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WORLD FINANCIAL REPORT ON RADIO JANUARY 17th 2019
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-CHART OF THE WEEK: JPMorgan Cuts Loonie Forecast as USMCA Deal Faces Turbulence. As current political turmoil in Washington threatens to bleed into the ratification of a new regional trade pact between the U.S., Mexico and Canada, JPMorgan Chase & Co. sees the Canadian dollar getting caught in the crossfire. The bank now expects the Canadian currency to weaken to C$1.35 per dollar by the middle of 2019, having previously forecast that it would be around C$1.30. A key reason for the pessimism is the fraught outlook for the passage this year of the U.S.-Mexico-Canada Agreement, according to analysts Daniel Hui and Patrick Locke. Ratifying the pact will be “bumpier” than most investors realize given the deep fissures within a split U.S. Congress, as well as an ongoing partial government shutdown.
“The governing relationship between the Democrats and the Republicans is clearly off to a poor start,” Hui and Locke wrote in a Jan. 11 note. “The current dynamic portends major risks surrounding USMCA ratification, which market participants do not yet fully appreciate.” The Canadian dollar tumbled almost 8 percent against the greenback last year, the second worst performance among Group-of-10 currencies. A rebound in oil prices has helped the loonie strengthen about 2.8 percent against the dollar this month to C$1.3270. While JPMorgan expects the pair to touch C$1.35 in the second quarter, the analysts believe the currency will finish 2019 at C$1.29. Bloomberg
-It’s Official: Wall Street Topped $100 Billion in Profit. The six biggest U.S. banks have never had a $100 billion year. Until now. Goldman Sachs Group Inc., JPMorgan Chase & Co. and their peers have already reported more than $111 billion of profit for 2018. Morgan Stanley will only make that number bigger when it releases its fourth-quarter results Thursday. They have Republican tax cuts to thank, along with rising interest rates, a surge in dealmaking and a retail-banking boom. Bloomberg
-CHART OF THE WEEK: The Next American Car Recession Has Already Started. The collapse of the sedan market has left Detroit automakers with too many plants. These should be boom times for Detroit. Unemployment is at a half-century low, gasoline is cheap and auto sales in the U.S. were near record levels last year. Yet American automakers are closing factories, cutting shifts and laying off thousands of workers. The industry is behaving like a recession has arrived. In one segment of the market, it has. Detroit is in the grips of a car recession marked by the collapse of demand for traditional sedans, which accounted for half the market just six years ago. Buyers have made a mass exodus out of classic family cars and into sport utility vehicles. Familiar sedan models such as the Honda Accord and the Ford Fusion made up a record low 30 percent of U.S. sales in 2018, and things will only get worse. Bloomberg
-If the shutdown lasts two more weeks, the cost to the economy will exceed price of Trump’s wall. It will only take another two weeks for the shutdown to cost the economy more than $6 billion, according to S&P Global Ratings. The partial government shutdown enters its 21st day Friday, tying the record for longest lapse in federal funding. CNBC
-Trump administration doubles estimate of shutdown cost to economy from original forecast: Source. The original estimate that the partial shutdown would subtract 0.1 percentage point from growth every two weeks has now been doubled to a 0.1 percentage point subtraction every week, according to a Trump administration official. The change is due to greater losses from private contractors also out of work and other government functions that have been halted. The administration’s estimate is more aggressive than some forecasts from Wall Street economists. CNBC
-A federal judge on Tuesday denied a request from a federal employees union to require the government to pay air traffic controllers who are currently working without pay during the partial government shutdown. The temporary restraining order was requested by the National Air Traffic Controllers Association. District Judge Richard Leon also denied two requests for temporary restraining orders regarding whether federal employees who are deemed essential and required to work without pay during the shutdown should be forced to work. CNN
-Jamie Dimon, the J.P. Morgan Chase CEO who has been bullish on the U.S. economy, said the partial government shutdown could wipe out growth from the world’s biggest economy. “Someone estimated that if it goes on for the whole quarter, it can reduce growth to zero,” Dimon told reporters on a media call to discuss fourth-quarter results. “We just have to deal with that. It’s more of a political issue than anything else.” Dimon, who is also chairman of the Washington, D.C.-based Business Roundtable, said that while the “underlying statistics for the economy globally are not bad,” the bank will be prepared for the eventual downturn. CNBC
-Delta CEO: Government shutdown will cost the airline $25 million this month. Delta’s CEO says the airline lost $25 million in revenue due to the partial government shutdown. The shutdown is the longest ever and has left some 800,000 federal workers furloughed or working without pay. CNBC
-How the government shutdown is putting national cybersecurity at risk. The country’s cybersecurity stance has been weakened by the partial government shutdown, with both immediate and longer-term negative consequences. This is especially true as a longstanding “brain drain” of cybersecurity talent has turned into an open bleed. Many essential cybersecurity functions continue, but their jobs are made harder by the fact that other IT staff who would normally implement routine fixes are furloughed. CNBC
-The European Union said it was horrified by the massive scale of the U.K. Parliament defeat of the Brexit deal agreed to with Prime Minister Theresa May but said there was no option to renegotiate. Diplomats said they were stunned by the extent of the loss. As they tried on Tuesday night to plot the EU response, they said they think there’s little more they can do to help May and fear that the U.K. tumbling out without agreement in March has now become a real prospect.
