Category: zerohedge

The IMF Disagrees With Zero Hedge

On Thursday, after we presented an article by Simon Black in which the author suggested that the IMF was implicitly proposing a 71% tax-rate on Americans, by “suggesting that the US government could maximize its tax revenue by increasing tax brackets to as high as 71%”, the IMF took offense to this characterization, and tweeted out the following:

Naturally, the IMF has a right to its opinion, be it retroactive revisionism, or proactive humorous predictions about the future, which incidentally we have charted in the past showing just how “accurate” the IMF’s forecasting track record has been in recent years…

… but since the topic of taxation, be it on wealth (something we warned about in September 2011, which as depositors in Cyprus banks learned about the hard way in March of this year), or income is far less humorous, we leave it up to readers to decide just what the IMF is “proposing”, using only the IMF’s own words.

Below we present the key passage from the IMF’s October 2013 Fiscal Monitor report titled “Taxing Times.”

Whether those with the highest incomes could or should pay more has become a contentious political issue in many countries. Several, given large consolidation needs, have bucked the decades-long trend by increasing top personal income tax rates quite substantially: since 2008, Greece, Iceland, Ireland, Portugal, Spain, and the United Kingdom have all done so, on average by more than 8 percentage points.

 

Assessing whether there is untapped revenue potential at the top of the income distribution requires comparing today’s top marginal income tax rate with the marginal tax rate that would maximize the amount of tax paid by top income earners. The latter depends on two things: first, how responsive their taxable income is to that marginal rate—which in turn depends on both “real” decisions (on labor supply efforts and the like) and “paper” avoidance activities; and second, the distribution of income within that upper group. Ranges of revenue-maximizing top income tax rates can be calculated by combining existing estimates of the elasticity of taxable income with the data on income distribution used above. The average is about 60 percent. In several cases, current top marginal rates are toward the lower end of the range (Figure 17), implying that it might indeed be possible to raise more from those with the highest incomes.

 

How much more? The implied revenue gain if top rates on only the top 1 percent were returned to their levels in the 1980s averages about 0.20 percent of GDP (Figure 18), but the gain could in some cases, such as that of the United States, be more significant. This would not make much of a dent in aggregate inequality, for which, if that is the objective, more dramatic change would be needed.

Figure 17:

Some additional commentary from the WSJ from before our article, picking up where we left off in September 2011 with “The Coming Global Wealth Tax“, and curiously a piece the IMF had no problems with:

What the IMF calls “revenue-maximizing top income tax rates” may be a good indication of how much further those rates could rise: As the IMF calculates, the average revenue-maximizing rate for the main Organization of Economic Cooperation and Development countries is around 60%, way above existing levels.

 

For the U.S., it is 56% to 71%—far more than the current 45% paid in federal, state and local taxes by those in the top tax bracket. The IMF singles out the U.S. as the country where raising top rates toward 70% (where they were before the Reagan tax cuts) would yield the most revenue—around 1.25% of GDP. And with a chilling candor, the IMF admits that its revenue-maximizing approach takes no account of the well-being of top earners (or their businesses).

 

…

 

Of course these measures won’t return the world’s top economies to sustainable levels of debt. That could be achieved only through significant economic growth (the good way) or, as the IMF puts it, “by repudiating public debt or inflating it away” (the bad way). In October the IMF floated a bold idea that didn’t get the attention it deserved: lowering sovereign debt levels through a one-off tax on private wealth.

 

As applied to the euro zone, the IMF claims that a 10% levy on households’ positive net worth would bring public debt levels back to pre-financial crisis levels. Such a tax sounds crazy, but recall what happened in euro-zone country Cyprus this year: Holders of bank accounts larger than 100,000 euros had to incur losses of up to 100% on their savings above that threshold, in order to “bail-in” the bankrupt Mediterranean state. Japanese households, sitting on one of the world’s largest pools of savings, have particular reason to worry about their assets: At 240% of GDP, their country’s public debt ratio is more than twice that of Cyprus when it defaulted.

 

…

 

From New York to London, Paris and beyond, powerful economic players are deciding that with an ever-deteriorating global fiscal outlook, conventional levels and methods of taxation will no longer suffice. That makes weapons of mass wealth destruction—such as the IMF’s one-off capital levy, Cyprus’s bank deposit confiscation, or outright sovereign defaults—likelier by the day.

Finally, here is the IMF on the prospect of a “one-off” financial asset tax:

A One-Off Capital Levy?

 

The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and ma
y be seen by some as fair). There have been illustrious supporters, including Pigou, Ricardo, Schumpeter, and—until he changed his mind—Keynes. The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away (these, in turn, are a particular form of wealth tax—on bondholders—that also falls on nonresidents).

 

There is a surprisingly large amount of experience to draw on, as such levies were widely adopted in Europe after World War I and in Germany and Japan after World War II. Reviewed in Eichengreen (1990), this experience suggests that more notable than any loss of credibility was a simple failure to achieve debt reduction, largely because the delay in introduction gave space for extensive avoidance and capital flight—in turn spurring inflation.

 

The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth

… which promptly resulted in this “IMF Statement on Taxation” clarification.

So is Zero Hedge wrong as the IMF broadly trumpets? We’ll let readers decide. However, we just wanted to set the record straight – after all the last thing we want is for the IMF to admit it is wrong once again as it did in early 2013 with the whole “fiscal multipliers” fiasco (about which incidentally the IMF would be absolutely correct if instead of “austerity” the IMF were to use the proper term in its calculations: “corruption, gross government incompetence and epic capital misallocation“).


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/pGBXSFIrYsA/story01.htm Tyler Durden

As Bitcoin Transaction Volume Triples Since October, Europe Prepares To Regulate, Tax The Digital Currency

Representing numbers that would put the adoption curve of Obamacare to shame, the Bitcoin equivalents of Paypal, BitPay, announced last week that it has now processed over $100 million in BTC transactions in 2013, has increased its merchant base to over 15,500 approved merchants in over 200 countries, but most importantly, has seen a surge in the number of merchants using its BTC payment pricing plan, by 50% since October while the volume of transactions has tripled. While the surge in the currency adoption has matched the explosive rise in the USD-value of the currency, the news should comfort any lingering doubts whether Bitcoin is a credible payment system.

