$1300 Rejects Gold

Gold was stopped cold in its tracks today at the psychological round number resistance level of $1300. It had initially reacted to Ben Bernanke‘s comments, (which most market analysts and players viewed as dovish) by moving smartly higher. During the Q&A session which followed, gold was slammed lower by a wave of very strong selling.

In watching the price action it occurred to me that just as we suspected in our notes from yesterday, nothing new or fresh proceeded from the Chairman. In other words, there was NO FODDER for the bull. Gold had already run higher last Wednesday when Bernanke first reversed himself from his comments in June. At this point in the game however, that is now old news. What gold needed to propel through $1300 was something far more definitive than what Mr. Bernanke gave the markets today.

Think about it this way – the QE will continue as long as the economy needs it. Okay – what is new about that? We have seen this QE going on for some time now and to the minds of most market participants, there is still no real inflation threat looming on the horizon. What is there to make them waver the least in their convictions that inflation is benign? Answer – there isn’t anything… YET.

Now, if crude oil and unleaded gasoline do not soon set back then that might change. But with a large grain harvest expected, food prices look to be moving lower. As stated previously in another piece I wrote – energy prices may be high and moving higher but food prices are going the other way. Just look at a chart of new crop corn or wheat, or sugar, or cattle, etc.

Both of these need to be moving up simultaneously to impact the consumer (and business to a certain extent although that segment is more impacted by higher fuel and energy costs) and to generate the all-important headlines needed to derail an entrenched, “there is no inflation” psyche.

Technically, two things happened today: Gold failed to extend past an obvious chart resistance level while simultaneously, the HUI FAILED TO CLOSE THAT IMPORTANT CHART GAP I noted in yesterday’s missive.

Both occurrences are viewed as technical failures and will bring in additional selling by the shorter-term oriented trader. What will be key for gold is whether or not it can generate enough buying to keep it above the “former resistance zone now turned support” that can be seen on the chart. Let’s call that the zone between $1270 – $1260. If it can hold here, it will bounce back and set up yet another try to best $1300. If not, down towards $1240 it will go.

I should also note that volume in today’s rejection at the $1300 level is very strong. I view that as a bearish sign that a lot of bulls threw in the towel and gave up on a breakout above $1300. Also, guys who have been playing gold from the short side were emboldened to come back in.

I am unclear just yet as to how much of this jump in volume is associated with rollovers as those are occurring in increasing frequency as we move deeper into July. Most traders will be moving out of the soon-to-be-in-delivery August contract and heading into the more active December. That might have distorted the volume somewhat and thus take what I say here about it with a grain of salt but nonetheless, volume was strong regardless.

Silver? What more can you say about it other than the fact that it too failed to push past tough overhead resistance at $20. The level is now reinforced with significance on the technical price chart. For this metal to start any fireworks whatsoever, that barrier MUST BE BREACHED. If not, it ain’t going nowhere. Poor English grammar but solid trading analysis.

Silver bulls simply must prove their mettle or the bears will grab control of that market and take it down for another test of $18.

One more thing I want to note was that the yield on the Ten Year note closed the day just below the 2.5% mark ( 2.491 to be exact). Interest rates have set back ever since Bernanke made those comments last Wednesday. Here we are now a week later and they have yet to exceed their recent peak. That being said, it might not be too much longer before they try sneaking up again. Everything will depend now on the content of each piece of economic data that gets released.

Source: http://traderdannorcini.blogspot.in/2013/07/1300-rejects-gold.html

The Paris Gold Ring Scam

I know I owe you a few stories out of Sydney, but I absolutely have to tell you about something that happened to me – TWICE – in Paris. We’ll get back to Sydney later this week. I promise.

Please, please say that you do, and that you weren’t, like, in the womb when the movie premiered, okay? Because I recently had an exchange with the lovely girlfriend of a friend (both of whom are slightly younger than us) and even though I consider us contemporaries, I realized that I saw Jurassic Park in the movie theater as a teenager when she was 2 years old.

I dealt with this revelation in the mature manner, adding a couple of tablespoons of metamucil to my vodka soda and whispering something about how the music was too loud.

Anywho, The Matrix: there’s this part where Trinity talks about the difference between how Neo sees himself (in the Matrix world) and what he really looks like. It touches on the nature of self-image, and how sometimes, there is a large delta between how we see ourselves, and how the rest of the world sees us.

I tend to think of myself as looking fairly cosmopolitan. That I blend into a city, especially when we’re in Central Europe. If I ever go anywhere without my massive camera, I get asked for directions, having been mistaken for a local. And even when I do have my camera, it’s not like I’m an easy mark, right? I mean, no one would look at me and think, “That girl looks easy to rob.”

Right, you guys? RIGHT?