Despite only 10 weeks to go until the U.K.’s scheduled departure, officials in Brussels ruled out the prospect of an extraordinary summit of the 27 EU leaders any time soon. They said there’s little to discuss if lawmakers in the U.K. can’t decide what they want. European Commission Jean-Claude Juncker told the U.K: “Time is almost up.” French President Emmanuel Macron chimed in also to remind May that the EU won’t offer concessions to solve “an internal U.K. politics problem.” “I will be very vigilant on that,” Macron told reporters in Normandy, northern France. “We went as far as we could.” Bloomberg
-UK Prime Minister Theresa May has seen off a bid to remove her government from power, winning a no confidence vote by 325 to 306. Rebel Tory MPs and the DUP who 24 hours ago rejected the PM’s Brexit plan voted to keep her in Downing Street. Labour leader Jeremy Corbyn argued that Mrs May’s “zombie” administration had lost the right to govern. Mrs. May said she would start talks with other party leaders to find a Brexit compromise that MPs will back. Read more here-https://bbc.in/2DcChr5
-Janet Yellen says it’s ‘very possible’ the Fed has made its last rate hike of this cycle. Former Federal Reserve Chair Janet Yellen thinks the central bank may have implemented its last rate hike of this cycle. A faltering global economy whose weakness spills over into the U.S. could push the Fed into a prolonged pause, she told a gathering of retailers in New York. CNBC
-Fed Chairman Powell says he is ‘very worried’ about growing amount of US debt. “I’m very worried about it,” Fed Chairman Powell said Thursday. “It’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face.” Total U.S. debt is about $21.9 trillion, of which $16 trillion is owed by the public. The sustained annual U.S. deficit is now believed to be more than $1 trillion. In part because of continued rate increases under Powell, the interest cost on that debt could start to become a bigger and bigger burden. CNBC
-US trade deficit with China grows to a record and it’s likely even worse than the data show. China’s trade surplus with the U.S. closely watched amid the tariff war between the two countries grew 17 percent from a year ago to hit $323.32 billion in 2018. According to Reuters, that’s the highest on record dating to 2006. Exports to the U.S. rose 11.3 percent year on year in 2018, while imports from the U.S. to China rose 0.7 percent over the same period. CNBC
-On Jan. 1, 2018, the biggest, most sweeping U.S. corporate tax cut ever enacted went into effect. A year later, we’re able to see how businesses used all that extra cash. The short answer: to buy back shares. The long answer is slightly more nuanced, but not by much. Corporations had been lobbying lawmakers for years to reduce the corporate income tax rate which, at 35 percent, was the highest among the U.S.’s major trading partners. Republicans in Congress and the White House framed 2017’s Tax Cuts and Jobs Act as a means to boost employment, enhance wages, and encourage companies to invest and manufacture in the U.S. Among other things, the law reduced the corporate tax rate to 21 percent, at a cost of as much as $1.5 trillion in lost government revenue over 10 years. Bloomberg
-Art Hogan is out with a new, lower year-end target. The longtime market bull blames lingering uncertainty for the decision to slash his S&P 500 estimate to 2,850 from 3,250. “If the government stays shut for much longer, if we drag out this trade war for the entirety of the year those earnings numbers are going to come down, and so will the multiple,” he said Monday on CNBC’s “Trading Nation.” Hogan’s comments came as he began his new job at National Securities as its chief market strategist.
He left B. Riley FBR in December. “Some of the global economic slowdown is being caused by the uncertainty over trade,” said Hogan. “If we have a slowing global economy, you are going to see that affect the earnings growth and the earnings power of the S&P 500.” Almost half of the S&P 500 companies get more than 50 percent of their revenues overseas. So, the longer the trade war persists, the more it could hurt their bottom lines. CNBC
-Investors are hiding out in cash: Assets in money market funds surge past $3 trillion. Money market mutual fund assets reached $3.066 trillion last week, the highest since March 2010. Money started flowing back above $3 trillion in money market funds in December, coinciding with a sharp sell-off in the stock market. Retail investors “blinked,” says Oppenheimer’s John Stoltzfus. CNBC
-John Bogle, who created the first index fund in 1975 and founded The Vanguard Group, died Wednesday at the age of 89. Bogle is legend in the investing world for inventing a low-cost way for individuals to invest in the broad market, and advocating for their interests. “Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless individuals saving for their futures or their children’s futures,” Vanguard CEO Tim Buckley said in a statement.