From the BitPay press release:

BitPay Inc, the world leader in business solutions for virtual currencies, announces it has processed over $100 million in transactions this year, and has increased its merchant base to over 15,500 approved merchants in 200 countries. Since the announcement of the new All Inclusive Pricing Plan in October, along with the integration with Shopify in November, the number of new merchants has increased over 50% and the transaction volume has tripled.

 

“This year, the 2013 holiday season was Adafruit’s biggest ever. We are delighted to offer bitcoin payments via BitPay to our community and customers. It was fast and easy, hundreds of orders and happy customers getting educational electronics, using bitcoin!” shared Limor Fried, Founder and Engineer with Adafruit.

 

Bitcoin has “clear potential for growth and could become a major means of payment for online transactions” a Bank of America analyst told CNBC. As the number of Bitcoin users continues to increase, merchants such as Adafruit, BTCTrip, Alliance Virtual Offices, and Clearly Canadian, see the value of working with BitPay to help expand their business.

Which explains why Europe, which over a year was the first entity to cry foul about Bitcoin (recall from November 2012: “The ECB Explains What A Ponzi Scheme Is; Awkward Silence Follows“) when the USD-price of one BTC was still in the double digits, is doubling down in its fight against the fiat alternative, this time as the European Union’s top banking regulator is preparing to actively supervise the virtual currency. From Bloomberg:

Trading Bitcoins could bleed you dry, the European Union’s top banking regulator said as it weighs whether to regulate virtual currencies. Thefts from digital wallets have exceeded $1 million in some cases and traders aren’t protected against losses if their virtual exchange collapses, the European Banking Authority said today in a report warning consumers about the risks of cybermoney.

 

Virtual currencies such as Bitcoin have come under increased scrutiny from regulators and prosecutors around the globe. China’s central bank barred financial institutions from handling Bitcoin transactions last week and German police arrested two suspects in a fraud probe into illegally generated Bitcoins worth 700,000 euros ($963,000).

 

“The technology is still relatively immature and lacks the infrastructure, regulation and understanding of the risks that are taken for granted in conventional financial systems,” Matt Rees, assistant director at Ernst & Young LLP, said in an e-mail. “It is not surprising then that thefts, frauds and other deceptions are currently commonplace.”

 

Since Bitcoins exist as software, the virtual currency isn’t controlled by any government or central bank. The digital money emerged in 2008, designed by a programmer or group of programmers going under the name of Satoshi Nakamoto, whose real identity remains unknown.

 

The virtual currency gained credibility last month after law enforcement and securities agencies said in U.S. Senate hearings that it could be a legitimate means of exchange. The price of Bitcoins topped $1,000 as speculators anticipated broader use of digital money.

Because, you see, it is the possibility of theft that has regulators worried, not that alternative currencies could undermine the fiat system (especially in Europe where the artificially common currency is not exactly the world’s most admired construct) the world is so hooked on.

So what does Europe propose? Simple: do more of what it truly excels at: tax stuff.

People holding virtual currencies may be subject to value-added or capital gains taxes, the EBA said.

 

The government of Norway, Scandinavia’s richest nation, said it would treat Bitcoins as an asset and levy capital gains tax on them.

 

“Bitcoins don’t fall under the usual definition of money or currency,” Hans Christian Holte, director general of taxation in Norway, said in an interview.

 

For virtual currencies to be regulated in the EU, the EBA would have to get approval from the European Commission, the 28-nation bloc’s executive arm.

 

We “support the EBA warning to consumers on the risks associated with virtual currencies,” Michel Barnier, the EU’s financial services commissioner, said in an e-mail.

In other words, it is only a matter of time before Europe does all it can to make the use of Bitcoin even more prohibitive, which in a Europe that is flooded with bad debt, with a banking sector whose credibility is non-existent resulting in loan “creation” plunging at a record pace, and a banking union “resolution mechanism” that is as improbable now as it has ever been, means more deposit bail-ins in a form that “fall under the usual definition of money” are just a matter of time.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/SVBCukOjheQ/story01.htm Tyler Durden

China Slams Abe's "Malicious Slander"; Warns Japan Is "Doomed To Failure"

Overnight rhetoric in Asia became increasingly heated when China's Ministry of Foreign Affairs expressed "strong dissastisfaction" at the slanderous actions of Abe's Japanese government over the Air Defense Identification Zone (ADIZ) and the "theft and embezzlement" of the Diaoyu Islands. "Japan's attempt is doomed to failure," China warned ominously and as we highlight below, a reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.

 

The 'triangle' of doom in the East China Sea…

 

 

Via Google Translate,

Q: Japanese Prime Minister Shinzo Abe held in Japan recently – especially during the ASEAN summit, accusing China to unilaterally change the status of the East China Sea, East China Sea, said China's air defense identification zone designation is improper for the high seas against the freedom of overflight, asked China to revoke the measure. What is your comment?

 

A: We have made some Japanese leaders use international slanderous remarks China expresses strong dissatisfaction.

 

Diaoyu Islands are China's inherent territory. Japan over the Diaoyu Islands theft and embezzlement have always been illegal and invalid. Since last year, the Japanese deliberately provoked the Diaoyu Islands dispute, unilaterally change the status quo of the Diaoyu Islands issue is none other than the Japanese themselves. In this regard, the Chinese law to take the necessary measures to safeguard national sovereignty and territorial fully justified, blameless.

 

East China's air defense identification zone designation is intended to protect national defense aviation security measures, consistent with international law and international practice, do not affect the countries of aircraft overflight freedoms enjoyed under international law. Deliberate on this issue in Japan to China to launch an attack, an attempt to tamper with the concept, the implementation of double standards, mislead international public opinion, Japan's attempt is doomed to failure.

 

"Rationalist Explanations For War" In The East China Sea

Submitted by Ankit Panda of The Diplomat,

Events in the East China Sea since 2009 have thrust to the forefront the following frightening question: will China and Japan imminently go to war? Conventional answers in the affirmative point to the deep level of historical mistrust and a certain level of “unfinished business” in East Asian international politics, stemming from the heyday of Showa Japan’s imperialism across Asia. Those on the negative often point to the astronomical economic costs that would follow from a war that pinned the world’s first and third largest economies against its second in a fight over a few measly islands, undersea hydrocarbon reserves be damned.

