Friday, December 9, 2016

Entitlement programs approaching terminal velocity


For decades we have known that the time would come when Social Security & Medicare costs would begin a rapid and explosive growth upwards. That time is no longer the distant future - but something that will take place next year, and the year after, and the year after. The long expected storm is now upon us, and as can be seen below, the amounts involved are staggering and they will arrive much faster than most people realize.

Based on Congressional Budget Office projections, total costs for Social Security, Medicare and Medicaid are likely to be about $120 billion greater in 2017 than 2016. Then almost double that amount in 2018, with an annual increase of $207 billion. Then almost double that amount again by 2019, with an increase of $372 billion compared to last year.

The half trillion dollar a year mark is likely to be hit by 2020 - before the next U.S. presidential election. With an annual increase in benefit spending that will continue to accelerate.

I wrote about this a while ago and it is my contention that the their is zero political will to correct this issue. My view is that these entitlements will lead to the political dissolution of the United States. 

I hope you are preparing for this storm because it is not an event that will take place at some point in the future. The future is now and most people are clueless. 

Thursday, December 8, 2016

Input Capital initiates dividend

Input Capital:

Input Capital Corp. announces that as part of the Company's long-term strategy to maximize shareholder value, the Board of Directors has approved the implementation of a new dividend policy whereby the Company will pay a quarterly dividend to class "A" common shareholders.

The declaration and payment of dividends on the Company's Class "A" common shares is at the discretion of the Board of Directors which takes into account the Company's financial results, capital requirements, available cash flow, future prospects of the Company's business and other factors considered relevant from time to time.

"We have long stated that a dividend was likely in Input's future, and we feel that time has come," stated Input President & CEO Doug Emsley. "Input is now sufficiently funded to deliver on its business plan and pay a regular dividend to shareholders." Concurrent with the establishment of this dividend policy, the Board of Directors has declared an inaugural quarterly dividend of CAD $0.01 per class "A" common share payable in cash on January 16, 2017 to shareholders of record on December 30, 2016.

Input is the second company in my portfolio, the other being Alterra Energy, that has recently initiated a dividend. I like dividends especially in a tax deferred account like an IRA or 401k. I continue to like Input's business model and I expect they will continue to compound capital as they have done in the past. The market certainly like the news and the stock is still well below its recent highs. 

Tuesday, December 6, 2016

As oil goes so goes Russia

With the recent agreement by OPEC to cut oil production in order to raise prices we can see that one of the beneficiaries is Russia. Russian stocks, as I said earlier this year, are some of the cheapest stocks in the world based on the cyclically adjusted p/e ratio.

If oil prices are in fact going to be heading higher we can also expect the Russian stock market to begin heading higher as oil has a heavy influence on the Russian market.

Sunday, December 4, 2016

Things in Venezuela are so bad companies are giving away their operations


Multinational companies are selling their Venezuelan operations at hefty discounts - or even giving them away - as they to seek to escape the OPEC nation's soaring inflation and chronic supply shortages.

Six firms, including General Mills and oil producer Harvest Natural Resources, have sold operations for as little as half their assessed value on the companies' books, according to securities filings and interviews with a dozen people knowledgeable about the deals.

One company, U.S. autoparts-maker Dana, last year sold its debt-laden Venezuela operations to a local buyer for no cash compensation. Two multinational corporations - Clorox and Kimberly-Clark - chose instead to abandon their operations here.

It seems we are close to all th wheels falling completely off the Venezuela economy. Things are so bad that multinational companies are in many cases just abandoning their operations and writing off the loss. 

This is a great lesson for those in the west that still romanticize socialism and communism. It never works and will never work because it is against human nature. Unfortunately millions upon millions have been murdered and lived in abject poverty to prove the point. Eventually the people in Venezuela will have enough and there will be a change in the political climate and then speculators like myself will come in and bring much needed capital. And yes we will become wealthy. 

Saturday, December 3, 2016

Mongolia Growth Group prospects are getting better

Seeking Alpha:

Mongolia Growth Group disclosed several materially positive developments in its third quarter earnings release, yet the stock is 20% lower today.

An “October surprise” essentially doubles the co.’s cash balance and provides tangible evidence suggesting MNGGF’s book value may be dramatically understated.

Investors may not be aware of these developments, as they occurred subsequent to quarter-end. Management buried the details at the bottom of the 3Q quarterly report and didn’t issue a press release.

