RANTING ANDY – Back in the saddle after three days of traveling, with plenty on my mind, I’m happy to say. I am touched by the multitude of emails from readers wondering where I was, but unfortunately I was literally out of cell phone and internet range in the wilds of Montana.
One reader worried I had “lost my fire” because I hadn’t sent a RANT in two days, which I assure you DID NOT, and WILL NEVER, happen. Actually, I spent three hours at the Spokane Airport writing “HUMAN NATURE, PART I” on Monday morning, and another four writing “RECORD BREAKING HORRIBLE HEADLINES TO MARKET ACTION RATIO” yesterday, both of which you have by now. Unfortunately, if I am not at my PC with the master email distribution list, I cannot get RANTS out in as timely a fashion as I’d like. But I’ll work on it for the future, I promise.
Regarding the question of my fire, I’d like to thank the reader submitting that comment, as it inspired this morning’s RANT. The past two RANTS focused on the literally dozens of “horrible headlines” that appear to be emerging like crabgrass in August. Just keeping up with the pace of financial collapse is difficult, and I assure you this morning is no different. However, to avoid being sucked into the news flow vortex, today I have simply agglomerated the most recent “horrible headlines”, as well as some other relevant reading material, into an addendum at the end of this missive.
As you can see, the title of today’s RANT is DEDICATION, a trait that has dominated my psyche for as long as I can remember. If you’re going to do something, do it right, do it thoroughly, and do it WELL. The essence of life is finding things that impassion you, be it your family, friends, hobby, or occupation. Only through DEDICATION to these passions can true satisfaction be attained, and one should RELISH each phase of the battle to achieve such ends.
In my personal life, my wife has been my passion for the past nine years, and my little dog Giselle for the past four. As well, my exhaustive devotion to moving out of New York and into a place where a more rewarding standard of living could be achieved, which I found here in the Denver/Boulder area five years ago. I have numerous hobbies, and anyone knowing me will tell you I spend an inordinate amount of time trying to improve my skills in soccer, biking, hiking, golf (although not so much this year), and skiing. I am also an avid sports fan, although unfortunately my New York Mets stink, and just blew their best chance at long-term success when they prevented David Einhorn, he of the massive gold holdings, from buying into the team.
When it comes to work, DEDICATION has been my hallmark. Perhaps it’s the quest for respect, admiration, and/or compensation, but I think it’s more a fear of failure than anything. I never want to be proven wrong, and have an equally strong resolve to prevent the appearance of lack of preparation. The exhilaration of a job well done motivates me more than anything, and only via DEDICATION to one’s craft can that occur.
In my prior life as an oilfield service buy-side and sell-side analyst (1996-2005), I immersed myself in the oil sector as deeply as in Precious Metals today, which I started reading about, and investing in, in May 2002. Oil was my life for a very long period of time, and I spent many an 80-hour week writing reports, updating financial models, and, generally speaking, trying to convince investors that oil prices would rise from the $15-$25/bbl range they traded at during that period, including lows of BELOW $10/bbl in both 1999 and 2002.
Most investors, including the supposedly most sophisticated in the business, did not believe me that oil prices would rise, which frankly I predicated more on my forecast of dollar depreciation than anything else. Even the oil companies themselves had it wrong, as depicted by the below table published in our E&P Spending Survey of January 2004. The data below is the average expectation of 224 global oil companies at the time, encompassing nearly $150 billion of annual capital expenditures, including EVERY Major oil company on Earth. Just imagine, during what was a very robust economic time, the greatest minds in Energy cumulatively anticipated the oil price to be $24.55/bbl in January 2007.
Want to take a guess what it actually was?
…$67 per barrel, on its way to $150 per barrel 18 months later!
Figure 16. Expectation for Long-Range (Three Years or More) Average Oil Price
($ per barrel)
The point I am making is the investment world is myopic at best, negligent on average, and just plain idiotic quite often. In order to make the great calls, one must be DEDICATED to his craft, and equally headstrong in refuting the myopia that is sure to fight one’s beliefs every step of the way. The concept of $67 oil in 2004 was as alien to the investment world as $3,000 gold and $100 silver are today, yet the fundamentals, in my view, are better for Precious Metals in the current environment than they were for oil back then. Of course, in January 2004, when gold and silver prices were $400/oz and $6/oz, respectively, anyone forecasting $1,600 gold and $30 silver would be dismissed immediately.
Since that time, oil prices benefitted from depletion, currency inflation, and rising global demand, all of which are equal factors in the current Precious Metals bull, except for one very important difference. Oil prices have been legally SUPPORTED by OPEC for the past decade, while gold and silver prices have been illegally SUPPRESSED by the gold Cartel for an even longer period!