I can’t pretend to arbitrate between these two camps but I find that far too many observers sympathize with the second camp based on rational impulse. Of course China and Japan wouldn’t fight a war! That’d ruin their economies! I sympathize with the Clausewtizean notion of war being a continuation of politics “by other means,” and the problems caused by information asymmetries (effectively handicapping rational decision-making), but the situation over the Senkaku/Diaoyu islands can result in war even if the top leaders in Tokyo and Beijing are eminently rational.

Political scientist James D. Fearon’s path-breaking article “Rationalist Explanations for War” provides a still-relevant schema that’s wonderfully applicable to the contemporary situation between China and Japan in the East China Sea. Fearon’s paper was initially relevant because it challenged the overly simplistic rationalist’s dogma: if war is so costly, then there has to be some sort of diplomatic solution that is preferable to all parties involved — barring information asymmetries and communication deficits, such an agreement should and will be signed.

Of course, this doesn’t correspond to reality where we know that many incredibly costly wars have been fought (from the first World War to the Iran-Iraq War). So, if wars are costly — as one over the Senkaku/Diaoyu islands is likely to be — why do they still occur? Well, the answer isn’t Japanese imperialism or because states just sometimes irrationally dislike each other (as the affirmative camp would argue). It’s more subtle.

Fearon’s “bargaining model” assumes a few dictums about state knowledge, behavior and expectations ex ante. I’ll cast the remainder of the model in terms of Japan and China since they’re our subjects of interest (and to avoid floating off into academic abstractions).

First, China and Japan both know that there is an actual probability distribution of the likely outcomes of the war. They don’t know what the actual distribution is, but they can estimate what is likely in terms of the costs and outcomes of going to war. For example, Japan can predict that it would suffer relatively low naval losses and would strengthen its administrative control of the islands; China could predict the same outcome, or it could interpret things in its favor. In essence, they acknowledge that war is predictable in its unpredictability.

Second, China and Japan want to limit risk or are neutral to risk, but definitely do not crave risk. War is fundamentally risky so this is tantamount to an acknowledgement that war is costlier than maintaining peace or negotiating an ex ante diplomatic solution.

The third assumption is a little dressed up in academic jargon: there can be no “issue indivisibility.” In plain English, this essentially means that whatever the states are fighting over (usually territory, but it could be a pot of gold) can be divided between them in an infinite number of ways on a line going from zero to one. Imagine that zero is Japan’s ideal preference (total Japanese control of the Senkakus and acknowledgement as such by China) and one is China’s ideal preference (total Chinese con
trol of Diaoyu and acknowledgement by Japan). Fearon’s assumption requires that there exist points like 0.23 and 0.83 (and so forth) which set up some sort sharing between the warring parties. Even solutions, such as one proposed by Zheng Wang here at The Diplomat to establish a “peace zone,” could sit on this line.

If the third assumption sounds the shakiest to you that’s probably because it is. “Issue indivisibility” is a nasty problem and a subject of quite some research. It usually is at the heart of wars that seek to decide which state should control a territory such as a Holy City (the intractability of the Arab-Israeli conflict is said to be plagued by indivisible issues).

So, is the dispute over the Senkaku/Diaoyu fundamentally indivisible? Probably in the sense of splitting sovereignty over the islands, but probably not in the sense of some ex ante bargain similar to what Zheng proposed. Even if the set of solutions isn’t infinitely divisible, whatever finite solutions exist might not fall within whatever range of solutions either Japan or China is willing to tolerate — leading to war.

Fearon actually doesn’t buy the indivisibility-leading-to-war theory himself. He reasons that generally almost every issue is complex enough to be divisible to a degree acceptable by each party (undermining the infinite divisibility requirement), and that states can link issues and offer payments to offset any asymmetrical outcome. In the Senkaku/Diaoyu case, this would mean a solution could hinge upon Japan making a broader apology for its aggression against China in the 20th century or China taking a harsher stance on North Korea (both unlikely).

Relevant to the Air Defense Identification Zone is Fearon’s description of war arising between rational states due to incentives to misrepresent capabilities. China and Japan’s leaders know more about their country’s actual willingness to go to war than anyone else, and it benefits to signal strong resolve on the issue to extract more concessions in any potential deal. Japan announcing its willingness to shoot down Chinese drones earlier this year and its most recent defense plans are example of this, and China’s ADIZ is probably the archetype of such a signal. Instead of extracting a good deal, what such declarations can do is force rational hands to war over the Senkaku/Diaoyu islands.

Fearon’s final explanation — regarding commitment problems leading to war — is slightly ancillary to the core discussion about the Senkaku/Diaoyu islands given Japan’s constitutional restraints on the use of force (rendering preemptive, preventative, and offensive wars largely irrelevant in the Japanese case). Regardless, the point remains that even if the Senkaku/Diaoyu islands might seem like a terribly silly thing for the world’s second and third largest economies to go to war over, war can still be likely.

As I observe events in the East China Sea, I mostly recall Fearon’s warnings on certain types of signals leading to brinksmanship (the divisibility issue is far murkier). Both Japan and China don’t seem to be relenting on these sorts of deleterious signals. Additionally, given that Chinese and Japanese diplomats haven’t had high-level contact in fourteen months, even the more primitive rationalist’s explanation, that war occurs because a lack of communication leads to rational miscalculations, becomes plausible.

A reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Y1ytMiDqgLs/story01.htm Tyler Durden

China Slams Abe’s “Malicious Slander”; Warns Japan Is “Doomed To Failure”

Overnight rhetoric in Asia became increasingly heated when China's Ministry of Foreign Affairs expressed "strong dissastisfaction" at the slanderous actions of Abe's Japanese government over the Air Defense Identification Zone (ADIZ) and the "theft and embezzlement" of the Diaoyu Islands. "Japan's attempt is doomed to failure," China warned ominously and as we highlight below, a reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.

