Friday, September 28, 2012

Newmont (NEM) Slashes Gold Production Estimates at Batu Hijau

After Newmont Mining (NEM) announced its gold and copper production estimates were significantly lowered, it also said it plans on cutting workers and other costs at it Batu Hijau Indonesian mine.

Saying it is now costing the company $1 million a day in cash flow to work the mine because of the low quality of the rock it is now mining.

Gold production for 2012 was downwardly revised from 114,000 ounces to 71,000 ounces. Copper production estimates were cut from 192 million pounds to 170.6 million pounds.

In 2011 the mine produced approximately 282 million pounds of copper and 318,000 ounces of gold for Newmont and its partners Sumitomo (8053.T) and Bakrie Group.

Expectations are low production will continue through 2013. Going into 2014 and 2015, the firm sees production rebounding at the mine as they tap into the more productive core ore body once again. The coming is preparing to widen the pit in the near future.

The lower production appears to present more problems for Newmont, as in November negotiations with workers will begin, with expectations high on their part of major wage increases after Freeport McMoRan Copper & Gold (FCX) workers gave its workers a huge 37 percent boost in wages over a two-year period in the latter part of 2011.

According to Newmont, it's looking at cutting costs, which will surely strain negotiations with workers.

Batu Hijau general manager, Ian McGaffin, said, "We are looking at trimming costs from all facets of our business including mining and processing and support costs. This includes reviews of contract services, parts and supplies, and salaries and wages."

Also a challenge for Newmont and other miners working in Indonesia is the change in rules in 2012 which now require companies to divest 51 percent of their mine assets after operating in the country for a decade. At that time they are also expected to pay a 20 percent levy on raw ore exports.

What is highly unlikely even though made a rule for miners, is all ore is to be smelted locally in Indonesia by 2014. No one thinks that will have any teeth to it, as no miners have plans in place to add more smelting capacity in the world, as there are already more than are needed.

Newmont does have to walk a fine line though, as Elang, another mining resource discovery close to Batu Hijau, could have more resources than that mine. That has yet to be confirmed though.

Newmont closed Friday at $56.01, falling $0.53, or 0.93 percent.

Good Ridance to Obama's Solyndra

Another domino in the disastrous, so-called green energy initiative, which according to Obama is the future, is closing out its final phase of its bankruptcy process, as it is holding an auction for the largest asset it still owns, a 412,000 square-foot manufacturing building. 

Soon after the Obama administration guaranteed a $535 million loan for the company, it declared bankruptcy. 

With the total amount of money expected to be raised via the liquidation process reaching not even $125 million, it is far under the approximate $870 million in debt held by the company. That means little of the capital lent to the company will be recovered by investors, including the taxpayers, who have had to pay for this mistake of Obama's, as well as similar ones.

In response to this terrible energy policy, the house recently passed a bill which would gradually end the loan guarantee program of the Department of Energy which irresponsibly funds these losing projects.

The focus instead should be on oil and gas holdings in the United States, which is the real future of energy in the country, whether people want to admit it or not.

Think of North Dakota which is booming, while providing outstanding jobs for those working there. We need that to happen around the U.S. where these amazing deposits reside.

Instead Democrats and liberal politicians are attempting to stop companies from accessing these amazing resources, which could give us true energy independence if we really want it. 

Green energy, which very few Americans could care less about, needs to compete against other energy to see what people want to buy, rather than be artificially propped up in the midst of very low demand. 

The government shouldn't be involved in any way in the free market as it is, and when you add these types of politically motivated projects, along with the low industry demand, it is a sure recipe for economic failure and disaster, as so many of these failed projects confirm. 

It's good news to see this bill pass, but unfortunately, Obama and the Democrats won't even consider this bill in the Senate, while Obama would no doubt veto it even if it came to a vote and successfully passed.

Thursday, September 27, 2012

Short Silver Says Queen Anne Gate Capital Management

I think in the not too distant future the call by Queen Anne's Gate Capital Management CIO Kathleen Kelley to short silver will come back to haunt her and the company, as she said she sees commodities as a "supply-demand play," when talking on CNBC's Fast Money.

She said, "When we look at demand -- supply is adequate in most of these commodities -- when we look at demand, including coming from China, in a lot of these sectors it's just not there.

"For example, copper demand is actually holding up OK in China because it's tied to the power grid and the infrastructure spending. The infrastructure budget in China hasn't really been used and probably will as we change leadership there, there'll be more of a potential to use that."

Most people wouldn't argue with supply/demand assertion for most commodities, but silver isn't simply an industrial metal, as most investors know, so to treat it as such in a way that doesn't take into account its value as an investing alternative to gold in a quantitative easing environment which will push down the value of the U.S. dollar and boost inflation, makes no sense whatsoever.

It's like saying they're going to pretend silver isn't considered a place of safety and a hedge in economic environments like this.

Silver must be analyzed with both sides of the equation in place as just a starting point, let alone the more complex side of industrial supply and demand.

You simply can't legitimately analyze the white metal from only one half of the impetus affecting the price movement of silver.

It's like looking at one half of a baseball team and determining how the overall team will perform against an opponent. You must include all members of the team to make an assessment that is even close to being accurate.

Silver must be treated the same, and to only look at the industrial supply/demand is to leave out a major catalyst for the price of silver, and the consequences will be a skewed result.

That's where Queen Anne's Gate Capital Management CIO Kathleen Kelley is at, and it doesn't speak well to her limited thinking in the matter.

Hedge Fund Silver Holdings Closing in on Record Levels

With holdings of silver in hedge funds approaching record levels, they have taken the most bullish long position in the precious metal since February 28, according to CFTC data

As for holdings, the funds now own 18,601.4 tons through ETPs, according to data gathered by Bloomberg. That's only 0.2 percent below record levels set in April 2011.

With the open-ended implementation of QE3, silver prices could go beyond the 53 percent jump during QE1, as well as the 24 percent climb after QE2.

The high price of gold makes most investors believe silver will now outperform the yellow metal in the years ahead, including the short term. A number of experts believe silver may be the best asset to hold over the next decade.

The U.S. Commodity Futures Trading Commission shows that silver investors have increased their long positions by about ten times since June 2012.

