Will Platinum Outperform Gold In The Near Future? (PPLT, PALL, GLD, SWC)

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Przemyslaw Radomski: Platinum and gold have been playing a game of tag, and this week, platinum took the lead again regaining its rightful position up front, but for how long?Looking back at history, platinum has been the front runner with an average $200 to $400 premium to gold. At times the difference was much greater. Before the 2008 Lehman Brothers crash, platinum was trading at more than $2,270 per ounce while gold was trading under $990 an ounce. The prices as of close of this week’s issue were $1,686.50 for gold and $1,694.30 for platinum.As the bull market in the precious metals sector continued, the yellow metal’s spectacular marathon over the past few years began posing a challenge to platinum. On September 2, 2011 gold took the lead pumped up on a runner’s high. This past year (2012) it looked like gold had hit the wall of fatigue and needed to catch its breath. And this week, for the first time since March, platinum captured its rightful place as leader of the pack.Platinum rallied strongly in the first two weeks of 2013 on bullish fundamental reasons, but the true catalyst for this week’s move up came on news of supply disruptions from Anglo American Platinum Ltd. (AMS.JO), the world’s largest platinum producer which announced that it will suspend production at several mines in South Africa. Closing the mines will cut platinum production by 400,000 ounces annually, according to some news reports. The company produces about 40% of the world’s mined platinum. The troubles for platinum don’t stop there. The cutbacks will result in 14,000 job losses, or 3% of the country’s mineworkers, and a 20% drop in annual production. Union leaders are already threatening new strikes, which brings to mind the violent strikes of last summer which resulted in about 50 deaths. On Thursday miners returned to work after an illegal walkout, but it’s difficult to predict how this will play out.There are several fundamental factors influencing the platinum market. Analysts say that global platinum production as a whole is in a deficit; with some citing a supply deficit of 400,000 ounces in 2012, versus a 430,000 ounce surplus in 2011. This news comes in tandem with a forecast of a rebound in automotive sales. Platinum’s greatest industrial use is in auto catalysts, so the simple equation of tight supplies and higher demand underpins a strong fundamental outlook.Platinum prices began to fall around a year ago in when demand dropped due to the poor economy. Then in August prices picked up again due to the labor strikes in South Africa, which produces 75% of world platinum supply. As the labor disputes were resolved, prices drifted lower once more, until recently.Platinum is much more rare in nature than gold. Approximately 10 tons of ore must be mined – sometimes almost a mile underground at high temperatures- to produce one pure ounce of platinum. More than ten times more gold is mined each year than platinum. In fact, all the platinum ever mined throughout history would fill a room of less than 25 cubic feet. Unlike gold, which is either held in bank vaults or used in jewelry, more than 50% of the yearly production of platinum is consumed (used up) by industrial uses, mostly in the automobile industry so that are no large inventories of above-ground platinum.Having discussed platinum’s fundamentals, let’s see what charts tell us about its near future. We’ll begin today’s technical part with its direct “competitor” – the yellow metal (charts courtesy by http://stockcharts.com.)In gold’s very long-term chart, where the daily noise is nicely filtered out, we see that gold formed a bottom slightly below the 300-day moving average. This is similar to what was seen in 2009 and also 2007, when gold bottomed close to this support line. It seems that another powerful rally for gold prices could be in the cards. All-in-all this chart and the long-term trends are clearly bullish for the yellow metal for the coming month.Now let us move on to a chart that shows platinum’s long-term performance relative to gold.In the platinum to gold ratio chart, recent trading days have seen a post breakout rally triggered by supply issues in South Africa. Fundamental factors and news, however, don’t determine how much prices will rally in the short-term or if the rally should be followed by a correction or a big move to the upside, which seems to be the case today – technicals do.For the rest of the story go here http://etfdailynews.com/2013/01/18/will-platinum-outperform-gold-in-the-near-future-pplt-pall-gld-swc/

Gold Prices Are Setting Up For A Massive Breakout 2013 (GLD, GDX, SLV, GG, ABX, KGC, IAG)

Jordan Roy-Byrne: This piece expounds upon what we covered last week. In that piece, regarding Gold, we concluded:If Gold is able to firm up here and now then it has a good shot to rally back to $1750-$1800 over the next few months. If we get the bullish scenario and a fundamental catalyst shift then expect Gold to break past $1800 in Q3. That would mean that Gold consolidated for two years which would be its longest consolidation on record. The longer the consolidation, the more explosive the breakout.Following that editorial, we noted for premium subscribers that various sentiment indicators continued to look favorable even as the market began to make some progress. For example, the daily sentiment index for Gold touched 6% yet Gold didn’t make a new low. At the same time we saw a continued reduction in speculative long positions. Bloomberg reported that hedge fund long positions in Gold were reduced to the lowest level since August. Technically, take a look at the weekly chart. Gold seemed at risk below $1630 yet it closed above $1650 in each of the past four weeks. Now that Gold is starting to turn bullish all time frames (daily, weekly, monthly) it has a great chance to rally back to $1750-$1800 over the next few months and position itself one step closer to a breakout.With that said, we want to show why Gold is setting itself up for an excellent breakout later this year. In the chart below we are focusing on two things: the price action and the volatility as measured by bollinger band width (bottom rows). Have a look.
http://etfdailynews.com/2013/01/18/gold-prices-are-setting-up-for-a-massive-breakout-2013-gld-gdx-slv-gg-abx-kgc-iag/

Buffett: U.S. debt on its own ‘not a problem’

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Warren Buffett says the federal deficit is less of a problem than it’s made out to be.