“He was a tremendously intelligent, driven and talented visionary whose ideas completely changed the way we invest. We are honored to continue his legacy of giving every investor ‘a fair shake.'” Vanguard is now the largest investment firm in the world. And index funds account for trillions in assets. In November, Bogle sounded a warning about his invention, expressing concern that index funds may eventually own half of all U.S. stocks. “I do not believe that such concentration would serve the national interest,” he wrote in the Wall Street Journal. CNNMoney
-A wide margin of Canadians support an oil pipeline that Prime Minister Justin Trudeau’s government is pushing to build though it remains unpopular among some voting blocs key to his re-election, a poll has found. In a poll published Wednesday by the Angus Reid Institute, 53 percent of Canadians said they support both the Trans Mountain pipeline, bought last year by the government, and the Energy East pipeline proposal that was abandoned by its proponent. Another 19 percent oppose both, while 11 percent support just one of the two. Canada’s pipelines are essentially full and efforts to build new ones have met a long series of delays over the last decade leading the province of Alberta to force a production cut to address a glut.
The poll results signal generally broad support for a project the government is trying to move forward on, after a court ruling struck down its initial permit. Trudeau has struggled, though, to balance the views of environmentalists and supporters of the country’s energy sector. The Trans Mountain pipeline would carry crude from Alberta to a Vancouver-area port. It has net-positive support in both provinces, despite high-profile opposition in British Columbia. In that province, 47 percent favor Trans Mountain and Energy East versus 22 percent who oppose both. The gap in energy-rich Alberta is much wider 87 percent favor both while 2 percent oppose both. Bloomberg
-The average Canadian home sold in December cost $472,000, a figure that declined by almost five per cent in 2018. The Canadian Real Estate Association also said Tuesday that the number of homes sold was down, too, to the lowest annual pace since 2012. December is not typically a busy year for home sales, but this year’s look even worse when compared to the same month in 2017, because at the time, new rules for stress testing mortgages were about to be implemented, and buyers were rushing to buy before they came into force in January 2018.
Sales were down by 19 per cent in December compared to the same month a year earlier. “Trends were pushed higher in December 2017 by homebuyers rushing to purchase before the new federal mortgage stress test took effect at the beginning of 2018,” CREA president Barb Sukkau said. “Since then, the stress test has weighed on sales to varying degrees in all Canadian housing markets and it will continue to do so this year.” Toronto-Dominion Bank economist Rishi Sondhi said the numbers show the housing market has clearly “lost some steam” in the second half of last year.
“The broad-based nature of the decline suggests that rising interest rates and a tighter lending environment are impacting markets across the country,” he said. For 2019, he projects “the level of sales will remain relatively low compared to recent years.” Real estate prices in Toronto and Vancouver are consistently and significantly higher than they are just about anywhere else in Canada, so those two cities skew the national average higher. Stripping the two out of the equation, the average Canadian home was worth just over $375,000 last month. Read more here-http://bit.ly/2Hduwp1
-Vancouver’s housing market is looking more fragile than Toronto a year after policy makers tightened mortgage lending to slow a boom. While the country’s two most expensive real estate markets have both been hit hard by higher interest rates and tougher mortgage regulations, the data suggest Toronto is faring better and showing signs of stabilizing, while Vancouver continues its slide. Sales in the west coast city plunged 32 percent last year, driving benchmark prices down 6.5 percent over the past six months, according to Canadian Real Estate Association data released Tuesday. Toronto also saw sales fall sharply, but by half as much as Vancouver and with prices in Canada’s biggest city little changed in recent months.
“I’m not worried about Toronto, I’m worried more about Vancouver at this stage,” said Sebastien Lavoie, chief economist at Laurentian Bank Securities in Montreal. “The biggest worry I have for Vancouver really is the expectations that could turn a lot more downbeat because of the downward trend we are seeing now.” The relative performance reflects in part a bigger surge in prices during the boom in Vancouver, where they gained 68 percent over the last five years. That’s ahead of Toronto’s 58 percent increase. “Vancouver is in full-blown correction mode,” Royal Bank of Canada economist Robert Hogue said in a research note Tuesday. “Prices are poised to depreciate more potentially a lot more considering the degree to which they are still unaffordable to average buyers.” Bloomberg
-Just over one quarter of Canadians with home equity lines of credit are paying only the interest portion of the loan, a government survey found. Additionally, almost three in 10 respondents use such lines of credit at least some of the time to make payments on other debt, according to an online poll by the Financial Consumer Agency of Canada released Tuesday. Over the past 15 years, home equity lines of credit have been the largest contributor to Canadian non-mortgage household debt.