In the latest quarter investors have gobbled up 717.2 metric tons of silver, which is valued at about $784 million. And that's only via exchanged traded funds.

Silver is being traded as protection against a weakening U.S. dollar and inflation, and with QE3 not expected to make a dent in industrial demand for about half a year, that could extend the strength of silver as investors bid it up as an alternative currency, as well as an alternative to gold, which has reached such high price levels.

So when headwinds blow against silver as it rises in price, at that time industrial demand should kick in, helping it to find significant support levels into the summer.

And if jobs in America don't increase, the Federal Reserve said it will boost the stimulus even more. That would give another big jump in the price of silver, and is almost a surety because throwing money into the economy has done nothing so far, and is very unlikely to do so any time soon - if ever.

That's good news for silver prices and investors.

Wednesday, September 26, 2012

U.S. Livestalk Companies Importing Corn from Brazil

With the price of corn in the U.S. having soared, livestock companies are looking for alternatives to feed their animals and chickens.

According to Reuters, Prestage Farms Inc. based in North Carolina, has ordered 750 tons of corn from Brazil, to be delivered by agribusiness giants Archer Daniels Midland Co (ADM) and Bunge Ltd (BG).

These imports are the largest order of its kind on record.

Senior Vice President John Prestage said, "As it got drier and drier, we starting thinking, 'We'd better start looking around.' So then we really went to work with the South American connections."

Prestage Farms raises about 170,000 sows and 15 million turkeys, which overall consume around 50 million bushels (1.27 million tons) of corn annually.

The first of approximately 15 shipments of about 50,000 tons of corn each is scheduled to arrive at the Port of Wilmington, North Carolina, next week. That will continue for a period of six months.

Also looking to import corn from Brazil for its chickens is Pilgrims Pride Corp.

Even after delivery costs Brazilian corn costs about 5 percent less than corn from the Midwest part of the U.S.

Potash (POT) (RIG) (CCJ) (CHK) (EPL) (UDRL) (AGU) Ratings Changes and Initiations

Shares of Potash Corp (POT), Transocean (RIG), Cameco Co. (CCJ), Chesapeake Energy (CHK), Energy Partners, Ltd. (EPL), Union Drilling, Inc. (UDRL) and Agrium (AGU) had ratings on them adjusted or initiated by analysts.

Goldman Sachs (GS) upgraded Transocean (RIG) from a "Sell" rating to a "Neutral" rating. They have a price target of $54.00 on the company.

TD Securities downgraded Cameco Co. (CCJ) from a "Buy" rating to a "Hold" rating. They have a price target of $24.00 on the company.

Stifel Nicolaus downgraded Chesapeake Energy (CHK) from a "Buy" rating to a "Hold" rating. They have a price target of $22.00 on the company.

Stifel Nicolaus downgraded Energy Partners, Ltd. (EPL) from a "Buy" rating to a "Hold" rating.

Gabelli downgraded Union Drilling, Inc. (UDRL) from a "Buy" rating to a "Hold" rating.

Dundee Securities initiated coverage on Agrium (AGU). They placed a "Buy" rating on the company.

Dundee Securities initiated coverage on Potash Corp. (POT). They placed a "Buy" rating on the company.

Silver Now Outperforming Gold

Over the last three months, the price of silver has jumped about 25 percent, while during that same period of time, gold has performed at about half that level.

Most commodities experts have been saying that silver is highly likely to outperform gold over the next decade, as the price of gold has soared so high in the previous decade that it'll be hard to duplicate that going forward, even as more industrial demand for silver continues to grow even as silver supply is tightening.

Add to that the new practice by the Federal Reserve and ECB of initiating open-ended stimulus programs, and you have support under both metals, with silver poised to break out even more once the sellers complete their current disposal of silver assets, which has pushed the price of silver and related companies and ETFs down.

Some rightly point out that economies important to silver demand have been slowing down, with the most significant being China, but that will change if that continues to go beyond the attempts by Chinese leaders to cool off their economy, which they've been doing for some time now.

There is no doubt the Chinese will stimulate if that becomes the case, and silver demand will continue to rise, even if there is a temporary lull.

The world is now in stimulus mode, and it doesn't matter whether the demand for silver is based primarily on that reality. What's the difference if silver prices move up because of stimulus or industrial demand that is organic in nature? Either way, silver demand will rise, even though over the long term the question of sustainability rises.

But we're talking years there, not months, and so silver prices should continue to rise over time, even though, as usual, it will have a more bumpy ride than gold.

Finally, the underlying assumption and assertion by the Federal Reserve is it stands ready to stimulate even more if the jobs market doesn't improve. If that were to happen, it would assuredly give the price of silver another big boost.

Again, most of this is only a matter of when, not if. In the short term, China and Europe may weigh on the price of silver some, but once Spain caves and requests stimulus, that should change quickly, and with most investors understanding China has deliberately slowed their economy down, it won't be much of an impact on silver prices, as there are really no surprises there except for those that don't do their homework.

Silver has become a long-term investment option, and one that should be invested in that way. There is no doubt whatsoever that it will be among the strongest performing assets in the next decade, based upon industrial demand alone. Include the long-term stimulus strategy of the U.S. and Europe, and you see how that will be the case.

Tuesday, September 25, 2012

Mitt Romney Promotes Free Enterprise for Answer to Poverty

Mitt Romney rightly pointed to the source of American prosperity, which is a free people pursuing free enterprise in order to attain their goals and pull them out of poverty.

Speaking at the Clinton Global Initiative in New York, Romney said, "The aim of a much larger share of our aid must be the promotion of work and the fostering of free enterprise. Nothing we can do as a nation will change lives and nations more effectively and permanently than sharing the insight that lies at the foundation of America's own economy - and that is that free people pursuing happiness in their own ways build a strong and prosperous nation."

In relationship to prosperity, there is no message more true, as government has nothing to offer in that regard with the exception of keeping out of the way of free people pursuing a variety of ways to serve their fellow man and provide jobs for those employed by business.

It's the correct message, and an inspiring one, one that, if practiced by nations around the world, would alleviate poverty for those who really want to escape it by working hard to attain that goal, while not looking to government as their source of provision, which will always keep them in poverty.

