• Long term view of gold in NZD
• A Windfall tax on Gold – a New Zealand perspective
• European absurdity and ludicrosity
• How do the Euro Troubles affect New Zealand?
• Germany to leave Euro?
• Will more QE be announced by the Fed this week?
In NZ dollars, both gold and silver are back down at the low ends of their recent ranges this morning. Gold is at $2031 per oz and silver is at $35.68. So very close to previous lows during 2012 of $2000 and $35.00 respectively. So you could argue another good buying opportunity presenting itself today.
This week our headline article is A Windfall Tax on Gold – a New Zealand Perspective. We had a question posed by a client on James Rickards (author of Currency Wars) theory that gold won’t be confiscated. That instead the US will impose a 90% “windfall” profits tax on all the “greedy” gold holders. So we’ve mulled this over and jotted down some thoughts. We’d be interested in some comments and opinions from readers too so leave a comment at the end of the article if you’ve got a theory you don’t mind sharing with the rest of us.
Psychology is just as important as knowledge when it comes to choosing when to buy and this article, Are You Brave Enough to Buy Low? looks at going against the grain.
We also hear from Doug Casey on what to be optimistic and pessimistic about, what comes next and what to do about it in How to Save Your Money And Your Life
For all the publicity about Greece, it’s Spain that counts being the 4th largest economy in the Euro and their govt bond yields are at record highs back up above 7% today after dipping initially following the bailout announcement a bit over a week ago. As we mentioned last week Spanish officials were hard out announcing they wouldn’t need a bailout right up until the announcement of the bailout. Well maybe Italy are up next as this past week FT reported that:
“Italy has forcefully denied it would be next in line after Spain to seek a eurozone bailout.
Mario Monti, prime minister, described as “inappropriate” loose talk a day earlier by Maria Fekter, Austria’s finance minister, that Italy was at risk of needing a rescue. Corrado Passera, industry minister, also dismissed the idea that Rome might need external help.”
We’ve been reading quite a bit on the Euro this week and the more we read the more absurd it all becomes. As David Morgan pointed out in our featured video this week The 2008 Crisis Has Not Been Resolved, “To have a European union of multiple countries with such different capital structures, spending rates, and promises to the populace, and to combine them together is ludicrous”.
Just as ludicrous is have Italy borrowing for 4-5% to lend to Spain for 3%!
As Mish Shedlock points out this is because according to the European Financial Stability Facility
“Supposedly Spain is 12.75% responsible to bail out itself. Italy is 19.18% responsible to bail out Spain.” So Italy is lending money to Spain at a rate less than what it pays to borrow for itself!!!
And more from the absurdity files is that another of the Euro bailout entities, the European Stability Mechanism (ESM) has only been ratified by 4 out of the required 17 members to actually create it! And this is meant to be done by 1 July! And it too is meant to be funded 30% by Spain and Italy! Sorry for so many exclaimation marks in one paragraph but you can’t make this stuff up.
How does all this affect NZ? We have a pleasant view from afar in front of a warm fire at the moment. But the world is more interconnected now than it’s ever been. Problems in Europe would flow on to China where a slow down (which already seems to exist) would affect us but also significantly affect our biggest trading partner Australia which would in turn obviously affect us.
It seems the PM may have finally cottoned on to this too this week. Now saying that they are not looking so likely to return the budget to a surplus by 2015. Although now we are trying to find a link to something about this we can only find a reference to Bollards reduction in growth targets and Johnboy still saying we will make it. Anyhow we’re sure we heard him say a return to surplus didn’t look so likely now on the telly a couple days ago and the telly never lies!
We’ll still stick to our call from back in October last year that we thought the govt growth projections were far too rosy. It didn’t take a genius to work out that things weren’t resolved by any means and that there wasn’t going to be the growth they predicted.