Pro-forma cash should comprise over 30% of MNGGF’s market cap: The co. is debt-free and posting a sharp positive inflection in operating results, hence, a very attractive entry point.

With the news that I posted yesterday that Mongolian coal exports are surging and that Mongolia is getting far better pricing than in the recent past I think it is time to get bullish on Mongolia. Readers know I have been a long suffering bull on the country and I continue to believe that the several trillion dollars in mineral wealth will eventually get unlocked and it will benefit MGG and their real estate holdings in the country. 

The stock is really cheap and extremely undervalued at this point and is basically a long term call option on Mongolian growth. 

Friday, December 2, 2016

Will the Met coal price spike save Mongolia?

Frontera News:

Over 60 kilometers, they line up: truck after truck, after truck. Nearly every one of them is laden with coal.

The world’s longest tailback has been building for months and has varying drivers: first, China’s drought prompted Beijing to slash water-intensive coal production; last, President-elect Donald Trump fanned revival for the least loved of commodities by casting doubt on the world’s commitment to outmode coal.

In the background, a newly installed government in Ulaanbaatar was quietly negotiating its way out of the economic crisis it inherited.

Last week, those negotiations came out into the open. Erdenes Tavan Tolgoi, the state-owned miner of the world’s largest undeveloped coal deposit, announced it had negotiated an 85% price jump in its average selling price to $50 a ton from December, rising to $60 for 2017. Mongolia had been selling its coal at only $32 as part of a settlement for debt owed to the Aluminum Corporation of China, or Chalco. In another part of Tavan Tolgoi, Mongolia Mining Corp. had already struck a deal to sell its premium washed variety of coal at $107.

So what’s the big deal? Right now, Mongolia is pleading poverty. Mounting debt has driven the government into talks with the International Monetary Fund. It’s been whacked with two credit rating downgrades in as many weeks.

Yet, sales of coal – coupled with rising earnings from the country’s other main resources, namely copper, gold and iron ore – appear destined to rescue this nation of 3 million people, with or without foreign handouts.

So this is the news I was looking for. If this article is in fact accurate than my speculation in Mongolia Mining Corp. and my decision to add to my Mongolia Growth Group Holdings should benefit in the extreme. 

Thursday, December 1, 2016

Zinc at 9 year high



The bottleneck in mine supply is now impacting the smelting industry, which is expected to be forced to cut production because of the lack of raw material. This market imbalance has led to smelting fees for zinc hitting their lowest level in two years. Because of these supply woes, the price of zinc has spiked to its highest level since October of 2007, topping $1.30/lb. This makes zinc the best performer this year among the 22 raw materials in the Bloomberg Commodity Index.

While much of the current strength in the zinc market is attributable to shuttered production, over the longer term a new driver may appear in this market: new battery demand. Zinc-carbon batteries were the old dry-cell batteries which were widely used until the current generation of hi-tech, lithium-ion batteries displaced this older technology.

 Not many people paying attention to zinc but it is making new highs.This is right in Nevsun's wheel house and as they ramp production of zinc and iron out their operations we should be seeing higher cash flows. 

Sunday, November 27, 2016

Top ten emerging markets

The list includes Pakistan and Vietnam both of which I am very stoked on long term. I saw Egypt on the list and it is also on my list after the recent 40% devaluation in the Egyptian Pound.

Pakistan stock market makes all time high

After five consecutive positive sessions throughout the week, the stock market recorded gains of 675 points or 1.6% to close at an all-time high of around 43,000 points.

Not much more to add on my end. This is what we were expecting when we bought the Pakistan ETF. With $42 billion being spent by China to create an economic corridor to the Pakistan coast from China and investment in infrastructure I expect growth to continue in Pakistan. 

Galaxy Resources presentation at Swiss Mining Institute Conference

Galaxy Resources:

Pretty interesting presentation. What especially got my interest was the slides about Chinese demand and how the Chinese are electrifying their transportation system.

China driving lithium demand

There is not a shortage of lithium reserves. However their is a shortage of producing properties. If the price stays high sufficient capital will come into the market and we will see supply catch up to demand. However that is not going to happen overnight and I expect it will take a few years to get new projects permitted, financed, built, and commissioned. That is the opportunity with Galaxy as the company is just now bringing a mine into production when prices are high and supply is constrained.

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