“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises (hat tip Jim Quinn)
My prediction for the current debt crisis: John Boehner and the establishment Republicans will form a coalition with the Congressional democrats to sell out the American people. They will raise the debt ceiling, Obama will sign the bill, Bernanke will officially begin QE3, and it will be business as usual. The dollar will continue its downward spiral and much of world is going to starve to death. During the Weimar Republic, food became the most expensive part of people’s budget. Gonzalo Lira explains why food production fails during times of hyperinflation: Is Farmland A Smart Hedge Against Inflation?
In an earlier post, I argued against renunciationguide.com that there is indeed a right of expatriation enshrined in the Declaration of Independence. Now I believe that I’ve found the same right in the United States Constitution–the Ninth Amendment:
The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.
Now since the American Revolution was the colonists’ major assertion of the right to expatriate from Britain and the King of England, it only makes sense that the Ninth Amendment must be interpreted as protecting that same right in the case of anyone who wishes to expatriate from the United States.
A year ago I mentioned that my in-laws were in India November and unlike previous trips, the U.S. Dollar was no longer accepted by vendors. About a year ago, my next door neighbor was in his home country of Burkina Faso. In previous years, the premium for exchanging US dollars for CFA (the Franc of French Africa) was reasonable. But when he was there last summer they started with 16% premium and negotiated from there.
Well, it seems that those who say you can’t time the market are right. Yesterday I sold a put on Goldcorp (Jan 2013, $52.50 for $9.40); on April 28, I bought back my last position (July $45 $4.60) for $0.33 on April 28 when GG was at $56. Then, Goldcorp announced yesterday after hours that they were cutting their production forecast by 9%. The Globe & Mail decided to highlight this aspect of their announcement with the headline: “Goldcorp scales back production forecasts“. Sometimes I wonder if the major media wants industry to do well. Their focussing on the negative all the time is quite ridiculous sometimes. (As I write, GG share price has dropped $2.10 from yesterday’s close).
But the announcement was not at all bad news. Their 2Q reports says that revenues are up 62%. If the share price goes down because of the cut in the production forecast, then it probably represents more of a buying opportunity than it already is. As it is–and this applies to GG as much as any gold miner–gold mining companies are a bargain compared to their typical price vis-a-vis the price of gold–see Fabrice Taylor and Monty Pelerin (here and here). I will sell another put if the share price drops to $45.
Update: TD Newcrest has downgraded GG from “Action List Buy” to “Buy” and lowered its target price from $70 to $68. (Price is now down $2.76).
Note: All prices in U.S. dollars (which has no intrinsic value).