But in Paris, I realized that’s a bunch of hooey. Someone might as well have put a sign on my back noting that I was a tourist with an expensive camera and no idea where her hotel was. Because no less than two people saw me and felt that it was appropriate to try to pull a scam on me. And it was the same scam – the gold ring scam.

Apparently it’s a popular one in France – there are posts about it on Trip Advisor, and on countless blogs. It’s fairly simple, and even now, I wonder if there isn’t more to it.

The first time it happened, I was by myself near the Palais Garnier Opera House in the 9th arrondissement. I was a few blocks from our hotel, but nevertheless hopelessly lost. I needed to pull out my map. Doing so always freaks me out, because it makes it painfully obvious to anyone within a block radius that you are not only a tourist, but a clueless one to boot. Plus, it involves opening up my purse.

I found a corner where the facade of a restaurant jutted out slightly from the storefront next to it, pressed my back against it, so I could stand comfortably, without worry that anyone would sneak up on me. I found the street I was on, and looked at the tiny little rues that burst out of it like rays of the sun on a child’s drawing. My hotel was on one of them but … good heavens, why was the print so small? Don’t mapmakers realize that those of us who get lost also tend to lose their glasses?

As I squinted at the map a pair of men walked by, and one of them stooped to pick something up in front of me.

Weird. I didn’t notice anything on the ground, and I tend to look (I’m constantly looking out for pooh).

He held it up to me. It was a men’s wedding band, simple and gold.

“Is this yours?” he asked in French.

Reflexively, my hands slapped down on my purse and camera. This happens every time a stranger tries to talk to me in a foreign city: my heartbeat quickens, and I’m convinced I’m about to be robbed. It isn’t because I’m savvy – it’s because I’m paranoid as hell. I shook my head, wide eyed, my back against the building behind me.

NO,” I said firmly, clutching my things and staring at the ring.

He shrugged, saying something like, “I guess I’ll keep it then” to his friend, and the two of them walked off.

In those brief moments, a million things went through my head. I wondered if it could have been Rand’s wedding ring. No, that was impossible. Rand’s ring isn’t gold.

I then thought of all the men I knew who had legitimately lost their wedding rings while playing with their kids or doing chores around the house, and how sad they’d been about it. I imagined a poor pair of elderly tourists walking through the city and one of them realizing that the gold band they’d worn for 40 years had somehow slipped off their finger. Maybe I should have told the man who’d found the ring to go to the authorities? Or taken it from him and offered to go myself.

But he’d never have believed me in the case of the latter.

“Give me the ring. I’ll get it to its owner.” Yeah, right.

Besides, I didn’t even know where was at that moment.

Looking at the map,  I wondered if it could have been a scam. Some sort of distraction or … ? I couldn’t figure it out, so I just focused on figuring out where I was.

I eventually made it back to the hotel, my possessions and a small portion of my sanity still intact.

I told Rand about my day, and I mentioned the ring.

“That was a scam,” he said, matter-of-factly.

“You think?”

“Definitely,” he replied. Rand guessed that it was some sort of pick-pocketing scheme. I wasn’t sure – the guys were well-dressed, and didn’t really seem shifty – but wouldn’t that have been the point? Plus, I realized that I couldn’t remember either of their faces. I’d only seen the ring, held just under my nose. That was odd,  because it meant that the gentleman had to be holding it quite low (I’m short).

The more I considered it, the odder the scenario seemed.

“Oh, man,” I whispered to myself.

The next day, Rand and I were walking not far from the Eiffel Tower, near the Quai Branley Museum. Though we’d encountered crowds of tourists everywhere, we found ourselves relatively alone as we walked down a narrow, tree-lined promenade. The only other people around were a heavily pregnant woman heading towards us, holding the hand of her small son, who looked to be four or five. She wore a long skirt that touched the ground, and her hair was up in a scarf. I wondered how she wasn’t dying of heat when I noticed her bend down to pick something up off the ground.

She struggled to get up – why the hell was a pregnant woman bending over like that? I’d have helped her had she been closer to us. She straightened up, and as we passed, I saw that she was holding a gold ring out to us.

“Is this …” she began.

“No,” I snapped, my hands squeezing tightly around my purse and camera. As we rushed away, I looked at Rand, my jaw hanging open.

“Told you,” he said.

My mouth hung open for a while. I’d been hit by the same scam two times in as many days. I realized that I looked like a tourist, but I hadn’t figured I’d been such an easy mark. Just a reminder that how we see ourselves isn’t necessarily how the rest of the world sees us.

Oh, and the next day? Two different people asked me for directions. Go figure.

Source: http://www.everywhereist.com/the-paris-gold-ring-scam/

Investing in White Gold!

hina circa 2008… six babies die from severe kidney damage while another 300,000 suffer kidney stones. As it turns out, melamine isn’t meant to be in infant milk formula! The result was a few Chinese businessmen taken out back and shot, literally… and a nation that, for good reason, doesn’t trust the dairy industry (for starters…).

