Spain and Italy Tank; China and India Rally

by Bespoke Investment Group

After declining more than 2.5% yesterday, the major equity indices in Italy and Spain are both down nearly 1.50% today. As shown in the top two charts below, both are currently in "don't catch a falling knife" patterns to put it bluntly.

While Europe falls apart, India and China have both seen huge price moves to the upside this week. China's Shanghai Composite has rallied 4.77% since Monday, while India's Sensex is up 4.20%. 

Which areas of the world would you rather see rallying? India and China or Europe?

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Invest now in new gold called molybdenum

By Carlo Biancardi

An investment will and should be in a precious metal needed for life to occur, plants and animals need Molybdenum to live. There is nothing more fundamental or basic than an element. We need elements to build or grow anything. We need Molybdenum (an element) to grow any plant or life form. There are 3 types of elements: poisonous, inert and life giving. Which elements would you want to be around? Which elements would you keep away? Gold does not support life. Silver does not support life. As for Platinum, Palladium and Rhodium you can probably guess what I will say next. Molybdenum is the finest metal to be a part of (literally). Molybdenum has many uses.

Molybdenum has the lowest abundance of the life giving elements in the Earth's crust (other than industry useless Selenium) at 1 ppm (0.0001%).

Molybdenum has the 6th highest melting point of all the elements, and by far the highest melting point (4753 degrees fahrenheit) of all the metals needed for life.

If I were leaving Earth forever, I would build the ship out of Molybdenum. I would only bring life giving elements with me, that is the same mentality I have here on Earth, that is to invest in physical Molybdenum. I could grow hydroponic plants which need Molybdenum and other life giving elements to survive. I would not bring Gold with me.

China has high rates of esophageal cancer and/or strokes because of low Molybdenum amounts in their soil. To fertilize farmland you need half a Pound of Molybdenum per acre (International Molybdenum Association) some websites suggest up to 6 pounds per acre, on a 1-3 year basis. There are about 1 billion acres of farmland in the U.S.A. and billions of acres of deficient farmland worldwide, which clearly means there is not enough Molybdenum for everyone.

Nuclear power is not leaving, nor are oil and gas pipelines. Nuclear power plants need high Molybdenum content stainless steel cooling pipes (6.5% or higher Molybdenum) because it prevents corrosion. Salty ocean water is very corrosive to the water cooling pipes. All nuclear power plants are near large bodies of water and need lots of water for cooling the reactors. Pipelines use high amounts of Molybdenum and will be using higher percentages of Molybdenum content in the future to combat corrosion and reduce friction of crude oil delivery in the pipelines. Corroded infrastructure and new infrastructure will need Molybdenum for the Steel used. Molybdenum also greatly enhances Steel strength.

China is calling molybdenum a national resource and is limiting the mining of molybdenum because they know it is more valuable left in their mines and in the ground, they will buy everyone elses at low cheap prices now. They will import this metal. China realizes that irreplaceable molybdenum is important for their country going forward.

The world total yearly amount of Molybdenum mined and CONSUMED is 500 million pounds. What does that amount look like? Well it's 150 meters x 150 meters x 1 meter high. That is not much at all! ONE small project could easily consume this all. All the data on the internet mentions tonnes and millions of pounds and when you look at the total amount mined in volume (cubic meters), it is very tiny.

ONE investor could buy the whole planets yearly Molybdenum production for $8 billion dollars (Jan 2011). Molybdenum only costs $1 per ounce. In comparison, to buy all the Gold that is available and that has ever been mined, it would cost you $7.4 trillion dollars (Jan 2011) to buy the 375 million pounds of useless bling!

Courtesy : EzineArticles.com

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Guest Post: Austria's Green Party In Position To Kill The Greek Bailout Package

by Tyler Durden

While EU leaders look forward to a multitude of emergency meetings until July 20, when Greece has to pay back a government bond with a volume of €6.6 billion, the fate of Greece's bailout may ultimately lie in the hands of the Green party in the dwarf nation Austria.

Austria's Green Party sent an open (German language) letter to the country's chancellor Werner Faymann on Thursday, threatening to boycott a vote in the Austrian parliament where a 2/3 majority is needed for a change of the constitution that would allow Austria to participate in the €138 billion bailout package for the Hellenic peninsula. As a Euro member Austria has the obligation to take part in the bailout that is hugely unpopular with voters/taxpayers.

