The Global Market Watch has been posted for the close of December 6th, 2013.
John Thornton, ex- Goldman Sachs banker who next year takes over the helm at Barrick Gold, the world’s top gold miner, has suggested that hedging may once again be appropriate. We use to assist mines in hedging. Outsourcing hedging is not really done other than to hand the reins of power to a bank who collects fees.
At Princeton Economic International, we use to take on the outsourcing projects to assist companies in restructuring portfolios globally to create natural hedging strategies and to outright hedge currency and product risk on a PERFORMANCE basis rather than just fees where the house always wins.
The mining companies were sold a bill of goods by the banks that they should always be hedging their product to lock in profits when gold was about $300 and in decline for 19 years. They lost tremendous upside in the 13 year rally. Naturally, like most unprofessional traders, they lifted their hedges to share in the new bull market. Then the high came in place and gold has crashed and burned since 2011.
The majority of the mines will once again hedge going into the low. They will have their short positions in place and end up with losses during the next rally as they did before.
You would be surprised, but the majority of big corporations do not have professional treasury management facilities. Most will defer to the banks for advice, which is how they make a lot of money trading against their clients.
Corporations are the targets of the banks more often than not. Even central banks are now starting to outsource the management of their reserves. Financial risks have always existed wherever trade and international investment have been undertaken. However, the extent to which they have been identified, quantified and controlled has varied tremendously. Some well-publicized losses incurred by both financial and non-financial organizations around the world in recent years. We were call into a major auto manufacturer who had made a hedging decision at board level based upon the headlines in newspapers.
Treasury risk management has become increasingly important. Companies need to comprehend the market trends to ensure that their own operations will survive. A Japanese airline bought a fleet of 747 planes in dollars years ago, but failed to hedge the currency. They were forced to lay-off almost 25% of their work force. Both currency and product are presenting tremendous risks that boards are incapable of comprehending. Simple and properly controlled risk is essential to good management.
Investors have to understand that hedging is vital to safeguard a company and its assets. However, also understanding that the hedging is done on a professional manner rather than listening to brokers and banks interested only in fees, should be distinguished from professional management.
Treasury Management has become the greatest un-quantified risk in a business given the implications of currency and product trends. Many companies should be reconsidering the way they have viewed treasury management in the past and making sure that in future treasury management contributes positively to the overall success of the company in a controlled and structured way. Investors need to pay attention to these trends and how companies are handling those risks.
QUESTION: Mr. Armstrong; Are you also going to update your report on weather, earthquakes, and plagues? I think the last time you did that was for the 1985 Conference. I do not recall the target, but I think it was 2020 on the plagues. Is that correct? I cannot find my materials.
ANSWER: We do have the forecasting booklets from the 1985 Conference in PDF version at $100. We are still looking for someone who has the VIDEO. We have included a brief update on the plagues in the current Cycle of War report. The target is 2019 on plagues, not 2020. We did include a brief discussion of the earthquakes also in the Cycle of War update.
This is a special report Cycles of War covers the global turning point in 2014 and the fascinating 2012 turning point in China that has marked with amazing accuracy the border dispute with Japan over the Shenkaku Islands. It is vital to understand this cycle and what it means for herein lies the fate of gold and the Dow Jones Industrials not to mention the Euro and European markets. This report covers the world including the cycles of war with respect to China and Russia in addition to the US, Japan, and Europe.
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The Global Market Watch has been posted for the close of December 5th, 2013.
Last night they lit the Rockefeller Christmas Tree. It is the one time NYC actually blossoms during the Christmas season. The first Christmas tree in NYC was actually erected in 1931 in the worst year of the Great Depression when just about all the foreign sovereign bonds defaulted on Americans causing massive bank failures. The first tree was put up in hopes of raising the spirits of the people in their dark hour of need. It was not the stock market crash that devastated the finances of the people, it was the bond collapse. Andrew Mellon had first commented when bonds rallied and stocks fell in 1929, that this was why “Gentlemen prefer Bonds”. By 1931, those words demonstrated that even conservative men lost their shirts.
The Chinese yuan data is now in and the October numbers from the Swift system show that the yuan, which in January 2012 held only 1.89% of trade transactions, jumped to 8.66% surpassing the Euro, which has fallen to just 6.64% of Swift transactions. In January 2012, the Euro held 7.87% of Swift transactions. These numbers show that the Euro is on its way to a third world country status.
The German polls show the collapse in support for the EU as well. Now only one-third of Germans believe there is any benefit to being part of the EU. The entire European experiment is a total disaster. Unemployment among the youth has risen to levels that warn revolution cannot be far behind once you exceed 60%. Taxes keep rising and the standard of living is collapsing as well. What has emerged is renting clothing now because people can no longer afford to even buy a pair of jeans.
Greece has seen no benefit at all. Employment has collapsed back to 1997 levels. To the average Greek, Europe has brought nothing but hardship. There is absolutely no hope that the policies being imposed upon Greece will restore the economy in any possible manner. Greece is destined for perhaps major civil unrest if not a revolution.
Now with the dream that a single currency was needed to rival the dollar, the Euro has fallen even behind China. It is destined to become a rather unimportant currency that is grossly overvalued given its economic prospects. We are witnessing the complete collapse of Marxist-Socialism. Just don;t tell the politicians yet. They are still in denial. In France, about 20,000 small and medium construction enterprises have just in the last 12 months have fallen into insolvency.
European EU elections are next May. Already there are mass rallies in Italy calling for the breakup of the Eurozone. We should expect serious political turmoil next year in 2014. This is part of the Cycles of War turning next year.