Gold Bulls Return as Wagers on Stimulus Accumulate: Commodities – Bloomberg 12-08-14

Salient to Investors:

  • Speculators boosted bullish gold bets to a 3-month high.
  • Frank Holmes at US Global Investors said gold prices have to rise because of the sheer size of the monetization of global debt – gold is insurance.
  • Jessica Fung at BMO Capital Markets sees very little prospect of a significant gold upside unless there is another financial crisis. Fung said markets have alternatives to gold and other assets which generate decent returns.
  • Michael Underhill at Capital Innovations said producers are holding back inventory and growing the herd, in swine as well as cattle and were able to feed and fatten them up with a bumper crop in corn in 2014.

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Fareed Zakaria GPS – CNN 08-04-13

Salient to Investors:

Author Mark Leibovich writes:

  • Washington works extremely well for its most important citizens, the lobbyists.  Money has trumped power as the ultimate currency.
  • Atlantic magazine reported in 1974 that only 3 percent of retiring members of Congress became lobbyists. Today, that number is 42 percent for members of the House and 50 percent for senators.
  •  Lobbyists hold the keys to what everyone in government is secretly searching for; a post- government source of income.

Lawrence Lessig at Harvard says Congressmen spend 3 of every 5 workdays raising money and vote with extreme attention to their donors’ interests, whose returns on their “investment” would make a venture capital firm proud.

Historian Ramsay MacMullen said the greatest empire in the history of the world, the Roman, collapsed in the fifth century due to political corruption.

Fareed Zakaria said:

  • Bills today are huge documents filled with thousands of giveaways. The act that created the Fed in 1913 was only 31 pages long, the 1933 Glass-Steagall legislation was only 37 pages long. Contrast the 2010 Dodd-Frank bill of 849 pages plus thousands of additional pages of rules, the Affordable Care Act with more than 2,000 pages.
  • American mobility has declined. A person born in Detroit in the bottom fifth of the income levels has a 5 percent chance of making to the top 5th versus twice that if born in San Diego.
  • It is easier to move up in the UK than it is in the US. Northern Europe does amazingly well, particularly Scandinavia where they have a very large middle class, where there is less inequality. The big difference between the US and northern Europe is if you are a poor kid in America, by the time you are 6 or 7, you have had a very tough time with nutritional issues, daycare and early childhood education, and the brain is almost permanently disadvantaged.
  • Britain’s very class-ridden society is less so.  Canada does better than the US and it too is diverse and has lots of immigrants and big cities.
  • The one study on Head Start was a flawed study.

Raj Chetty at Harvard said:

  • There is a great deal of variation within the US in rates of upward income mobility. Places like Pittsburgh or San Diego or San Francisco have high odds of moving from the bottom of the income distribution to the top. Other places like Atlanta or Charlotte or Indianapolis have much lower odds.
  • Differences in school quality or degree of income inequality or segregation in a city or things like the number of 2-parent families in an area are all correlated with upward mobility. E.g. Atlanta, where the odds of moving up are low. It comes back to early childhood education or school quality more generally, things related to segregation or the degree of inequality.
  • The amount of income accruing to the top 1 percent of the income distribution is not highly correlated with levels of upward mobility in an area. But the gap in incomes between the 25th and 75th percentile – the middle class – is very highly correlated with rates of upward mobility.
  • There are places within the US that have mobility rates comparable to Denmark and Canada,

Jeffrey Sachs at Columbia’s Earth Institute said:

  • The crisis at the bottom and soaring wealth at the top is a real problem for America in places with very low social and income mobility. The labor market has just disappeared in Detroit and its school system is in deep crisis.
  • Northern Europe has social democracy and pays almost half of their national income in taxes – versus 30 percent in the US – and which they use to support families under the pressures of poverty, to support early childhood development, daycare for poor families.
  • Where there are high concentrations of African-Americans, white populations don’t vote for school funding. They don’t vote for public goods.
  • The very obvious and direct reason for the variation of upward income mobility is an absolutely poor environment for public services, for early childhood development, and quality of schools.

Journalist Megan McArdle said:

  • Places with good public education, good public transport are correlated with doing well.
  • It is not fair to say blue America is doing better at this than red America, as David Leonhardt of the New York Times contends. Salt Lake City with its high Mormon population and Mormon Church is extremely good: they have their own private welfare system, are extremely good at investing in people.
  • A lot of cultural capital that used to be more widely distributed is getting segregated, as men cannot make enough to support a family and so are detached from their families.

Scott Winship at Brookings said:

  • There is no relationship between the amount of mobility that the people in the local area have and how much income is received by the top 1 percent. Areas with high levels of income equality do not necessarily have low levels of income mobility – the poor have chances to move ahead.
  • Countries with more inequality do not tend to have lower mobility. We don’t really know why countries differ in terms of their mobility rates. Miles Corak at the University of Ottawa found that Canada has more family leave, more generous policies for parents when kids are born, than the US. But Canada has very different demographics than the US. The US has a lot more teen childbearing, entrenched poverty, segregation of our poor population.

