"Don’t Rush For Gold" - What A Real Hard Currency Mine Looks Like

When it comes to mining for alternative currencies, there is this:

Or this:

Tien Shan mountains, Kyrgyzstan

“Don’t run! Slow down! Just don’t run!” I repeated this non-stop to myself like an incantation. Indeed, it is hard even to pace quickly – let alone run — when you have to breathe in the rarefied air and wear a supplied protective helmet and brand-new rigid boots with steel toes.

I also had to look out for giant trucks the size of three-story houses chugging around. It was difficult to keep my emotions under control during the few hours on this tight assignment. I was at an altitude of over 4,000 meters above sea level near the Chinese border, inside a huge open-pit gold mine at Kumtor, Kyrgyzstan’s largest gold asset, operated by Toronto-based Centerra Gold. Gigantic trucks and excavators worked non-stop in the snow-clad pit, looking like characters from a fantasy movie. As if playing a computer game, an excavator operator elegantly manipulated small joysticks – just five scoops full of ore, and almost 200 tones were loaded into a truck in about one minute.

In line with Centerra Gold’s tough requirements, I passed two medical checks before I started working at these giddy heights. A day before, we had to stay for the night at a guest house located at about 1,700 meters above sea level to get accustomed to high altitudes before ascending to Kumtor. The gold mine is the world’s second highest-altitude gold deposit after Peru’s Yanacocha mine. Some vehicles never even stop their engines in these ferocious conditions of Arctic tundra and permafrost.

Finally, the work of hundreds of workers, dozens of huge machines and the state-of-art gold-extracting mill reached its logical conclusion accomplished by just two workers. Moving like extra-terrestrials in their silvery heatproof overalls and helmets, they slowly poured dazzling, bright orange molten gold from a crucible into molds.

Minutes later, four bars containing around 80 percent pure gold and worth $ 2.6 million were ready for polishing. A worker wearing a mask closed the curtain of his glass booth to polish a 20 kg bar inside.

I saw gold dust shine in the light of bright lamps illuminating the booth. After being photographed as though they were prestigious models on a catwalk, the four shiny bars were then stamped and sealed in massive vaults. I have seen batches of banknotes worth more than $ 2.6 million, but beyond all doubt, gold bars look much more attractive!

When I left the hot melting shop, I saw a crystal clear sky over the Kumtor mine outside. As our team prepared for the 400 km (248 mile) ride back to the Kyrgyz capital Bishkek, I raised my camera to shoot a final general view of the plateau. In the bright sunlight, a few tiny specks of gold dust were still glittering on my lens and camera.

By Shamil Zhumatov, Reuters

Zero Hedge

"Don’t Rush For Gold" - What A Real Hard Currency Mine Looks Like

Show me your (real and metaphoric) safety net

What does your safety net look like? What has caught you when you’ve stumbled — or helped you feel financially secure enough to take a leap? Today, we launch an occasional series we’re calling Show Me Your Safety Net.  In this first installment, we meet Mercedes Gallup. 

This is not the first time Mercedes Gallup has exposed a part of her safety net. She still remembers the stares she would get, 20-years ago, when she would pull out her food stamps at the grocery store. 

“Back then you held up the line when you were using food stamps,” she remembers.  “They had to check everything and they were paper — it was like a little book of Disneyland cards.

Sometimes, Gallup says she would feel judged. “But I had to feed my kid,” she says. “So I’ll hold up the line all day. I was a single mom, I was in nursing school, and had a job. And it just was not enough to cover food.”

But in the three years that Gallup was on food stamps, they didn’t just help her cover food. Gallup says  they provided her a safety net that allowed her to take risks she otherwise wouldn’t have taken. Risks she believes have paid off. 

Now, she is a public health nurse at a state college in Southern California, with a good salary and benefits, which provided her another kind of safety net, when she had breast cancer a few years ago. Gallup has recovered. And these days, she has the time and money to take new risks.

You see, Mercedes Gallup uses yet a third kind of safety net now. A literal one. Because when she’s not working, she is a trapeze artist. Her coworkers call her “The Flying Nurse.”