 

The 'triangle' of doom in the East China Sea…

 

 

Via Google Translate,

Q: Japanese Prime Minister Shinzo Abe held in Japan recently – especially during the ASEAN summit, accusing China to unilaterally change the status of the East China Sea, East China Sea, said China's air defense identification zone designation is improper for the high seas against the freedom of overflight, asked China to revoke the measure. What is your comment?

 

A: We have made some Japanese leaders use international slanderous remarks China expresses strong dissatisfaction.

 

Diaoyu Islands are China's inherent territory. Japan over the Diaoyu Islands theft and embezzlement have always been illegal and invalid. Since last year, the Japanese deliberately provoked the Diaoyu Islands dispute, unilaterally change the status quo of the Diaoyu Islands issue is none other than the Japanese themselves. In this regard, the Chinese law to take the necessary measures to safeguard national sovereignty and territorial fully justified, blameless.

 

East China's air defense identification zone designation is intended to protect national defense aviation security measures, consistent with international law and international practice, do not affect the countries of aircraft overflight freedoms enjoyed under international law. Deliberate on this issue in Japan to China to launch an attack, an attempt to tamper with the concept, the implementation of double standards, mislead international public opinion, Japan's attempt is doomed to failure.

 

"Rationalist Explanations For War" In The East China Sea

Submitted by Ankit Panda of The Diplomat,

Events in the East China Sea since 2009 have thrust to the forefront the following frightening question: will China and Japan imminently go to war? Conventional answers in the affirmative point to the deep level of historical mistrust and a certain level of “unfinished business” in East Asian international politics, stemming from the heyday of Showa Japan’s imperialism across Asia. Those on the negative often point to the astronomical economic costs that would follow from a war that pinned the world’s first and third largest economies against its second in a fight over a few measly islands, undersea hydrocarbon reserves be damned.

I can’t pretend to arbitrate between these two camps but I find that far too many observers sympathize with the second camp based on rational impulse. Of course China and Japan wouldn’t fight a war! That’d ruin their economies! I sympathize with the Clausewtizean notion of war being a continuation of politics “by other means,” and the problems caused by information asymmetries (effectively handicapping rational decision-making), but the situation over the Senkaku/Diaoyu islands can result in war even if the top leaders in Tokyo and Beijing are eminently rational.

Political scientist James D. Fearon’s path-breaking article “Rationalist Explanations for War” provides a still-relevant schema that’s wonderfully applicable to the contemporary situation between China and Japan in the East China Sea. Fearon’s paper was initially relevant because it challenged the overly simplistic rationalist’s dogma: if war is so costly, then there has to be some sort of diplomatic solution that is preferable to all parties involved — barring information asymmetries and communication deficits, such an agreement should and will be signed.

Of course, this doesn’t correspond to reality where we know that many incredibly costly wars have been fought (from the first World War to the Iran-Iraq War). So, if wars are costly — as one over the Senkaku/Diaoyu islands is likely to be — why do they still occur? Well, the answer isn’t Japanese imperialism or because states just sometimes irrationally dislike each other (as the affirmative camp would argue). It’s more subtle.

Fearon’s “bargaining model” assumes a few dictums about state knowledge, behavior and expectations ex ante. I’ll cast the remainder of the model in terms of Japan and China since they’re our subjects of interest (and to avoid floating off into academic abstractions).

First, China and Japan both know that there is an actual probability distribution of the likely outcomes of the war. They don’t know what the actual distribution is, but they can estimate what is likely in terms of the costs and outcomes of going to war. For example, Japan can predict that it would suffer relatively low naval losses and would strengthen its administrative control of the islands; China could predict the same outcome, or it could interpret things in its favor. In essence, they acknowledge that war is predictable in its unpredictability.

Second, China and Japan want to limit risk or are neutral to risk, but definitely do not crave risk. War is fundamentally risky so this is tantamount to an acknowledgement that war is costlier than maintaining peace or negotiating an ex ante diplomatic solution.

The third assumption is a little dressed up in academic jargon: there can be no “issue indivisibility.” In plain English, this essentially means that whatever the states are fighting over (usually territory, but it could be a pot of gold) can be divided between them in an infinite number of ways on a line going from zero to one. Imagine that zero is Japan’s ideal preference (total Japanese control of the Senkakus and acknowledgement as such by China) and one is China’s ideal preference (total Chinese control of Diaoyu and acknowledgement by Japan). Fearon’s assumption requires that there exist points like 0.23 and 0.83 (and so forth) which set up some sort sharing between the warring parties. Even solutions, such as one proposed by Zheng Wang here at The Diplomat to establish a “peace zone,” could sit on this line.

If the third assumption sounds the shakiest to you that’s probably because it is. “Issue indivisibility” is a nasty problem and a subject of quite some research. It usually is at the heart of wars that seek to decide which state should control a territory such as a Holy City (the intractability of the Arab-Israeli conflict is said to be plagued by indivisible issues).

So, is the dispute over the Senkaku/Diaoyu fundamentally indivisible? Probably in the sense of splitting sovereignty over the islands, but probably not in the sense of some ex ante bargain similar to what Zheng proposed. Even if the set of solutions isn’t infinitely divisible, whatever finite solutions exist might not fall within whatever range of solutions either Japan or China is willing to tolerate — leading to war.

Fearon actually doesn’t buy the indivisibility-leading-to-war theory himself. He reasons that generally almost every issue is complex enough to be divisible to a degree acceptable by each party (undermining the infinite divisibility requirement), and that states can link issues and offer payments to offset any asymmetrical outcome. In the Senkaku/Diaoyu case, this would mean a solution could hinge upon Japan making a broader apology for its aggression against China in the 20th century or China taking a harsher stance on North Korea (both unlikely).

Relevant to the Air Defense Identification Zone is Fearon’s description of war arising between rational states due to incentives to misrepresent capabilities. China and Japan’s leaders know more about their country’s actual willingness to go to war than anyone else, and it benefits to signal strong resolve on the issue to extract more concessions in any potential deal. Japan announcing its willingness to shoot down Chinese drones earlier this year and its most recent defense plans are example of this, and China’s ADIZ is probably the archetype of such a signal. Instead of extracting a good deal, what such declarations can do is force rational hands to war over the Senkaku/Diaoyu islands.

