McAlvany Weekly Commentary, July 28,2010

End of the Party: An Interview with Don McAlvany

Posted on 28 July 2010.

Don McAlvany is Chairman of McAlvany Wealth Management and also founder of International Collectors Associates (ICA), a precious metals brokerage and consultation firm serving clients in over 20 countries since 1972. He has been a featured speaker at political, monetary, and investment conferences in Western Europe, Africa, Australia, the Middle East, Hong Kong, and Singapore, as well as all over the North American continent and Latin America. Don is also the founder and President for the Asian Pacific Children’s Fund (APCF). APCF is a non-profit organization that’s mission is to find well-run, largely unknown Asian children’s homes – homes that are on no one’s radar screen – and to help them to raise funding and bring in resources which they need to survive and prosper. www.mcalvany.com

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Jim Rogers: Another Recession to Hit by 2012

By: Frank McGuire

Jim Rogers, chairman of Rogers Holdings, thinks another recession will hit around 2012 but central banks will not be able to throw cash at it anymore.

"We do have inflation in the world … most central banks should resign," Rogers told CNBC.

There has always been a recession every four to six years in the United States "since the beginning of time," and that would mean another one is due around 2012, according to Rogers, a hedge fund pioneer who started the Quantum Fund with George Soros in 1970.

"When the next one comes the world is going to be in worse shape because the world has shot all its bullets," he said.

"Is Mr. (Federal Reserve Chairman Ben) Bernanke going to print more money than he already has? No, the world would run out of trees," Rogers added. (more)

Evolving Global Financial Crisis: The Dollar Should Head Down Again

by Bob Chapman

As we long ago predicted, 2005 was the beginning of the collapse of the housing bubble. The result was financial chaos and a credit crisis that enveloped the US, Europe and eventually the world. Some would like us to believe that materialism and selfishness were the reasons for bubbles, but the causes go far deeper than that. US, UK and European central banks, due to their greed for power, and a desire for world government, allowed debt to get totally out of control.

America’s monetary problems began on August 15, 1971, when the country left the gold standard, although GATT, which became WTO in 1986, began the cycle of destruction in the early 1960s. The presidency of Ronald Reagan opened and initiated the floodgates of debt after cutting taxes far too much and then destroying upper income taxpayers with the 1986 Tax Reform Act, which thrust 8 million millionaires into bankruptcy. Reagan’s failure to cut spending set a precedent, which lives with us to this day. During his time in office debt doubled. The result was the economy came unglued in 1989 and didn’t recover until the beginning of 1994. His successors had the opportunity to purge the system of debt and malinvestment, but they and the Fed passed up that opportunity to again cover up the mess they created. A boom in the stock market followed in the late 1990s and economic failure by 2007. (more)

More than 40M gallons of oil MIA

By Rick Jervis, USA TODAY

NEW ORLEANS — For more than three months, Gulf Coast residents and federal officials have asked where the oil spill was headed and how much damage it would deliver.

Now, a new, equally baffling question looms: Where has the oil gone?

The amount of surface oil that has bubbled up from the leaking well at the site of the Deepwater Horizon rig sinking has rapidly shrunk in size since the well was capped 11 days ago, according to the Coast Guard.

Recent flyovers of the spill area spotted only one sizeable oil deposit in the region, down considerably from the large pools of thick, reddish oil that washed into Louisiana's coastal marshes and beaches along the Gulf of Mexico.

"What we're trying to figure out is: Where is all the oil at?" said retired Coast Guard admiral Thad Allen, the oil response's federal overseer. "There's still a lot of oil that's unaccounted for." (more)

BNN: Top Picks

Michael Sprung, president, Sprung & Company Investment Counsel, shares his top picks.

click here for video

Dry Bulkers Pull Back As BDI Extends Rally

Indie Research,

Dry bulk shipping stocks took a breather on Wednesday, but there was no slowing the Baltic Dry Index. The sector's pricing benchmark pushed higher for its ninth straight session after plummeting from late-May through mid-July. At the end of that run, Deutsche Bank analyst Justin Yagerman called a bottom for dry bulk shares after the BDI's first session in positive territory following those more than 30 trading days in the red. Earlier this week Bloomberg suggested that the shipping sector is bottoming as Chinese steel prices signal iron ore demand.

As a whole, the Dry Bulk Shipping Stocks Index is off by -1% on the day as the S&P 500 widens its monthly lead on the sector. OceanFreight (NASDAQ: OCNF - News), DryShips (NASDAQ: DRYS - News), and Diana Shipping (NYSE: DSX - News) are all among top performers for the period, gaining more than 8%.

DryShips will report its second-quarter results after the bell today, and Diana is reporting next Thursday. The stocks were both among Pro-favorites in the dry bulk sector at the end of the first quarter, with four 13F-filing asset managers counting shares among their top-15 U.S.-listed equity holdings respectively. (more)

Buy, Sell, or Hold Research In Motion?

