Bloomberg reported yesterday that after weakening 20 percent in 2008, the Mexican peso fell to a record low of 14.5/U.S.$, and that RBS Greenwich Capital Markets – click here – predicts a further  4.5 percent drop by June 30. This drop is attributed to the U.S. recession and falling oil prices.

An obvious fallout from this is that anyone owning shares in companies whose principal operations are in Mexico – and a number of the mining companies in the StockResearchPortal.com company universe qualify – ought to carefully assess what this means, either positive or negative, to each of those companies.  Likely each company is being affected somewhat differently.  I suggest the quickest way to determine the affect on a given company is to call the company’s President or CFO and question them about this.  I find these people are readily available to shareholders.  Having said that, I am told by many of them they don’t get a lot of calls from individual shareholders.  I am always surprised when I am told that.  My advice – don’t hesitate to pick up the telephone.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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I follow the U.S. Trade Deficits closely.  They, along with U.S. Consumer’s using their houses as ATM’s (which I figured out in mid-2005) are the primary reasons I am bullish on gold.  For some time I have been well aware of the amounts of U.S.$ held in Treasury Bills and Treasury Bill equivalencies – almost U.S.$2 trillion.  As I understand it, China has accumulated these U.S. equivalents through the following process:  Walmart (or some other U.S. business) orders U.S.$20 million of product from a Chinese manufacturer.  On receipt of payment in U.S.$ that Chinese manufacturer trades those U.S.$ for Chinese Yuan printed by the Chinese government.  The Chinese manufacturer then pays its employees in Yuan, buys capital equipment in Yuan, and so on.  The Chinese Government retains the U.S.$ it effectively got by printing Yuan (indirectly printing U.S.$) and buys U.S. government backed Treasury Bills or other securities.

Not everyone – including Wall and Bay Streeters –focus on the quantum of $U.S. held by the Chinese government, and the possible consequences of this.  Personally, I believe China’s accumulation of U.S.$ equivalents likely is a world changing event.  This massive amount of U.S.$ will enable the China to build infrastructure, further their internal economic development, and acquire assets outside China that China considers strategic.  This in circumstances where the Chinese ideologies are different from North American ideologies.

There is a very good article, with charts, available today on Brad Setser’s blog – click here.  I strongly suggest you read Setser’s article, particularly if you are not familiar with the extent of China’s U.S.$ reserves.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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In what I consider to be a very interesting development, yesterday Todd Sullivan wrote an article titled ‘Hedge Fund to Measure Returns in Gold Rather than Currency’ in Seeking Alpha  quoting from the Financial Times – click here – that says (paraphrased) “as worries grow over governments debasing their currencies by printing money Osmium Capital Management, a $178m hedge fund manager based in Bermuda, has begun offering investors the chance to have their investment denominated in gold by ‘launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than U.S. dollars, sterling or euros’”.

The Osmium website – click here – in part describes the workings of the fund as follows:  “An investor will be able to subscribe in GBP, EUR or USD. The investor’s subscription amount will then be converted into a number of ounces of gold and denominated as such thereafter. The Fund will hedge its exposure to the price of gold by selling gold for cash and buying gold forward on a monthly basis, in the same conceptual way as the GBP and EUR Classes are hedged to these respective currencies.  The result is that the investor will be able to hold the equivalent of a long gold position, with exposure to the performance of the price of gold and invest this gold position in the Fund, additionally gaining exposure to the underlying performance of the Fund.”

Sullivan says:  “This shows a stunning lack of confidence in currencies. It also says that the fund is anticipating inflation to rear its ugly head in a scary way.”  I think his use of the word ‘stunning’ is an overstatement, and that even if he is right that ‘the fund is anticipating inflation’ the latter would not be the only motivation the fund may have had.  In any event, if this move by Osmium (obviously on a world scale a ‘smallish’ hedge fund – although who knows if that is correct in the aftermath of market corrections to date – is followed by others, that would be one more positive factor for gold.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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Bespoke Investment Group LLC (click here) claims offer some of the most original content and intuitive thinking on the Street.  Trading range charts for ten major commodities showing two standard deviations above and below their respective 50-day moving averages are shown in charts you can find by clicking here.  There is a brief commentary on trends in these commodity prices as well.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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Note:  I do not know Mish and only began reading his Blog 10 days ago.  While I find him an ‘interesting commentator’ I read his articles with a healthy skepticism – an approach I bring to everything I read.

An article titled ‘Peter Schiff Answers His Critics’ is posted today on Seeking Alpha – click here.  It is 4 printed pages of highly defensive rebuttal to the ‘Mish Post’ I commented on earier on this Blog – click here.  The Press (notably the Wall Street Journal) and others have commented extensively on Mish’s Post.  The publicity Mish’s Post has received may be the reason Schiff deals, in my view, on a low and unbecoming level in his current article – I say it doesn’t ‘look good on him’.  He begins the article (not naming Mish) referring to Mish as “a very small money manager (attempting) to use his popular financial blog to promote his fledgling business”.  Schiff goes on to say:  “To achieve his ends, this individual has distorted much of what I have been saying and writing, and has twisted the facts to support his own preconceived conclusion. In essence, his piece is nothing more than an overt advertisement (and a highly deceptive one at that) to use my popularity to advance his career.”

