Month: March 2014

Gold Hedges Against Surge In Cost Of Bread, Eggs, Beer and Fuel

Today’s AM fix was USD 1,334.25, EUR 961.55 and GBP 800.87 per ounce.
Friday’s AM fix was USD 1,348.25, EUR 971.22 and GBP 805.17 per ounce.

Gold fell $11.30 or 0.82% on Friday, to $1,339.20/oz. Silver dropped $0.65 or 2.2% at $20.89/oz.

For the week, gold’s positive momentum continued and gold eked out slight gains of 1.3%.

Inflation history table: How the price of everyday items changed over 40 years – (Lloyds Private Banking via Daily Telegraph)

Gold retreated in all currencies for a second day after U.S. jobs data was slightly better than expected. Bullion for immediate delivery fell 0.4 % to $1,336.00 in London.

Gold sold off sharply on Friday after the data and was down $25 in minutes in concentrated selling. The sell off was unusual as the data did not merit such a sharp, sudden sell off especially given that the fundamentals, including the geopolitical situation, remain highly supportive.

Gold in US Dollars (Bloomberg)

Prices posted a fifth weekly gain last week, climbing to a four-month high of $1,354.87 on March 3, as tension between Ukraine and Russia escalated. This has led to an increase in safe haven demand which has contributed to gold’s 10% gains so far in 2014.

Platinum lost $3.20, or 0.2%, to $1,483.60 an ounce, ending around 2.5% higher for the week, while palladium rose 65 cents, or 0.1%, to $781.80 an ounce, up roughly 5% for the week.

Russia is among the world’s biggest producers of platinum and palladium. Its conflict with Ukraine and tensions with the U.S. is leading to worries about supplies of the precious metals.

Gold Hedges Against Massive Inflation In Bread, Beer, Eggs, Fuel and Property 
A new study has shown how the British pound has depreciated significantly in the last 40 years and how gold has again acted as hedge against inflation and currency debasement.

 

Gold in British Pounds – 2000 to March 10 2013 (Bloomberg)

The value of the pound has shrunk so rapidly over the last 40 years that a pound in 1973 is worth the equivalent of just nine pence today, the study by Lloyds Bank Private Banking has found.

The study found £9.48 in 1973 would have the same spending power as £100 today. The rising cost of retail goods means someone who was a millionaire 40 years ago would need £10,553,000 today to enjoy the same spending power, according to Lloyds Bank, which analysed data from the Office for National Statistics.

Everyday staples that we eat and consume now cost a huge amount more due to the massive 91% depreciation of the pound in the last 40 years.

– Beer surged by more than 20.5 times in cost. A pint of a beer has shot up by 1,948% from 14p to £2.87 per pint.

– Bread and the cost of a loaf of bread costs a whopping 12 times more – up 1,082% from 11p to £1.30.

– Milk costs nearly 8 times more. A pint of milk went up 667% from 6p to 46p.

– Coffee in its instant form (per 100g) cost nearly 10 times more from 28p to £2.67.

– Apples cost 7 fold more. From 28p per kilo to £2.02 per kilo for a rise of 622%.

– Sausages cost 8 times more. A kilo of sausages went from 58p to £4.84 or 735%.

– Butter costs nearly 11 times more. A 250 gramme slab of butter went from 13p to $1.42 or 992%.

– Carrots cost 8 times more. A kilo bag of carrots now costs 91p, up from 11p or a rise of 723%.

– Sugar costs nearly 9 times more. A kilo bag of sugar now costs 93p, up from 11p – up 787%.

– Eggs costs 8 times more. A dozen eggs now cost £2.78, up from 33p or a rise of 743%.

– Flour costs 8 times more. A 1.5kg bag of flour went from 15p to £1.19 or a rise of 724%.

– Petrol or diesel costs nearly 18 times more. A litre of diesel went from 8p to £1.41 or 1,727%.

– Residential property costs 18 times more. The price of the average detached house went from £16,980 to £305,391. The family home now costs 1,699% more.

Soaring inflation in recent months has put pressure on cash strapped households. However, the recent surge in inflation is less than that seen between 1973 and 1983, which saw the biggest rise in the cost of day-to-day items, at an annual average rate of a whopping 13.6%.