Countries like India, if the government got out of the way, would flourish beyond imagination, as would other countries, even the United States, which continues to be strangled by increasing and encroaching big government, which implements a growing number of socialists laws, as well as encourages fascist, crony capitalism, which gives free enterprise a bad name, when in fact it has little to do with real capitalism.

Robust businesses and limited government are the answer to nations concerning poverty, and in places where creative businessman are given even a little rope to run with, many people in these countries have their lifestyles raised, providing a much better life for them than they formerly had.

We need a new breed of governmental public servants, those who understand that business success if fantastic for everyone involved, and isn't there to steal money from the productive and creative in order to create unsustainable and poverty-producing programs which only drain resources and redistribute them to those who believe they are entitled to them.

Monday, September 24, 2012

Chevron (CVX), (FSM), (AKS), (BTU), (TLM) (WLT) (DRQ) Ratings Changes

Ratings on shares of Chevron (CVX), Dril-Quip (DRQ), AK Steel Holding Co. (AKS), Peabody Energy Corp. (BTU), Fortuna Silver Mines (FSM), Talisman Energy (TLM), Walter Energy (WLT) and U.S. Steel (X) were adjusted by analysts.

Howard Weil upgraded shares of Chevron (CVX) from a "Market Perform" rating to an "Outperform" rating. They have a price target of $135.00 on the company.

ISI Group upgraded Dril-Quip (DRQ) from a "Hold" rating to a "Buy" rating.

Citigroup (C) downgraded AK Steel Holding Co. (AKS) from a "Neutral" rating to a "Sell" rating. They lowered their price from $5.50 to $3.50 on the company.

Bank of America (BAC) downgraded Peabody Energy Corp. (BTU) from a "Buy" rating to an "Underperform" rating. They lowered their price target from $32.00 to $22.00 on the company.

Dundee Securities downgraded Fortuna Silver Mines (FSM) from a "Buy" rating to a "Neutral" rating.

Credit Suisse (CS) downgraded Talisman Energy (TLM) from an "Outperform" rating to a "Neutral"rating.

Bank of America Walter Energy (WLT) Buy Neutral $45.00 $37.00

Citigroup U.S. Steel (X) Buy Neutral $30.00 $23.00

Nothing to Hold Gold Prices Back Now

Based upon the assertion by Ben Bernanke that the Federal Reserve is tying its QE3 program into the performance of the job market stimulus could be ongoing for the next five to six years.

with that in mind, along with the decision to keep interest rates artificially low, gold prices should continue to push up for years into the future.

The expectations are that the Fed will continue to ease until unemployment reaches about 5.5 percent. That would result in the Fed balance sheet doubling again, assuming that figure can be met over the next five years or so. If not, the sky is the limit as to how high the balance sheet would go, which will continue to devastate the U.S. dollar, and push up the price of many commodities, including gold.

As measured by the prior experience of the price of gold moving up in conjunction with the size of the monetary base in the U.S., gold prices could soar to the $3,500 to $4,000 range before it's all through. Again, that assumes the job market improves and the Federal Reserve stops printing or digitizing money out of thin air.

Goldman (GS) Sees Commodities Jumping 18 Percent

Over the next year, Goldman Sachs (NYSE: GS) said they see commodities providing a return of 18.2 percent, led by industrial metals and energy prices.

Interestingly, and I think wrongly, Goldman sees precious metals rising only six percent during the same period, as measured in Standard & Poor’s GSCI Enhanced Commodity Index.

Goldman Sachs analyst Jeffrey Currie said, “Apart from being attractive in its own right, we also continue to see an overweight in commodities as a hedge against the risk of the impact of sharply higher commodity prices on economic growth and other asset classes, if oil supplies were to disappoint against a backdrop of very limited spare capacity.”

As for other commodities, Goldman sees agriculture overall dropping by 5 percent over the next year, although it sees livestock climbing 4.5 percent.

For the year, expectations are the Standard & Poor’s GSCI Enhanced Commodity Index will jump 26.5 percent. For the next quarter Currie sees it up by about 8.6 percent.

Globally, these numbers are lower that projections of a 32.8 percent increase in the Tokyo Stock Exchange Topix and 25.5 percent boost in Stoxx equity index.

Saturday, September 22, 2012

Why Silver Prices Will Continue Going Up

Gold has been among the top performing assets over the last decade, soaring from under $300 an ounce to over $1,900 an ounce during that period of time. Investors and traders believe over the next decade silver will be among the top asset performers, as it has lagged gold during the last 10 years.

One of the many reasons for that is the extraordinary move up in the price of gold, which has resulted in individuals and smaller investment firms looking to lower-priced silver as an alternative to gold.

And now with the American central bank, the Federal Reserve and the ECB releasing more rounds of quantitative easing, gold and silver will continue to rise, with silver believed to be positioned best to take advantage of that printing of money; although gold prices and gold miners will continue to soar in price as well.

If anything can be sure in investing, it's in regard to the price of silver and gold during this period of time.
The Federal Reserve has announced it will acquire $40 billion in mortgage-backed securities on a monthly basis, one that is open-ended and based upon performance of the economy and the employment rate.

With no end in site for job improvement, and with QE1 and QE2 doing nothing to improve the economy, it appears we're in for a long period of spending by the central bank, which will devalue the U.S. dollar as well as push up the price of silver and gold during the duration of the "stimulus."

Again, with silver lagging the performance of gold, that bodes especially well for the white metal.

Silver Supply

Now the next reason to really like silver is that supply has never been so tight as it currently is, as demand has risen while supply is struggling to catch up.

Part of this reason is the huge number of products needing silver as part of their design. For example silver is used in cell or mobile phones or handsets. Most of this is unrecoverable, as is some silver used in medical products.

That means while silver demand rises, a larger percentage of silver is unable to be melted down and reused. Over time this will significantly impact the price of silver.

In the near term this isn't as important as the spending of central banks, which will devalue currencies of perspective countries or regions, but also also boost inflation, which results in investors fleeing to silver or gold to keep pace with rising costs.

About the only sector where silver demand is falling is in photography, where digital cameras are replacing former camera technology. But that has had little effect on growing demand for silver in emerging technologies.

Silver Investment Vehicles

So what types of silver investment vehicles should traders or investors look for?