Tuesday’s report follows similar studies from the country’s federal housing agency and the Bank of Canada that highlighted some of the risks associated with such loans. The average HELOC holder at a federally regulated bank owes C$65,000. The survey by the Ottawa-based consumer protection agency was designed to track how home equity lines of credit are being used, and how much consumers know about them. Although the loans are widely sold, “many consumers appear to lack awareness of the terms and conditions of this financial product, exposing them to the risk of overborrowing, debt persistence, uninformed decision-making and wealth erosion,” the agency said. Bloomberg
-Home sales in the U.S. slumped in December, while prices inched up slightly, marking the smallest annual increase since the end of the last housing crash in 2012, according to data from brokerage Redfin. The median home price rose to $289,800 in December, a gain of 1.2 percent, the slowest monthly pace since March 2012. Sales dropped by almost 11 percent, the biggest decline for any month since 2016, Redfin said. Previously hot metropolitan areas are cooling fast. Prices dropped 7.3 percent in San Jose, California.
The property market, which was surging for years as buyers fought for a limited supply of homes, is softening as inventories start to increase and buyers take more time. The jump in mortgage rates last year added to housing’s underlying affordability problem, putting an end to the era of rampant bidding wars. “It was like hitting the brakes when you’re going over the speed limit,” Redfin Chief Economist Daryl Fairweather said of the slowdown. “You can’t have prices growing faster than wages year after year.” Bloomberg
-In the years since the financial crisis, global cities like London, Hong Kong and New York appeared to defy housing-market cycles, thanks to a concentration of financial jobs and the self-fulfilling belief that they offered investors a safe haven. Now every release of data seems to turn those assumptions on their head. In Manhattan, the median condo price dipped below $1 million for the first time in three years. Hong Kong home values endured their longest losing streak since 2008, while prices in outer London neighborhoods fell for the first time since 2011. Sydney home owners are grappling with the worst real estate slump since the 1980s.
Luxury residential prices are growing at the slowest rate since 2012, according to a Knight Frank index of prime properties in 43 cities. Where some see an orderly retreat, others see cause for concern. A November working paper by the International Monetary Fund warned that the tendency of housing prices in global cities to move in sync means that local shocks could upend markets around the world. There are a few global cities that affect “the sentiment about risk perception,” said Albert Saiz, a professor of urban economics and real estate at the Massachusetts Institute of Technology. “If New York and London are catching a cold, the primacy is large enough that they might have an impact on the overall market.” Bloomberg
–Eddie Lampert, the dogged billionaire who’s hitched his career and reputation to a fading American retail icon, will get another chance at reviving Sears Holdings Corp. In an agreement reached in the wee hours of Wednesday in New York, Lampert won an auction with a plan that will keep the bankrupt company in business and save thousands of jobs, according to people with knowledge of the discussions. The agreement still needs to be approved by the U.S. judge overseeing the bankruptcy. Lampert’s offer prevailed over competing proposals from liquidators that would have forced the 126-year-old department-store chain to shut down and sell its assets. The bid is valued at over $5 billion and represents an improvement of more than $150 million over the hedge fund manager’s previous offer, said the people, who asked not to be identified because the talks are confidential. Bloomberg
-CDC says it’s another bad flu season with up to 7.3 million people sick so far. Up to 7.3 million people have been sick with flu so far this season, the CDC says. Half those people have been to the doctor because of flu, it says. As many as 83,500 people have been hospitalized because of flu, federal health officials say. CNBC
-More Americans say they don’t carry cash. In an average week, roughly 3 in 10 adults said they make zero purchases using cash. Those who do carry paper money around have less than $50 in their wallets. Even as society becomes increasingly cashless, some people remain committed to dollar bills. CNBC