The lowest increase in inflation came during the period 1993 to 2003, with an annual increase of 2.6%, according to official data.

In the past ten years to 2013, inflation averaged 3.3% per year, with the highest levels coming post recession from 2008 and on.

If retail prices were to rise by 2.8% annually – in line with government targets – the value of money would decline by a further 67% over the next 40 years.

If inflation follows this pattern, consumers would need £311 in 2053 to have the same spending power as an individual with £100 today – or more than £3 million to enjoy the equivalent lifestyle of a millionaire today.

Lloyds based the calculation on estimates that a 2.8% rise in Retail Prices Index (RPI) inflation would be consistent with the government’s 2% target for Consumer Price Inflation.

Conclusion
Media coverage of the study tended to focus on the fact that the average price of a pint of lager increased from 14p in 1973 to £2.87 in 2013.

Little attention or coverage was given to the fact that gold has risen in value by more than beer, bread, apples, milk, sausages, butter, carrots, sugar, coffee, eggs, flour, diesel and even the beloved residential property in the form of the average detached house.

Therefore, gold had acted as a store of value and hedge against currency depreciation and inflation in the UK in the last 40 years, as it has done throughout recorded history.

On the back of the study, banking giants Lloyds warned that in 40 years, an individual would need £3 million to enjoy the same lifestyle as a millionaire today. Alternatively, millionaires could allocate a portion of their hard earned cash to gold to hedge against inflation. Investors and savers would be prudent to do the same.

Investing and saving are about protecting and growing one’s wealth in the long term. The recent poor performance of gold has garnered much attention and negative comment. Gold’s long term and historical performance as an important hedge against inflation continues to be unappreciated … for now.

Our latest report, ‘Gold Is Safe Haven According To Academic and Independent Research‘ looks at the academic and independent research on gold as a safe haven asset and hedge against inflation in more detail and can be read here.


    



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Edward Snowden: NSA Too Busy Spying on Americans To Catch Terrorists

Edward SnowdenIn

testimony published last week by the European Parliament’s
Committee on Civil Liberties, Justice, and Home Affairs, NSA
snooping whistleblower Edward Snowden told lawmakers that mass
spying has proven to be an especially ineffective means of
deterring wrongdoing. NSA claims to have prevented multiple
terrorist attacks evaporated upon actual scrutiny. Worse, he says,
the NSA is so busy probing the general public’s gaming habits and
personal communications that it has no time or to devote to
anything useful.

According to
Snowden (PDF):

The first principle any inquiry must take into account is that
despite extraordinary political pressure to do so, no western
government has been able to present evidence showing that such
programs are necessary. In the United States, the heads of our
spying services once claimed that 54 terrorist attacks had been
stopped by mass surveillance, but two independent White House
reviews with access to the classified evidence on which this claim
was founded concluded it was untrue, as did a Federal Court.

Looking at the US government’s reports here is valuable. The
most recent of these investigations, performed by the White House’s
Privacy and Civil Liberties Oversight Board, determined that the
mass surveillance program investigated was not only
ineffective–they found it had never stopped even a single imminent
terrorist attack–but that it had no basis in law.

Specifically, the board
concluded, “we have not identified a single instance involving
a threat to the United States in which the program made a concrete
difference in the outcome of a counterterrorism investigation.”

When it comes to legal concerns, the board
noted “There are four grounds upon which we find that the
telephone records program fails to comply with Section 215,” that
“the program violates the Electronic Communications Privacy Act,”
and that “The NSA’s telephone records program also raises concerns
under both the First and Fourth Amendments to the United States
Constitution.”

The board’s report also cautioned, “the bulk collection of
telephone records can be expected to have a chilling effect on the
free exercise of speech and association, because individuals and
groups engaged in sensitive or controversial work have less reason
to trust in the confidentiality of their relationships as revealed
by their calling patterns.”

Needless to say, the White House
glibly rejected the Privacy and Civil Liberties Oversight
Board’s conclusions.

Snowden went on to point out the failings of the NSA’s
all-you-can-hoover approach to surveillance.