For those who understand and are comfortable with it, options are a great choice, especially with the very predictable movement of the precious metal at this time.

If you don't understand silver options, you may want to educate yourself concerning them, as it's a very lucrative way to invest in silver with a minimum amount of your own capital.

You can also hire an expert to do the investing for you, although one should still know the basics of the process so your money is working in the way you want it to. In other words, choose a reputable brokerage to invest your money for you.

Other ways to invest in silver is through silver streaming companies, silver coins, silver miners and silver ETFs.

Silver Coins

Depending on your strategy and goals, a number of silver experts believe the absolute best way to invest in silver is via silver coins.

This is a strategy which isn't just to simply build wealth, but to preserve wealth as well. And in the case of social unrest and uncertainty, they are very portable and can be used to acquire almost any type of necessity and need in order to survive.

Although that may seem far-fetched in some countries, the reality is there is already turmoil of this type, and with the devaluation of currencies around the world, silver coins are a major and effective way to retain the value of your wealth.

Silver Miners

Like any public company we're looking to invest in, we need to perform due diligence on any silver miner, and also take into account the reason we're investing in a miner in the first place.

If we're only using a small portion of our capital to invest in a junior miner which is largely unproven but has some major upward potential, it's all a matter of getting the best data available to make in informed decision. It's all about provable or likely reserves and getting in at a great price point.

But since most investors aren't willing to take those types of risks, the majority will look at proven silver miners; those that have a track record that can be understood, as well as great management in place.

Also important is where the mines of particular companies are located. If they're in unstable geo-political regions, it adds a lot of risk to the investor, even under great macro-economic conditions.

Finally, researching and knowing the proven silver reserves, as well as secondary metals in a project, is vital to deciding on which silver miner to invest in.

Overall, it's not a lot different than any company, other than silver and other metals are usually easy enough to measure within the parameters of the operations being run by a miner.

Playing a major factor with miners is also the cash-on-hand and the amount of debt held by the company.

Silver ETFs

Silver ETFs are another fantastic way to invest in silver, with several of them existing for those wanting to play the market in a certain way.

For example, for a pure silver play backed by physical silver, you have the ETFS Physical Silver Shares ETF (SIVR) and iShares Silver Trust (SLV).

Other ways to utilize silver ETFs is through the PowerShares DB Silver. This particular ETF has within it silver futures contracts, which are different than the spot price of silver.

Global X Silver Miners exists for the purpose of those not interesting in investing in silver futures options or physically-backed ETFS. This ETF is filled with a grouping of silver miners for those believing they're going higher in the future.

The ProShares Ultra Silver ETF focuses on the assumption the price of silver will continue to rise. If correct, investors could make a huge amount of money, but along with that possibility comes more risk.

While it's a good economic climate for this ETF, investors need to research the risks inherent in leverage and inverse ETFS.

On the other side of that is ProShares UltraShort Silver ETF (ZSL), which bets the price of silver is going to fall. This can be effectively used during short-term drops in silver prices, which can produce a nice, quick amount of money.

As with ProShares Ultra Silver, the prices can fluctuate quickly, so the buyer needs to beware on short-term trades.

Silver ETFs offer investors about every conceivable way to invest in silver without needing to watch individual companies or contracts.

Here's a list of some silver ETFs and their tickers:

iShares Silver Trust Fund (SLV)
ETFS Physical Silver Shares ETF (SIVR)
PowerShares DB Silver Fund (DBS)
ProShares Ultra Silver ETF (AGQ)
Global X Silver Miners (SIL)
ProShares UltraShort Silver ETF (ZSL)

Silver Streaming Companies

In what I consider the best way to invest in silver to build your wealth, are silver streaming companies. Silver streaming companies offer financing to silver mining companies in exchange for the right to acquire a portion or all of the silver production at a mining company. That's also done with gold by some of the silver streaming companies as a secondary resource.

This is particularly important and effective at this specific  time because European bankers, which were the predominant financers of mining companies, have pulled back in investing in the sector because of sovereign debt issues in the eurozone, causing a potential shortage in financing of miners at a time when gold and silver prices are set to soar again.

What's really powerful about this business model is these companies can lock in low prices which create huge margins as the price of silver climbs. And even if the price of silver pulls back, the price agreed upon is so much below the market price that margins are still significant even if silver prices pull back.

Silver Wheaton the King of Silver Streaming Companies

Among the silver streaming companies there have been none as lucrative and as large as Silver Wheaton (NYSE: SLW), which has brought tremendous returns to investors over time, and continues to do so.

The strength of the silver streaming business model for Silver Wheaton and other companies is they don't face the risk of labor challenges and an increase in production costs. They lock in the price of silver no matter what happens in the overall global and regional silver market.

They also lock in prices no matter what happens internally at the company they're financing. This is why silver streaming companies such as Silver Wheaton are able to produce such awesome margins and low costs. Both are also very predictable and easy to access.

Risks for Silver Wheaton are in regard to disruptions at mines which could slow down production and result in less sales, revenue and earnings for any particular quarter. In most cases that's only a temporary blip, as the conditions of the agreements made with mining companies remain in place. Over the long term they'll extract the revenue from their partners no matter what may happen in the short term.

But even here there are only occasional problems, and as long as investors watch the companies and properties invested in by Silver Wheaton, there will be no surprises to catch them off guard, and slow downs should be looked upon as opportunities to plow more money into the company.

With a decent dividend, investors will also get a nice benefit in addition to the rising share price.

Investing in Silver

So with the surety that silver prices will rise for some time to come, with many experts seeing another approximate 50 percent jump in prices before a major correction, it's very much worth the while of investors to take a very close look at silver and get in as soon a possible.

The only thing to consider for those that haven't invested in silver before is because supply is much lower than gold, prices can swing in larger and quicker movements than its precious metal counterpart.

In other words, don't panic when investing in silver, especially in the midst of this major silver bull market, as it is far from reaching its high, and those that hang in their will reap some major rewards.

Thursday, September 20, 2012

Exxon Mobil (XOM) Acquiring More Bakken Assets

Exxon Mobil Corp. (NYSE: XOM) announced it is acquiring $1.6 billion more in assets held by Denbury Resources Inc. (NYSE: DNR) in the Bakken oil field in Montana and North Dakota.