One recent morning, I went to the Trapeze School in Woodland Hills, CA, where she trains.  I watched her fly through the air. Sometimes she’d do somersaults.  Sometimes, she’d miss, and fall. But she was always ok. The net caught her.

After her last trick, once she’d climbed out of the net, she mentioned in passing that even though her old food stamps have long expired, she still has some — $ 65 worth.  She keeps them in an envelope with other important papers. 

“I definitely have a healthy respect for the net,” Gallup tells me.  Literal, and metaphoric.

Up next in our series:  Krissy Clark gets a crash course in safety nets real and metaphoric….when she learns to fly on a trapeze.

 

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Show me your (real and metaphoric) safety net

Atlanta real estate: Peachy keen or sour grapes?

Deborah Gilmore is a realtor with Harry Norman Realtors. She’s been selling homes in the Atlanta area for more than two decades. Gilmore says people should move to Atlanta because of its fabulous weather, diversity and the wide variety of housing — everything from a condo to a castle. She says Atlanta’s housing market is recovering.

“We do have a heartbeat now. We had flat line for quite a while, but we are beating. That’s good news,” says Gilmore. “Certain areas of Atlanta, where high-end is predominant, there are people buying.”

Gilmore says a three bedroom, two bath home in Atlanta can be found for around $ 150,000-200,000. While the same type of home in other parts of the county — depending on whether it’s in foreclosure or on short sale — can cost around $ 90,000-150,000. In one of her recent sales, Gilmore says she sold a house to a new couple who were thrilled with their new home.

“They got so excited about the house, we got close to closing. And the buyer called and said that he wanted to go and cut the grass. I said that’s so very nice. I said we have one problem. He said, ‘What?’ I said you don’t own the house. It’s not your house yet. You haven’t bought it, so you can’t just show up on the property and start cutting the grass and trimming the bushes. That’s just one example. Excitement of people that when they want to buy and they have a good experience with the process and they can’t wait to get the property, that’s what I like,” she says. “[If] they have cartwheels from the front door, you know they love the house.”

But how are the bankers down South? Are they as hospitable as the people and likely to throw loans at potential buyers?

“Nobody’s throwing loans, I’m sorry. You have to check with a lender bank first to see if you’re credit worthy. People love to look at the pretty stuff — the house and dream about where they want to live, but the restrictions are much different now than they were five or six years ago,” says Gilmore. “They’re looking at credit scores and pattern of payment. This has to be really good and clean.”

CLICK HERE TO VIEW AN INTERACTIVE MAP OF HOW MANY MORTGAGES ARE UNDERWATER IN YOUR STATE
 
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Atlanta real estate: Peachy keen or sour grapes?

Sequester cuts get real for unemployed Americans

One reason House Republicans might not feel a sense of urgency about budget cuts that start today? They’re kind of abstract. No set timeline. No clear definition of who gets hit.

So you can kind of understand that, right?

Richard Crowe most definitely does not. He’s a steelworker — or, he was, until he was laid off nine months ago. He’s collected unemployment since. And federal unemployment is one of the programs being cut because of the budget cuts.

Crowe isn’t quite sure what will happen come Monday, or in the following weeks. His check is expected to get smaller by about 10 percent. That’s cutting a good $ 76 out of the $ 764 he receives from unemployment every two weeks. “It isn’t enough to begin with, and then you’re losing money on top of it. It ain’t good.  I struggle to pay bills now.”

His wife works, but doesn’t make a living wage. His Plan B? Crowe continues his job search. He says he’s applied for over 200 at this point, but hasn’t had much luck.

Crowe says he’s not happy with Congressmembers from either party. “I worked my whole life. I don’t want to be on unemployment. But I don’t think the 535 people, any of them care about you.”

Latest Stories on Marketplace.org

Sequester cuts get real for unemployed Americans

Sequester cuts get real for unemployed Americans

One reason House Republicans might not feel a sense of urgency about budget cuts that start today? They’re kind of abstract. No set timeline. No clear definition of who gets hit.

So you can kind of understand that, right?

Richard Crowe most definitely does not. He’s a steelworker — or, he was, until he was laid off nine months ago. He’s collected unemployment since. And federal unemployment is one of the programs being cut because of the budget cuts.