I believe that suspicionless surveillance not only fails to make
us safe, but it actually makes us less safe. By squandering
precious, limited resources on “collecting it all,” we end up with
more analysts trying to make sense of harmless political dissent
and fewer investigators running down real leads. I believe
investing in mass surveillance at the expense of traditional,
proven methods can cost lives, and history has shown my concerns
are justified.

Despite the extraordinary intrusions of the NSA and EU national
governments into private communications world-wide, Umar Farouk
Abdulmutallab, the “Underwear Bomber,” was allowed to board an
airplane traveling from Europe to the United States in 2009. The
290 persons on board were not saved by mass surveillance, but by
his own incompetence, when he failed to detonate the device. While
even Mutallab’s own father warned the US government he was
dangerous in November 2009, our resources were tied up monitoring
online games and tapping German ministers. That extraordinary
tip-off didn’t get Mutallab a dedicated US investigator. All we
gave him was a US visa.

Nor did the US government’s comprehensive monitoring of
Americans at home stop the Boston Bombers. Despite the Russians
specifically warning us about Tamerlan Tsarnaev, the FBI couldn’t
do more than a cursory investigation–although they did plenty of
worthless computer-based searching–and failed to discover the
plot. 264 people were injured, and 3 died. The resources that could
have paid for a real investigation had been spent on monitoring the
call records of everyone in America.

Snowden’s testimony also ranged over disclosures to come, and
the complicity of European spy agencies in snooping on each other’s
citizens—and then sharing the data with the NSA, which gets the
full package. Countries even modify their privacy laws to make the
NSA’s job (and that of their own agencies) easier.

All of this, to suck up more data than the spies can process, at
the expense of targeting real threats.

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Meanwhile In Turkey…

The Turkish Lira is tumbling this morning (+150pips at 2.22); rapidly devaluing back towards pre-emergency-rate-hike levels and Turkish bond yields have surged back to levels seen in mid-2009. The driver appears to be the release of several political prisoners, suggesting the President is starting to lose control and given that ‘political stability’ is the key factor for many of these EM debt markets. The government, however, remains adamant that an “operation” by some institutional holders of lira bonds to “threaten” Turkey’s economy started after the probe into government corruption began in mid-December.

As Bloomberg notes,

Economy Minister Nihat Zeybekci says “operation” to undermine Turkey’s economy started after emergence of Dec. 17 probe into alleged govt corruption, state-run Anatolia news agency reports.

 

Zeybekci links lira volatility to “operation” by some institutional holders of Turkey’s lira bonds: Anatolia

 

Holders of Turkey debt dumped lira bonds, increased FX positions to “threaten” Turkish economy

 

Zeybekci says action against economy destined to fail

However one glance at the chart of Turkish bonds and it’s clear the selling began amid Taper fears last summer and was merely exacerbated by corruption concerns and EM crisis flows (and who would lock in rates for an allegedly corrupt government)

 

It would appear the driver of today’s weakness is an apparent loss of control by the President as several political prisoners are released by Turkey’s 13th high criminal court:

Turkey’s 13th high criminal court rejects release of some suspects in Ergenekon trial today, while 21st criminal court released others in same case, saying parliament’s abolition of specially authorized courts meant they had to be set free, HT reports.  

 

* 21st court decided today to release Ergenekon suspects Tuncay Ozkan, Levent Goktas and Sedat Peker, who were being     tried for alleged involvment in the so-called Ergenekon plot to overthrow Prime Minister Recep Tayyip Erdogan’s govt  

 

* 13th court, in contrast, didn’t release suspects, saying that parliament had no authority to dissolve the specially authorized courts that saw the cases, known in Turkish as OYMs  

 

* HSYK, the body that appoints judges and prosecutors – and which was re-structured by the govt amid a corruption probe – says 13th court overstepped its authority and parliament does have the authority to open or shut courts down

 

* Nationalist lawyer known for suing authors including murdered Armenian journalist Hrant Dink and Nobel Prize-winning author Orhan Pamuk for “insulting Turkishness” freed today, state-run TRT reports.  