The Greens got 9.8% of the votes in Austria's latest elections, making them the 4th biggest party in the five party Austrian parliament.

In their German language letter published on the party's website the Greens demand 2 key adaptions of the bailout package from Austria's socialdemocrat-conservative coalition government. The letter is signed by Chairwoman Eva Glawischnigg, budget speaker Werner Kogler and foreign policy speaker Alexander van der Bellen.

• Firstly the Greens demand an obligatory inclusion of private creditors (that's the banks) and the regulatory introduction of an orderly default mode for bankrupt Euro members that shall be part of the final version of the legislature of the moneyless €750 billion European Stability Mechanism (ESM) that shall come to life in 2013 when the current European Financial Stability Facility (EFSF) will end. The greens explicitly noted that chancellor Faymann should inform the other Euro governments of their intention to block a constitutional change for the ESM if such measures are not taken.

This initiative finds my full support as it is clearly written on the wall that the Eurozone will see more defaults than Greece only. This was also indicated by Dutch central bank governor Nout Wellink last week. He proposed to double the ESM to an almost unimaginable €1.5 Trillion. This sum may still not be enough as Greek debt currently stands somewhere between €310 billion and €467 billion.

Europe needs a clear framework for such events that are historically much more frequent than politicians want to admit. In the last 2 centuries almost every European country has defaulted at least once. It was a major political blunder in the creation of the Euro not to include rules for those who turn out to be too weak for the Euro.

• Secondly the Greens would support the issuance of Eurobonds by the European Central Bank (ECB) as proposed by outgoing ECB President Jean-Claude Trichet, arguing that this would strengthen European solidarity and could also help preventing another attack of speculators on bonds of single countries.

This second point is rubbish as such a Eurobond would raise financing costs for the Euro hardcore comprised of AAA-rated Austria, Germany, Finland, Luxembourg and the Netherlands. Sorry, there is no solidarity among these populations with the book-cooks from the souther European hemisphere and never will be. Why should Austrians or other Eurozone inhabitants accept that Greek public servants retire with 53 years when their own politicians already discuss to push out the legal retirement age past the 65 year limit applied in most Euro countries?

 

It has yet to be seen if the Greens will stick to their strategy and really prevent the Greek bailout package as it it highly improbable that the Eurozone will come up with a framework for sovereign defaults before the deadline on July 20, when Greece will have to pay back a maturing bond.

 

But they would very likely gain in popularity for the courage to stand up against the worldwide political concept to fight debt with more debt.

 

The Greens in Austria are in dire need of a popularity booster as they fell behind far right-wing party FPÖ in the last elections and are soul-searching for a policy line that does not estrange their core constituency of environmentalists and the young left that does not find a home under the roof of the socialdemocrats.

 

Standing up against the financial tyranny of the EU would also help to win back anti-EU voters which are currently lured by the two xenophobic parties, the FPÖ (Freedom Party) - now leading in polls with 30% ahead of the two coalition parties SPÖ (Social Democrats) and ÖVP (Christian Conservatives) - and the BZÖ (Alliance for the future of Austria).

 

Occupying a critical position towards an undemocratic EU would break the dam that only right-wingers publicly oppose the repressive regime of the Moloch in Brussels that tends to overregulate every aspect of life while salting away billions in taxpayer money by widespread subsidy fraud.

 

It would also help restore the image of an autonomous party favoring liberal policies over Brussels' law-spewing machine that is increasingly opposed by most Europeans except the politicians that live very well from and with the EU.

 

Therefore I call on the Greens: Please give financial sanity a chance in the world and do not back down from your key demands. It is now entirely in your hands to push Eurozone policies back on a sound path. Bailing out Greek again will only lead to more expensive bailouts as it delivers a bad example to the other budget sinners in the Eurozone. Help stop the money printing madness arranged by a clueless set of Euro politicians that will retire comfortably no matter what happens instead of becoming a complicit partner in the robbery of Europe's future.

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Morning markets: Greece deal puts crop markets on front foot

by Agrimoney.com

Financial markets looked to end a difficult week on a brighter note.