Eric Jhonsa, Motley Fool

Right now, you can't go through a list of news articles for Research In Motion (Nasdaq: RIMM - News) without seeing gloomy headlines such as "Why RIM is a Risky Investment" (TheStreet.com) and "BlackBerry's Era May Be Ending" (The New York Times). Fears of market share declines because of Apple's (Nasdaq: AAPL - News) iPhone and Google's (Nasdaq: GOOG - News) Android platform clearly have investors on edge -- and an underwhelming earnings report last quarter didn't do much to calm their nerves.

But the tech sector's history features many companies that thrived long after predictions were made of their imminent doom. Is RIM one of those names, or are Apple and Google on the verge of deep-sixing the Canadian giant? Here's a list of reasons to either buy, sell, or hold onto RIM's shares: (more)

Unemployment rises in 75 pct of metro areas

(AP) -- The unemployment rate in about three-quarters of the nation's largest metro areas rose last month as nearly one million teenagers entered the work force looking for summer jobs.

The Labor Department said Wednesday that the unemployment rate rose in 291 of 374 areas in June from May. It fell in 55 areas and was flat in 28. That reverses the trend of the previous three months, when joblessness fell in most metro areas.

But the report does not adjust the figures to take into account seasonal trends, such as high school or college students looking for work during the summer. As a result the figures tend to be volatile from month to month.

The economic recovery has spurred some hiring, with private employers adding an average of 100,000 jobs each month this year. But the pace of hiring slowed in May and June and isn't nearly fast enough to bring down the unemployment rate. (more)

Mining for Mergers: Which Gold Miners Might be Acquired?

Joung Park,

As gold prices have scaled new heights in recent years, acquisition activity has begun to heat up in the gold mining space. In this article, we will conduct a case study of recent major transactions in the gold mining space to identify characteristics of attractive takeover candidates. We will then apply these lessons to spot likely takeover targets within our coverage universe.

Profile of the Perfect Target
The primary reason a gold miner would acquire one of its peers is to expand its reserve base. As a gold miner depletes its existing reserves by extracting its below-ground ore, the firm must replenish those reserves to ensure continued production. This need is particularly acute for large majors, who typically deplete reserves at prodigious rates. While miners can expand their reserves by using either their shovels or their checkbooks, many prefer to purchase reserves on the market given the significant capital and time requirements, as well as the highly uncertain prospects surrounding exploration.

One of the largest deals in the gold mining space in recent years was initiated by Australian major Newcrest Mining (Other OTC:NCMGY.PK - News), which extended a takeover bid for Lihir Gold (NasdaqGS:LIHR - News) in May 2010, valued at $8.8 billion at the time of the offer. We believe the deal will almost certainly close this fall. There are several reasons why Lihir represented such an attractive takeover target for Newcrest. The firm controls the world-class Lihir Island mine, which houses 31 million ounces of gold reserves. Lihir is also a low-cost producer, ensuring that the combined Newcrest-Lihir entity will remain in the bottom quartile of the industry cost curve. More specifically for Newcrest, most of Lihir's reserves are situated in Papua New Guinea, a country where Newcrest also enjoys a significant mining presence. This close geographic proximity of Lihir's assets undoubtedly increased its appeal to Newcrest, as the firm can leverage its existing infrastructure and experience working in Papua New Guinea to better service the acquired assets. (more)

U.S. households only have a median of $2,000 saved in retirement accounts. The median net worth for those 25 to 34 is $3,700

I recently had a conversation with a retired neighbor, a former Navy vet who worked most of his life at a local grocery store. I wouldn’t call him wealthy but he has his financial house in order; he paid off his home in the early 1990s, has no other debts, and lives well below his means. His big source of income comes from Social Security. We talked about the current economy and the strain we are facing. It was a good conversation and ultimately the mathematical problems we are facing for the working and middle class become extremely obvious when confronted face to face. We both conceded that government retirement programs will have problems in one or two decades (doesn’t help many who are still working). The economic issues faced between the generations will cause many hard decisions down the road.

First, we should examine income levels in the U.S.: (more)

Marc Faber: Relax, This Will Hurt A Lot

Tyler Durden, Zerohedge.com

Marc Faber closed out this week's Agora Financial Symposium with a speech that pretty much recapitulated the view that the end of the world is if not nigh, then surely tremendous dislocations to the existing socio-political and economic landscape are about to take place (with some very dire consequences for the US). His conclusive remarks pretty much summarize his sentiment best: "We've had a trend for most of the past 200 years: GDP of countries like China and India went down while the West surged. That's now changed. Emerging economies will go up, and your children in the West will have a lower standard of living than you did. Absolutely. We won't sink to the bottom of the sea. But other countries will grow much faster than us. The world is very competitive, and the odds are stacked against us. Americans, with their inborn arrogance, will not let it go that easily, so there will be lots of tension going forward." While long-time fans of Faber will not be surprised by the gloom and doom (not much boom) here, anyone else who still holds a glimmer of hope that at the end of the day the CNBC spin may be right, is advised to steer clear of Faber's most recent thoughts. (more)

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