Fearon’s final explanation — regarding commitment problems leading to war — is slightly ancillary to the core discussion about the Senkaku/Diaoyu islands given Japan’s constitutional restraints on the use of force (rendering preemptive, preventative, and offensive wars largely irrelevant in the Japanese case). Regardless, the point remains that even if the Senkaku/Diaoyu islands might seem like a terribly silly thing for the world’s second and third largest economies to go to war over, war can still be likely.

As I observe events in the East China Sea, I mostly recall Fearon’s warnings on certain types of signals leading to brinksmanship (the divisibility issue is far murkier). Both Japan and China don’t seem to be relenting on these sorts of deleterious signals. Additionally, given that Chinese and Japanese diplomats haven’t had high-level contact in fourteen months, even the more primitive rationalist’s explanation, that war occurs because a lack of communication leads to rational miscalculations, becomes plausible.

A reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Y1ytMiDqgLs/story01.htm Tyler Durden

Investing in 2014

2013 is ready for the history books as an exceptional year on the financial markets in many regards. For the first time in five years there were no signs of a big financial crisis anywhere in the world. At a certain point it felt like Japan was going to be next in line to be hit by an implosion, but the swift actions from the Bank of Japan squashed the possibility. A party ensued on the Japanese stock market, which took away the prize for ‘best market in 2013’ with a rounded return of 50%!

The stock markets fared well this year. But the global economy stabilized all over too, with a modest growth of 1 to 2 percent for Western economies and 4 to 7 percent for the emerging markets. Of course, we have the extremely accommodative monetary policy from the central bankers to thank for this. They were again quite busy in 2013. The Federal Reserve for example, coupled its stimulus package to economic targets for the first time. More specifically an unemployment rate of less than 6.5 percent and an inflation rate of more than 2 percent. In the aftermath of these decisions, the Fed adjusted their monthly debt buyback program upward, to 85 billion dollars.

It is not about fighting of crises anymore, but about supporting balance sheets of banks, financing government spending and keeping the bond markets in check. Meanwhile, the core of the problem from a few years back – a huge pile of debt – is far from solved. You do not have to be a rocket scientist to understand that sooner or later this will have its effect, which is when the financial markets will be challenged once more. The only sustainable solution for the debt problem is economic growth, but at this stage it is practically impossible for Western societies like the US or Europe to grow its way out of debt. The gap between income and spending has become too large and it is increasing exponentially.

One day we will have another Big Bang. The question of ‘when’ is extremely hard to answer, however. Because until that time, the current trends will remain intact. That is why we are keeping an ‘open mind’ over at Sprout Money. Do not get caught up with one asset class or another. Make sure you have a decent mix of different assets in your portfolio. Be alert, but nimble. Ensure you respect your cash position as you never know what tomorrow might bring. New opportunities might present themselves fairly quickly. And although we do not have a crystal ball, we do want to share a few scenarios with you based on our decades of experience in the markets. As always, we are focusing on our specialties: stocks and commodities.

Stocks

This past year presented new highs for stocks. The Western markets are trading 20 to 30 percent higher, and the most important indices put historical records on the board. That is an important sign if we look at the big picture. Stocks practically broke free from the crisis period as you can see on the Bank of America chart below, which depicts the S&P 500 since 1927.

Generational lows stock market 100y

Not only did we just experience a similar crisis period as we did in the ‘30s and ‘70s of the last century, but the recent breakthrough also fits the mould well. However, we do expect that this breakthrough will be tested. Technical analysis would say that the last resistance level should become the new support level. For the S&P 500 that line lies somewhere around 1,550 to 1,600 points. That is why we do see the markets continuing the race in the first months of 2014, but the rally will meet resistance at some point, probably around symbolic barriers. If we have to make an estimation: the S&P 500 can go to 2,000 points, the Dow Jones could jump to 18,000 and the Nasdaq will have to meet its historical resistance at 5,000 points. Indeed, the technology sector is not in record territory yet!

Investing however, is looking ahead. Stock markets are trading 6 months ahead of the real economy. Those who want to predict the evolution of the markets in 2014, has to predict in one way or another the developments in 2015. As the expectations of corporate profits keeping growing at a decent pace, we foresee some ‘fear of heights’ among investors by that time. That will translate into a more turbulent year for the markets next year, possibly even before the summer. Although we are far from negative, we do predict that the stock market will not repeat its amazing 2013 performance. We expect a modest but higher close at the end of 2014 (around 7 percent) for the traditional markets. Investors will have to search for profit growth (technology stocks) and laggards – the emerging markets – to realize an above average return next year.

Commodities

2013 was as exciting for the stock market, but it was quiet for most commodity markets. Important (economically relevant) commodities barely made the news. While oil is closing off the year modestly higher, the copper price is now a little bit lower. Also in the agricultural sector there were mixed results between the grains and the softs. For real fireworks however, precious metals where the place to be, but in a negative way. We had predicted last year that the stock market could become a party pooper for gold and silver. And that scenario is exactly what happened.

Gold 10y chart 2013

As you can see on the above chart, the gold market blew off a lot of steam in 2013. The market sentiment however, felt like gold is done for. Nothing is further from the truth! Although the gold price almost had a 30 percent correction this year, it is still 3X higher than ten years ago. The secular bull market is more than intact. We are not giving up on the precious metal just like that.

We have seen movements like this before in the ‘70s. Things actually were a lot worse then, as the market had a correction of almost 50 percent, with all the doom and gloom at the time. Afterwards, the gold price made a full 180 and shot up at a ratio of 8X in the four years after. We are not saying that the next four years are going to be the same, but the gold rally is far from over. For 2014, we do expect a stabilization and a first ‘recovery’ for gold. If you look at the fundamentals, you cannot ignore the enormous demand for the precious metal. China bought most of the gold production of 2013, while the supply could possibly decrease because of the lower gold price. If we have to make an estimation for next year, we do see gold coming close to its historical record price. For gold’s ‘little brother’, silver, we expect a similar recovery, although a new record price might be a bridge too far.

