March 10, 2014
- Calling the waahmbulance for this bureaucrat: Byron King administers a dose of reality
- The truth about Crimea and Ukraine… and the most profitable investment angle
- The return of Platinum Eagles… at an ideal moment
- Gold mined in 1849, sunk in 1857, about to be recovered in 2014
- Copper whacked again… in search of the Fort Knox gold… The 5 accused of “permabull” mentality (seriously!)… and more!
The word is “waahmbulance.” It’s defined in Urban Dictionary as “the hypothetical vehicle that’s called for someone who is whining, usually in a self-absorbed and/or annoying way.”
Somebody call it — please — for deputy national security adviser Tony Blinken.
“It’s not a done deal,” said Mr. Blinken yesterday on the Sunday talk shows, about Crimea’s likely secession from Ukraine and reunion with Russia.
“If there is a referendum and it votes to move Crimea out of Ukraine and to Russia, we won’t recognize it, and most of the world won’t either.”
“Let’s be candid,” says our Byron King. “With President Putin setting strategy, Russia is rapidly succeeding in its immediate goal of hobbling Ukraine and taking back Crimea.”
Byron wears both our natural-resource and military-tech hats at Agora Financial — and very comfortably, at that. Last week, he was at the PDAC mining conference in Toronto. While he talked rocks with executives and geologists… he also spent an afternoon talking with members of Canada’s diplomatic corps who deal extensively with NATO, Russia and nations of the former Soviet Union.
“I’ll note an obvious point,” he says, “but one that’s apparently lost on many senior politicians in the U.S. and elsewhere. In short, Ukraine-Crimea is not a battle that the U.S. or NATO ever should have pretended to join. We’re dealing with geography that’s at the heart of Russia’s ‘near abroad’ and vital to Russia’s national defense. So it’s accurate to say that Ukraine-Crimea is a point of supreme national interest to Russia. Get it? Hey, some people don’t.”
“There’s nothing that anyone in Ukraine, the EU, NATO and/or the U.S. can do about Crimea,” Byron adds.
“Not unless Western political players want to send in tanks and troops, which would doubtless escalate into something very bad, and certainly much worse than what we see. Really, the Russians don’t fool around, let alone back down, on issues like this. They’ll fight.
“This current standoff — and this Western ‘loss,’ if you’re keeping score — has been many years in the making. Russia is responding to two decades of strategic insult and political fecklessness by the West.
“NATO was a post-World War II military alliance created to contain the then-expansionist, aggressive Soviet Union. Yet when the USSR imploded in 1991, NATO remained intact; kept its name; perpetuated its bureaucracy; and, organizationally, expanded eastward to the borders of Russia (think of Latvia, Estonia and Lithuania). From the Russian perspective, it was as if Napoleon were assembling another Grande Armee.
“More recently, the idea of Ukraine as part of NATO has proven to be, basically, the equivalent of Soviet missiles in Cuba in 1962.”
And the endgame? “When the territorial transfers are completed, perhaps Russia will come to a meeting somewhere,” says Byron.
“The Russian diplomats will allow Western politicians to save a bit of face, perhaps by offering back a few scraps of borderlands here and there. Through it all, Russia will do what’s in its broad interests.”
Including cyberattacks… about which it is getting bolder.
“Until recently, the Russians have kept a low profile, but there’s no doubt in my mind that they can do the full scope of cyberattacks,” says Nigel Inkster.
Inkster works for the think tank IISS. He used to run operations and intelligence for Britain’s MI6. And the occasion for his remarks is a cyberweapon called Snake… which, according to the Financial Times, “has infected dozens of Ukrainian computer networks, including government systems in one of the most sophisticated attacks of recent years.”
Indeed, some experts say it’s every bit as complex as Stuxnet — the U.S.-Israeli malware that wrecked Iran’s nuclear centrifuges in 2010.
The “tell” for Russian origin? Code in the program that’s in Moscow’s time zone and fragments of Russian text — clues that also showed up in a malware attack that penetrated U.S. military systems in 2008.
The “fifth domain of war” — beyond land, sea, air and space — is making itself felt even in this very “Old World” conflict. And as we mentioned a few days ago, U.S. Cyber Command is asking for a substantial budget increase — on top of the 134% increase it got in fiscal 2014.
For several months, we’ve encouraged you to learn about the seven companies Byron believes are best poised to collect the lion’s share of that loot. Come Thursday at midnight, we’re pulling Byron’s exclusive presentation offline…
This presentation will come offline Thursday night at midnight…
Stocks are slumping as a new week begins. Every major index is down one-third to one-half of a percent. After touching another record high on Friday, the S&P 500 is down seven points, to 1,871.
Boeing’s disclosure of “hairline cracks” in the wings of several 787 Dreamliners is proving a drag on the Dow. McDonald’s is reporting crummy same-store sales. And Chinese export numbers rang in worse than expected overnight.
“The S&P 500 Index climbed 1% higher last week,” says Jonas Elmerraji of our trading desk, “pushing closer to the top of the trend channel that put us into ‘caution mode’ last week. That makes a correction look slightly more imminent.” But the long-term rally, says Jonas, remains in place as it enters its sixth year.
Copper — that economic bellwether — is down another nickel this morning, to $3.05 a pound — maybe in part because of the lousy Chinese export figures. The loss comes on top of the dime copper sank on Friday for no obvious reason.
