. While so many investments collapsed amid the turmoil, the price of an ounce of gold posted a gain of about 4.3%.
So far this year, the rare metal is up about 0.7%, after a rally Friday put it back in positive territory. And longer-term concerns are emerging that aggressive, untested government policies aimed at righting the flailing economy could ultimately fuel a further rise in gold prices.
When that might happen, no one knows. But for investors who want to hedge against potential economic turmoil, "buying gold is a very good idea for 2009," says Chuck Butler, president of EverBank World Markets in St. Louis.
The case for gold is this: The government is pumping trillions of dollars into bailouts and stimulus plans, a purposefully inflationary policy aimed at reversing current deflationary pressures. If inflation results, or if the dollar weakens as the supply of dollars necessarily increases under the stimulus plans, gold is a likely winner because it hedges against inflation and fiat currencies..."
Wednesday, January 21, 2009
Tuesday January 20, 2009, 7:34 pm EST
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 20, 2009) - TNR Gold Corp. ("TNR" or the "Company") (TSX VENTURE:TNR - News) is pleased to announce a debt financing of up to $600,000 through the issuance of Series I Convertible Secured Debentures. The Debentures have a term of one year and bear interest, payable quarterly, at 9% per annum, compounded semi-annually (9.2% p/a). The debentures are convertible by the Holders at any time during the Term into Units at $0.05 per Unit. Each Unit is comprised of one common share and one warrant to purchase an additional common share at $0.10 for a period of two years. Quarterly interest payments may also be made in Units, at the election of the Holder. The Debentures will be secured by a General Security Agreement, with the holders having the right to roll the debentures into any other debt or equity financing carried out by the Company during the term, subject to TSX Venture Exchange rules. The financing is subject to regulatory approval.
The company's major shareholder and Director Mr. Kirill Klip, who currently owns 18.4% of outstanding TNR Gold Corp issued shares, is showing his continuous support by participating in the current offering.
In addition to the financing, the Company is proposing the settlement of approximately $800,000 of debt with Units at $0.10 per Unit. Each Unit for non-related party debt will consist of 1 share and one-half common share purchase warrant. Each whole warrant will entitle the holder to purchase one additional common share of the Company at a price of $0.15 for a period of one year. Each Unit for related-party debt will consist of 1 share only.
The debt settlement, along with the proceeds of the debenture financing, will allow the company to explore new opportunities created by the recent economical crisis and advance its current portfolio of properties.
TNR is a base and precious metals exploration company focused on aggressively identifying new prospective projects as well as fostering work on its large portfolio of 15 properties in Argentina, as well as overseeing the exploration and development of the Iliamna and Shotgun projects in Alaska through its wholly owned US subsidiary.
On behalf of the board,
Gary Schellenberg, President
Gold is ready for a Break out off MA200. GDL, GDX, HUI, XAU, SLW, AUY, SST.v, TNR.v, OK.v, MGN, FVI.v.
Monday, January 19, 2009
By Chua Kong Ho and Nipa Piboontanasawat
Jan. 19 (Bloomberg) -- Jim Rogers, chairman of Singapore- based Rogers Holdings, said investors should be “worried” about the U.S. dollar, and recommended selling government bonds and buying raw materials, China stocks and the yen.
“If I were you, I would be worried about the U.S. dollar,” said Rogers, 66, in a speech at the Asia Financial Forum in Hong Kong today. “The Americans are printing U.S. dollars. The Americans are going to do whatever they can to revive their economy, even if it means destroying the U.S. dollar.”
The Dollar Index on ICE Futures, which tracks the greenback versus six major U.S. trading partners, fell 11 percent since Nov. 21, when it reached 88.46, the highest in 19 months. The Japanese yen climbed 12 percent against the dollar over the past three months as investors reduced holdings of higher-yielding assets.
Holding government bonds is a “big mistake” and is going to “end badly,” he said. Investors should favor agriculture, power generation and China shares if they want to make money, said Rogers, who correctly predicted the start of the commodities rally in 1999 and has written books including ‘A Bull in China: Investing Profitably in the World’s Greatest Market.’
The Reuters/Jefferies CRB Index, which tracks 19 commodities, has declined 3.7 percent this month after dropping 36 percent in 2008, its worst annual performance on record.
The Hang Seng China Enterprises Index, which tracks 43 stocks of Chinese companies traded in Hong Kong, has declined 8.2 percent this year.
China, the world’s third-largest economy, may have expanded at the slowest pace in seven years in the fourth quarter, with gross domestic product rising 6.8 percent from a year earlier, according to the median estimate of economists surveyed by Bloomberg News before a government report due this week.