We also foresee upward pressure for other commodities. The structurally higher prices of years past will continue their trend. Not only as a consequence of the increasing global demand, but also because of monetary measures taken by central bankers. The inflationary pressure will sooner or later have its effect within the commodity complex.

In summary we are keeping an open mind for 2014, with the current trend leading the charge. Increased turbulence, however, will most likely cause changes along the way. That is why flexibility, in the form of a decent cash position, is a must for every investor in the new year. New opportunities and challenges may present themselves at any given time. Our sights are mostly set on technology stocks, Chinese s
tocks, and gold and silver mining stocks.

Prepare for 2014 & Download our Free ‘Guide to Gold’

Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the Gold & Silver Report and the Technology Report.

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/QgXcSK0-6rI/story01.htm Sprout Money

Yet Another Massive Nail In The Dollar's Coffin

Two years ago, the CME announced USD/CNH futures trading enabling speculation (and hedging or risk transfer) of offshore Chinese Renminbi. On the other side of the world this week, a couple of gentlemen that few people have ever heard of signed an agreement that has massive consequences for the global financial system. It was a Memorandum of Understanding signed by representatives of the Singapore Exchange and Hong Kong Exchange. Their aim – to combine their forces in rolling out more financial products denominated in Chinese renminbi. This is huge…

 

Submitted by Simon Black via Sovereign Man blog,

Hong Kong and Singapore are THE two dominant financial centers in Asia. For years they’ve been locked in competition with one another, much like New York and London. So their public partnership is a very big deal… indicative of the clear objective they have in front of them.

Bottom line – finance executives in Asia see the writing on the wall. They can see that the dollar is in a period of terminal decline, and it’s clear that the Chinese renminbi is going to take tremendous market share away from the dollar. They want a big piece of the action.

The renminbi has already surpassed the euro to become the #2 most-used currency in the world when it comes to trade settlement, according to a report released yesterday by the Society of Worldwide Interbank Financial Telecommunication (SWIFT).

Right now the renminbi has about an 8.6% share of the global market for trade settlement. Granted, the dollar has the lion’s share of trade settlement at more than 80%.

But just look at how quickly the renminbi has grown; in January 2012, its share of the global market was just 1.9%. So it’s grown by nearly a factor of 5x in less than two years.

With today’s agreement between Hong Kong’s and Singapore’s financial exchanges, that growth will likely accelerate.

As we’ve discussed before, the dollar is in a unique position simply because it is the world’s dominant reserve currency.

This means that when a rice distributor in Vietnam does business with a Brazilian merchant, they’ll close the deal by trading US dollars with each other… even though neither nation actually uses the dollar.

It’s been this way since World War II, simply because there has been such a long tradition of trust in the United States, and a steady supply of dollars throughout the world.

But this confidence is fading rapidly as merchants and banks around the world have been seeking alternatives, primarily the Chinese renminbi.

As the dollar’s market share in international trade decreases, it will mean the end of US financial privilege. No longer will the US be able to print money without repercussions.

And as so many other nations have learned the hard way, when you print money with wanton abandon and indebt your nation to the hilt, there are severe consequences to pay.

Last week’s move between Hong Kong and Singapore gives us a glimpse into this future.

We’ll soon see more financial products– oil, gold, Fortune 500 corporate bonds, etc. denominated in renminbi and traded in Asia.

And as trade in these renminbi products grows, the dollar will be closer and closer to its reckoning day.

Years from now when this has played out, it’s going to seem so obvious.

Just like the post-Lehman crash in 2008, people will scratch their heads and wonder– ‘why didn’t I see that coming? Why didn’t I recognize that it was a bad idea to loan millions of dollars to unemployed / dead people?’

Duh. Same thing. People will look back in the future and wonder why they didn’t see the dollar collapse coming… why they didn’t recognize that it was a bad idea for the greatest debtor nation in the history of the world to simultaneously control the global reserve currency…

The warning signs are all in front of us. And last week’s agreement between Hong Kong and Singapore is one of the strongest signs yet.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/HxQnR5RYAyw/story01.htm Tyler Durden

Yet Another Massive Nail In The Dollar’s Coffin

Two years ago, the CME announced USD/CNH futures trading enabling speculation (and hedging or risk transfer) of offshore Chinese Renminbi. On the other side of the world this week, a couple of gentlemen that few people have ever heard of signed an agreement that has massive consequences for the global financial system. It was a Memorandum of Understanding signed by representatives of the Singapore Exchange and Hong Kong Exchange. Their aim – to combine their forces in rolling out more financial products denominated in Chinese renminbi. This is huge…

 

Submitted by Simon Black via Sovereign Man blog,

Hong Kong and Singapore are THE two dominant financial centers in Asia. For years they’ve been locked in competition with one another, much like New York and London. So their public partnership is a very big deal… indicative of the clear objective they have in front of them.

Bottom line – finance executives in Asia see the writing on the wall. They can see that the dollar is in a period of terminal decline, and it’s clear that the Chinese renminbi is going to take tremendous market share away from the dollar. They want a big piece of the action.

The renminbi has already surpassed the euro to become the #2 most-used currency in the world when it comes to trade settlement, according to a report released yesterday by the Society of Worldwide Interbank Financial Telecommunication (SWIFT).

Right now the renminbi has about an 8.6% share of the global market for trade settlement. Granted, the dollar has the lion’s share of trade settlement at more than 80%.

But just look at how quickly the renminbi has grown; in January 2012, its share of the global market was just 1.9%. So it’s grown by nearly a factor of 5x in less than two years.

With today’s agreement between Hong Kong’s and Singapore’s financial exchanges, that growth will likely accelerate.

As we’ve discussed before, the dollar is in a unique position simply because it is the world’s dominant reserve currency.

This means that when a rice distributor in Vietnam does business with a Brazilian merchant, they’ll close the deal by trading US dollars with each other… even though neither nation actually uses the dollar.

It’s been this way since World War II, simply because there has been such a long tradition of trust in the United States, and a steady supply of dollars throughout the world.

But this confidence is fading rapidly as merchants and banks around the world have been seeking alternatives, primarily the Chinese renminbi.

As the dollar’s market share in international trade decreases, it will mean the end of US financial privilege. No longer will the US be able to print money without repercussions.