Greece's agreement with international lenders to further measures to improve its finances lent a sunnier air to risk assets. Tokyo shares, for instance, closed up 0.9%, and Shanghai stocks stood 2.1% higher in late deals.

Furthermore, the dollar took one step backwards, easing 0.1% against a basket of currencies, as the idea that this chapter of the Greek debt saga was over, on consent by Athens to further spending cuts on top of the E28bn ($40bn) plan settled last month, so winning a (further) E12bn rescue package.

A weaker dollar improves the case for dollar-denominated assets, making them cheaper to buyers in other currencies.

Next week is coming...

Copper gained more than 1%, while New York crude recovered 0.7% to stand at $91.67 a barrel at 07:20 GMT (08:20 UK time).

And grains showed even stronger gains, building on their recovery late in the last session on the idea that the selling of recent sessions had gone further than could be justified, for now at least.

Of course, investors will gain a better idea of where grain fundamentals are next Thursday, when the US Department of Agriculture releases data on American inventories and sowings.

"The market has to be looking ahead to the June 30 stocks and acreage reports which are just a week away, and that should provide some underlying support and consolidation as we move forward over the next four sessions," Jon Michalscheck, at Benson Quinn Commodities, said.

Wet weather

Corn led Friday's bounce, adding 1.5% to $6.90 ½ a bushel for July, further expanding its premium over the new crop December lot, which managed only a 1.0% rise to $6.52 ¼ a bushel.

And this despite the December contract having managed, unlike earlier lots, to retake its 100-day moving average in the last session, a tick in the box for chart-followers. (Another tecnical point to note is the expiry of July options, which could provoke some unusual moves.)

Wheat gained 0.9% to $6.54 ¾ a bushel, a touch behind the new crop September lot, which added 1.1% to $6.76 ½ a bushel, with some observations of poor weather ahead too.

Lynette Tan at Phillip Futures said that a "forecast of more rain in northern US Plains for the next few days could prevent some farmers from planting all their intended wheat acreage". That is, if they haven't given up already.

"Rainy conditions in southern US Plains may also delay harvest of hard red winter wheat," she added, although Agrimoney.com has not heard yet of mention of the rains turning observations of better-than-expected quality into reverse.

Against the tide

Soybeans for July added 0.4% to $13.23 ¼ a bushel, creeping back from the edges of the oilseed's recent trading range, which it was helped to on Thursday by Canadian data showing that farmers had intended higher-than-expected canola sowings.

(Although whether they found enough breaks in the rain to plant them is a different matter, of course.)

And cotton set course for the somewhat remarkable feat of closing higher, for July delivery, every day this week, even while prices of other crops have collapsed. Who said all agricultural commodities moved in the same direction these days?

The lot has been buoyed by covering of short positions ahead of the start of the expiry process today, a period which, for the May lot, caught out holders short of cotton big time.

It added 1.1% to 166.38 cents a pound on Friday, with the December lot gaining this time too, by1.8% to 121.49 cents a pound.

Seven-month low

Elsewhere, palm oil continued its march south, touching a seven-month low of 3,118 ringgit a tonne in Kuala Lumpur, for September delivery, before recovering a little ground to stand at 3,125 ringgit a tonne, down 0.4% on the day.

The vegetable oil is being depressed by much improved hope for production, which drove Malaysian stocks in May to their highest in 16 months.

However, there is hope for bulls. "The downside could be capped as the strong buying interest from China and Middle East could continue," Ker Chung Yang at Phillip Futures said.

"The demand for palm oil has risen due to a wide discount to competing soyoil, and as countries gear up for the Islamic fasting month of Ramadan," which starts in August.

Soyoil, indeed, added 0.3% to 55.32 cents a pound in Chicago for July delivery, helped by better-than expected US crush data published on Thursday.

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Rising Food Prices Are on the Menu Regardless of G20 Action

By David Zeiler

You've no doubt felt them in your wallet already. And just a few days ago, we again warned you about the storm that's been brewing in the agricultural sector.

Well yesterday (Thursday) the Group of 20 (G20) decided to take action by announcing it would curb rising food prices by creating a more transparent system of tracking food supplies.

But sadly, that won't be enough.