Copper has held the line on $3 consistently for nearly four years. Just sayin’…
After getting knocked down on Friday, gold is gamely making another run for $1,350. At last check, the spot price is up about $4, to $1,343.
Silver’s up slightly, to $20.92. Platinum is down slightly, to $1,474.
Starting today, Platinum Eagles are back.
After a five-year break, the U.S. Mint has begun shipping American Eagle platinum bullion coins to its dealer network at a 4% premium over the spot price. “We have already sold 1,000 of them without even trying,” says Michael Kramer of the coin wholesaler Manfra, Tordella & Brookes.
Already a hot commodity…
For now, only the 1-ounce variety is available; the Mint’s announcement last week said nothing about possibly producing fractional sizes in the future.
The Mint gave up producing Platinum Eagles as prices soared and demand caved in 2008. Spot platinum hit $2,300 in March of that year. It crashed to $730 in October, but gold also bottomed that same month, and that’s where investor attention turned. November 2008 is the last time a Platinum Eagle exited the Mint’s doors.
“Platinum offers a strong investment case going forward,” says the aforementioned Byron King… and he’s plugged into the latest after attending the PDAC mining conference in Toronto last week.
“Strikes in South Africa have knocked 40% off of expected global output over the past six weeks. Stockpiles are quickly declining. By the end of March, absolute shortages will set in and prices could spike.”
And beyond March? “The longer-term outlook for platinum looks robust,” says a new report from the investment bank ScotiaMocatta, “as supply is struggling to keep up with noninvestment demand, which means that even a relatively small amount of investment can cause a supply deficit.”
That is, every ounce of Platinum Eagles wholesalers can sell “without even trying” is one less ounce available to automakers for their catalytic converters.
A hearty congratulations to our friends at Odyssey Marine Exploration, who’ve scored a major savage coup — a contract to recover the goods from the “Ship of Gold.”
The steamship SS Central America went down during a hurricane off South Carolina in 1857. Some 200 passengers and crew were rescued, but another 400 died. Many were miners and businessmen making the long trip home by sea with their riches from the California Gold Rush.
The wreckage was located in 1987. “An extensive collection of gold coins, bullion and raw gold were recovered from the site during the following years,” explains the Odyssey Marine press release. “The salvors have not returned to the site for more than two decades as lengthy legal battles played out.” The courts appointed a receiver last year, and the receiver awarded a contract to Odyssey last week.
The gold not yet recovered includes ingots and newly minted Double Eagles. Estimated face value? $760,000. The bullion and collector value today? Surely off the charts.
The Odyssey Explorer — longtime readers will recall that’s the same ship whose exploits got caught up in an outrageous and rigged battle with the government of Spain a few years ago — begins work on the new project next month.
“Let’s see,” begins today’s mailbag. “Ukrainians have an election. The president they elected opts to make a deal with Russia. Some don’t like that, so they take to the streets. The elected president leaves the country. The Russians move into Crimea to protect their only warm water port. And our law-ignoring resident of the White House tells Putin that he can’t do that because it’s against the law.”
“Who said the gold in Fort Knox is still there?” a reader writes.
We knew someone would write in to say that after we mentioned on Friday that if a gold standard were still in place and the U.S. ran the kind of trade deficits it’s run for decades, “the gold in Fort Knox would be long gone by now.” We even thought about saying “if the gold is there now”… but it felt like a distraction from our main point.
So cue the reader: “According to whichever report you read, the last time that Fort Knox was audited was either 1952 (62 years ago) or 1974 (40 years ago). Considering that by law the gold is supposed to be audited every year and a report made to Congress, it doesn’t exactly fill me with confidence that the ‘Masters of the Universe’ may have decided that gold is an asset that can be used for their own benefit.
“You will also note the recent problems that Germany had at getting even a small portion of their gold back from the New York Fed. No, I think that when the gold vaults of Fort Knox are finally opened for the inspection of the American people, you’re going to find that just like the ‘Social Security’ fund, they are going to find that it’s pretty much bare and the American dollar is really and truly backed by nothing except a lying governments promise.”
“Why is it good to see the Dow industrials see some action?” a reader writes after Greg Guenthner said as much last Wednesday.
“Does it mean squat for the average Joe and Jane? Is it good for the economy to have inflated asset prices? Is it good for positions you have already taken? Sound like permabulls rather than objective analysts!”
The 5: Permabulls? Us? C’mon, we have a reputation as a firm to uphold!
Seriously, all Greg was saying is that if stocks are to remain in a bull market, both blue chips and small caps should be moving up in tandem. Nothing more, nothing less.
Is the Federal Reserve driving many stocks to nosebleed levels? Absolutely. That’s a completely separate issue. Only by looking at the charts — and that’s what we pay Greg to do — will you have a prayer of knowing when those inflated prices will start coming back to Earth.
Without that insight, you end up saying “It’s unsustainable! The end is near!” every day for five years while the market races up 175%…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. So you haven’t gotten around to filing your taxes because the rough winter got in the way of your plans?
It’s just as well: Now you have a chance to take advantage of our special report The Vanishing Point: How to Disappear From the IRS This Tax Season and Save a Boatload of Money in the Process. Use it now and save thousands before April 15.