And as so many other nations have learned the hard way, when you print money with wanton abandon and indebt your nation to the hilt, there are severe consequences to pay.

Last week’s move between Hong Kong and Singapore gives us a glimpse into this future.

We’ll soon see more financial products– oil, gold, Fortune 500 corporate bonds, etc. denominated in renminbi and traded in Asia.

And as trade in these renminbi products grows, the dollar will be closer and closer to its reckoning day.

Years from now when this has played out, it’s going to seem so obvious.

Just like the post-Lehman crash in 2008, people will scratch their heads and wonder– ‘why didn’t I see that coming? Why didn’t I recognize that it was a bad idea to loan millions of dollars to unemployed / dead people?’

Duh. Same thing. People will look back in the future and wonder why they didn’t see the dollar collapse coming… why they didn’t recognize that it was a bad idea for the greatest debtor nation in the history of the world to simultaneously control the global reserve currency…

The warning signs are all in front of us. And last week’s agreement between Hong Kong and Singapore is one of the strongest signs yet.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/HxQnR5RYAyw/story01.htm Tyler Durden

The Definitive History Of Bitcoin

In 2008, the aftermath of the Subprime Mortgage Crisis created the perfect storm for the emergence of Bitcoin. Here is the definitive history of the famous crypto-currency. From the pseudonymous “Satoshi Nakamoto”‘s founding to the innovation of block chains to the “genesis block”, buying pizzas, Sandiches, Teslas, and now houses… Bitcoin has come a long way (and where it goes is anyone’s guess)…

 

(click image for massive legible version)


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/kYVnzdMudWI/story01.htm Tyler Durden

Meet The Restaurant With The Five-Year Waiting List

It’s not Spago, nor Per Se. It isn’t located on Rodeo Drive or in Columbus Circle. The restaurant with the longest waiting list, five-years to be precise, is a small, nondescript, 12-table basement located in Earlton, N.Y., named simply enough Damon Baehrel after its owner and chef. Its guests come from 48 countries and include such celebrities as Jerry Seinfeld, Martha Stewart and Barack Obama himself. However what makes Baehrel’s restaurant the most exclusive restaurant in the world is not the decor, nor the patrons, some who fly overnight from Manhattan to pay $255 for dinner (before wine and tip), nor the hype (although all the advertising is through word-of-mouth), but the food, which is all cultivated, grown, prepared, cooked and served from and on the property, and where Baehrel is literally the only employee. “I’m the chef, the waiter, the grower, the forager, the gardener, the cheesemaker, the cured-meat maker, and, as I will explain, everything comes from this 12-acre property.”

The reality is that farm-to-table dining is not exactly a revolutionary concept, although it certainly makes for a far more enjoyable eating experience. As Bloomberg reports, “even McDonald’s touts its farmers and ranchers in feel-good ads. Increasingly, though, entrepreneurial chefs are doubling down on the eat-local trend and bringing customers into their own homes (or cozy approximations thereof). At these culinary salons or underground restaurants, as they’re often called, professionally trained cooks host for-profit dinner parties in unexpected spaces. There’s Wolvesmouth in Los Angeles, where chef Craig Thornton invites patrons to come to his house and pay what they want; City Grit in Manhattan, which rotates Top Chef winners through a downtown furniture store (yes, the communal dining table is for sale); the Underground Restaurant in London; Supper Underground in Austin, Tex.; and Hush Supper Club in Washington and Chicago. The food world revolves around hype—the harder it is to get into a restaurant, the more people want to go—and so culinary tourists obsess and war over the limited space at these secret spots.”

In this world of self-contained gastronomical universes, Baehrel is the most secret:

He has no staff, unless you count his wife and a tech-savvy friend, who help him manage the reservation e-mail address posted on his website. He spends no money on marketing and doesn’t have a business manager cultivating endorsement deals. There have been no profiles of him in major food magazines nor write-ups of his restaurant in any newspapers. In spite of this, or possibly because of it, the wait time just keeps getting longer.

The chef, waiter, gorager, grower (etc), never started off as one: “He learned how to cook from his mother, an avid gardener, and also from years doing odd jobs in mountain-resort kitchens in the Northeast. “I learned bits and pieces along the way, but I never did the research, never looked in a cookbook. In my family, we just learned to do it ourselves, and the inspiration came from nature,” he says. After an injury in 1985 derailed his nascent career as a professional motocross racer, Baehrel and his wife bought their land and opened a catering business specializing in foraged food. It eventually morphed into the bistro concept in 2006 and since then has relied almost entirely on word-of-mouth buzz.”

And a lot of buzz there is: as Michael Chernow of New York’s chain of Meatball Shops says, “With [Baehrel’s] skills, it’s like he’s the Michael Jordan of culinary art.”

So just what does the Michael Jordan of cooks serve?

Baehrel has a thing for molecular gastronomy; his small bites are dehydrated, infused, and tinctured on their way from lawn to mouth. All of that work happens in a red and white-trimmed kitchen-as-barn the chef built himself. It could pass for a rustic guesthouse. He keeps the space meticulously clean, laying down plastic sheets every few days to protect the linoleum floors. On steel prep tables sits the usual restaurant gear of blenders and food processors; neatly organized shelves store hundreds of containers of carefully labeled ingredients such as powdered bracken ferns or pickled maple leaves. “It occurred to me one day—and this was really an epiphany, 25 years ago—that everything I needed was here,” Baehrel says. “And I was going to spend the rest of my life developing and exploring what was possible.”

Not surprisingly, with an unmatched work ethic, Baehrel’s concept is very lucrative.

This hyperlocal, hyperunderground strategy is paying off. Baehrel won’t provide exact numbers but says he serves a few thousand guests each year and generates annual revenue of at least $750,000. By contrast, a successful restaurant in Manhattan’s crowded West Village might break the $1 million mark, though the business model is much different. Baehrel’s expenses are less predictable each season; they can include one-off big-ticket items such as a $5,000 trailer or a $10,000 hauling cart. But with no payroll or mortgage, and no food vendors except for his wine, seafood, and meat, which is from a local farm stand, he can stay both small and successful. “The biggest risk,” he says, “is that it’s just me there.”