NEW YORK (MarketWatch) — Billionaire Warren Buffett believes the federal deficit should be stabilized in relation to U.S. economic growth, but that the nation’s $16.4 trillion in red ink is not trouble in and of itself.

“It is not a good thing to have it going up in relation to GDP, that should be stabilized, but the debt itself is not a problem,” the CEO of Berkshire Hathaway BRK.A +0.01% said in an interview broadcast Sunday on the CBS “Sunday Morning” news show.

“What is right about America just totally dwarfs what’s wrong with Washington. 535 people are not going to mess up 315 million over time. I know it.”
Warren Buffett, CEO of Berkshire Hathaway

The nation’s debt is “a lower percent of GDP [gross domestic product] than it was when we came out of World War II. You’ve got to think about it in relation to GDP,” added Buffett, a vocal advocate for increased taxes on the nation’s wealthiest, a stance he alluded to in the broadcast.

“I would say in a country with $50,000 of GDP per person, that nobody should be hungry, nobody should lack a good education, nobody should be worried about medical care, you know, nobody should be worried about their old age.”

http://www.marketwatch.com/story/buffett-us-debt-on-its-own-not-a-problem-2013-01-20

Uncertainty on Batteries May Weigh on Boeing

Stuart Isett for The New York TimesBoeing’s Everett, Wash., factory is producing five 787 Dreamliners a month. One possible cause of battery fires has been ruled out.

By CHRISTOPHER DREW

Published: January 20, 2013

But the grounding, prompted by a battery fire on one jet and the emergency landing of another, has knocked Boeing off stride. Now, investors as well as government officials are paying close attention to see how big the issue becomes for the company, which is one of the nation’s biggest exporters.Until smoldering batteries forced safety regulators to ground Boeing’s new 787 Dreamliner jets last week, the aircraft manufacturer was flying high, with soaring profits and a recently regained No. 1 ranking in jet deliveries over Airbus.
Although company officials said they expected to find a solution quickly, federal regulators on Sunday ruled out one simple explanation — that the battery was overcharged. If the problems prove more complicated, they could threaten Boeing’s plans to expand production of the planes, and the jobs that go with them.

“Boeing has a lot at stake, for its headlining airliner and for the company brand,” said Scott Hamilton, the managing director of the Leeham Company, an aviation consulting firm in Issaquah, Wash.

Mr. Hamilton said he had no doubt that Boeing would “work its way through this.” But until more is known about the batteries, he said, “it’s impossible to draw conclusions about what went wrong, what the fix is, how long it will take and what the long-term damage to the 787 and to the Boeing brands will be.”

In what would seem to be the worst possible outcome right now, Boeing might also have to redesign its powerful new lithium-ion battery system, or even switch back to older, safer models. Aviation experts said such changes could cost hundreds of millions of dollars and shave off some of the 20 percent savings in fuel costs that the new jets have delivered.

Analysts say Boeing, which has about $80 billion a year in sales, has the financial muscle to weather the problems and make production of the next generation of airliners succeed in an industry familiar with outsize bets.

But the recent incidents were a reminder of the manufacturing and testing mishaps that had delayed the development of the planes. And any lengthy new delay could tax the patience of airlines and investors who thought the Chicago-based company had put the problems behind ithttp://www.nytimes.com/2013/01/21/business/battery-fire-resolution-may-weigh-on-boeing.html?_r=0
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Hostess union hires investment bank

NEW YORK — The pension fund for one of Hostess Brands' unions has hired an investment bank to represent workers and pensioners as the maker of Twinkies and Wonder Bread sells off its brands.In a statement posted Sunday on its website, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union – which represents around 6,000 Hostess bakers – said Gordian Group LLC will represent the fund.Gordian, a New York investment banking firm that specializes in distressed cases, has represented unionized workers at American Airlines, which is undergoing restructuring in bankruptcy. It's also an adviser in the ongoing liquidation of disgraced investor Bernard Madoff's firm.Earlier this month, Irving, Texas-based Hostess selected Flower Foods Inc. to buy its six bread brands, including Wonder Bread, along with 20 bakeries and 38 depots, for $390 million.Flower Foods, based in Thomasville, Ga., was selected as the "stalking horse" bidder for the bread brands. That means higher competing bids can still be made and the final deal must be approved in bankruptcy court.Hostess is expected to find buyers for its dessert cakes, which include its iconic Twinkies and Ding Dongs, along with the Drake's Cakes and Dolly Madison brands, in the coming weeks.Gordian President Peter Kaufman said his company will try to ensure that potential buyers hire former Hostess workers and honor Hostess' pension obligations."Given the sale process that is under way, we believe the bakers working with a buyer create the opportunity to increase value and are pivotal to the success of the business," Kaufman said in a statement. "Buyers should know that the Bakers are very interested in having direct discussions with them."The Bakery and Confectionary Union and Industry International Pension Fund pays out $42 million in benefits per month to 52,000 pensioners, according to its website. Hostess told a bankruptcy judge in November that it was no longer able to pay its retiree benefit, which total $1.1 million per month, and that it stopped contributing to its union pension plans more than a year ago.Hostess filed for bankruptcy protection in January 2012, after years of management turmoil and turnover. A bankruptcy judge approved its plan to liquidate its assets in November after it failed to reach a new contract agreement with the bakers' union.