The acquisition represents all of the shale assets held by Denbury in the Bakken field. In addition to the $1.6 billion, which will be paid in cash, Denbury will receive the interest held by Exxon in two fields in Texas and Wyoming.

Denbury had held 196,000 acres in the Bakken, which will bring the total owned by Exxon to just under 600,000 acres in the region.

The immediate benefit to Exxon will be production on the acreage will add about 15,000 barrels of oil and other hydrocarbons a day to their production, with all of that coming on the land they're acquiring.

This will increase as they boost drilling on the acreage. It adds approximately 3 percent to its oil production in the U.S.

As for North Dakota, they have quickly become the second-largest oil producer state in the United States.

Denbury was trading at $17.45, up $0.74, or 4.40 percent, as of 12.03 PM EDT. Exxon was trading at $91.16, up 0.59, or 0.65 percent.

Tuesday, September 18, 2012

Alcoa (AA) (GOLD) (MPC) (PSX) (RS) (SCHN) (STLD) Downgraded

Alcoa Inc. (AA), Randgold Resources Ltd. (GOLD), Marathon Petroleum (MPC), Phillips 66 (PSX), Reliance Steel & Aluminum (RS), Schnitzer Steel (SCHN) and Steel Dynamics, Inc. (STLD) were downgraded by analysts.

Jefferies Group (JEF) downgraded Alcoa Inc. (AA) from a "Buy" rating to a "Hold" rating. They have a price target of $11.00 on the company.

Stifel Nicolaus downgraded Randgold Resources Ltd. (GOLD) from a "Buy" rating to a "Hold" rating.

Credit Suisse downgraded Marathon Petroleum (MPC) from an "Outperform" rating to a "Neutral" rating. They have a price target of $63.00 on the company.

Credit Suisse downgraded Phillips 66 (PSX) from an "Outperform" rating to a "Neutral" rating. They have a price target of $46.00 on the company.

Jefferies Group downgraded Reliance Steel & Aluminum (RS) from a "Buy" rating to a "Hold" rating. They have a price target of $62.00 on the company.

Jefferies Group downgraded Schnitzer Steel (SCHN) from a "Buy" rating to a "Hold" rating.

Jefferies Group downgraded Steel Dynamics, Inc. (STLD) from a "Buy" rating to a "Hold" rating.

Time to Short Diamonds?

Although it's not a new story, the majority of investors have forgotten that Russia is sitting on an enormous stash of diamonds, reportedly enough to supply the global market for the next 3,000 years, according to a recently declassified report.

The question that immediately comes to mind is why Russia has again brought this out into the open.

If the assumption is they're warning they're about to release a large number of them into the market, it could be time for investors to short diamonds and the companies currently selling them.

This would be good for consumers and industries wanting or requiring diamonds, as it would break up the diamond cartel and drive the prices down.

According to the report, the diamonds are about twice as hard as usual diamonds, making them especially attractive for industrial applications needing harder diamonds for machinery.

With Russia needing to take advantage of its natural resources as a major part of its economic strategy, as its need for hard currency suggests selling diamonds would be an attractive way to meet that need.

This is an interesting story that needs to be watched closely for signs diamonds from Russia are being sold on the market in large quantities. It would change the financials for a number of companies supplying the market, as well as costs for those needing a significant amount of diamonds in their businesses.

Another factor to consider is those holding diamonds for investment purposes could get clobberd if the rocks from Russia are released in significant numbers.

Silver Could Hit $100 Says Citigroup (C) Analyst

Citigroup (NYSE: C) analyst Tom Fitzpatrick said in an interview with King World News that the price of silver could jump to around $100 an ounce if gold prices continue to soar and people turn to silver as an alternative to higher-priced gold.

Fitzpatrick said this:

When we get a weekly close through both of those critical levels ($1,791 for gold and $37.48 for silver), we anticipate that will give us an acceleration which will take us up toward the targets on gold to the $2,055 area, and silver back to the old highs near $50. However, on a longer-term basis we believe we have a setup here which suggests that gold could continue to go higher for some time to come.

We’ve always been of the view, and are still of the view that gold is first and foremost a hard currency more so than it is a commodity. So the building blocks are there for gold to continue to go higher, not just against the dollar but against all of the other paper currencies as well.

Given the dynamics that we have in the background, the similarities that we to the 70s, we would argue the combination of the similarities, and the major difference which is the money printing being exercised by all of the developed world’s central banks, we can see gold continue to follow a trend equal in magnitude to what we saw in the 70s.

Fitzpatrick sees a direct correlation between the price move of gold and the response of silver investors to that.

If we see gold move to the $3,400 level, it is not inconceivable that we may see silver closer to $100. Investors have to remember that at the end of the 70s the gold price doubled in a mere five or six weeks. If 3 to 5 years down the line we see that the base policy of the developed world is to continue printing money, then the gloves are off in terms of what levels gold and silver could actually go to.

It's highly probably that central banks around the world will continue to print money for years because they continue to hold to the flawed Keynesian view.

That's also sure to happen because corrupt politicians refuse to take the needed austerity measures to rein in out of control spending. They will continue to kick the can down the road until the global economy blows up in their faces.

With that as a backdrop, every investor should have a portion of their assets in gold and silver at minimum, and keep an eye on other commodities which will benefit from the endless printing of money.

Outside of silver and gold, investors should look at commodities that are trading at lower levels in comparison to their peers.

Monday, September 17, 2012

Will Oil Trigger Next Recession?

I was confident that the Fed had already begun printing. That seemed quite evident by the overall action in the commodity markets, the dollar, and the fact that stocks were unable to correct in the normal timing band for a daily cycle low. However, I didn’t really expect Ben would come out and publicly admit it. That one took me by surprise Thursday. I guess Bernanke wants to get full value for his attack on the dollar and make sure that markets are rising into the election.

At this point all the pieces are in place for the inflationary spike and currency crisis I’ve been predicting for 2014. We now have open ended QE that is tied to economic output and unemployment. But since debasing currencies has historically never been the cure for the bursting of a credit bubble, all the Fed is going to produce is spiraling inflation. So as this progresses we are going to see the Fed printing faster and faster as the result they are looking for never materializes. This is what will ultimately drive the currency crisis at the dollar’s next three year cycle low in 2014.