China’s government unveiled a 4 trillion yuan ($585 billion) stimulus package in November, which included spending on roads and bridges.
Rogers said in a Dec. 17 Bloomberg Television interview that he planned to sell the dollar. In a Dec. 31 interview, Rogers said he had been buying Chinese agricultural stocks to benefit from state efforts to bolster economic growth.
Stephen Roach, chairman of Morgan Stanley Asia Ltd., recommended investors buy “anything to do with the Asian consumer, infrastructure, alternative energy and technology.” He made the comments at the same forum.
To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at email@example.com; Nipa Piboontanasawat in Hong Kong at firstname.lastname@example.org Last Updated: January 19, 2009 04:28 EST
Saturday, January 17, 2009
Posted: January 13, 2009, 9:16 AM by Jonathan Ratner
Silver Wheaton Corp. was upgraded to a “buy” at UBS as a result of a more optimistic view of the risks associated with its credit facilities (highly leveraged to Silver over its Debt - this was killing the company it will launch it Up with Silver close to 15USD. S.). Analyst Dan Rollins expects that it will be able to renegotiate its debt covenants and de-lever its balance sheet through silver stream acquisitions and/or the divestiture of equity investments.
“Last year was a disappointing one operationally for Silver Wheaton,” he told clients, noting that the company’s sales guidance was reduced throughout 2008 from 15 million ounces to 11.4 million. Sales were also below original expectations as a result of lower-than-anticipated production from the Luisman mine in Mexico and Yauliyacu in Peru.
However, while Vancouver-based Silver Wheaton struggled operationally, it did sign four more silver stream contracts in 2008, Mr. Rollins noted. This follows a much bigger deal in 2007 that saw the largest pure silver company in the world pay US$485-million in cash to acquire 25% of the life-of-mine silver produced from Goldcorp Inc.’s Penasquito project.
UBS estimates that Silver Wheaton sold 11.3 million ounces of payable silver in 2008 at an average gross operating margin of US$10.84 per ounce. Based on those figures, it forecasts 2008 fully diluted earnings per share will come in at US31¢ and operating cash flow of US43¢.
At the end of the year, UBS said Silver Wheaton likely had approximately US$14-million in cash and US$373-million in debt on the books.
Mr. Rollins values Silver Wheaton on a price to net asset value basis, which factors in UBS’s silver price forecast of US$8.95 per ounce in 2010. (What are they smoking there? S.)This yields a price target of US$7.50 per share, up from US$5.75 previously, and representing upside of nearly 35%.He also expects a reserve/resource update in 2009 and approval of a shareholders’ rights plan.
CDNX Canadian Venture Home of Junior Mining near Death Exprerience. TNR.v, CZX.v, SST.v, SBB.v, OK.v, RVM.to, RMK.v, AMM.to, ASM.v, BTT.v, CGP.v
Insiders are Buying actively into Juniors. CDNX, TNR.v, SST.v, CZX.v, OK.v, CNU.v, SBB.v, RVM.to, AMM.to
Panic and VIX is going down - time for Irrational delusion is Over. GDX, GLD, SLV, TNR.v, SST.v, MGN, OK.v.
"1% of money shifted into Gold means 100% rise in Gold demand"
Thursday, January 15, 2009
- Open circuit flotation tests using water from a potential water source for the project returned recoveries of 88% for both silver and gold.
- Open circuit flotation tests produced high grade commercial concentrates with 99 g/t gold and 12,306 g/t silver.
- Regrind of rougher concentrate increases concentrate grades to 135 g/t gold and 17,130 g/t silver.
- The above mentioned results were obtained with a standard grind size of 80% passing 74 microns. Additional tests are being carried out at coarser grind sizes of 105 and 149 microns.
- It is estimated that closed circuit flotation tests will improve metal recovery. Final results are scheduled for mid February.
Mr. Jorge Ganoza, CEO of the Company, commented, "We are extremely pleased with metallurgical results to date. It is clear that we can produce a high grade silver-gold concentrate for sale using standard grind and flotation processes and technology. We plan to have a final flow sheet design along with equipment selection by the end of first quarter."
Wednesday, January 14, 2009
Treasuries to fall and Dollar to weaken - sounds like people start to talk their Books. TLT, TYX, TNX, FVX, GDX, AUY, SLW
By Daniel Kruger
Jan. 14 (Bloomberg) -- Treasuries will fall over the next six months and the dollar will weaken as the U.S. sells a record amount of debt to finance a budget deficit poised to exceed $1 trillion, a monthly survey of Bloomberg users showed.