Long Silver, Short Gold Play Continues To Work Well

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)


A few key pieces of information on precious metals caught my attention this week, which continues to support my thesis that 2013 will be a year where gold (GLD) will continue to underperform against silver (SLV). I wrote an article about this topic about a month ago. Let's examine how gold and silver have performed in the last month.As the chart shows, both are up, but silver is outperforming gold by a factor of 3. Let's examine the key news that came out this week to see if this trend has legs.First, the news on silver.There seems to be a shortage of silver right now. This is not surprising. As industrial demand grows with the economic recovery in China, silver, a key industrial commodity, is in high demand. As reported by Seeking Alpha commentator Dave Kranzler:

I have a couple different business colleagues who have spoken with bullion smelters who say the market is in short supply right now. Furthermore, Swiss money manager Egon Von Greyerz statedyesterday that "we are now seeing very lengthy delays in getting physical silver."

How have investors reacted to the anticipated increase in silver demand, and hence higher prices? As reported by ETFtrends.com:

The iShares Silver Trust has gathered inflows of more than $600 million so far this week, which represents approximately 6% of the assets under management in the fund, to lead all ETFs.

This has led to a sharp rally in silver, as is clear from the chart above. I continue to be bullish on economic growth, especially from China. As reported by Seeking Alpha:

Chinese Q4 GDP rises 7.9% Y/Y vs. 7.8% consensus, 7.4% prior. December industrial production +10.3% Y/Y vs. 10.2% consensus. December retail sales +15.2% Y/Y vs. 15.1% consensus.

China is the engine that has been driving world industrial growth. If the outlook is positive for China, I believe that it is positive for silver as well. So, I continue to be bullish on silver.Next, the news on gold.Gold demand in aggregate continues to be weak. A reported byBullionvault.com: http://seekingalpha.com/article/1122561-long-silver-short-gold-play-continues-to-work-well?source=email_rt_article_title

Sent to me by Shaza

Food waste: From farm to fork and landfill

By Eoghan Macguire and Ines Torre, CNN

7 Reasons Markets Are Overbought, And What To Do

Most key gauges of risk assets, like the S&P 500 or other major global stock indexes, are near decade highs. Thanks to unprecedented stimulus actions from the US, EU, and Japan, they have held on within 10% of these highs (about 1550 on the S&P 500 for example) for most of 2012 despite mostly dismal fundamentals.
As we argued in our 4 part overview of 2013 forecasts, one's outlook for 2013 depends on whether you believe markets can continue being propped up artificially by assorted stimulus programs comprised mostly of deficit spending with printed money. As noted in section 6 below, it's not clear. In the above 4 part series we argued that one should not fight a central bank action of this magnitude. That means you don't open any long term shorts until you've evidence of a technical breakdown.But does it still pay to open new long positions? The short answer is probably not, as we'll discuss in the conclusions section below.Here's our latest collection of evidence that markets are seriously overbought, and some ideas on what to do to protect yourself and profit.

1. Continued Evidence of Slowing Global Growth

The world bank cut global growth forecasts last week. That shouldn't surprise anyone given that Japan Europe, and the UK are all in recession. China is slowing, and we can expect similar slowing from the other export oriented nations, given that their customers have less to spend. Friday's US UoM consumer sentiment report confirms that the world's biggest group of consumers isn't optimistic.

2. Austerity, Slowing Growth Coming To US Too

No matter what the final deal (or series of temporary deals) on the coming fiscal cliffs and debt ceiling fights, even the most bullish scenario brings at least some kind of tax increases and spending cuts, such as those imposed in the latest fiscal cliff deal, which is expected to cut 1%-1.5% from a US annual GDP that was running just over 2% (versus the average 3.6 % US GDP from 1950-99 and Fed's original 4.5% forecast for 2012).Future deals are likely to yield similar results - deals that produce some kind of "lesser of evils" scenario in which debt growth slows (but continues to rise) while weak growth gets weaker from the minimal austerity steps taken.

3. So Earnings To Drop Too

Q3 2012 earnings fell short, and thus far Q4 looks no better. These results make sense given the above.

4. Time Is Not On Our Side: Market Cycle Perspective

From a market cycle perspective, major stock indexes remain near decade highs that most likely mean the end of a bull cycle within a longer term secular bear market. See here for details.

5. A Series of Unfortunate Events: Other Technical And Sentiment Readings

In addition to the above fundamental weaknesses, we also from a set of technical and sentiment readings present, and quote them from John Hussman's "A Who's Who of Awful Times To Invest."The following set of conditions is one way to capture the basic "overvalued, overbought, overbullish, rising-yields" syndrome:1) S&P 500 more than 8% above its 52 week (exponential) average
2) S&P 500 more than 50% above its 4-year low
3) Shiller P/E greater than 18
4) 10-year Treasury yield higher than 6 months earlier
5) Advisory bullishness > 47%, with bearishness < 27% (Investor's Intelligence)

6. History: Current Conditions Suggest 10% - 20% Drop

History suggests current conditions mean the next move is down, at least 10%, possibly in excess of 20%.

From SocGen's Albert Edwards:

We noted in our recent article on lessons for the coming week:

In a note to clients, Societe Generale's bearish strategist Albert Edwards noted that "U.S. S&P rally from low looks spookily similar to 2007," saying that the S&P 500 is exactly 807 points above its March 2009 low of 666. From its 2002 low to its 2007 high, the S&P 500 moved exactly 807 points.

