sábado, 29 de diciembre de 2012

Fiscal cliff impacts my gold stocks.

Going over the fiscal cliff corrects the many budget imbalances created during the Bush/Greenspan years and exacerbated during the Obama/Bernanke years. It sounds like the prudent and conservative thing to do. BUT....

... would it really be wise to abandon the "Bernanke way"?

The budget imbalances, from my viewpoint, are showing up as a surplus in afew countries like China and Peru, and in many large corporations like Apple $AAPL, Google $GOOG, and Exxon $XOM. These fortunate instututions don't know what to do with their surplus so they lend it back to the US Treasury, ie purchase US Treasury Bonds. Interest on the US treasury bonds is historically low, and in fact paying more interest would only result in more accumulation of dollars in afew fortunate countries and large corporations. Best that interest rates remain low, or zero, for the forseeable future, or until employment picks-up.

Fortunately, the "Buck" does not stop at the US Treasury, the US government pays it out to the military complex, medicare, unemployment benefits, social security, ie. the circulation of money keeps going and the "Buck" is passed to the consumer. Stopping the flow of money would be the worst case for the US government. Most likely it would cause riots in the streets in addition to a collapse of the economy in general. There is already a lack of demand. We need more demand, not less!

Therefore, why abandon a fiscal strategy which appears to keep everything in place, a policy which keeps the flow of money intact and maintains a floor under consumer demand?  That's my question.

As for my gold stocks, let's face it, Bernanke has changed course from supporting US Treasury bonds to supporting real estate mortgages and the real estate market.  Gold stocks flourished during the first phase of Bernanke's strategy.  Will they continue to flourish?  Maybe so... as long as the gold companies invest their surplus dollars in the private sector and not US Treasury Bonds.

I hope we don't go over the fiscal cliff.

Bond Market:
30-Year US Treasury Bond -  "the yield on the 30-Year Bond declined 5 basis points to 2.87 percent."
US Dollar Index - 79.67 - "Dollar Index Touches Two-Week High."
Gold - $1,653.80 - "...one might expect more modest increases in metal prices..."

Public traded stocks:
Barrick Gold  - $34.01 - $ABX ... Returns will drive production... Barrick website
                       ... Photos — Pasqua-Lama Project Overview November 2012... Barrick website
Newmont Mining - $45.03 - $NEM "...dividend yield... 3.2% and return on capital is 13%..." Barrons
Rio Alto Mining - $4.97 - $RIOM...production cost guidance in January 2013..."   Seeking Alpha
Freeport McMoran - $33.14 - $FCX "...refuse to give up at Davy Jones 1..." Forbes

Projects and Exploration:
Sulliden Gold - C$0.86 - Shahuindo Project - Location in Peru. see Sulliden website
Tartisan Resources ... Engages Ubika Corporation to Promote Investor Exposure... Newsfile
Candente Gold... Projects - Map Alto Dorado... Candente Gold website

Privately held companies:
Comarsa... joins facebook.... Facebook/Comarsa

Disclosure: I intend to focus on selected gold mines in Northern Peru. I have one long positions in the stocks mentioned above. I prepared this article myself, and linked it to third party articles and information published on the internet. I am not receiving compensation for this article other than from Google Adsense, my website www.leansupplier.com and the sale of my book The Lean Supplier. I have no business relationship with any company whose stock is mentioned in this article.

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