Archives of “double digits” Tag

Is This The Start Of China’s Gold Miner Buying Spree?

Back in October of 2012, Hugh Hendry proposed a simple investment thesis: ‘”I am long gold and I am short gold mining equities. There is no rationale for owning gold mining equities. It is as close as you get to insanity. The risk premium goes up when the gold price goes up. Societies are more envious of your gold at $3000 than at $300. And there is no valuation argument that protects you against the risk of confiscation. And if you are bullish gold why don’t you buy gold ETFs, gold futures or gold bullion.” Since then, anyone who listened to Hendry has made a substantial double digit return (yes, one can make double digits returns on gold even when gold is sliding: such is the “magic” of long gold, short GDX pair trades). However, following a massive, 50%+ selloff, there comes a time when even gold miner stocks become attractive to those with deep pockets filled with reserve fiat. For someone like China, that time may be now. The WSJ reports that China’s largest gold company, China National Gold Group Corp., has talked to Ivanhoe Mines “about buying a stake in or asset from the company.”

 
 

It is unclear where talks stand, but, if completed, such an investment would mark another step into international markets for the Beijing-based miner and further Chinese investment in African mining. It could also entail Mr. Freidland’s taking on a major international partner not long after he lost control of a major mining company to London-listed giant, Rio Tinto PLC.

The WSJ adds “on Monday, Toronto-listed Ivanhoe said it is selling $100 million worth of stock at $2 a share, a sharp discount to Friday’s closing price of $2.56. The stock fell 11% as investors digested news of the dilution and analysts said that the total falls short of the money that Ivanhoe needs to raise. In a release Ivanhoe said that it is in discussions with a number of international, private and state-owned mining companies about raising further funds through investments in its projects and the company. “Ongoing talks could lead to the formation of a significant strategic corporate partnership or syndicate for continued exploration and development of the company’s discoveries and associated infrastructure,” Chief Executive Lars-Eric Johansson said Monday. A spokesman for the company declined to comment on whether it had held talks with China National Gold.” Read More  

Black Clouds for Indian Economy

BACK TO THE DARK AGES

 

Morgan Stanley’s chief economist Chetan Ahya has warned that India is in real danger of slipping to a Hindu rate of growth that characterised the pre-liberalisation era. GDP growth could plummet to an abysmal 3.5 per cent to 4 per cent if the weak growth trend persists over the next four to five quarters.

The Hindu rate of growth — a term coined by economist Raj Krishna — was a derogatory term that referred to the 3.5 per cent growth witnessed in the socialist economy that India had before 1991.

The dire forecast of a throwback to those dark ages could spook markets but is unlikely to alarm the mandarins at Raisina Hill and Mint Street. Read More  

Inflation bond auction cancelled

The Reserve Bank of India (RBI) on Monday again tried to limit the impact of liquidity tightening measures on short-term rates by cancelling the inflation-indexed bonds auction. Though it is trying hard to restrict the impact of liquidity tightening measures to the shorter end of the yield curve, the efforts might not be successful, since economists expect some spillover effect even on long-term rates.

In the inflation-indexed bond auction for a notified amount of Rs 1,000 crore held on Monday, RBI cancelled all bids as traders were quoting very high yields. It was the auction of 1.44 per cent inflation-indexed bonds maturing in 2023. Short-term rates have been rising since RBI resorted to liquidity tightening.

Rates of short-term instruments like certificates of deposit and commercial paper breached the 11 per cent mark in the secondary market. Read More  

Reserve Bank of India Governor Duvvuri Subbarao tempers expectations of rate cut

DuvvuriSubbarao on Tuesday tempered expectations ofinterest rate cuts beginning this month, saying prices of consumer products and manufactured items are still rising.

Subbarao, who has refused to give in to pressure from industry and the finance minister to lower key rates, said though the rate of price increase has slowed, it remains elevated.

“Inflation has come down, (but is) still high,” he was quoted as saying by Bloomberg in his speech at the Indian Institute of Management, Lucknow.

The RBI governor said though India’s economic growth rate may be headed towards a decade-low, there is not much room for either monetary or fiscal stimulus. Read More  

2012 Key ETF Performance

As shown, US equity indices did well in 2012, but international markets did even better.  France (EWQ), Germany (EWG), Hong Kong (EWH), India (INP) and Mexico (EWW) were all up more than 20% for the year.  Mexico (EWW) was the best performing ETF in the entire matrix with a 2012 gain of 31.19%.  Germany (EWG) was the second best performer at +28.51%.

In the US, the Nasdaq 100 (QQQ) and S&P Midcap 400 (IJH) were the best performing index ETFs in 2012 with gains of more than 16%.  The Financials ETF (XLF) was the best performing sector ETF with a gain of 26.08%, followed by Consumer Discretionary (XLY) at +21.58%.  The Utilities sector (XLU) did the worst and actually declined 2.94% for the year.

Looking at commodities, oil (USO) was down double digits in 2012 with a decline of 12.44%, while gold (GLD) and silver (SLV) posted gains of 6.60% and 9.02%, respectively.  Finally, fixed income was down across the board in December and the fourth quarter, but the aggregate bond market ETF (AGG) managed to post a small gain for the full year.  The 20+ year Treasury ETF (TLT) ended down for the year after a rough month of December.