 

* Kerincsiz among suspects freed after being jailed in so-called Ergenekon trial of people alleged to be plotting a coup against Prime Minister Recep Tayyip Erdogan

 

* Lieutenant General Mehmet Eroz also freed, TRT says

Chart: Bloomberg


    



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23andMe’s Anne Wojcicki Says FDA Order Seriously ‘Slowed Up’ Gene Test Sales

The U.S. Food and Drug Administration (FDA) has

succeeded in stifling sales for innovative genetic testing company
23andMe. “It has slowed up the number of people signing up,”
23andMe co-founder Anne Wojcicki said during a speech at
music/tech/everything festival South by Southwest (SXSW) on
Sunday.

In late 2013,
the FDA sent 23andMe
a letter ordering it to “immediately discontinue
marketing” of its home genetic tests or face “seizure, injunction,
and civil money penalties.”

The
public largely supports direct-to-consumer sales of gene screening
tests, which for as little as $99 can reveal information such
as ancestry and the presence of hereditary diseases and conditions.
But the FDA worried that consumers may make unwise medical
decisions based on their results. The FDA wants to stop consumers
from accessing important health information for their own good,
see?

Meanwhile, in foreign countries, scholars and government
agencies are going ahead and partnering with 23andMe to continue
moving medicine into the 21st century. At the SXSW
panel, Wojcicki said 23andMe now has 650,000 people in its
database and is “being inundated with requests from academics and
foreign partners.”

Genetics is going to become extremely cheap and part of our
daily life, she said. In China, the Beijing Genome Institute is now
the largest genome testing firm in the world, and Saudi Arabia, the
UK and others are all strong in this area.

Wojcicki also talked about how genetic screening can be used to
reduce health care costs and shift focus from disease treatment to
prevention. This, however, makes it unpopular with both
pharmaceutical companies and their buddies in the FDA, who have
more motive to make sick people better than to keep well people
from getting sick. Wojcicki said she was told by one doctor that,
“the problem with 23andMe is that you generate non-billable
information.” 

Non-billable, private information—23andMe allows
consumers to access their genetic info without a physician,
insurance company, or government middleman (which is probably
another strike against it in the FDA’s eyes). “Everyone has the
right to their genetic information and to use it,” said Wojcicki.
For now, however, 23andMe doesn’t have the right to tell you how to
get that information. 

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To Celebrate The Bull Market Anniversary, Sbarro Files Second Bankruptcy In Three Years

People apparently don’t eat pizza when it is snowing… Or during an economic recovery… And certainly not when celebrating the market’s all time high 5 year bull “market” anniversary.

That is the conclusion one can derive from the just filed Sbarro Chapter 11 bankruptcy filing, which just happens to be the company’s second in three years after it did the same in April 2011. The filing itself, which lists assets and liabilities between $100 and $500 million, is not surprising following on the heels of the announcement last month, when Sbarro said it would close 155 of 400 North American restaurants to cut costs. The reason for the Chapter 22 as it is known in restructuring circles: too much debt (so… debt isn’t wealth?) and declining customer traffic, which like in the McDonalds’ case has nothing to do with a cash strapped US consumer, but the nagging fear, which came true in January, that it would snow during the winter. Oh, and there is also no inflation, even though as Moody’s warned in January, Sbarros was striggling with “high food, labor and occupancy costs.”

But fear not: your favorite neighborhood Sbarro outlet will likely not be shutting down – a typical misunderstanding when bankruptcy is involved – as a $20 million DIP loan has already been arranged according to Bloomberg which will fund ongoing operations, and after $140 million in debt is eliminated, along with the existing equity of course, the company will return to operating its stores, albeit under new equity ownership.

Finally, none of the 600 or so worldwide franchises will be affected.

Full filing below.

 


    



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“Stolen Passport” Passenger On Missing Malaysian Airlines Jet Identified

One of the two men who used stolen passports to board the missing Malaysia Airlines jet has been identified according to the nation’s inspector general of police. Authorities are not releasing details of his nationality but confirmed he is neither Malaysian nor from Xinjiang, China (the home of the Uighur separatists who have come under suspicion following Taiwanese authorities tip last week warning that terrorists were targeting Beijing’s international airport).

 

Via LA Times,

Malaysian authorities have identified one of the two men who used stolen passports to board the missing Malaysia Airlines jet, the nation’s inspector general of police told local media Monday, as international search teams continued to look — so far unsuccessfully — for wreckage from the jet.