-Costco is selling a $90 tub of mac-and-cheese that weighs 27 pounds and lasts 20 years. College students and survivalists rejoice: Costco is selling a 27-pound tub of mac-and-cheese with a shelf life of two decades for $89.99. Unfortunately it’s not available in stores. It’s also intermittently out of stock on Costco.com. As of mid-afternoon on Friday, it’s sold out. If it remains that way, you can also find it for $149.99 on Amazon, although stock appears limited there, too. The Chef’s Banquet Macaroni & Cheese, listed under Emergency Kits & Supplies, offers 180 servings in separate pouches of elbow pasta and cheddar cheese sauce. That comes out to two servings per dollar. For maximum longevity, Chef’s Banquet recommends storing the tub in a “dry, cool environment.” A doomsday bunker, for example, or a root cellar. You can put it next to your 7-pound bucket of Nutella and 40-pound bucket of honey. CNBC
-For all the studies that tell us how important it is to limit screen time, does it sometimes feel that no matter where we are or what we do, there’s a screen in front of us one way or another? Perhaps it’s no surprise then that Americans spend nearly half of their waking hours looking at screens, according to a survey of 2,000 adults. More specifically, the survey found that 42% of the time Americans are awake, their eyes are fixated on a television, smartphone, computer, tablet, or other device. Supposing the average American slept eight hours a night (not even close to the case for most adults), the researchers calculated that people spend about six hours and 43 minutes a day staring at a screen. Over a typical lifespan, that’s 7,956 days. Read more here-http://bit.ly/2TQVa8M
-The Best Investments of 2018? Art, Wine and Cars Luxury assets have outperformed stocks and bonds this year. Who beat the market this year? Investors who like the finer things in life. Luxury assets, including wine, art, classic cars and fancy colored diamonds, have outperformed stocks and bonds this year. “People are looking for a place for their cash, and the security of holding something physical is appealing,” said Anthony Maxwell, director at Liv-ex, the London-based wine exchange. “They are looking outside securities, and gold is not what it used to be.” Investors who put money into art at the beginning of the year saw an average gain of 10.6% by the end of November, according to Art Market Research’s Art 100 Index, the closest thing the industry has to a benchmark.
In November, David Hockney’s painting of a man in a pink jacket by a swimming pool set a record for a living artist at auction, selling for $90.3 million at Christie’s New York. Those investing in wine have seen a 10.2% gain this year, according to the Liv-ex 1000 index, a broad measure that covers wines across regions. Meanwhile, global stocks have tanked in the past quarter, reversing gains earlier in the year, as analysts fret over slowing global growth and trade tensions between the U.S. and China. Investors who put money in the S&P 500 at the beginning of the year have lost 5.1%, based on estimates of total return. Those seeking refuge in cash equivalents have gained 1.9% this year, while those holding gold have lost 2.2%. Yet, the fall in stocks is a recent trend.
Analysts say equity markets may well strengthen in the coming months, while the trend for luxury investments could reverse. “Wine is something to drink and enjoy, and art is something to appreciate,” said Robin Creswell, managing principal at Payden & Rygel, a Los Angeles-based asset manager. “You might enjoy the updraft of higher prices in beneficial markets but you shouldn’t be surprised if there is a downdraft.” Meanwhile, those who own luxury investments can revel in their relative staying power. “They will always have some sort of market because somebody loves them,” said Andrew Shirley, a partner at global real-estate consulting firm Knight Frank and editor of the group’s Wealth Report.
“With a share, there is no sense in owning it for the sake of owning it.” The market for high-end diamonds has been steady, gaining 0.4% in value in the first three quarters of 2018, according to the Fancy Color Research Foundation in Tel Aviv. Eden Rachminov, chairman of the FCRF, a diamond-industry body, says the gemstones can help diversify an investment portfolio and there is almost no volatility in prices. There are risks involved in holding alternative assets, from regulatory reform to changing tastes, such as a recent shift in demand beyond traditional Bordeaux wines to top-end Burgundy and other varieties. And the wealth effect that people feel from higher stock markets can reverse itself quickly.
“If people make money on the stock market, they have more money to spend on their hobby,” said Dietrich Hatlapa, director of Historic Automobile Group International. Luxury-car prices were down slightly this year, according to HAGI’s Top Index, which covers rare collectors’ automobiles a correction, Mr. Hatlapa says, that was expected given the rate at which investors poured money into the vintage-car market following the 2008 financial crisis. “They decided to allocate more to classic cars as part of their portfolio because they couldn’t find returns elsewhere, but there are more alternatives as interest rates normalize,” he added. Cars have been the best-performing luxury investment over the past 10 years, gaining 289%, according to a report published by Knight Frank earlier this year.