Crowe isn’t quite sure what will happen come Monday, or in the following weeks. His check is expected to get smaller by about 10 percent. That’s cutting a good $ 76 out of the $ 764 he receives from unemployment every two weeks. “It isn’t enough to begin with, and then you’re losing money on top of it. It ain’t good.  I struggle to pay bills now.”

His wife works, but doesn’t make a living wage. His Plan B? Crowe continues his job search. He says he’s applied for over 200 at this point, but hasn’t had much luck.

Crowe says he’s not happy with Congressmembers from either party. “I worked my whole life. I don’t want to be on unemployment. But I don’t think the 535 people, any of them care about you.”

Latest Stories on Marketplace.org

Sequester cuts get real for unemployed Americans

Real Disposable Income Down 4%, Reversing Strong Gains in December

The Bureau of Economic Analysis report on Personal Income and Outlays for January shows a 4% decline in real disposable income (the biggest decline in 20 years) following sharp gains in December. Personal Consumption Expenditures (PCE) eked out a .1% month-over-month gain.

Personal Income and Outlays, January 2013

Personal income decreased $ 505.5 billion, or 3.6 percent, and disposable personal income (DPI) decreased $ 491.4 billion, or 4.0 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $ 18.2 billion, or 0.2 percent.  In December, personal income increased $ 353.4 billion, or 2.6 percent, DPI increased $ 325.7 billion, or 2.7 percent, and PCE increased $ 14.8 billion, or 0.1 percent, based on revised estimates.

Real disposable income decreased 4.0 percent in January, in contrast to an increase of 2.7 percent in December.  Real PCE increased 0.1 percent, the same increase as in December.

Wages and Salaries

Private wage and salary disbursements decreased $ 44.8 billion in January, in contrast to an increase of $ 49.1 billion in December. Services-producing industries’ payrolls decreased $ 41.5 billion, in contrast to an increase of $ 39.3 billion.

Personal Outlays and Personal Saving

Personal outlays — PCE, personal interest payments, and personal current transfer payments — increased $ 22.0 billion in January, compared with an increase of $ 13.3 billion in December.  PCE increased $ 18.2 billion, compared with an increase of $ 14.8 billion.

Personal saving — DPI less personal outlays — was $ 283.9 billion in January, compared with $ 797.4 billion in December. The personal saving rate — personal saving as a percentage of disposable personal income — was 2.4 percent in January, compared with 6.4 percent in December.

December to January Wild Swing Expected

The December to January swings were generally expected (at least they should have been). Corporations brought as many wages and bonuses forward as they could to avoid 2013 payroll tax hikes.

The surge in the December savings rate and the surge in December personal incomes were essentially a mirage.

Big Four Indicators

Dough Short at Advisor Perspectives does an interesting report every month on “Big Four” indicators: Industrial Production, Real Income Minus Transfer Payments, Employment, and Real Sales. “Real” means inflation adjusted.

click on chart for sharper image

Notes: 

1. The above chart shows Real Personal Income Minus Transfer Payments. That accounts for the difference between what Short reports and the BEA reports.
2. I added the dashed lines. Real disposable income is right about where it was a year ago, and not that far above where it was 25 months ago.

As per Short “The -4.7% decline in January essentially cancels the 1.4% rise in November and 3% rise in December. The January year-over-year number probably gives us a better sense of the economic reality: Personal Incomes Less Transfer Payments are essentially flat — up a tiny 0.7%.” 

Looking Ahead in 2013

Looking ahead, expect to see declines in real personal incomes on a year-over-year basis (an artifact of the end of the temporary 2% payroll tax cut). Sales tax hikes, especially in California (as a result of proposition 30), will take a further bite out of disposable income.