Participants turned the most bearish on 10-year U.S. notes since September, while continuing to forecast declining yields on government debt from Germany, U.K. and Japan, according to the Bloomberg Professional Global Confidence Index. The survey, which questioned 2,991 Bloomberg users last week, showed the outlook for the dollar is the lowest since July.
The Treasury’s plan to sell as much as $2 trillion in debt to help the government fund bailouts of financial companies and a stimulus package comes as the Federal Reserve floods the financial system with dollars to end the freeze in credit markets. The amount of assets held by the Fed more than doubled to $2.14 trillion as of Jan. 7 from $909 billion in August, according to the central bank.
“The combination of selling a lot of Treasuries and printing a bunch of dollars to expand the Fed’s balance sheet isn’t necessarily a very positive dynamic over any kind of medium or longer term horizon,” said Jason Brady, a managing director at Santa Fe, New Mexico-based Thornburg Investment Management, which oversees $4 billion in fixed-income assets. Brady participated in the survey.
Tuesday, January 13, 2009
US Dollar Dead Cat Bounce and 2 Trillion Deficit is not the best value proposition for Treausary Buyers. DXY, GDL, SVL, GDX, SLW, AUY
By Rebecca Christie
Jan. 13 (Bloomberg) -- The U.S. budget deficit soared to a record in the first quarter of the 2009 fiscal year, surpassing the shortfall for all of last year as the government used taxpayer money to shore up the financial system by purchasing stakes in banks.
The deficit swelled to $485.2 billion in the first three months of the fiscal year that started Oct. 1, the Treasury said today in Washington. For all of 2008, the shortfall was $454.8 billion. The monthly budget picture also worsened, as the excess of spending over revenue widened to $83.6 billion in December, compared with a $48.3 billion surplus a year earlier.
President-elect Barack Obama will take over Jan. 20 facing the biggest budget deficit as a percentage of U.S. gross domestic product other than during the Civil War and the two World Wars, his nominee to head the Office of Management and Budget said today.
“We are inheriting a daunting fiscal position,” Peter Orszag, nominated by Obama to be the White House budget director, told the Senate Budget Committee. The budget shortfall in the 12-month period to Sept. 30 will likely exceed $1 trillion “even without steps to mitigate the economic downturn,” he said.
Government revenue fell 14 percent to $237.8 billion last month, while spending soared 41 percent to $321.4 billion compared with a year earlier.
The December shortfall was forecast to widen to $83 billion, according to the median of 35 estimates in a Bloomberg News survey of economists, the same as the Congressional Budget Office’s prediction on Jan. 9.
Outlays in December for the Social Security Administration rose 9 percent to $58.7 billion, while Department of Defense spending increased 23 percent to $60.5 billion, the Treasury’s report showed.
Spending last month by the Department of Health and Human Services, which administers the Medicare and Medicaid health programs, totaled $63.5 billion, up 42 percent from the same month a year earlier.
The government also spent $51.1 billion in December on the financial rescue plan called the Troubled Asset Relief Program, and another $21.8 billion on purchasing mortgage debt from government-sponsored enterprises including Fannie Mae and Freddie Mac.
Obama is pressing Congress for a stimulus plan of about $775 billion, including tax cuts and spending on everything from roads and schools to the energy network, to help pull the world’s largest economy out of a slump that’s in its second year.
“Nearly every leading economist agrees we have no choice but to act aggressively to expand aggregate demand and address the macroeconomic crisis,” Orszag said. “That will necessarily imply even larger deficits in the near term.”
To contact the reporter on this story: Rebecca Christie in Washington at email@example.com Last Updated: January 13, 2009 14:45 EST
2009 production expected to increase by approximately 40 per cent; cash costs expected to decline
"We will remain focused on demonstrating growth on all measures," continued Mr. Marrone. "We will continue with cost control and containment, with our precious metals and our Americas focus. We would look at add-on acquisitions that show better returns than our current development and exploration portfolio if they also meet the other criteria of stable mining jurisdictions and good infrastructure."
Monday, January 12, 2009
At the same time, however, it's letting small coal mines go to the wall, seizing a chance to make good on years of rhetoric, as well as allowing smaller, less efficient metal producers go under.
"As the fundamental balance moves toward a liberal supply of coal, it is an opportune moment to close small mines and speed up restructuring and consolidation of coal resources," Zhang Guobao, head of the National Energy Administration, said this week.
The government's State Reserve Bureau has begun building up government reserves of metal, buying around 300,000 tonnes of aluminum and 30 tonnes of indium and starting negotiations to add to its zinc and copper inventories..."