Fareed Zakaria said in Saudi Arabia, 1 out of 3 people is a foreigner, 2 out of 3 people with jobs are foreigners, and in the private sector, 9 out of 10 people who hold jobs are non-Saudi.

Author Karen Elliott House said:

  • Saudi Arabia is as equally stagnant as the old Soviet Union in its dying decade.
  • Saudis are finding a voice, and understand the myth – like the communist myth – that they are better off than everyone else is not true.
  • Saudi Arabia is not absolutely done for, but three things are very different from the past. First, Saudis know what’s going on in the world in a way they never did and so the divisions in society are greater. Second, information is greater. Third, the royal family is running out and will have to make a generational change. Many worry that some of the hundreds of the grandsons will wind up fighting with each other.
  • Many young Saudis have nothing to do and unhappy because they feel they should have a better life. They believe the oil wealth belongs to the country, not the royal family. They don’t really want to work any harder, but they want more.

Author Thomas Lippman said Saudi Arabia’s economic history is built upside down. They got rich overnight but have not grasped the fact that in the private sector employers want to hire as few people as possible.

The UN’s FAO says raising animals for food takes up 30 percent of the planet’s land mass and more than 8 percent of global human water. Global demand for meat is expected to double in the next 40 years.

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Goldman Cuts Commodity Outlook as It Exits Bet on Gold Drop – Bloomberg 04-23-13

Salient to Investors:

Goldman Sachs:

  • Lowered its 3- and 12-month return forecasts for the S&P GSCI index of 24 commodities to 2.5 percent in 3 months and 3 percent in 12 months, and cut its near-term outlook on commodities to neutral from overweight, amid prospects for weak global demand.
  • Exited its April 10th Sell recommendation on gold, saying bullion may trade at $1,530 in 3 months, $1,490 in 6 months and $1,390 in 12 months due to the combination of continued ETF outflows and an expected re-acceleration in US growth later in 2013.
  • Lowered its near-term outlook for Brent oil to $100, and its 2013 forecast to $105.
  • Remains bullish on copper at lower prices, while lowering its 12-month outlook for LME copper to $7,000 a ton.
  • Lowered its outlook for Arabica coffee on improved production prospects in Brazil.
  • Lowered its outlook for cattle prices because of larger-than-expected US feedlot supplies.

Assets in the SPDR Gold Trust are the lowest since 2010.

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Global Food Reserves Falling as Drought Wilts Crops – Bloomberg 08-09-12

Salient to Investors:

Stockpiles of the biggest crops will decline for a third year on drought in three continents.

U.S. crops are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall is 20 percent below normal.

Goldman Sachs, Macquarie Group and Credit Suisse say crops will continue to be the best-performing commodities this year.

The U.S. drought in June was the widest since December 1956, while the past 12 months were the hottest on record.

U.S. nuclear plants’ output on July 27 was the lowest for the day since 2001 because water was too hot to be an effective coolant.

Global food prices are still 10 percent below the record reached in February 2011.

Barclays  is “modestly overweight” in grains and soybeans, but recommended investors reduce bullish bets as improving weather, declining demand or an easing of U.S. requirements for ethanol in gasoline may send prices lower

Goldman predicted $9 corn, $20 soybeans, $9.80 wheat in three months.

Danske Bank predicts global food prices will jump 25 percent this year .

Gates Foundation says U.S. households spend 6 percent of their total expenditures on food versus 35 percent in India and 45 percent in Kenya. The USDA says with less than 5 percent of the world population, the U.S. consumes 31 percent of global corn production, 18 percent of soybeans, 32 percent of cheese and 20 percent of beef and veal.

The National Intelligence Council says nations reliant on food imports, including Egypt, Pakistan, Bangladesh and Sudan, are especially vulnerable to unrest. More than 60 food riots erupted worldwide from 2007 to 2009 as prices surged, the U.S. State Department estimates, while the U.N. says production will need to expand 70 percent by 2050 as 2 billion people are added to the population.

Professor Tim Hagle at the University of Iowa says retail-food costs keeps the economy in a fragile position, the big issue in this election.

Steve Hatz at Bank of the West said U.S. farmers are less likely to feel the pinch because about 85 percent of crops are insured.

Ron Plain at the University of Missouri said livestock ranchers lost $260 a head in June versus a $156 loss a year earlier.

Steve Shafer at Covenant Global Investors said global beef inventories are dropping in part because rising incomes in emerging markets mean consumers want to eat more meat, causing a rising supply/demand imbalance.

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