Coins gained around 182%, wine 147% and jewelry 125% over the same period, while antique furniture and Chinese ceramics lost value. Emerging markets represent a large part of demand growth for luxury assets, leaving prices vulnerable to moves in currency markets too, analysts say. Wine analysts point to the boom that followed the United Kingdom’s decision in 2016 to leave the European Union. Political uncertainty over Brexit dragged on sterling, the main currency for trade in wine, creating a buying opportunity for international investors. WSJ
-Colored Diamonds Expected to Shine in 2019. Colored diamonds, which have natural pink, blue, yellow, and other brilliant hues, will continue to be closely sought-after by collectors and investors in 2019, according to Russian diamond group Alrosa. “Colored diamonds appreciate even in turbulent times against the backdrop of instability of the world economy,” says Yuri Okoyemov, vice president at Alrosa, the world’s largest diamond mining company by volume. “We expect fancy diamonds to become ever more popular investments in the near future.” Alrosa auctions colored diamonds twice a year. Last September, its “True Colours” auction in Hong Kong sold a total of US$9 million worth of colored diamonds.
Tracked by Knight Frank as one of 10 luxury investment assets along with jewelry in general, art, wine, watches, and cars, the value of colored diamonds has appreciated 70% in the last decade, or about 12% every year, according to The 2018 Knight Frank Luxury Investment Index. During the third quarter last year, the last period for which data is available, overall fancy color diamond prices grew 0.4% from the year before, according to the Fancy Color Research Foundation, an Israel-based diamond market information provider. Fancy vivid blue diamonds continued to outperform other kinds, rising 8.5% during the same period of time.
While all fancy pink diamonds gained only 0.5% in value in the third quarter of 2018, their valuations will likely grow faster in the coming years due to an expected shortage of supply, according to Okoyemov. The Argyle Diamond Mine in Australia, a source of over 90% of pink diamonds in the world, is set to close by 2020. Rare fancy pink diamonds have also set records at auction in recent years. Last November, a 18.96-carat rectangular fancy vivid pink diamond, The Pink Legacy, fetched US$50.4 million at Christie’s Geneva, setting a record price per carat for a pink diamond sold at auction, at US$2.6 million.
In 2017, The Pink Star, a 59.60-carat fancy vivid pink diamond fetched US$71.2 million at a Sotheby’s auction in Hong Kong. It retained the title of most expensive pink diamond in the world. Also in 2017, Christie’s Hong Kong sold The Pink Promise, an oval-shaped, 14.93-carat fancy vivid pink diamond, for US$32.5 million, or US$2.2 million per carat. Yellow diamonds saw their overall value rise 1.6% in the third quarter of 2018, according to the Fancy Color Research Foundation. Only one in every 10,000 gem-quality diamonds has natural color. Depending on the intensity of the colors, colored diamonds can be even more valuable than white (or colorless) diamonds, which are considered to be of the highest quality. Read more here-http://bit.ly/2H329tB
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Gold to silver ratio at 80 to 1 with gold at $2,000 the silver price would be $25.00
Gold to silver ratio at 70 to 1 with gold at $2,000 the silver price would be $28.57
Gold to silver ratio at 60 to 1 with gold at $2,000 the silver price would be $33.33
Gold to silver ratio at 50 to 1 with gold at $2,000 the silver price would be $40.00
Gold to silver ratio at 40 to 1 with gold at $2,000 the silver price would be $50.00
Gold to silver ratio at 30 to 1 with gold at $2,000 the silver price would be $66.67
Gold to silver ratio at 20 to 1 with gold at $2,000 the silver price would be $100.00
Gold to silver ratio at 15 to 1 with gold at $2,000 the silver price would be $133.33
-CHART OF THE WEEK: Gold has historically outperformed equities during periods of market stress. Counting 11 episodes beginning from the 1987 market crash, gold has increased an average of 6.8% while the S&P has declined 19.4%. For the record, gold outperformed equities in 2018, declining 1.6% vs. a loss of 4.4% for the Standard and Poor’s 500. As almost all investors can attest, the S&P index masked the full extent of the decline in equity markets due to high concentration of the index in a handful of stocks that outperformed run-of-the-mill stocks. Gold outperformed all currencies last year except for the Swiss franc and the Japanese yen. It also held its own against bonds, roughly matching the 0.9% increase in the US ten-year bond. Read more here-http://bit.ly/2ssmD4I
-CHART OF THE WEEK: During six recessions since the 1970s, gold increased on average 20.8%. Gold exposure, in our view, is the antidote to unknown adverse repercussions stemming from a sovereign-debt crisis. Gold has always protected capital from currency debasement. We believe it will prove to be a winning strategy in a bear market. Depressed gold and silver mining stocks have historically generated massive upside against a backdrop of systemic risk concerns. The tide of easy credit and risk-taking appears to be receding. The US is beginning to sport a debt-to-GDP ratio worthy of any banana republic. Therefore, we believe that exposure to gold is both timely and potentially rewarding. Read more here-http://bit.ly/2ssmD4I
-Gold Posts Worst Start to the Year Since 2013 After Rally. January has typically proven a good month for gold, with the precious metal gaining in each of the past five years. Yet gold’s had a relatively sluggish start to 2019, recording its worst performance in six years despite a backdrop of political and economic uncertainty that tends to boost demand for havens. Gold bulls shouldn’t despair though there’s still plenty of time for prices to break through resistance at the $1,300 an ounce level and notch up another strong January, according to Ole Hansen, head of commodity strategy at Saxo Bank. Bloomberg
-South African Gold Output Has Longest Losing Streak Since 2012. Gold output in South Africa, once the world’s biggest producer of the metal, fell for a 14th straight month in November, the longest streak of declines since 2012. Production retreated 14 percent from a year earlier, Pretoria-based Statistics South Africa said in a statement on its website Tuesday.