"The plan of action tries to address the symptoms of price volatility on agricultural markets," Olivier De Schutter, the United Nations special rapporteur on the right to food, told the Guardian, "but it fails to address the causes."

Those causes have been well-documented in Money Morning: The steeply rising global population, growing demand from emerging markets such as China, the spillover effect of rising energy prices, mandates on biofuels, and a weak dollar.

And those factors together mean rising food prices for the foreseeable future - regardless of what the G20 tries to do.

It's a pain we will all share - and that will be felt most acutely in poorer countries - but companies involved in supplying and transporting food such as Archer Daniels Midland Co. (NYSE: ADM) and Bunge Limited (NYSE: BG) should do well.

Another company that should fare well is Deere & Co. (NYSE: DE), which last month raised its 2011 guidance based on rising sales of farm equipment.

Certainly, the G20 plan, officially known as the Agricultural Market Information System (AMIS), is well-meaning. The group believes volatility in agricultural commodities results from irresponsible speculation and a lack of information on global food stocks and the supply and demand of crops.

The G20 is betting that collecting that information from nations as well as private companies - and making it public - will help foil speculators and calm markets.

"What we saw when prices started to surge in 2008 was that the lack of information on stocks and availability can lead to panic in markets, and panic is what leads to price hikes," World Bank President Robert Zoellick said at a news conference. "Uncertainty leads to volatility."

Of course, a major flaw in the AMIS plan, aside from its failure to address why food prices are rising, is that it requires the full cooperation of nations and corporations.

French Agriculture Minister Bruno Le Maire even admitted that China and India have resisted disclosing details about their food supplies, citing national security. Both nations have already been given extra time to provide the requested information.

The private corporations present an even bigger challenge. Four companies - Cargill Inc., Bunge Limited, Archer Daniels Midland, and Louis Dreyfus Commodities - control more than 90% of global grain trading.

Although Le Maire has met with these companies in an effort to win their cooperation, the G20 can't force them to disclose their data, and they may resist revealing sensitive information to competitors.

Beyond Their Control

This isn't the first time the G20 has tried to exert some control over an erratic and troublesome commodity market.

Back in 2002 the G20 launched the Joint Oil Data Initiative (JODI), an attempt to arrest volatility in the oil markets. Participants in the oil markets have been slow to cooperate, and a glance at any recent oil price chart will tell you that the oil markets are as volatile as ever.

Similarly, the many pressures on agricultural commodities, most of which are beyond the G20's control, will keep the market volatile while pushing prices upward.

In a report last month, the United Nations revised up its estimate for the global population in 2050 by 150 million people to 9.3 billion, and projected a peak of 10.1 billion by 2100. That will require a 70% increase in global food production, an issue the AMIS plan doesn't even begin to address.

More immediately, you have the rapidly rising appetite of countries like China, which already is using 47 times more corn than it did 10 years ago.

And then there is the inscrutable emphasis of governments on biofuels that convert crops such as corn into fuel. The U.S. ethanol industry expects to convert 5 billion bushels of corn into ethanol next year, encouraged by the Renewable Fuel Standard mandate requiring the blending of ethanol with gasoline.

Recent spikes in energy prices also have affected food prices, with crude oil rising 10.3% in March, 36% higher than the same period in 2010.

"These oil price increases impact the price of food -- a 10% increase in crude oil prices is associated with a 2.7% increase in the World Bank Food Price Index -- through multiple channels," a recent World Bank report stated. The organization's Food Price Index has remained stuck near the all-time high it set in early 2008.

Finally, there's the weak dollar. As the world's reserve currency, commodities are usually priced in dollars, so a weak dollar tends to make commodities more expensive.

All told, it looks like the G20 has bitten off more than it can chew.

"Fixing the global food system and ending the food price crisis requires major surgery yet the G20 produced little more than a sticking plaster," Jean-CyrilDagorn, policy advisor for Oxfam's GROW campaign,said in a statement. "Agriculture Ministers agreed to address some of the impacts of high and volatile prices but failed to introduce the measures needed to prevent prices spiraling out of control in the first place."

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Gold Prices: Will Gold Equity Investors Reap Big Gains?