Sunday, January 11, 2009
Marc Faber: "With the Fed buying up everything, hyperinflation will be the result."
Around the world, governments are throwing money at the system to revitalize debt growth. When an economy is credit-addicted and debt growth slows, it is a catastrophe. With the Fed buying up everything and boosting the federal deficit, hyperinflation will be the result down the line. I am pleased that Barron's just wrote a cover story about the inflation in Treasury bonds ["Get Out Now!" Jan. 5]. This was the last bubble the Fed was able to inflate, aside from their egos.
So, Marc, you're not too bullish this year.
Faber: Let's put it this way. A true market low will be lower, but in a hyperinflating economy, you can have nominal price gains while going lower in real, or inflation-adjusted, terms. Between the start of 2008 and November, almost every asset market collapsed, but the dollar was strong. After November the asset markets rebounded but the dollar went down again. There's an inverse correlation. Dollar weakness is a signal that the Fed has succeeded in pushing liquidity into the system. Some say the dollar will collapse this year, but collapse against what? The euro? The Russian ruble? These currencies are even weaker. In the very long run, each citizen must become his own central bank. Every responsible citizen must hold some physical gold, platinum and silver -- physically, not through derivatives..."
On to gold. You have to protect yourself against potential hyperinflation. All the central banks are printing money now. The bull market in gold was rather orderly for the first eight years. We haven't seen the blow-off phase you get in all bull markets. That's coming. In dollar terms, gold was up 5% or so last year. In Indian rupees it was up nearly 30%. The price of almost all other commodities collapsed. I own bullion, the gold ETF [ SPDR Gold Shares (GLD)], some gold stocks and coins. I couldn't get them as the year progressed because demand was so great. But my first pick today is Market Vectors Gold Miners, an ETF. It sells for 32 and mirrors the NYSE Arca Gold Miners Index, a modified market-capitalization-weighted index of publicly traded gold companies. The top five components are Barrick Gold [ABX], Goldcorp [GG], Newmont Mining [NEM], Kinross Gold [KGC] and Agnico-Eagle Mines [AEM].
How has it performed?
Hickey: The ETF dropped 26% last year, so while gold held up, the stocks didn't do as well. One reason is that oil prices were so high; oil is a key component in production costs. Now crude is falling, which will be a help to gold miners in 2009. The fund has $2 billion in assets. It has been around since 2006, and the expense ratio is 0.55%. It gives you broad exposure to the gold-stock business.
My second gold pick is Agnico-Eagle Mines . It fell about 6% last year, so it did relatively well. It trades for 51. Not every stock fell in the 1930s, either. Homestake Mining went from 65 a share in 1929 to 500 in 1935. It had two things going for it: rising production and an increase in the price of gold, against a devalued dollar.
Barron's Mike Santoli speaks with The High Tech Strategist Editor Fred Hickey, at the Barron's Roundtable, about the reaction to gold in the market and how it can be handled as 2009 progresses.
Zulauf: The U.S. was on the gold standard. It devalued the dollar and revalued gold relative to the dollar, and the price went up to 35 an ounce from 28.
Hickey: Gold could go to $2,000 an ounce this year, or next. The Fed is going to pump all kinds of money into the economy and it won't help. It won't get to corporations or the consumer. But it might get to gold and cause yet another bubble. Gold is one of the few assets that has performed well. And, there is a tremendous shortage of physical gold. In times of turmoil it is a classic hedge against inflation.
Gabelli: People withdraw their cash from banks and buy safes and guns and gold.
Zulauf: You can't get a safe at a Swiss bank anymore because they are all rented out.
MacAllaster: Agnico-Eagle doesn't make much money and pays almost no dividend. It earned more than a dollar a share in 2006 and '07. Earnings were cut in half in 2008 because one mine produces zinc and the price of zinc collapsed. The real kicker is that Agnico will quadruple production, from 300,000 ounces in 2008 to 1.2 million ounces in 2010. Capital expenditures will decline to $146 million by 2010 from $900 million in 2008. They have five new mines, in Canada, Mexico and Finland, countries with low political risk. Production costs are around $300 an ounce.
Zuluaf: The industry's break-even is about $430 an ounce. There is a limited amount of gold in the earth's crust, and most of it is in politically unstable places. It is cheaper to buy mining stocks than build new mines.Hickey: Very few gold miners will grow production or earnings this year and next. Agnico's earnings are going up by orders of magnitude. They'll do 40 or 50 cents this year, and $2 to $5 when the new mines come on. Because there is excitement about this company, they were able to do a stock offering in December. There are still a lot of momentum investors. This stock will have momentum."