-Goldman Predicts Gold Prices to Climb to Highest Since 2013. Goldman Sachs Group Inc. is leading a pack of bullish voices cheering for gold. The bank’s analysts led by Jeffrey Currie raised their price forecast for gold, predicting that over 12 months the metal will climb to $1,425 an ounce a level not seen in more than five years. Bullion has benefited as rising geopolitical tensions fuel central bank purchases, while fears of a recession helped boost demand from investors seeking “defensive assets,” they said. Bullion-backed exchange-traded funds are expanding, with holdings rising to the highest since May. On the Comex, futures have climbed 11 percent to $1,291.70 on Friday, from a low in August. Speculative interest in gold signals investors are not only closing bearish bets but are also adding to bullish positions, Suki Cooper, an analyst at Standard Chartered, said in a note. Gold is also getting a boost from mounting speculation the Federal Reserve may pause in raising borrowing costs, boosting the appeal of non-interest-bearing metal.
“We expect the safe-haven bid, and to a lesser extent, gold’s inflation hedge properties, to remain key drivers of the metal’s price in 2019, complemented by a resurgence of physical demand,” Cantor Fitzgerald analysts led by Mike Kozak said in a report. Gold and silver are “looking good in 2019,” underlining a potentially positive indicators that “should drive a bullish case” for both metals “and as a result, the related equities as well.” Bloomberg
-Brexit Turmoil Spurs U.K. Investors to Buy Gold, Royal Mint Says. British investors are rushing to buy gold as increasing uncertainty over the outcome of Brexit boosts market volatility, according to The Royal Mint. “We have seen a significant increase in demand for gold this month and at the end of last year, a trend which we have no doubt is largely attributed to Brexit turmoil and subsequent market volatility,” Chris Howard, director of precious metals at The Royal Mint, said in a statement on Monday. Sales revenue so far in January surged 73 percent from year-earlier period, the Royal Mint said, without giving actual figures. The gold coins and bars produced by the mint are purchased by individual, rather than institutional, investors.
“I fully anticipate further increases in gold demand over the coming months as investor uncertainty grows,” Howard said. “By increasing their exposure to gold and other precious metals, they have the opportunity to offset the risks of market volatility.” The Royal Mint’s report contrasts with the findings of BullionVault, which last week reported that its gold investor index reflecting the balance of buyers against sellers fell in December to the lowest since August 2017. Selling increased as investors took profits after gold gained 5.1 percent in December to reach a six-month high, the London-based brokerage said. Sales in the Royal Mint’s bullion business slumped 28 percent to 227 million pounds ($292 million) in the year through March 2018. Bloomberg
-Ross Norman: Gold hits an all time high in 72 currencies. It is natural that we measure things by a familiar yardstick the problem is that being so-biased or lazy, we can be deceived. Take gold. Popular belief has it that gold prices have not performed especially well despite some egregious geopolitical and economic factors. Well measured in 72 currencies, gold is at or within a few percentage points of being at an all time high for people in those countries. Not on the list are the British Pound, the Swiss Franc, the Euro and Chinese Yuan but we are not far off in all of those currencies too. Only in USD does gold lag and not all of us live in the US. Using the dollar gold price, as most of us do, has disguised what is actually quite a powerful bull market.
If my memory serves me right, we saw the same phenomenon a stealth rally in minor currencies – ahead of the last major gold bull run (in dollars) in the late 1990’s. Arguably this may be a very good leading indicator. Faulty yardsticks also takes us onto wealth management. Measuring our net worth in local currencies, we might be rather pleased with ourselves smug even. However we chose to ignore the fact that the yardstick is not a constant it is shrinking and sometimes really quite fast. It’s the natural corrosive effect of inflation. Knowing this, governments give us a gauge for yardstick shrinkage to use such as RPI or CPI, to reassure you that the shrinkage is minimal and then lie about it. Read more here-http://bit.ly/2QRQOwc
-Newmont to Buy Goldcorp in $10 Billion Deal, Creating World’s Largest Gold Miner. Newmont Mining Corp. will buy rival Goldcorp Inc. in a deal valued at $10 billion, creating the world’s largest gold miner and cementing a return of M&A to the industry. The biggest deal in the gold mining industry’s history comes just three months after Barrick Gold Corp.’s move to buy Randgold Resources Ltd. in a $5.4 billion transaction, which instantly spurred speculation that rivals would have to respond. The two huge gold deals have the potential to spark investor interest after the industry lost favor following years of lackluster bullion prices, bad investments and disastrous deals. Just two weeks ago, Mark Bristow, the new chief executive officer of Barrick, said the industry is heading for irrelevance unless there are major changes.