From Citibank's Tom Fitzpatrick

While he concedes that the S&P could yet reach around 1500 (it closed last week at 1485), he sees the market due for a pullback in excess of 20% to around 1200. Admittedly that's not much beyond a normal technical pullback, but it's one you'd rather avoid if possible. Key points include:The Bullish Evidence Isn't So Bullish

• Housing has improved, but only a bit compared to its peak just over 6 years ago. It's still way below that level (me: or even averages of the past decade).
• Stocks overall flat for over a decade: The 120 % rally since 2009 only brings leading indexes back to their 1999 level, and we're still a bit below the 2000 and 2007 highs. The secular bear remains intact.
• As we noted above, US and global growth is stagnant, and US growth is likely to slow given even relatively minimal new efforts to make slow deficit growth.
• Since the start of QE3, or QE-infinity there's been no meaningful improvement in stock prices, employment, or wages.

He adds (along with most other analysts) that central bank intervention is unsustainable and (as suggested above) both US and global economies are expected to be flat to lower for the year ahead, and that he sees no compelling fundamental reasons that risk assets should make another sustained break higher.

From Citibank's Peter Lee

Per Lee, the picture is potentially bleaker, who see's the S&P 500 (and by extension other risk assets making a similar drop) reverting back down to its long term uptrend line, meaning it's due for a roughly 50% drop in the coming years to around 750 - 850 per his long term studies dating back to the 1800s. See here for the full article and some disturbing charts.

7. EU Risk Complacency

As we wrote last week here, the widespread notion that EU crisis risk is over, aided and abetted by EU officials, is arguably 2012's biggest lie and 2013's biggest risk. In addition to what we've said earlier about how nothing of note has improved in the EU (except its ability to provide some short term liquidity) and that instead there is every reason to believe things are fundamentally worse, we already have news this past week that yet another warning, this time via the IMF, of more haircuts for Greek bondholders.

On the (Relatively) Bullish Side

There are more optimistic views from those who deserve to be taken very seriously.

Goldman's Hatzius More Optimistic

Regarding the US, Goldman Sach's to economist Jan Hatzius sees 9 bullish reasons to believe US markets don't become unglued in the first half of 2013, and then see modest increase in growth in the second half.Note however, that his positive outlook for the second half depends on two positive outcomes, neither of which is assured.The recent and future fiscal cliff and debt ceiling deals don't cause real income growth to go negative on a year-over-year basis. Whenever that has happened there has been a recession. He acknowledges it could happen but believes the likelihood is that it doesn't. See here for the full article.The current calm about the EU crisis continues. He believes (me too) that the EU crisis has been the prime market driver for the US since mid 2011. See here for details and supporting chart.

BofA/ML's Bartels: 10-15% Correction A Last, Best Buying Opportunity

Based on her view of past patterns and trading ranges, BofA/ML's technical analyst Mary Ann Bartels, sees a possible 10-15% correction in 2013 (well within the range of a normal technical pullback)as a multi-year low and start of the next leg higher of about 500 points or more on the S&P 500.The What to do is on this link:http://seekingalpha.com/article/1121941-7-reasons-markets-are-overbought-and-what-to-do

Davos Schwab Says Iran, Syria ‘Black Swans’ as Euro Crisis Fades

Klaus Schwab, founder of the World Economic Forum, sees political “black swan” events threatening global security even as economic risks subside, with confidence returning to the euro area.“The world is still full of risks and we do not have only to address the economic risks, I think it is very important that we become more resilient in terms of the political risks,” Schwab, 78, said in an Bloomberg Television interview in Davos yesterday. “There are many black swans round,” he said, referring to the Japan-China dispute in the East China Sea, the Syrian civil war and the nuclear inspections in Iran.Black-swan events, named after the belief that all swans were white until the discovery of black ones in Australia in 1697, describe extreme outcomes such as the 2008 financial crisis that were previously considered very unlikely to happen. A World Economic Forum survey presented earlier this month found that income disparities and government budget deficits present the most likely risks to the global economy in the next decade.Schwab, who founded the annual meeting of political and business leaders in 1971, said that he expects Northern Africa, Syria and the war in Mali to be “hot issues” at the Forum, which starts tomorrow, while the euro-region crisis “will not play such a big role as it did the last year.”

Europe Stabilized

“I think we have certain signs that at least we have stabilized the situation,” Schwab said, adding that a breakup of the common currency was “definitely” off the table. “There might again be a crisis mode, but there will not be a breakup, because we have seen in Europe sufficient political will to make sure that Europe remains as a unity.”http://www.bloomberg.com/news/2013-01-21/davos-schwab-says-iran-syria-black-swans-as-euro-crisis-fades.html

Big Banks Seen in Need of Breakup Amid Mistrust in Poll

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The world’s largest banks need to shrink or be broken up in order to regain investors’ confidence after four years of scandals, high-profile trading losses and financial crises, according to a Bloomberg poll.Almost 60 percent of respondents said they were not confident or “just somewhat confident” that banks are taking prudent risks and conforming to the law, and getting smaller was seen as the top fix in the Bloomberg Global Poll, with 29 percent choosing that remedy. Changing the compensation structure was the No. 2 way to improve trust, with 23 percent.Enlarge imageA police boat passes the Canary Wharf business district in London. The Jan. 17 survey of the 921 investors, analysts and traders who are Bloomberg subscribers showed trust in the largest banks has failed to recover four years after the worst financial crisis since the Great Depression. Photographer: Simon Dawson/BloombergChart: Poll ResultsAfter injecting $600 billion to rescue failing banks during the worst financial crisis since the Great Depression, governments around the world have tried in the last four years to strengthen banking regulations to prevent a similar outcome. Those efforts have been stymied by conflicting laws and increasing complexity, making the changes harder to implement and reducing their effectiveness.Solutions suggested so far are “a grab bag of minimalist Band-Aids to patch up the self-inflicted wounds” of the financial system, said Lew Coffey, a poll participant and a fixed-income analyst at Windsor Capital Management LLC in Phoenix. “What’s required to re-establish investor confidence is a series of basic measures to simplify the business, isolate different kinds of risks into different boxes and increase transparency to outsiders.”