“I can confirm that he is not a Malaysian, but cannot divulge which country he is from yet,” Tan Sri Khalid Abu Bakar told the Star, a major Malaysian newspaper. He added that the man is also not from Xinjiang, China — a northwestern province of the mainland home to minority Uighurs. Uighur separatists have been blamed for a knifing rampage in southwestern China this month that left 29 dead.

Meanwhile, a Taiwanese official said national security officials received an anonymous tip last week warning that terrorists were targeting Beijing’s international airport.

…

According to the report by Taiwan’s Central News Agency, a man speaking Chinese claimed to have information of planned attacks directed against Beijing’s airport and subway system by the East Turkestan Independence Movement, an Islamic-inspired group seeking independence for the Uighurs. The caller identified himself as a member of a French-based anti-terror network and said he had called Taiwan’s national airline because he couldn’t reach anybody in Beijing.

…

As of Monday evening in Malaysia, investigators have found no confirmed wreckage of the airliner despite an intensive search by more than 40 ships and nearly three dozen aircraft off the southern coast of Vietnam.


    



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Russian Troops Open Fire In Crimea, Reuters Reports As Kerry Delays Russia Visit

That Ukraine “drill” may be coming at just the right time. Just out from Reuters:

  • RUSSIAN TROOPS OPENED FIRE DURING TAKEOVER OF UKRAINIAN MILITARY POST IN CRIMEA, NO ONE WOUNDED -INTERFAX QUOTES UKRAINIAN BASE COMMANDER

More:

Russian troops opened fire with automatic rifles during a takeover on Monday of a Ukrainian naval post in Crimea, Interfax news agency quoted a Ukrainian officer as saying.

 

The unnamed officer from the motor vehicle battalion of the Ukrainian navy said Russian troops broke in to the base near the inland town of Bakhchisaray some time after 2 p.m. (noon GMT), took mobile phones from the Ukrainians and began trying to remove vehicles. None of the Ukrainian troops was hurt and the base commander was trying to negotiate an end to the action.

 

Further details were not immediately available. Russian forces who have taken control of a number of military installations across the Black Sea peninsula have not so far exchanged fire in anger with Ukrainian troops.

And at the same time:

  • RUSSIA’S PUTIN SAYS TOLD FOREIGN MINISTER LAVROV TO INVITE U.S. COUNTERPART KERRY FOR MORE CONSULTATIONS ON UKRAINE
  • RUSSIAN FOREIGN MINISTER LAVROV SAYS HAD INVITED KERRY TO RUSSIA TODAY, BUT KERRY SAID ON SATURDAY HE WOULD LIKE TO POSTPONE VISIT
  • RUSSIA’S LAVROV SAYS RUSSIA HAS OWN PROPOSALS TO RETURN UKRAINIAN SITUATION TO THE FRAMEWORK OF INTERNATIONAL LAW, TAKING INTO CONSIDERATION INTERESTS OF ALL UKRAINIANS

No de-escalation yet. Any minute now though. The market said so.


    



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How Human Beings Shaped “Wild” Forests

I've got my property title RIGHT HERE.Here’s a doubly interesting Smithsonian

story about a study in southeast Asia. After examining pollen
samples from Borneo, Sumatra, Java, Thailand, and Vietnam, the
magazine reports, the paleoecologist Chris Hunt and the
archeologist Ryan Rabett concluded that “humans have shaped these
landscapes for thousands of years.” That may sound uncontroversial,
but it isn’t: “Although scientists previously believed the forests
were virtually untouched by people, researchers are now pointing to
signs of imported seeds, plants cultivated for food, and land
clearing as early as 11,000 years ago—around the end of the last
Ice Age.”

The article goes on to explain the evidence and reasoning that
led Hunt and Rabett to their conclusions, as well as how their
findings feed into “a larger discussion about when and how our
species began shaping the world around us.” All very interesting
stuff, especially for those of us who do not fetishize “untouched”
“wilderness” and see human beings as a part of nature, not an
intrusive alien force.