Newmont and Goldcorp were “clearly not willing to sit back and let Barrick take the limelight,” said Kieron Hodgson, a natural resources analyst at Panmure Gordon in London. Gold mining companies are turning to M&A as a way to kickstart growth and secure mine reserves after a decade of cutting back on exploration spending, according to Adrian Hammond, who covers African gold companies for SBG Securities Pty Ltd. Investors have punished the industry in recent years and Newmont shares are about half the value from a peak in 2011. “Companies are struggling to compete for lower costs whilst trying to replenish their reserve base, so acquiring assets has become the easier alternative,” Hammond said in an interview from Johannesburg. Bloomberg
-Ted Butler: Questions Only the DOJ Can Get Answered. At a minimum, if I am falsely maligning JPMorgan for alleging that it is manipulating the silver market, I should be made to stop. But if my allegations are close to being accurate (as I know them to be), then the bank has been involved in the most egregious market manipulation of all time. Either way, the Justice Department can settle the issue once and for all time by demanding that these questions be answered. It has now been two months since the DOJ’s announcement on Nov 6 of the guilty plea and ongoing investigation and three months since the plea was first recorded and sealed on Oct 9. Obviously, the Justice Department had to be pursuing the matter for several months prior to the sealed guilty plea.
Therefore, the Justice Department has spent the better part of 2018 looking into the matter of a COMEX silver manipulation. No entity is better equipped for such a task than the Justice Department. Having raised the issue of a silver manipulation for more than 30 years and the specific allegation that JPMorgan was the main manipulator since 2008, there would be something wrong if I didn’t feel the involvement of the Justice Department was the most important development, I have seen over both time periods. I have petitioned the CFTC and the CME for decades to no avail. It may turn out that I am putting too much faith in the Justice Department for confirming my allegations, but it is at the very pinnacle of a regulatory food chain that doesn’t go any higher. It would be unreasonable not to have faith that the DOJ will do the right thing. Read more here-http://bit.ly/2CstT5c
-Another precious metal of interest is silver, which has similar functions as a store of value but is much cheaper compared with gold, he said. In April 2011, gold was about 32 times more expensive than silver while today it’s a multiple of 83. The white metal traded at $15.54 an ounce on Wednesday. “Gold gets top billing when it comes to store of value,” said Johnson. “But we think given relative valuations, it makes sense for investors to look at alternatives like silver or platinum.” Bloomberg
-Pimco Favors ‘Unloved’ Platinum That’s Looking Cheap Versus Gold. Platinum could be the dark horse among precious metals, according to a money manager at Pacific Investment Management Co.
Nic Johnson, Pimco’s managing director and portfolio manager for commodities, says he prefers the metal over gold. Used in autocatalysts of diesel engines and jewelry, it’s near the cheapest ever relative to both bullion and palladium, after tumbling 14 percent last year. While investors have poured into gold funds, they’ve deserted platinum, which has fallen out of favor amid shrinking demand and excess supply. The possibility the trend reverses even slightly represents a buying opportunity, Johnson said in an interview from Newport Beach, California. With $1.72 trillion under management as of September, Pimco is one of the world’s largest bond managers.
“Platinum is relatively unloved and relatively cheap compared to other precious metals,” Johnson said in an interview last week. “It would only take a rotation of a few percent of the assets in gold exchange-traded funds moving to platinum to really have a big impact on platinum supply-demand balances and prices.” Platinum was the weakest of the four major precious metals last year as environmental concerns reduce demand for diesel-powered automobiles.
By contrast, equity market turmoil and an increasingly dovish Federal Reserve have supported gold and silver, while palladium has benefited from its use in vehicles that run on gasoline. Gold’s premium over platinum hit a record at the start of January after a rally in the last quarter of 2018 pared its annual decline to just 1.6 percent. Holdings in bullion ETFs are near the highest level since 2013 as speculation grows the Fed may ease its tightening pace or even pause in raising interest rates. Meanwhile, holdings in platinum funds are close to a five-year low. Bloomberg