Plain Vanilla

Coffey, who’s been managing money for more than 35 years, suggested reinstating the 1933Glass-Steagall Act, which separated commercial and investment banking, and limiting the size of banks’ balance sheets. Both ideas have been proposed in Congress since 2008 and failed to garner enough backing.The U.S. and other countries have considered alternative ways to separate risky activities from the more plain vanilla functions of banks. The 2010 Dodd-Frank Act bans depository institutions from making short-term bets with their own money, while the U.K. is weighing how to wall off the trading units from commercial lending operations. The European Union is discussing a possible combination of the two measures.The EU also is considering limiting executive pay at banks. In an effort to tie employees’ compensation to long-term performance, the largest firms have extended how long it takes for stock awards to vest. Many have instituted claw-back provisions to reclaim bonuses from employees whose bets end up losing money, though no bank has yet to invoke such a provision.

Wrist Slap

“You can de-risk activity more effectively if you limit the incentive portion of compensation, most likely a cap as to percent of salary,” said Vincenzo Galli-Zugaro, managing partner of Seven Pillars Capital Management LLP in London and another poll participant.The Jan. 17 survey of the 921 investors, analysts and traders who are Bloomberg subscribers also showed that trust in the largest banks has failed to recover four years after the crisis. A majority said they lacked or had little confidence that the biggest institutions are taking prudent risks and conforming to laws.Half said their opinion of the world’s largest lenders hadn’t changed over the past year, while 61 percent said legal troubles such as the Libor scandal had affected their view.When big banks break the law, they’re treated more leniently than individuals doing the same, said David Wren- Hardin, a trader at Ronin Capital LLC in New York. Banks caught laundering money for criminal clients were allowed to “get off with a slap on the wrist,” he said.

‘Ponzi Scheme’

http://www.bloomberg.com/news/2013-01-22/big-banks-seen-in-need-of-breakup-amid-mistrust-in-poll.html

Republicans Renew Effort to Dismantle Obama’s Health Law

Two top Republican senators began a fresh effort to dismantle President Barack Obama’s U.S. health- care system overhaul, attempting to succeed where other lawmakers have failed in trying to annul the law.The legislation would repeal a mandate that most Americans carry medical insurance starting in 2014, Senators Orrin Hatch of Utah and Lamar Alexander of Tennessee said today in a statement. The insurance mandate is the heart of the 2010 Affordable Care Act’s purpose of extending health care to most Americans.The Republican senators face an uphill battle with Obama’s Democratic party controlling the Senate. Two bills that Republicans in the House of Representatives passed to repeal the law in 2011 and 2012 stalled once they reached the Senate. The insurance mandate also survived a legal challenge in June before the Supreme Court.“This legislation we are introducing today is simple: it strikes the individual mandate, so we can instead find ways of providing people with health care, but in a manner that doesn’t run counter to our constitutional framework of limited government,” Hatch, the senior Republican on the Senate Finance Committee, said in the statement.He said the health law marked the first time that every American would be required to buy insurance even if they don’t want it. Alexander is the top Republican on the Senate committee for health.Obama’s administration has argued in court that the government can’t require insurance companies to cover sick people -- another key element of the law -- without also requiring healthy people to purchase policies.A White House spokesman, Bradley Carroll, didn’t immediately respond to an e-mail seeking comment on the proposed legislation.