And then we get to the other reason the piece is interesting.
Hunt thinks there’s a political dimension to his work, a way to
help indigenous people stake out a Lockean claim to their
territories:

This kind of research is about more than glimpsing
ancient ways of life. It could also present powerful information
for people who live in these forests today. According to Hunt,
“Laws in several countries in Southeast Asia do not recognize the
rights of indigenous forest dwellers on the grounds that they are
nomads who leave no permanent mark on the landscape.” The long
history of forest management traced by this study, he says, offers
these groups “a new argument in their case against eviction.”

Such tensions have played out beyond Southeast Asia. In Australia,
for example, “the impact of humans on the environment is clear
stretching back over 40,000 years or so,” says environmental
geoscientist Dan Penny, of The University of Sydney. And yet, he
says, “the material evidence of human occupation is scarce.”
Starting in the 18th century, the British used that fact “to
justify their territorial claim” to land inhabited by Aboriginal
Australians—declaring it terra nullius (belonging to
no-one), establishing a colony, and eventually claiming sovereignty
over the entire continent.

It would be a stretch, of course, to treat that pollen alone as
a property title, especially so many centuries later and among men
and women who aren’t necessarily the descendents of the people
who lived in those forests 11,000 years ago. But as a way to change
the terms of the conversation around those seizures and
evictions—to show that mixing your labor with the land can take
many forms, and that individuals can intervene in their
environments in ways that aren’t always obvious to outsiders—Hunt
may well be right about his study’s implications. 

You can read the rest of the Smithsonian
article here.
And if you’re willing to shell out $35.95 for it—or if you have
access to the site through an academic institution—you can download
Hunt and Rabett’s paper from the Journal of Archaeological
Science
here.

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Amtrak ‘Residency’ Offers Free Rides to Writers Who Don’t Disparage It

'look on my works, ye mighty, and despair!'Do you write? Are you looking
for a free ride? Do you like Amtrak, or can you at least avoid
disparaging it? If so, it wants to hear from you:

Amtrak is excited to announce the official launch of
the #AmtrakResidency program.

#AmtrakResidency was designed to allow
creative professionals who are passionate about train travel and
writing to work on their craft in an inspiring environment.
Round-trip train travel will be provided on an Amtrak long-distance
route. Each resident will be given a private sleeper car, equipped
with a desk, a bed and a window to watch the American countryside
roll by for inspiration. Routes will be determined based on
availability.

Amtrak is one of those worst of both worlds public/private
hybrids. Instead of using the power of privatization to improve
services previously offered by government (what happens in
successful public private partnerships), Amtrak is a “for-profit”
corporation that doesn’t actually turn a profit because it gets
annual funding from the federal government and various state
governments who have stepped in any time the feds have tried to
trim funding.

How bad is it at Amtrak? Their 2013 budget and business plan
(pdf)
spun nearly 40 years of operating deficits as a good thing because
the “history of operating deficits demonstrates consistent
improvement over a long period”, when viewed in 2012 U.S. dollars.
In nominal U.S. dollars, operating deficits have remained
relatively constant.

Amtrak has just one profitable division to speak of, the
Northeast Corridor, which runs from Boston to Washington, D.C.
 On this route, Amtrak tickets are most expensive. They help
off-set much lower prices in other parts of the U.S., where local
members of Congress tend to lobby Amtrak to keep prices down even
when price hikes might not bring the routes to profitability. And
even in the case of the Northeast Corridor, it’s only “profitable”

excluding the route’s capital costs, for which Amtrak insists
it still needs a government subsidy, as it does for most of its
“business”.

So what’s the wisdom of a “Residency” for a company that’s never
managed to even break even? Amtrak still advertises, and its
support among enough Washington politicians probably ensures it
will continue to be able to bleed money and get away with it. Is
the “Amtrak Residency” a transparent attempt to buy some positive
press from participants? Amtrak skeptics, libertarians, and other
critics of the government appear to need not apply. The official terms of the
program outline that applications cannot “[d]isparage sponsor, its
agencies, any other person or entity affiliated with the Program or
products, services or entities that are competitive with any of the
foregoing.” At an estimated retail value of $900 per “residency,”
it could be cheap but useful propaganda for a company that relies
on money from politicians and not a profitable business model.

Via the Twitter feed of Doug
Stanhope

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