Ed’s Daily Notes for August 14th   5 comments

Reuters (via Yahoo Finance): Germany, France pull euro zone out of recession

Really?

The German and French economies grew faster than the United States in the second quarter, pulling the euro zone out of its longest recession.

Growth in the 17-country bloc was 0.3 percent from the previous quarter, with its two biggest economies both revealing unexpected strength, data from the European Union’s statistics office Eurostat showed on Wednesday. A Reuters poll had forecast 0.2 percent.

Germany grew 0.7 percent, its largest expansion in more than a year thanks largely to domestic private and public consumption.

France’s economy expanded 0.5 percent, pulling out of a shallow recession to post its strongest quarterly growth since early 2011. The turnaround was driven by consumer spending and industrial output, although investment dropped again.

That compared with around 0.4 percent growth in the quarter – 1.7 percent annualized – in the United States, considered one of the bright spots of the global recovery.

…Improvement was noticeable elsewhere in the bloc. Bailed-out Portugal’s GDP leapt 1.1 percent in the quarter due to higher exports and an easing of previous investment contraction.

Austria and Finland also saw improved growth.

But recession continued in The Netherlands, as well among the debt-laden periphery including Spain and Italy.

Portugal’s growth is probably the big story here, although France is a bit of a surprise. But I still wouldn’t buy the “Europe’s fixed” story, at least not until Spain and Italy show some growth.

Bloomberg: Losing Faith in Gold From Ghana to Vancouver Proves Rout

Bloomberg has been known to have an anti-gold bias, and this article once again misses the point with it’s bias:

Akwesi Boahene’s gold dreams ended better than those of some people in Dunkwa-on-Offin, Ghana, whose riverbeds yield flecks of the precious metal to pickaxes. He still had his life.

Boahene, a satellite-television installer, and a partner pooled $10,000 two years ago to rent land and start a mining operation in a muddy West African town then booming with prospectors lured by what was gold’s longest bull market in at least nine decades.

In May, as prices sagged, his venture became another victim in a year of lost faith in the metal. Boahene shut down the no-longer-profitable business and told his 15 workers to stay home.

While the article points out correctly how tough things are for gold miners, it buries what should be the lede:

Gold advocates say there remains deep-rooted demand for the metal that has captivated humans since it was fashioned into decorative objects on the coast of the Black Sea 6,000 years ago. In countries like India, where weddings and other rites are steeped in gold-gifting, this year’s price drop caused long waits at jewelry stores and delighted Supriya Gupta, a teacher in Kolkata. She picked up a toe ring, anklets and a tiara for her soon-to-be married daughter and a pair of earrings for a younger one.

“If the price continues to fall, we can always buy more,” said Gupta.

Dubai is pressing ahead with plans to create a gold storage, trading and refining hub on a par with Switzerland, announcing in July it will build the world’s tallest office tower to house commodities traders.

“People own gold because they don’t trust the central banks,” said William Fleckenstein, author of “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve,” a 2008 book arguing that the Fed caused repeated asset bubbles with artificially low interest rates. The price will be “much, much higher” within five years and stocks will crash again, he said.

Even seasoned forecasters say the metal’s future price is hard to predict, dictated more by sentiment than standard measures of supply and demand. Bulls point to the surge in jewelry buying and nine consecutive quarters of net buying from central banks, among them Russia and Kazakhstan. Bears contend the banks often buy at the wrong time — adding 203 tons this year as prices dropped, for example, leaving them with $284 billion of losses on gold holdings of 31,910 metric tons through May, according to data from central banks compiled by the International Monetary Fund.

Ironic, isn’t it? People buy gold because they don’t trust the central banks, yet gold bears argue the central banks always buy gold at the wrong time. It seems the bears’ argument actually supports the gold bulls.

Anyway, the takeaway here is that times are hard for gold miners, which will put downward pressure on production. Any demand spike will carry the price up, possibly a significant amount.

Bloomberg: BlackBerry Said to Have Sought Buyers Since 2012

BlackBerry Ltd.’s announcement that it will consider takeover bids followed almost a year of advisers unsuccessfully canvassing potential buyers in search of a deal, two people with knowledge of the matter said.

In recent months, as BlackBerry sales and subscriber numbers deteriorated, bankers from JPMorgan Chase & Co. and RBC Capital Markets quietly contacted possible bidders and found little interest in buying the whole company, especially among private-equity firms, said the people, who asked not to be named because the talks were private.

What this tells me is that BlackBerry’s management never did have any faith in their new products. I would avoid BlackBerry completely, both their stock and their products. They are a zombie company until they get new management, or bought out.

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Posted August 14, 2013 by edmcgon in Economy, Market Analysis, News, Precious Metals

5 responses to “Ed’s Daily Notes for August 14th

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  1. Hurray, Europe is saved! It is all over the headline here: Europe is out of the recession, if politicians do as they are doing now, there is much hope for the future. All is good, isn’t it?
    I do wonder if Europe were a big ship. If it were sinking for the past years with 10 feet/meter/whatever every quarter, would the passengers be happy if one quarter it was rising again? Are the ship and passengers saved once the ship is not sinking further?
    Maybe I’m looking it too far, but if you look as Spains and Portugals numbers: the debt is rising, and rising fast; banking sector is still having huuuge problems; etc etc etc. I really don’t understand all the euphoria now we are “growing” again … we are still miles underwater, we’re just not sinking further – at least averaged down, because there are still parts sinking further away, but probably that detail is not important.

    • plastronneke, I agree with you on Europe. It’s hard to compare companies but as a whole mine is moving more service orientated. Cut all risk sub out danger. And yes my company is world wide.

  2. Two things noteworthy today for me:
    – the civil war in production in Egypt (info enough to find)
    – almost backwardation in gold-future-market – futures are tightening:
    http://traderdannorcini.blogspot.ca/2013/08/gold-futures-spread-continue-to-tighten.html

  3. plas,
    Egypt is an interesting political story, but I’m not sold on it as a market story. Egypt doesn’t produce enough oil to impact oil prices, and if they tried to shut down the Suez Canal, the U.S. and Britain would own the canal tomorrow.

    As for Europe, I agree with you.

  4. Boy, Egypt is going well, isn’t it? Is it still the arab spring or the summer stench. The 1.5 billion dollars the bummer sent over there is really paying dividends, driving the country toward democracy. 400 more killed today. Our foreign policy has never been in such shambles. Oh well, there’s always another vacation to look forward to.

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