The four industries that rule Australia

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Like most, I believe in democracy. But I also believe in capitalism, and though the two have usually been seen in the West as a good fit, of late I'm having doubts.Every society has to use some system for organising production and consumption, and I know of none better than leaving it largely to private enterprise.
For the most part, markets work well in bringing buyers and sellers together and satisfying their respective needs. Markets' reliance on people pursuing their own interests does a good job in encouraging efficiency and innovation.
The funny thing is, when capitalism is working well it's the capitalists themselves who get taken advantage of. They keep coming up with new ways of making a fortune - railways, electricity, motor cars, the telephone, radio, television, the internet - but in the end competition causes most of the start-up companies to go broke and leaves most of the benefit not with the capitalists but their customers. It comes in the form of access to affordable transport, power, entertainment or communication.Advertisement
Of course, as the global financial crisis so painfully reminded us, markets are far from perfect and it's folly to leave them inadequately regulated. Markets are actually a creation of government, and governments have to continuously supervise them to ensure they don't run off the rails.
It's this need for continuous government involvement that can cause problems. Can we be sure government intervention is always aimed at benefiting customers rather than making life easier for the few big companies that dominate many of our markets?Then there's democracy. What if it becomes too easy for capitalists to take advantage of the institutions of democracy to get the rules of the game bent in their favour? Of all the columns I wrote last year, the one that drew the biggest reaction was called ''The four business gangs that run America'', quoting a book by Professor Jeffery Sachs of Columbia University. Sachs wrote that four key sectors of US business exemplified the takeover of political power in America by the ''corporatocracy'': the military-industrial complex, the Wall Street-Washington complex, the Big Oil-transport-military complex and the healthcare industry.I ended the column by saying that ''fortunately, things aren't nearly so bad in Australia''. It's true, they're not. But, in a paper to be issued on Wednesday, ''Corporate power in Australia,'' by Dr Richard Denniss and David Richardson, of the Australia Institute, we're reminded that things here are far from ideal.
The authors argue that ''big business exerts influence through campaign contributions, influence over university funding, sponsorship of think tanks and in other ways''.The four most disproportionately influential industries in Australia, they say, are superannuation, banking, mining and gambling.
Employers in Australia are required by law to remove 9 per cent of employees' pre-tax wages and deposit it in a superannuation account the employees can't touch until they retire. The industry has now persuaded the Labor government to gradually increase this to 12 per cent.Thus the government has compelled almost all employees to become the customers of a particular industry.
The average management fee paid by Australians with a retail super fund is about 2 per cent of their fund balance each year.
So someone with a balance of $100,000 is paying a fee of about $2000 a year, or nearly $40 a week. This is more than the average Australian pays for electricity. After the compulsory contribution rate is raised to 12 per cent, these annual fees will have increased by a third.To be fair, the government is working to oblige the super industry to give its captive customers a better deal. But it is encountering - and yielding to - much push-back from the industry.According to the authors, our big four banks are among the eight most profitable banks in the world, with the International Monetary Fund saying we have the world's most profitable banking
system.
Over the years, the big four have been allowed to acquire or merge with 15 of their rivals, with the authorities continuing to insist the industry is competitive.Since the global financial crisis, the big four's market share has risen from 74 per cent to 83 per cent, the authors say.
Both sides of politics profess to be highly disapproving when the banks seek to protect their profit margins by failing to pass on all of a cut in the official interest rate.But the pollies rarely match their words with deeds. Their efforts to increase competition are quite timid and some measures actually make life easier for the banks.
Last year the mining industry accounted for more than a fifth of all the profit made in Australia, even though it had a much smaller share of the economy. This was mainly because the royalties charged by the state governments failed to capture enough of the market value of the minerals the largely foreign-owned miners were being permitted to extract.
When the Rudd government tried to correct this with a resource super profits tax, the industry set out to bring about its electoral defeat, Tony Abbott saw his chance and sided with the industry, and Julia Gillard backed off rapidly, settling for a new tax that seems to be raising little revenue.

Read more: http://www.smh.com.au/opinion/politics/the-four-industries-that-rule-australia-20130205-2dwew.html#ixzz2KBGnhDtK

The Question You Should Be Asking About the Stock Market

By CARL RICHARDS

Carl RichardsCarl Richards is a financial planner in Park City, Utah, and is the director of investor education at the BAM Alliance. His book, “The Behavior Gap,” was published last year. His sketches are archived on the Bucks blog.With the stock market up more than 100 percent from those scary days in early 2009 and up 16 percent in 2012 alone, we’re now hearing plenty abouthow small investors are getting back into the market. Andrew Wilkinson, the chief economic strategist at Miller Tabak Associates, referred to it as a “a real sea change in investor outlook.”It seems we’re in danger of repeating the same old cycle of swearing off stocks forever during scary markets, missing a huge rally and then deciding it’s time to buy when stocks are high again. On the flip side, I’ve had a number of conversations with Main Street investors who are asking if now is the time to sell because the Dow Jones Industrial Average is hovering near 14,000 and the S&P 500 stock index is around 1,500 again.So which one is it? Should everyday investors be buying or selling?Do you see the problem here?If we’re investing based on what the market has done, it’s a recipe for disaster. Recent market performance tells us almost nothing useful about what the market will do in the near future. Logically it seems like it should, but a quick review of the market’s performance during the last six years should be evidence enough to convince us that it doesn’t.Remember how you felt in March, 2009? I bet you didn’t feel like investing, and you weren’t alone. Almost no one did. It was a scary time. But it turns out that it would have been a brilliant time to invest. Again, not because of what the market had done, but what it was about to do.But there was no way to know that in March 2009.Did anyone expect (or feel) like 2012 was going to turn into a 16 percent year? In fact, almost all the unfortunate souls that make their living predicting the markets got 2012 wrong.Here’s the thing we need to remember: we have no idea if now is the time to be buying or selling. But the good news is that it’s not even the question we should be asking. Instead we should be asking, “How can we avoid making the big behavioral mistake of selling low and buying high (again!) in the future?”Instead of worrying about getting in or out of the market at the right time, take that time to focus on crafting a portfolio based on your goals. Start by taking out a piece of paper and writing a personal investment policy statement that addresses the following:

1. Why are you investing this money in the first place? What are your goals?
2. How much do you need in cash, bonds and stocks to give you the best chance of meeting those goals while taking the least amount of risk?
3. What actual investments will you buy to populate that plan and why? Make sure you address issues like diversification and expenses.
4. How often will you revisit this plan to make sure you’re doing what you said you would do and to make changes to your investments to get them back in line with what you said in number 2?