However, what is most unique, and why Baehrel’s kudos and fame, are well-deserved, is his passion for working, cooking, that he takes no shortcuts, and that he has learned how to survive and thrive in an isolated ecosystem with zero supply-chain constraints and considerations, and with zero outside influence by the all-powerful megacorporations (although we have a nagging feeling it is only a matter of time before a major publicly-owned restaurant chain dangles a multi-million dollar check before Baehrel, acquires his 12-table basement and promptly pollutes yet another independent, clean eating concept).

“Native Harvest is more than the cuisine; it’s my way of life. It’s living off the land, and it’s fun to watch nature reveal itself,” Baehrel says. The three-bite dish has an appealingly musty mushroom taste. Sixteen dishes follow over the next five hours, some bite-size and others hearty courses of scallops, steak, and chicken. “He doesn’t use any dairy or butter in his cooking, and yet his sauces are creamy and delicious,” Chernow says. Each course is somehow improved by Baehrel’s monologue about the effort it takes to produce.

 

Perhaps that’s why the mainstream food world has finally started to take notice. Earlier this year, Damon Baehrel earned one of the country’s highest Zagat ratings: 29 for food and 28 for service, out of a possible 30. Baehrel also won his first James Beard nomination, as best chef in the Northeast in 2013. As it stands, the wait list for dinner stretches well into the back half of this decade. As the once-secret restaurant becomes less so, a new puzzle emerges: How does one score a table before Baehrel reti
res? He acknowledges that eventually he’ll have to stop taking reservations. “It’s a good problem to have.”

It’s also a good problem to have for all the minimum-wage restaurant workers of America who toil day and night at various McDonalds and Burger Kings around the country, demanding a higher wage and engaging in nearly daily strikes. Here’s a thought: take your passion for your job (if of course there is one) and do what Baehrel did – start a venture, open up a business, provide something new, original, fresh, and you too can attain the American dream. Or alternatively, keep on striking, and demanding more, more, more from the government, and from an uncaring corporatocracy, while lamenting your plight. Because if there is a lesson in Baehrel’s experience (and this most certainly is not a promotional post), is that while the US system is doing everything in its power to crush the enterpreneurial drive and to make upward mobility impossible, for those who have a real passion about their lot in life true success is still possible.

Finally, and perhaps most important assuming the future of the world is one in which critical supply chains tear apart: Baehrel’s example shows that one can lead a self-contained life of near gastronomical perfection with zero needs for 99 cent meals, and merely a few acres in which to grow and raise one’s food. All it takes, of course, is a lot of work…

For the reading challenged, here is an abbreviated 3-minute video summary of the above.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0oSwjtsasns/story01.htm Tyler Durden

Has the Tide Turned for Precious Metal Stocks?

By Russ Winter of Winter Actionables

Many post-facto articles appear at the end of severe bear markets and bull markets. A recent Wall Street Journal article, for example, noted:

“One of the world’s biggest gold bugs is getting crushed by the metal’s steep fall.

 

“The flagship fund of prominent Canadian hedge-fund manager Eric Sprott SII.T -1.56% has dropped more than 50% this year in what will likely be the third consecutive year of double-digit percentage losses, according to documents sent to investors.


 “Redemptions and weak performance have pushed down hedge-fund assets managed by Mr. Sprott to about $350 million from nearly $3 billion in 2008.” (Article here.)

The latter probably is a 3Q number that has been driven even lower by endless taper-talk and Comex paper shorting rout in the 4Q. The historic liquidation has run its course and supply is drying up.

How much more selling is left in Sprott’s and similar funds, or for that matter in the GLD ETF? The latter has liquidated its gold, plus some that was added going back to Lehman Brothers. How much additional naked-paper shorting to producers and bullion bankers can slingers muster? Nominal would be my estimation [see “One for the Ages“].

Rick Rule of Sprott conducted an interview about this flow of funds situation and offers some color on what’s transpiring. I put his last comment first because it points to the timing of what’s potentially a real turn in sector money flows. I think he is hinting that the money flow worm has turned from a selling climax to a gearing for an up phase.

“[The] events that have transpired over the last month have made me much more bullish in terms of timing than I would have been six weeks ago,” Rule said. “First, has been with regard to our Sprott mutual funds. We are seeing net inflows, as opposed to redemptions, for the first time in a long time.

 

“We recently signed and funded a joint venture with the incredibly large Chinese state-owned mining company,” he said. “This will show that outbound investment by the Chinese government into the junior mining sector, which is what we’ve specifically been charged with, is alive and well.”

Note: The following is in regard to the Zijin deal that I wrote about several weeks ago [see “China’s Precious Metal Mines Running Out Of Reserves“].

“We expect to be able to announce a similar joint venture with another name-brand Asian investor by the end of 2013. Once again, this is testimony to the fact that Asian strategic investors are back in the junior mining sector in earnest,” Rule said.

 

“Our Sprott institutional lending fund, where we aim to raise $350 million for our lending business, is very close to securing an extremely strong cornerstone lead-order from a name-brand North American institution.

 

“I did a couple of days of marketing around the city of London with our CEO.  We were seeing some of the bigger accounts in the city of London.  The bottom line is we received an awful lot of interest in what we were doing.”

One would think that value investors from outside the industry would be all over this vacuum. Adrian Day’s fund was able to buy 5% of Vista Gold for less than a million and half dollars.

Teranga’s very bullish $135 streaming royalty deal with Franco Nevada is also a bell ringer. It has all the hallmarks of a smart, private company builder transaction that is shareholder positive. Further, it refutes the notion that there is no activity in the space. Incidentally, FNV has $1.3 billion in capital for acquisitions.

Before the deal, this went completely undetected by the market. TGZ was trading in a dull, vacuum-like manner, much like the rest of the sector. The good news is that the stock actually responded with a 32% rally on the news. TGZ will soon become a large producer and has the full backing of the government of Senegal, which has a stake in the deal.  In fact, I have it from good sources that Senegal helped pushed this deal through. Hats off to TGZ management for consolidating this high potential district without any shareholder dilution.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/n7P-g0ZMhVo/story01.htm ilene