Schiff has not taken the ‘high road’.  He clearly is entitled to rebut Mish’s views.  He should have done just that in an impersonal and logical manner.  For me, who has bought and read Schiff’s books, his approach degrades him, not Mish.

I have written several technical books on Business Valuation.  These books are used by most senior litigators and valuation experts in Canada, and are frequently referenced by Canadian Courts.  I say that, not because I talk about those books often –I don’t and have no ego need to – but to give some context and credibility to my following comments.  I have found that many authors write out of ego need to be recognized.  The best ones write because they have something to say in circumstances where they are more interested in helping their readers than helping themselves.  I don’t know Schiff, but his ‘low road’ ‘personal attack’ approach to dealing with Mish’s criticism doesn’t impress me one bit.  In my view he either should have said nothing, or should have written a ‘high road’ carefully thought out rebuttal that would (done properly) have added to his existing work.  I don’t see him having done that.

Read Schiff’s article by clicking here, and commenting if you wish on whether you think I have the foregoing right.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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To read 3 articles that deal with U.S. trade protectionism in the Obama Stimulus Package now before the U.S. Congress click here, click here, and click here.

The ‘Buy American’ provisions in the Stimulus Package require major public works projects to favor U.S. steel, iron and manufacturing over imports, leaving out manufactured goods.  It is suggested, in my view sensibly, that if these measure are passed a trade war could result.  So far, Canada, the European Union (the U.S.’s two largest trading partners), Brazil, Japan and India have all spoken out against trade protectionist measures.  Some commentators believe an American protectionist policy would cost the U.S. more jobs that would be gained.  For background, trade protectionism was introduced by the U.S. at the beginning of the Great Depression and lead to the worldwide retaliation – this in the early 1930’s long before the extent of economic globalization that now exists.

I live in Toronto.  From the time I learned of the U.S. bail-out of its Automotive Industry I have been concerned about U.S. protectionism and introduction of a formalized ‘Buy American’ policy.  The N.A. Auto Industry is a fully integrated industry essentially without borders.  Approximately 20% of all vehicles sold in the U.S. are assembled in Canada – a % highly disproportional to the Canada/U.S. 10:1 population demographic.  Loss of Ontario auto jobs related to auto assembly plant closures would be devastating to the Ontario economy, and even more so if auto parts production by ‘parts feeder companies’ not owned by the automakers also was affected.  This is but one example of the negative economic impact a formalized and active ‘Buy American’ policy could have on Canada.  A litany of similar issues would arise in the cases of U.S.’s other major trading partners.  I will follow this issue in subsequent posts.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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Bloomberg has just posted an article titles ‘Gold Climbs to 3-Month High in London as Fund Demand Increases’ – read here.  The article says that SPDR Gold Trust gold holdings increased 1.3% to 843.59 metric tons in January.  The article quotes a Dresdner Bank (Zurich) analyst as saying:  “There’s really strong physical demand from the ETFs, there’s a motivation to preserve some wealth”, and a Standard Bank Group (Johannesburg) analyst as saying:  “The relationship between precious metals and the greenback could be dislocated in the short run due to safe-haven investment flows.  Precious metals could encourage investment-fund flows even if the dollar strengthens more”.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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U.S. Q4 GDP has just been reported as down 3.8% in Q4, down 5.1% excluding a buildup of inventories – read here.  Escalated government spending ought to occur when GDP is rising, not when it is falling.  Accordingly, while no surprise, this drop in GDP – which I think won’t reverse any time soon – is oxymoronic in the context of the U.S. government bailout programs and the ever increasing cumulative U.S. National Debt.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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Brad Setser states in a short article this morning titled ‘Just how much is $350 billion?’ that “the Council’s Center for Geoeconomic Studies calculated (on January 21) that $350 billion was enough to buy most of the common equity of the US financial system” – read here.

Assuming that number is remotely accurate I find it truly shocking in and of itself.  If accurate, it emphasizes deep, deep fundamental U.S. economic issues, and in my view casts real light on the amounts of money the U.S. Administration has and plans to throw at the problem.  Because intuitively I am having difficulty believing the $350 billion number I am emphasize that I have not independently checked that number.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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Today Mish has posted an article on his Blog titled ‘Global Crisis Destroys 40% of World Wealth; Bailout to Hit $4 Trillion’.  The portions of the article I find particularly worth reading can be found under the headings ‘The world Economic Forum is reporting Global crisis ‘has destroyed 40pc of world wealth’ and ‘The Ever Rising Cost Of The Bailout.

I recommend you click here and read Mish’s Post.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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