Uranium to Trump Potash in Canada

With the Canadian government making a highly publicized and controversial decision in November not to permit Australian mining giant BHP Bhiliton (NYSE:BHP) to acquire potash giant Potash Corporation of Saskatchewan (NYSE:POT), some investors may question the relative lack of news flow surrounding Australia-based Paladin Energy Ltd (TSE:PDN; ASE:PDN) acquiring uranium assets of Canada's Fronteer Gold Inc (TSE:FRG) in an all-stock deal valued at about $258.7 million.

While it is very rare for the government to intervene, under the Investment Canada Act, the federal government can only allow a takeover bid by a foreign company to proceed if it deems that a deal would bring a “net benefit” to Canada. The uranium assets are located in the highly prospective Central Mineral Belt of Newfoundland and Labrador in Eastern Canada. Some analysts suggest the deal is quite lucrative for Paladin with the company paying a mere $1.90 per pound for an estimated 130 million pound resource, compared with recent precedents of $6-11 per pound. Last week, Russia's ARMZ announced a $1.6 billion or $10 per pound for Mantra Resources, which owns the Mkuju River project in Tanzania.

A preliminary economic assessment released in September of 2009 supported a combination open pit and underground uranium mining operation and milling facility, which could process 10,000 tonnes of mineralization per day and produce an average of approximately 5.7 million pounds of uranium per year sustainable over a 17-year life of the mine with potential for growth. The assessment came in with expected average cash costs of $28.57 per pound of uranium. (more)

Bloomberg Businessweek - 03 January-09 January 2011

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Central Bankers Warn of Asset Bubbles

Sweden Shows Central Bankers How to Fight Next Asset Bubble ... Riksbank Governor Stefan Ingves (left) has raised the repo rate four times since July even as inflation remains below the bank's 2 percent target. House prices in Sweden jumped an annual 7 percent in the three months through July, the 15th consecutive period of increases. Sweden's central bank may set the direction for other policy makers as it looks beyond conventional inflation targets to asset-price growth in an effort to prevent the next bubble. "Not countering asset-price increases has been the conventional wisdom among central banks, but what has it actually resulted in?" said Tina Mortensen, an economist at Citigroup Inc. in London. "Surely the current crisis has made central bankers rethink policy; Sweden is actually facing this problem" because "asset prices and monetary policy are a hot topic," she said. – Bloomberg

Dominant Social Theme: Responsible bankers are concerned – and may have a solution.

Free-Market Analysis: The Bell recently analyzed "Inflation Heard Round the World" – and now an article (excerpted above) provides us with yet more concerns voiced by central bankers themselves. Swedish central bank head Stefan Ingves is worried about asset bubbles; the article tells us he has bumped up the repo rate considerably even the price inflation remains under two percent. The repo rate technically contracts the money supply.

Sweden thus becomes a country officially running counter to the inflationary trend, or at least one with a lead-banker who has claimed to take action. Europe, America and the BRIC countries are still following a stated pattern of loose money; serious price inflation is all but a given. The article quotes Johnny Akerholm, president of the Helsinki-based Nordic Investment Bank, as saying that the central bankers of most major countries areas are making a mistake: "We are practically re-running the same situation these days. Rates are low and the central banks are ‘printing money' while virtually all prices, except the consumer prices in industrial countries, are increasing rapidly." (more)

Palladium doubles in price in 2010; platinum up

Palladium more than doubled in price in 2010 based on Friday morning's London fixing, driven by growing demand from auto markets in emerging economies, while platinum racked up a second consecutive year of gains.

Palladium, which is used predominantly in catalytic converters for gasoline-powered vehicles, fixed at $791.00 an ounce in the final fixing of the year, against $797.00 at the previous fixing on Thursday afternoon.

Based on the fixings, it rose by 101.27 percent this year, compared with an annual gain of 95 percent for the freely traded spot price . Platinum fixed at $1,731.00 an ounce versus $1,755.00 at the previous fixing. Based on the fixings, it rose for a second straight year, by 18.4 percent in 2010.

The freely traded spot price rose by 18.3 percent. Platinum, which relies most heavily on demand from the jewellery sector, has underperformed palladium this year largely due to its exposure to the flagging European car market, where it is used in greater quantities than palladium in diesel catalysts. - Reuters

Medicare Bound to Bust as First Boomers Hit 65

WASHINGTON - The coming year is a big one for President George W. Bush, President Clinton and for millions of others born in 1946, the start of the post-war baby boom.

They're turning 65.

That makes them eligible for Medicare, with huge implications for our future, CBS News Correspondent Sharyl Attkisson reports.

(Scroll down to watch a video of this report)

On New Year's Day, the first baby boomers will celebrate the big 6-5, and they're not just getting older. They're getting more costly.

"Boomers" are the 77 million Americans born from 1946 through '64. Beginning Jan. 1, 10,000 a day will turn 65. That will continue for the next 19 years.

"The retirement of the baby boom generation will bring a tsunami of spending that will cause a severe problem for the federal government's budget over time," said David Walker, former U.S. comptroller general and CEO of the Comeback America Initiative.