New Zealand will also pay for the Euro problems as theGovernment has just committed another 1.26 billion to the IMF. Further evidence of how absurd this all is. The equivalent of one guy who spends more than he makes and has a decent sized credit card debt, lending money to a bunch of other mates who spends way more than he makes, has a massive mortgage and a credit card he can’t pay for. How can this all end well?
A completely different take on the outcome of Euro troubles we heard for the 2nd time this week was from blogger Bruce Krasting. A couple weeks back we reported how a contact of his from within Greece had predicted the Centrist parties who were voted out last time round would be voted back in this time. Seems he got that one about right. What is he predicting now?
Well “Athens”, as Bruce calls him, thinks there will be a new crisis within 3 months even if a renegotiated bailout package is agreed as significant new funds won’t come from Germany. So when asked “But what is Plan B?” Athens reply was:
“Simple. Germany will leave the Euro. It will reestablish the old Deutsche Mark (DM). The Euro, without Germany in it, would fall against all currencies. The necessary adjustments to restore competitiveness will have been achieved. The DM will be very strong against the Euro. This will hurt Germany, but not for long. In the end this is the only solution that I can see.”
So there’s an interesting alternative point of view to mull over.
Beats us – to be honest we get sick of all the theorising on what the Fed will do. However a logical analysis we read this week was from John Hathaway whose no hype opinion we’ve appreciated over the years.
“With respect to more QE, we believe the risk/reward posture of the gold market is asymmetric. By now, it seems that market expectations for additional QE have been sufficiently dashed; that any new round of monetary easing will come as a big surprise. The possible absence of QE seems unlikely to inflict incremental damage to the gold price. On the other hand, a new round of QE will most likely be triggered by emergency conditions in the financial markets and be seen as both an act of desperation and a tacit admission by policy makers that they really have no answers. In such a moment, we would not be surprised by a leap in the gold price approaching several hundred and possibly thousands of dollars an ounce in too short a period for significant capital to enter.”
More volatility in gold and silver prices seems likely in the coming days then. If you want to get in on one of the down days then today may be your day. As always David sits waiting for your email or phone call for a quote…
1. Email: firstname.lastname@example.org
2. Phone: 0800 888 GOLD ( 0800 888 465 )
3. or new and improved Online order form with indicative pricing
Have a golden week!
This Weeks Articles:
Gold and silver steadily trending up
This week: Gold and silver steadily trending up PM says Europe will “muddle through” Turkey leading the way? Not just Central Banks buying gold Gold and silver steadily trending up Over the past week gold gave up all of the big one day gain from the previous Friday night. But overnight on Monday it did […] read more…
Are You Brave Enough to Buy Low?
We’ve been writing over the past couple of months or more that $2000NZ per ounce has been looking like a good level to buy gold at, as the price has continued to bounce off this level many times in 2012. But buying is as much about (in fact maybe more about) psychology as it is […] read more…
David Morgan: 2008 crisis has not been resolved
David Morgan has been around the block and is one of the best sources of information on silver in particular. In the below interview which took place during the recent 2012 World Resource Investment Conference in Vancouver Morgan discusses: How the 2008 financial crisis has not been resolved To have a European union of multiple countries […] read more…
How to Save Your Money And Your Life
The following is probably aimed more at Americans but that said in it Doug Casey does refer to how the “U.S. and it’s allies will turn into authoritarian police states”. And I while NZ is a lot further from a police state than the US seems to be currently I guess we could be classed […] read more…
Windfall Tax on Gold? – a New Zealand Perspective
This week we had an email from a reader (and well informed reader at that) asking about the possibility of governments confiscating citizens gold or even the possibility according to James Rickards that “the government won’t need to confiscate gold, they will deem that the citizen has made an unfair windfall profit and impose a […] read more…
The Legal stuff – Disclaimer:
We are not financial advisors, accountants or lawyers. Any information we provide is not intended as investment or financial advice. It is merely information based upon our own experiences. The information we discuss is of a general nature and should merely be used as a place to start your own research and you definitely should conduct your own due diligence. You should seek professional investment or financial advice before making any decisions.