A personal investment policy statement can be one of the most important guardrails against the emotional investment decisions that we all regret in hindsight. So, when you get worried about the markets and are tempted to sell everything you own that has anything to do with stocks, go back to that piece of paper. If your goals haven’t changed, forget about it.http://bucks.blogs.nytimes.com/2013/02/04/the-question-you-should-be-asking-about-the-stock-market/

Apple’s Profits Are Flat, and Stock Drops

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I told you AAPL was oversold and overpriced. QB
Apple on Wednesday reported the kind of quarter most big companies would envy, posting a profit of $13.1 billion and selling 28 percent more iPhones and 48 percent more iPads, its two biggest products.Enlarge This ImageApple's stock price has been falling for several months.Its stock sank 11 percent.What is going on? Because of its great success in recent years, many investors have come to expect nothing short of perfection from Apple. And while it is still widely considered the most innovative company in the technology world, a maker of products that its devoted customers cannot live without, Apple is facing a range of challenges.It is dealing with increased competition from big rivals like Samsung and Google, and with so many people already using smartphones, the market is not quite as untapped as it once was. Apple is forging into cheaper product categories, meaning lower profit margins. And given that Apple has grown so big, with sales of more than $160 billion in the last 12 months, keeping up its heady growth rate is becoming harder and harder.Once-euphoric investors, who pushed Apple’s stock to a record high of $702.10 last September, have become nervous, and in after-hours trading on Wednesday, the stock traded at $461.30, down 34 percent from its peak.Apple has reinvented itself several times over the last decade with groundbreaking new products, and could do so again. Television and electronic payments are among the markets where analysts believe the company could make a push, leading it to new heights.“Apple has really been able to invent whole new markets,” said John Gallaugher, an associate professor at Boston College’s Carroll School of Management. “That’s where it differs from companies like Microsoft. I don’t think the mojo of this team has evaporated.”In a conference call with analysts, Timothy D. Cook, Apple’s chief executive, said the company’s pipeline of new products was “chock-full.”“We feel great about what we have in store,” he said, without adding details.In the meantime, though, the love affair that investors once had with Apple is clearly waning.“There’s nothing that can help the stock from sliding now,” said Mark Moskowitz, an analyst at J. P. Morgan Securities, who said Apple’s holiday sales met his own forecasts, even though they missed others’ predictions.http://www.nytimes.com/2013/01/24/technology/apple-earnings.html?_r=0

Delta in talks with Airbus, Boeing to buy jets: Bloomberg

(Reuters) - Delta Air Lines Inc (DAL) is in talks with Airbus SAS and Boeing Co (BA) to buy $1 billion or more new jets, Bloomberg reported, citing people familiar with the matter.The Atlanta-based airline is looking at current versions of the Airbus A320 and Boeing 737, not the newest versions, likely meaning a deeper discount to retail prices than normal, the news agency quoted one person as saying. (http://link.reuters.com/byw45t)The talks are for an order of twenty-four to thirty planes and deliveries would start in three to five years, it said.Lindsay McDuff, a spokeswoman for Delta, told Reuters that the company does not comment on industry rumor and speculation.The deal could have a book value of at least $1 billion, based on prices tracked by consultant Avitas of Chantilly, Virginia, Bloomberg said.Delta, the No. 2 airline behind United Continental Holdings (UAL), is looking for a deal in which it could exchange some of its 50-seat regional jets for new planes from Boeing or Airbus, similar to a deal with Bombardier Inc (BBD-B.TO) made in December.The sale of old aircraft is a part of a cost-cutting program at the company, which includes retiring smaller, less efficient planes from its fleet.This could be the end of the Dreamliner for a couple of years. QB

Gold Rally Seen Sustained as Fed May Stick With QE3 Until 2014

By Phoebe Sedgman - Jan 23, 2013 9:26 PM ET

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Gold will rally this year and climb further into 2014 as U.S. Federal Reserve policy makers will probably maintain asset purchases for two more years to buttress the recovery, according to Morgan Stanley.The metal, which advanced for a 12th year in 2012, may average $1,830 an ounce in the final quarter from $1,715 in the first, $1,745 in the second and $1,800 in the third, analysts Peter Richardson and Joel Crane said in a report today. Prices will supported by investment and central-bank buying, they wrote.Gold had the biggest quarterly drop since 2008 in the final three months of last year as data showed the recovery in the largest economy gaining traction, boosting concern the Fed may withdraw stimulus. Minutes from the Federal Open Market Committee’s December meeting released on Jan. 3 said asset purchases will probably end this year. Each month the Fed has committed to buying $85 billion of Treasuries and mortgage debt.“We are skeptical that dissenters within the FOMC on current monetary policy will succeed in overturning the current policy settings before the end of 2014,” the analysts wrote, citing elevated unemployment and so-called tail risks to growth. There would be an “ongoing commitment to QE3,” they said, using initials for the third round of quantitative easing.Gold for immediate-delivery traded at $1,682.90 an ounce at 9:59 a.m. in Singapore after losing 0.2 percent. The price dropped to $1,625.85 an ounce on Jan. 4, the lowest level since August, after the release of the FOMC minutes.