I think this will matter more than most economists have figured. 2% payroll cuts may not be much to upper income groups, but it will hit disproportionately hard on low-wage earners who ten to spend every cent they make.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Real Disposable Income Down 4%, Reversing Strong Gains in December

The Real Reason Boomers Buy Bonds

Day after day we are inundated with the apparent ‘idiocy’ of investors putting their hard earned money into Treasury bonds when they only earn 2% yields. Hour after hour, we hear why investors should buy stocks, ‘get paid to wait’, and bonds are in a bubble. So why is it that day after day, an entire generation appears to have found a new mantra of investing, preferring less risk to more, satisfied with less return as opposed to more. The simple answer comes down to two words – often misunderstood – risk and drawdown. While most consider the former to be some quantifiable measure of uncertainty (more is better because think of the upside potential); it is the latter that ends careers, crushes retirement hopes, and scars pysches for life – and is often ignored. As we discussed here previously – must read, comparing (risky uncertain cashflow stream) equity dividend yields to (risk-free certain cashflow stream) Treasuries is like comparing apples to unicorns, but more importantly as Boomers retire en masse, this chart explains why there is a third leg to the investment decision – risk, reward, and regret; and equity drawdowns are the real ‘risk’.

 

Drawdown risk has kept equity investors at bay; bonds have appeal as a safety play – despite low yields as return OF capital still trumps return ON capital – even though bonds have provided both in recent years.

and some important lessons from Oaktree Capital’s Howard Marks:

Question: Why do behaviour patterns and mistakes recur despite the plethora of information available now? Are we doomed to repeat our mistakes?

 

Howard Marks: It’s extremely important to know history, but the trouble is that the big events in financial history occur only once every few generations. The latest global financial crisis began in 2008 and the one before that in 1929. That’s a gap of 79 years. So, while memory has the potential to restrain action and induce prudence by reminding us of tough periods, over time as memory fades the lessons fade as well.

 

In the investment environment, memory and the resultant prudence regularly do battle with greed, and greed tends to win out. Prudence is particularly dismissed when risky investments have paid off for a span of years. John Kenneth Galbraith wrote that the outstanding characteristics of financial markets are shortness of memory and ignorance of history. In hot times, the few who do remember the past are dismissed as relics of the old, lacking the ability to imagine the new. But it invariably turns out that there’s nothing new in terms of investor behaviour. Mark Twain said that “history does not repeat itself but it does rhyme,” and what rhyme are the important themes.

 

The bottom line is that even though knowing financial history is important, requiring people to study it won’t make a big difference, because they’ll ignore its lessons. There’s a very strong tendency for people to believe in things which, if true, would make them rich. Demosthenes said, “For that a man wishes, he generally believes to be true” Just like in the movies, where they show a person in a dilemma to have an angel on one side and a devil on the other, in the case of investing, investors have prudence and memory on one shoulder and greed on the other. Most of the time greed wins. As long as human nature is part of the investment environment, which it always will be, we’ll experience bubbles and crashes.

 

Question: Is it volatility that’s made people scared of equity markets, particularly since 2000?

 

Howard Marks: Volatility goes in both directions but it’s declines that people dislike, not volatility. The equity markets of the last 50 years tell a long and meaningful story. Owning stocks wasn’t very popular back in the 1950s, until the brokerage houses popularised equity investing. People started buying equities and they went up, encouraging more people to buy them. This is the usual selffeeding spiral. So equities rose in nearly a straight line from 1960 to 1972. After this they had a bad decade, but then they did even better from 1982 to 1999. Overall, for 30 out of those 40 years, equities rose breathtakingly and people fell more and more in love with them. By the end of 1999 everyone had more equities than ever before and maybe too much of them. So, equity performance, equity prices, investor attitudes towards equities and equity allocations within portfolios all reached their acme in 2000, after which equity prices collapsed under their own weight. In 2000-02 we had the first three-year decline in equities since the Great Crash, and people started to fall out of love with them. This made them sell, driving prices down further and prompting even more selling. The same spiral, but now in reverse. And as investors fell out of love with equities, they fell in love with bonds.

The mantra in the last four decades of the 20th century was “growth” and the mantra in the last 12 years has been “safety and income.” And so, from 2000 to very recently, equity allocations have been going down, equity prices have been unchanged overall, equity returns have been close to zero, and we’ve seen people chase safety and income through bonds instead. But people often forget to look at the price they’re paying for the concept they’re buying into. In 2000, people pursued growth but forgot to ask themselves ‘at what price?’ And in recent years they’ve been pursuing safety and income while ignoring the same question. Today the price being paid for the safety and income of bonds is among the highest in history.

Chart: Goldman Sachs

Zero Hedge

The Real Reason Boomers Buy Bonds