OPEC has become largely toothless in since this report was published, as around that time nearly every OPEC nation reached its productive capacity, except for Saudi Arabia, of course (unless you believe Matt Simmons, whom vociferously opined that Saudi oil reserves are overstated). Conversely, the Gold Cartel has increased its pressure on PMs, but its influence has largely migrated from the REAL, PHYSICAL gold and silver world to the FAKE, PAPER pits. Fortunately for investors, there’s only so much REAL, PHYSICAL gold and silver available due to the aforementioned factors, which is why the gap between PHYSICAL and PAPER prices continues to widen, and will continue to do so until eventually the paper market disappears.
Don’t believe me? Just remember that in 2004, West Texas Intermediate Crude (WTIC) was the KING of oil products, the undisputed benchmark on which ALL global oil products were priced. Brent Crude ALWAYS traded at a discount to WTIC, in most cases considered as an afterthought, and in fact our spending survey is based on expectations for WTIC, which essentially ALL the world’s oil companies used as their benchmark.
Well, what do you know? Here we are in 2011, and not only does WTIC trade at a 22% discount to Brent ($86/bbl vs. $110/bbl), but has become a laughing stock in the energy world. NO ONE uses WTIC crude as a benchmark anymore, and in fact some Asian blends, from areas where oil is FAR less plentiful than in Texas, are becoming more widely known. Many theories exist as to why this change suddenly occurred in the past year or so, but of yet no singular theory has been accepted. The consensus view is that a lack of pipeline and/or storage capacity is the problem with WTIC, but plenty of differing viewpoints have been offered, INCLUDING the possibility that U.S. government manipulation of Energy futures has created the same type of unbacked “fractional reserve” market in WTIC as we see in the COMEX gold and silver markets. If that is the case, expect COMEX gold and silver prices, potentially in very SUDDEN and UNEXPLAINABLE fashion, to become obsolete as the REAL, PHYSICAL markets take over, potentially usurped by the new PAGE Exchange in China.
Back in January 2004, I knew nothing of what OPEC’s future capacity constraints would be, or that WTIC would lose its “oil reserve currency status”, and I certainly had no idea how the global economy would perform. But DEDICATION to learning ALL aspects of the TRUTH, and not allowing propaganda and Wall Street myopia to invade my mind, enabled me to correctly predict what even the greatest “experts” in the field wouldn’t dream of.
You can call it the quest for respect and compensation, or simply the fear of failure, but in the end it boils down to the DEDICATION to fight through “miles of red tape” to reach the TRUTH, enabling one to act accordingly.
Irrespective, oil and Precious Metals are apples and oranges, in nearly all aspects. In the case of oil, an industrial commodity, the goal of my research was always PROFIT, while with gold and silver, the goal is PROTECTION from the hyperinflation that is as imminent as death and taxes, perhaps much sooner than most people can imagine.
My goal is to help you UNDERSTAND that gold and silver are NOT “commodities”, but “precious” assets that have been utilized as MONEY for the past 6,000 years. Once you realize that, your CLARITY of the financial world will expand dramatically, and ability to SURVIVE and THRIVE enhanced exponentially.
Rise in India’s gold and silver imports in 2011
Gold and silver imports are escalating in India in 2011 primarily due to an unprecedented and aggressive consumer demand for these commodities. India’s import of gold elevated by 76% and 160% in April and May 2011, respectively; silver import rose by 22% from the levels in April-May 2010.
Data Source: Gems and Jewellery Export Promotion Council
India ranks on number one position, as consumer and importer of gold and silver globally. Ascertaining import volumes rather than values is much more accurate, given the rise in gold and silver prices in May 2011, the statistics reveal clearly the rising demand for the commodities.
According to World Gold Council (WGC), gold and silver demand from India amounted to 963.1 tonnes in 2010 – a 66% rise in 2010.
Latin America – Bloomberg reports that 30 day deposit rates in Argentina for 1 million pesos or more rose 150bpts on October 13th (the last data available) to 17.4%, and up 600bpts since the end of June. About USD2bn is leaving the country each month as inflation has risen to more than double the official figures – (24% vs 9.9% officially stated) – and FX reserves dwindle as the country remains shut out of the international bond market. Speculation is intensifying that President Cristina Fernandez de Kirchner, the front runner in the October 23rd elections, will accelerate the currency’s depreciation to boost competitiveness. “If the deposit rate goes above 20% and stays there for a long period of time, it’ll start to choke off local economic activities” according to Marketfield Asset Management. The pesos 6.4% decline over the last year hasn’t been sufficient to keep pace with rising consumer prices, making Argentina’s products more expensive relative to its competitors. The currency is 16% overvalued according to the Big Mac index
And one more for a good laugh (or cry):