At this point, watch the price of oil if you want to know when the next recession is going to begin. As I’ve pointed out many times in the past, recessions (well, at least since World War II) have all been preceded by a sharp spike in the price of energy. Any move of 100% or more in a year or less, has historically been the straw that breaks the camel's back. Modern economies cannot survive that kind of shock. It invariably triggers the collapse of consumer discretionary spending and economic activity comes to a grinding halt.

In 2007 oil surged out of the 3 year cycle low into a parabolic advance as Bernanke trashed the dollar in the vain attempt to halt the sub-prime collapse. That 200% spike in oil is what tipped the economy over into recession, which was then magnified in the fall of `08 as the financial bubble and debt markets imploded.

I think it’s safe to say that Bernanke doesn’t understand his role in causing the recession of 08/09 as he is now making the same mistake again. I think he believes the recession was solely triggered by the financial meltdown. That was the icing on the cake, but not the initial trigger that caused the recession.

Despite the complete inability of QE to heal the economy or job market, and since he really has no other tool, Bernanke just keeps doing the same thing over and over expecting a different result, but never getting it.

Commodities are the check that prevents Keynesian economic policies from healing the global economy. Keynesian academics either don’t understand this, or refuse to acknowledge it. Until they do, or we install Austrian economic advisers in the government, we are destined to continue making the same mistakes over and over.

So we will watch the price of oil as it rises out of its three year cycle low. If it hits $160 by next summer that will probably be enough to start the economy on the next downward spiral. If politicians get involved (and I’m sure they will) and try to impose price controls, they will multiply the damage and probably guarantee that the next economic downturn escalates into a truly catastrophic depression.

Until we see the spike in oil and the corresponding damage to the economy, no one has any business try to short anything, well maybe bonds, but even that will be risky because the Fed is going to be actively trying to prop the bond market up and keep interest rates artificially low.

All in all there is going to be so much money to be made on the long side, especially in precious metals, that no one needs to fool around with puny little gains on the short side, especially in a market that is going to be hell to trade from the short side. The time to sell short will be in 2014 after the dollar’s next three year cycle low. The dollar’s rally out of that bottom will correspond with the next global economic collapse, ultimately caused by the decisions made by the ECB and the Fed this past week. I dare say if they could see the damage their decisions are going to inflict upon the world and the dire unintended consequences, maybe they would finally stop kicking the can down the road and let the economy heal naturally. Of course that would entail several years of severe pain and politicians, as we all know, are extremely allergic to that.

2014-2015 is when we are going to see the stock market drop 60-75% and the next great leg down in this secular bear market. But until then there’s probably a pretty good chance we are going to see the S&P at new all time-highs in the next 6 months – 12 months.


Shell's (RDS-A) Alaska Drilling Plans Put on Hold

Plans to drill for oil of the coast of Alaska had to be put on hold by Royal Dutch Shell Plc (RDS-A) after a containment dome built to limit any oil spill was broken.

According to the company, the time it'll take to finish repairing the dome will result in Shell not being able to drill in the region this year.

Shell said this in a statement:

"We are disappointed that the dome has not yet met our stringent acceptance standards, but as we have said all along, we will not conduct any operation until we are satisfied that we are fully prepared to do it safely."

In place of drilling for oil this year, Shell said it will instead drill what are called "top holes," which will prepare for deeper drilling next season.

Shell is drilling in the Burger A prospect in the Chukchi Sea, and has spent approximately $4.5 billion in preparation for the process. The company will also begin to explore the Beaufort Sea region.

will Indian Economic Reforms Hold?

The recent moves by the Indian government are considered very positive by those watching the country, but the question remains on whether or not Prime Minister Manmohan Singh has the character and strength to keep the proposed measures in place, after reneging on retail reforms earlier in the year.

This time around the government of India has said it will allow foreign supermarket chains to compete in retail markets, as well as open up the airline sector and broadcasting to foreign investment.

Also of significance is the announcement India will be selling stakes in four of the industries run by the state. It will also cut fuel subsidies.

Again, the question is whether or not the Indian government will hold its ground in the midst of fierce opposition from within the country.

India will never reach its potential until it does, and it has been dragging its feet far too long in order to get the country moving in a significant economic manner.

Until the government proves they'll stick with a plan, it won't do much to get the Indian economy going in any sustainable way.

The country also much attempt to do something about its high inflation, capital costs and high energy prices. Consequently, investment demand is weak both externally and internally as a result.

Friday, September 14, 2012

Trina (TSL) (AKS) (KGI) (RIG) (EPL) Ratings Changes

Trina Solar (TSL), AK Steel Holding Co. (AKS), Kirkland Lake Gold Inc. (KGI), Transocean (RIG) and Energy Partners, Ltd. (EPL) had ratings on them changed or initiated by analysts.

Credit Agricole downgraded AK Steel Holding Co. (AKS) from an "Underperform" rating to a "Sell" rating.

CIBC downgraded Kirkland Lake Gold Inc. (KGI) from an "Outperform" rating to a "Sector Perform" rating.

Guggenheim downgraded Transocean (RIG) from a "Buy" rating to a "Neutral" rating. They have a price target of $50.00 on the company.

Raymond James downgraded Trina Solar (TSL) from a "Market Perform" rating to an "Underperform" rating.

Brean Murray initiated coverage on Energy Partners, Ltd. (EPL). They placed a "Buy" rating on the company.

CF (CF) (HFC) (PCL) (PFC) (CNX) Ratings Changes

CF Industries Holdings Inc (CF), HollyFrontier Corp (HFC), Plum Creek Timber Co. (PCL), Petrofac Ltd (PFC) and CONSOL Energy Inc. (CNX) had ratings on them changed or initiated by analysts.

JPMorgan Chase (JPM) upgraded CF Industries Holdings Inc (CF) from a "Neutral" rating to an "Overweight" rating. They have a price target of $253.00 on the company.

Wells Fargo & Co. (WFC) upgraded HollyFrontier Corp (HFC) from a "Market Perform" rating to an "Outperform" rating.