By Frank E. Holmes

Gold prices passed the $1,500 per ounce mark for the first time ever in mid-April and, aside from a couple of short pullbacks in early May, have set up shop in the neighborhood of $1,525 to $1,550 an ounce (gold closed at $1,553.40 on Wednesday).

So far in 2011, it's been relatively status quo for those investors who've embraced gold as a way to protect themselves from currency debasement, excessive money printing and inflation as prices have increased 7.67%. Bank of America-Merrill Lynch (NYSE: BAC) analysts are forecasting gold prices could fall to $1,400 an ounce during seasonal weakness in July before rebounding as high as $1,650 an ounce by early fall.

While the party continues for gold bullion prices, stocks of gold companies have been a no-show. The NYSE Arca Gold Bugs Index (HUI) has fallen more than 13% year-to-date and the Philadelphia Gold & Silver Index (XAU) has toppled more than 16%. Companies such as High River Gold Mines Ltd., Jaguar Mining Inc. (NYSE: JAG) and NovaGold Resources Inc. (AMEX: NG) are off more than 45% from 2007-2008 highs.

This underperformance has been exacerbated in recent weeks making it a hot topic of discussion among investors, analysts and portfolio managers.

An Analyst's View of Gold Prices

I recently had lunch with CIBC (NYSE: CM) analyst Barry Cooper, gold-company wizard and one of the industry's best. He sees this recent phenomenon as "a market-sentiment-driven event that will pass as fundamental financial drivers kick in to support share prices and drive them higher."

However, the trend could continue as long as the cost of mining operations continues to inflate. Cooper modeled a case study that showed equities can produce an inferior return relative to bullion when the price of an ounce and the cost to produce it rise in tandem despite the opportunity for companies to use higher gold prices to expand production or increase reserves.

According to Cooper, "the average global cost per ton has been rising at a rate that is slower than the gold prices increase; however, it has also been accompanied by a declining grade profile for most operations." The average grade of a gold deposit has declined 21% since 2005, but higher bullion prices have made it economically viable for gold companies to pursue higher cost projects and keep lower-cost, high-grade operations off line in case gold prices pull back.

Further, Cooper says this means that "the market seems to have penalized companies for the rising costs associated with lengthening the life of a mine operation ... the market does not seem to be paying for the optionality offered by increasing reserves when they come with increased costs."

The strongest periods of underperformance seem to correspond with times when cost inflation was high. Cooper concluded that "investors seeking gold exposure also want safety in terms of cost containment, and when part of the reason for buying stocks falters, the choice is abandoned for alternative investments."

The financials for the majority of gold companies have been improving for years. According to Cooper, many gold companies "have been generating positive [cash flow] and growing earnings on a per-share basis." Although it hasn't showed up in share price performance, senior gold miners have seen the strongest gains with average per share earnings increasing roughly 67% since 2009.

Corporate cash flows for gold producing companies have also increased significantly. The average senior gold miner now has more than twice the amount of cash flow; mid-sized intermediate gold companies' cash flow has more than tripled.

This year's carnage has created a substantial opportunity to buy healthy, gold mining companies at historically low prices compared to gold bullion. Cooper says that "the net result is that gold companies can now be purchased for about their intrinsic value for the spot price of bullion."

Gold-Mining Dividends - Getting "Paid to Wait"

One way gold companies can lure investors is by sharing their profits through dividends. This would provide a cash incentive to hold shares of the company and allow investors to participate in rising earnings. We like the idea of investors getting "paid to wait" or reinvesting those dividends and purchasing additional shares at potentially lower prices.

Newmont Mining Corp. (NYSE: NEM), a company whose share price is about 15% off of its highs, recently initiated a dividend program and has a current yield of 1.55%. Companies such as Compania de Minas Buenaventura SA (NYSE ADR: BVN) (1.82%), Yamana Gold Inc. (NYSE: AUY) (1.59%), Gold Fields Ltd. (NYSE ADR: GFI) (1.39%) and Barrick Gold Corp. (NYSE: ABX) (1.11%) also offer attractive yields.

The ongoing debt crisis in Greece should remind everyone that global markets are still recovering from 2008's trauma. The system is not nearly as strained as it was then but we are by no means out of the woods in terms of global economic stability. This should continue to provide a catalyst for strong gold prices.

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