Wall Street Week Ahead: Bears hibernate as stocks near record highs

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(Reuters) - Stocks have been on a tear in January, moving major indexes within striking distance of all-time highs. The bearish case is a difficult one to make right now.
Earnings have exceeded expectations, the housing and labor markets have strengthened, lawmakers in Washington no longer seem to be the roadblock that they were for most of 2012, and money has returned to stock funds again.
The Standard & Poor's 500 Index .SPX has gained 5.4 percent this year and closed above 1,500 - climbing to the spot where Wall Street strategists expected it to be by mid-year. The Dow Jones industrial average .DJI is 2.2 percent away from all-time highs reached in October 2007. The Dow ended Friday's session at 13,895.98, its highest close since October 31, 2007.
The S&P has risen for four straight weeks and eight consecutive sessions, the longest streak of days since 2004. On Friday, the benchmark S&P 500 ended at 1,502.96 - its first close above 1,500 in more than five years.
"Once we break above a resistance level at 1,510, we dramatically increase the probability that we break the highs of 2007," said Walter Zimmermann, technical analyst at United-ICAP, in Jersey City, New Jersey. "That may be the start of a rise that could take equities near 1,800 within the next few years."
The most recent Reuters poll of Wall Street strategists estimated the benchmark index would rise to 1,550 by year-end, a target that is 3.1 percent away from current levels. That would put the S&P 500 a stone's throw from the index's all-time intraday high of 1,576.09 reached on October 11, 2007.
The new year has brought a sharp increase in flows into U.S. equity mutual funds, and that has helped stocks rack up four straight weeks of gains, with strength in big- and small-caps alike.
That's not to say there aren't concerns. Economic growth has been steady, but not as strong as many had hoped. The household unemployment rate remains high at 7.8 percent. And more than 75 percent of the stocks in the S&P 500 are above their 26-week highs, suggesting the buying has come too far, too fast.
MUTUAL FUND INVESTORS COME BACK
All 10 S&P 500 industry sectors are higher in 2013, in part because of new money flowing into equity funds. Investors in U.S.-based funds committed $3.66 billion to stock mutual funds in the latest week, the third straight week of big gains for the funds, data from Thomson Reuters' Lipper service showed on Thursday.
Energy shares .5SP10 lead the way with a gain of 6.6 percent, followed by industrials .5SP20, up 6.3 percent. Telecom .5SP50, a defensive play that underperforms in periods of growth, is the weakest sector - up 0.1 percent for the year.
More than 350 stocks hit new highs on Friday alone on the New York Stock Exchange. The DowJones Transportation Average .DJT recently climbed to an all-time high, with stocks in this sector and other economic bellwethers posting strong gains almost daily.http://www.reuters.com/article/2013/01/25/us-usa-stocks-weekahead-idUSBRE90O15V20130125

Choice of Mary Jo White to Head SEC Puts Fox In Charge of Hen House
 
By Matt Taibbi


I was shocked when I heard that Mary Jo White, a former U.S. Attorney and a partner for the white-shoe Wall Street defense firm Debevoise and Plimpton, had been named the new head of the SEC.I thought to myself: Couldn't they have found someone who wasn't a key figure in one of the most notorious scandals to hit the SEC in the past two decades? And couldn't they have found someone who isn't a perfect symbol of the revolving-door culture under which regulators go soft on suspected Wall Street criminals, knowing they have million-dollar jobs waiting for them at hotshot defense firms as long as they play nice with the banks while still in office?I'll leave it to others to chronicle the other highlights and lowlights of Mary Jo White's career, and focus only on the one incident I know very well: her role in the squelching of then-SEC investigator Gary Aguirre's investigation into an insider trading incident involving future Morgan Stanley CEO John Mack. While representing Morgan Stanley at Debevoise and Plimpton, White played a key role in this inexcusable episode.As I explained a few years ago in my story, "Why Isn't Wall Street in Jail?": The attorney Aguirre joined the SEC in 2004, and two days into his job was asked to look into reports of suspicious trading activity involving a hedge fund called Pequot Capital, and specifically its megastar trader, Art Samberg. Samberg had made suspiciously prescient trades ahead of the acquisition of a firm called Heller Financial by General Electric, pocketing about $18 million in a period of weeks by buying up Heller shares before the merger, among other things."It was as if Art Samberg woke up one morning and a voice from the heavens told him to start buying Heller," Aguirre recalled. "And he wasn't just buying shares – there were some days when he was trying to buy three times as many shares as were being traded that day."Aguirre did some digging and found that Samberg had been in contact with his old friend John Mack before making those trades. Mack had just stepped down as president of Morgan Stanley and had just flown to Switzerland, where he'd interviewed for a top job at Credit Suisse First Boston, the company that happened to be the investment banker for . . . Heller Financial.Now, Mack had been on Samberg's case to cut him in on a deal involving a spinoff of Lucent. "Mack is busting my chops" to let him in on the Lucent deal, Samberg told a co-worker.So when Mack returned from Switzerland, he called Samberg. Samberg, having done no other research on Heller Financial, suddenly decided to buy every Heller share in sight. Then he cut Mack into the Lucent deal, a favor that was worth $10 million to Mack.Aguirre thought there was clear reason to investigate the matter further and pressed the SEC for permission to interview Mack. Not arrest the man, mind you, or hand him over to the CIA for rendition to Egypt, but merely to interview the guy. He was denied, his boss telling him that Mack had "powerful political connections" (Mack was a fundraising Ranger for President Bush).But that wasn't all. Morgan Stanley, which by then was thinking of bringing Mack back as CEO, started trying to backdoor Aguirre and scuttle his investigation by going over his head. Who was doing that exactly? Mary Jo White. This is from the piece I mentioned, "Why Isn't Wall Street In Jail?":It didn't take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm's lawyers, Mary Jo White, was on the phone with the SEC's director of enforcement. In a shocking move that was later singled out by Senate investigators, the director actually appeared to reassure White, dismissing the case against Mack as "smoke" rather than "fire." White, incidentally, was herself the former U.S. attorney of the Southern District of New York — one of the top cops on Wall Street . . .I'm not sure if he is as shocked as I am shocked that he is shocked. Did he actually believe that Obama would appoint someone to oversee the banks? As they say on ESPN "Come on man" Queenbee

Read more: http://www.rollingstone.com/politics/blogs/taibblog/choice-of-mary-jo-white-to-head-sec-puts-fox-in-charge-of-hen-house-20130125#ixzz2J2VIdYnr