Bank of America (BAC) upgraded Plum Creek Timber Co. (PCL) from an "Underperform" rating to a "Neutral" rating. They have a price target of $47.00 on the company.

Investec upgraded Petrofac Ltd (PFC) to a "Buy" rating. They have a price target of $32.26 on the company.

Global Hunter Securities initiated coverage on CONSOL Energy Inc. (CNX). They have a "Neutral" rating and a price target of $35.00 on the company.

North Dakota Oil Production Reaches Record Levels

According to the Industrial Commission of North Dakota, oil production in the state has soared to record levels.

For the month of July, the amount of oil produced in the state climbed to over 674,000 barrels a day, a record for the state.

For Bakken, Three Forks and Sanish, oil production also surged to record levels, jumping to 610,000 barrels a day for the month.

Ron Paul Blasts QE3, Fed, Bernanke

Ron Paul took out his own economic tools and did surgery on the latest round of quantitative easing from the Federal Reserve - QE3.

“No one is surprised by the Fed’s action today to inject even more money into the economy through additional asset purchases. The Fed’s only solution for every problem is to print more money and provide more liquidity,” Paul said.

“Mr. Bernanke and Fed governors appear not to understand that our current economic malaise resulted directly because of the excessive credit the Fed already pumped into the system.”

Paul also said that the central bank is simply repeating its former actions, which did absolutely nothing to help the American economy.

“For all of its vaunted policy tools, the Fed now finds itself repeating the same basic action over and over in an attempt to prime the economy with more debt and credit,” Paul said. “But this latest decision to provide more quantitative easing will only prolong our economic stagnation, corrupt market signals, and encourage even more misallocation and malinvestment of resources.

“Rather than stimulating a real recovery by focusing on a strong dollar and market interest rates, the Fed’s announcement today shows a disastrous detachment from reality on the part of our central bank. Any further quantitative easing from the Fed, in whatever form, will only make our next economic crash that much more serious,” Paul noted.

The latest stimulus will entail the acquisition of $40 billion in mortgage-backed securities on a monthly basis with no time frame or limitations set upon it.

Evidently the Fed and Bernanke will continue to inject money into the economy until they start to see an improvement in the jobs market.

Since 1913 when the Federal Reserve was created, it has overseen and been the source of the fall in the value of the U.S. dollar by over 95 percent.

Marc Faber Says Bernanke Should Resign

Apparently believing Ben Bernanke has no shame, Marc Faber said in a CNBC interview that if he were Bernanke he would resign for screwing up the U.S. economy so badly.

"If I had messed up as badly as Bernanke I would for sure resign. The mandate of the Fed to boost asset prices and thereby create wealth is ludicrous - it doesn't work that way. It's a temporary boost followed by a crash," Faber said.

In the latest round of quantitative easing, identified as QE3, Bernanke said the Federal Reserve will acquire $40 billion in mortgage-backed securities indefinitely ... until the employment situation improves, which could be years into the future, based upon the response of the economy to the failure of prior quantitative easing initiatives.

Faber asserted and concluded this: "The money printers are responsible for this crisis. If we continue with this expansionist monetary policy we won't be facing a fiscal cliff it will be a fiscal grand canyon."

Also rightly taking a needed shot at the outrageous size of government, Faber said, "If we have an economic crisis in the Western world it's because the government makes up 50 percent or more of the economy. This is a cancer that is taking away people's freedom." He is right.

Jim Rogers Likes Emerging Russia Story

Seeing Russia's President Vladimir Putin as probably being the leader to bring the large country into the modern business world, Jim Rogers says Putin is taking the right steps to make that a possibility.

Having said that, Rogers isn't putting his money into the country yet, as there are still enormous infrastructure and ethical problems which must be addressed to bring more transparency and predictability to the Russian market.

What Rogers says he is looking to do is to invest in the Russian ruble.

That is apparently one of the strategies Rogers employs when looking at emerging markets which are taking the needed steps to provide an environment which will allow business to grow and thrive.

Thursday, September 13, 2012

Bernanke Initiates Endless QE

Ben Bernanke and the Federal Reserve put into place a policy whereby there will be the acquisition of $40 billion in mortgage-backed securities on a monthly basis until there is a sustainable improvement in the labor market. At least that's the theory behind the action.

The FOMC said in a statement:

"If the outlook for the labor market does not improve substantially, the committee will continue its purchase of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability."

Also announced was the Fed would continue to have Operation Twist in effect until the end of 2012, as well as keep interest rates low through the middle of 2015.

After all of this is said and done, the most likely and predictable outcome will be an astounding and growing national debt which is already beyond the ability of Americans to pay.

And with no real positive impact on the economy coming from QE1 and QE2, there is no reason to believe anything different will come about from this latest round, which is likely to go on for years, as there's little hope of the economy rebounding in any significant manner, which means little in the way of new and sustainable job creation.

What will benefit is a number of commodities and some of the miners accompanying the sector. The U.S. dollar will now start to plunge in value against some of the major currencies.

As for the effect on the euro zone, it could get even worse there with the U.S. dollar falling, as they couldn't even do well on exports when the euro was weak against the dollar.

In reality, this is a disastrous decision, although investors rightly positioning themselves will do very well in the months ahead.head.

Wednesday, September 12, 2012

Jim Rogers Doubtful of QE3

Billionaire investor and commodity expert Jim Rogers says he's not convinced the Federal Reserve and Chairman Ben Bernanke will implement another round of quantitative easing, saying they would "look like fools again."

"QE1 failed, QE2 failed, so I'm not so sure they would announce QE3, because they'll look like fools again," said Rogers.

He already thinks that's the case with the introduction of the Draghi plan for Europe, which was ruled as being in line with the constitution of Germany Wednesday by its Federal Constitutional Court.

Rogers concluded:

"We're all going to pay a horrible price for this in a year or two or three," adding that it's only a tool that is "unanimity towards mutual destruction" by the West.

Although it's almost a surety that the Federal Reserve will implement QE3, the ruling that the European Stability Mechanism can be implemented in the euro zone does make it possible that Bernanke will wait until later in 2012, or maybe early 2013 before launching QE3.

If Europe hadn't acted, Bernanke would have been under even more pressure than he is to stimulate the economy, even though it has proven to be a waste of money.