Since then China has “enjoyed” multiple infant formula scandals, including formula containing aflatoxin, a known carcinogen, and a scandal involving milk powder containing mercury.

Outside of infant formula, but remaining on the topic of food found on Chinese supermarket shelves, it’s also possible to buy “glow in the dark” meat. Turns out bacteria-laden pork does that. I figure there may be a market serving it in night clubs, instead of glow rods you could have “glow kebabs” – call it theme food.

Not to be outdone by the Europeans, who were recently caught passing off horse meat as beef, below I present a list of culinary delights to be found in the middle kingdom:

  • Rice containing cadmium. A heavy metal which destroys your internal organs and causes cancer. Not a great ingredient in food methinks.
  • Rat, Fox and Mink meat sold as Lamb. Come on…let’s face it, most any meat deep fried and doused in sufficient amounts of soy sauce tastes pretty much the same anyway.
  • Dead, diseased pigs sold as food. This was stylishly referred to as “swine gate”. Turns out the pseudo-rabies virus in the pigs doesn’t gel well with humans.

 

Dead pigs in China
Deep fried with a bit hoisin sauce and it’ll be alright, no?

In short, buying food off a supermarket shelf in China is a high risk adventure sport. What the average man may risk on his own behalf, he is far less likely to risk on his precious spawn. Those reading this article who have loved ones, especially children will likely agree with me when I say I would NEVER let my kid so much as look at any infant formula originating out of China. Even if there is a statistically small chance of poisoning, the ultimate penalty is death. Yeah, thanks, but no thanks!

It appears many Chinese parents feel the same way, which has led to mainland Chinese buying infant formula in bulk from Hong Kong, Europe, the US, and Australasia, thereby prompting a rationing in some countries by companies such as Danone and Mead Johnson Nutrition Co.

In a move reminiscent of US anti-drug trafficking efforts, the Chinese Government, exhibiting the intellectual capacity of a stuffed bear, have since restricted imports to just 2 cans per person. This has opened up a massive smuggling opportunity. You know the world is a screwed up place when transporting something so innocuous as infant formula is a punishable crime!

Hong Kong border officials last year arrested more people for smuggling baby infant formula than they did for heroin!

Markups now exceed 100% above retail prices in Europe, Hong Kong, Australia and New Zealand. When you consider I’m talking about the retail price and not the wholesale price, those of you who are not asleep, stoned, or dim, will quickly realise the obscene profits that smuggling generates. The average Chinese newborn consumes 22,630 grams of formula in their first 6 months of life, equating to a US$1,544 retail value. Demand is overwhelming supply right now.

When a market accepts and trusts people whom they don’t know from Adam, selling infant formula out of their garage, then you know you have a market ripe with opportunity. Done properly the potential exists to create a powerful “trusted brand”.

At present 70% of the imported infant formula market is controlled by foreign brands, with most of the independent brands run by small “Mom and Pop” companies from NZ and Holland, who as far as our analysis shows are successful mainly due to their product coming from “safe” jurisdictions. None we’ve found have strong marketing or endorsement programs, or are taking advantage of this opportunity in a well thought out manner.

Below is a graphic representation of the major players in this $12.5 billion sector:

china-milk-1024x734

Mark and I, along with our CPAN members have recently completed a “friends and family” seed financing round in a company seeking to change this.

Using a strong marketing platform they will seek to establish themselves as a niche, high-end supplier of infant formula to the China market. I’m here in NZ, and I just met with the CEO who is sourcing supply from a boutique New Zealand dairy company. He commented to me, “you know I wouldn’t know what to do here in NZ, all the problems seem to be solved.” This is exactly what excites us about emerging and frontier markets. There is NO shortage of problems, and the greatest profits always go to those who solve problems.

We believe this company is in the right market, has a solid strategy which they are systematically executing on, and most importantly they have a very well-established team of professionals with solid track records of operating in China. Those factors, combined with a compelling valuation, are some of the reasons we got involved.

As mentioned on our blog numerous times, we ALWAYS bet on talented, proven management first and foremost. By doing so we think the odds are stacked more in our favour than otherwise. Executed well, the rewards in this sector promise to be substantial. What is a sure bet is that someone in this space is going to make a fortune.

We have placed our bet, now let’s see how it plays out. Time will tell, and nothing in private equity is ever a sure thing. However, I’m always cognizant of the deals which have vaulted my own portfolio, and most have had the ingredients of this one. We’ll likely introduce readers again to the company in question once they hit cash flow, but prior to going public.

Source: http://www.zerohedge.com/contributed/2013-05-30/investing-white-gold