Take Medicare, health care for the elderly and disabled:

• The number of people eligible will nearly double from 46 million to 80 million by the time all the boomers reach 65.
• It's estimated the cost will grow from $500 billion a year today to $929 billion by 2020. (more)

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Commodities Beat Financials Making Silver Top Pick

(Bloomberg) -- At a time when money managers’ concerns have swung between record government stimulus and the potential for a new recession, investors remain bullish on commodities that beat stocks and bonds for a second year.

The benchmark Standard & Poor’s GSCI gauge advanced 20 percent, more than the 9.1 percent gain in the MSCI World Index of stocks and 5.3 percent return on a Bank of America Merrill Lynch index of Treasuries. Currency traders are betting on a stronger dollar, sending a contrarian signal because commodities moved in an opposite direction to the currency in 16 of the past 20 quarters, data compiled by Bloomberg show.

Silver, an investment and an industrial material, will jump as much as 37 percent next year, leading gains in the 15 commodities covered in a Bloomberg survey of more than 100 analysts, traders and investors. Zinc, this year’s worst- performing metal, will appreciate 21 percent. Arabica coffee, which reached a 13-year high last week, will be the weakest performer, adding no more than about 7 percent.

The strength in demand “has been a surprise considering that we’ve just come out of the worst recession since the 1930s and carnage in most asset classes,” London-based Roxana Mohammadian-Molina, one of a team of 18 analysts at Barclays Capital who correctly called the bottom in oil and copper last year, said by phone Dec. 22. The bank says U.S. natural gas, will be the only one of the 25 commodity prices it follows that will average less next year. (more)

Inflation in China will cause the collapse of the regime

(AsiaNews) - The inflation that is hitting China recently, the cause of many social protests, is different from any other to have ever occurred in the country: it continues to grow and can be simply explained by the greed of a minority of people, exploiting the cheap labour and authoritarianism of the regime to get rich.

Wei Jingsheng, pro-democracy activist and author of Democracy Wall, explains why the Chinese government is playing with fire at this critical stage of development: only democratic governments, he says, "can successfully manage an economic transformation similar to the one taking place in contemporary China”.

China's economy often has excessive inflation. But each inflation is not exactly the same. The inflation during the Mao Zedong era was due to the shortage of goods caused by the planned economy. Academics call it a shortage economy. After the economic reform of the 1980's, inflation is still emerging consistently. At present the recently rising currency inflation has such intensity that it has made many people puzzled: "Since China has been reformed to a market economy, why is it still short of commodities, and has this inflation?"

Some friends with knowledge of economics would say: "the capitalist countries engaging in a Keynesian economy will also have a little inflation from time to time." So let us take a look at this Keynesian inflation of the Western countries, to see how it is different from the currency inflation in China now. Then we will analyze how to adjust and control the current inflation, and also explain why only democratic politics could avoid a hyperinflation. (more)

At 4.86%, The Fannie 30 Year Fixed Mortgage Is Back To 7 Month Highs

To all who have been following the recent rout in both the 10 year and the mortgage market, today's most recent jump in the 30 Year Freddie Fixed-rate mortgage, which at 4.86%just hit a 7 month high, will not come as a surprise. To Ben Bernanke, however, this is a flashing red sign, that QE2 is only working for Wall Street: its primary function of creating imaginary wealth in the form of additional home equity is not only failing, but the recent jump in mortgage rates by 1%, has had the indirect impact of forcing home prices to drop by another 10%. Look for this to hit Case Shiller data in March-April when today's near-5% mortgage rates diffuse through the marketplace. Robert Shiller describes it best: "Optimism is fading from the housing market." QE3 should promptly abort any last traces of anything even remotely resembling a housing recovery. (more)

Matterhorn Closes The Year In Style: "Hyperinflation Will Drive Gold To Unthinkable Heights"

From Egon von Greyerz of Matterhorn Asset Management

Hyperinflation Will Drive Gold To Unthinkable Heights

We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments. Thus most of these assets are also worth-less.

So the world financial system is a house of cards where each instrument’s false value is artificially supported by another instrument’s false value. The fuse of the world financial market time bomb has been lit. There is no longer a question of IF it will happen but only WHEN and HOW. The world lives in blissful ignorance of this. Stockmarkets remain strong and investors worldwide have piled into government bonds in a perceived flight to safety. Due to a century of money creation (and in particular since the 1970s) by governments and by the fractal banking system, investors believe that stocks, bonds and property can only go up. Understanding risk and sound investment principles has not been necessary in these casino markets with guaranteed payouts for anyone who plays the game. Maximum leverage and derivatives have in the last 10-15 years driven markets to unfathomable risk levels, with massive rewards for the participants.

In the meantime central banks are cranking up the printing presses but as Bernanke recently said quantitative easing is an “inappropriate” description of what should be called “securities purchases”! Who is he kidding? What the Fed is buying has nothing to do with “securities”. There is no security whatsoever in the rubbish the Fed is purchasing. They are buying worthless pieces of paper with worthless pieces of paper. This is the Ponzi scheme of all Ponzi schemes.

Let us be very clear, this financial Shangri-La is now coming to an end. The financial system is broke, many western sovereign states are bankrupt and governments will continue to apply the only remedy they know which is issuing debt that will never ever be repaid with normal money.

So why does the world still believe that the financial system is sound? (more)

The Economist - 1 January 2011

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