Rogers is correct concerning the consequences of the actions of central banks around the world, which continue to go deeper into debt as countries raise their debt ceilings and spending to unsustainable levels.

Over time commodities will thrive in this atmosphere, as prices will rise if stimulus continues, and they'll also rise because little in the way of new production is being entered into by commodity-producing companies because of the slow economic growth.

It's a win/win for commodity investors either way. Rogers recommends looking for commodities that are trading lower for best results, as commodity prices in many segments have been soaring lately.

Monday, September 10, 2012

Jim Rogers Says Euro Zone To Pay 'Terrible Price'

Billionaire investor and commodities expert Jim Rogers said in an interview on CNBC today that the euro zone will pay a "terrible price" going forward no matter if the European Central Bank (ECB) launches a large acquisition of bonds or not.

Rogers said: "These guys have been saying the same old garbage for a long time. It's not a game-changer - it's good for the market for maybe a month. The debt keeps going higher and higher and eventually we'll all going to pay a terrible price."

As for what he considers a misguided idea for investors to get back into buying some riskier assets because of the announcement, he said this:

"It's not an opportunity to make money for me. This is not good for the market and it's not going to last. Every three or four months they have a summit and they say: Ok guys, everything is ok now. The market goes up. But we're getting a little tired of this and the market is getting a little tired of this," Rogers noted.

As for the commodities bull market Rogers has predicted and continues to assert will last for a long time, he said this:

"The bull market in commodities will end some day - but some day is a long way away.

"Commodities have been correcting for a while. Now everybody knows they're throwing money into the market, and history tells you that when they do this the way to protect yourself is to own real assets whether it's silver or rice. If the world economy gets better, I own commodities because there's shortages developing. If it doesn't they're all going to print money. It's the wrong thing to do, but it's all they know to do."

There is also a growing belief that the Federal Reserve is poised to introduce another round of quantitative easing in the United States, and the central bank of China is also believed to be ready to provide more stimulus in its slowing economy.

Over the long term, when added together, it'll be a powerful impetus for numerous commodity price increases.

Friday, September 7, 2012

CF (CF) (DNR) (ANV) (BRD) (EOG) (SUN) (TLM) Ratings Changes

CF Industries Holdings Inc (CF), Denbury Resources Inc. (DNR), Allied Nevada Gold Corp (ANV), Brigus Gold (BRD), EOG Resources (EOG), Sunoco, Inc. (SUN) and Talisman Energy (TLM) had ratings on them adjusted by analysts.

Feltl & Co. upgraded CF Industries Holdings Inc (CF) from a "Buy" rating to a "Strong-Buy" rating.

Sterne Agee upgraded Denbury Resources Inc. (DNR) from a "Neutral" rating to a "Buy" rating. They have a price target of $20.00 on the company.

Macquarie downgraded Allied Nevada Gold Corp (ANV) from a "Neutral" rating to an "Underperform" rating.

Global Hunter Securities downgraded Brigus Gold (BRD) from an "Accumulate" rating to a "Neutral" rating.

Societe Generale downgraded EOG Resources (EOG) from a "Buy" rating to a "Hold" rating.

Citigroup (C) downgraded Sunoco, Inc. (SUN) from a "Buy" rating to a "Neutral" rating. They have a price target of $51.00 on the company.

Societe Generale downgraded Talisman Energy (TLM) from a "Hold" rating to a "Sell" rating.

Thursday, September 6, 2012

Copper Traders Bullish on Stimulus Expectations

There is no doubt that stimulus expectations are the economic story and source behind the rise in stock prices and commodities, as investors and traders are basing their strategy, for the most part, on the belief there will be plenty of more stimulus in the near term to battle the faltering global economy from various countries, including the Federal Reserve in the U.S.

That has resulted in a much more bullish outlook for copper, which is now more favored by analysts than it has been in about 11 months.

With that in mind, hedge funds are starting to re-enter copper for the first time since May, expecting copper prices to jump in response to the stimulus they're looking for.

Another factor is that copper watched by the London Metal Exchange show that stockpiles it monitors have dropped to four-year lows for the metals, generating the probability that supply may struggle to meet demand if the stimulus efforts result in increased global business.

In the first half of 2013, Barclays Plc says that it expects demand to climb above supply for copper, while in the second half increased production should push prices down as demand decreases.

China is also part of the overall equation, as it cut its industrial production estimates for 2012 to 10 percent from 11 percent on September 5. China accounts for 40 percent of all copper consumption.

Europe is another concern, as the contracting region accounts for 18 percent of copper consumption, and a slowing North American economy, 11 percent.

Wednesday, September 5, 2012

Rio Tinto (RIO) Challenged by Oyu Tolgoi's Lack of Power

Rio Tinto (NYSE: RIO) isn't in an enviable place concerning its Oyu Tolgoi mine in Mongolia, as it's sitting on an amazing property only to be challenged and frustrated over not having the electric power resources on hand to run the operations there.

Oyu Tolgoi has enormous amounts of copper and gold in it, along with a number of smaller amounts of metals.

At this time Rio Tinto is struggling to find enough electricity to operate the mine, as it closes in on completing project, with only 6 percent of the project remaining.

According to Turquoise Hill Resources (formerly Ivanhoe Mines), the mine should be operating commercially by as early as 2013.

At this time China is the major provider of electricity, and it's not a guarantee that once the increased demand for power comes about from an operating mine that China will be willing to sell it to Rio Tinto, as there have been poor relations between China and Mongolia for some time.

To make it work, Rio Tinto will probably have to enter into negotiations with China itself to ensure it has enough power for the giant mining project.

So at this time Oyu Tolgoi must be considered a property with extraordinary potential, but always seeming to be one step away from significantly adding to the bottom line of Rio Tinto.

In the second quarter alone Rio had a net loss of $285.9 million at the mine, and to recoup and go into the black, they must secure electricity in a timely manner in order to be sure this amazing resource doesn't become a huge weight around the fiscal neck of the company.

And even if electricity is secured, for Rio Tinto investors, it must be taken with a long-term view as to how it will have an impact on the bottom line of the company.

Once it's going full throttle, which could take several years, it will be a huge feather in the cap of Rio Tinto, but it will take patience on the part of shareholders to wait until that time arrives.