Saturday, April 28, 2012

Review of Barron's -- Dated 30 April

Before starting with anything else, take a look at the debt widget above.  $16 trillion!  Whee!

Now enjoying the normality of our weekends, I am pleased to offer up this Saturday review of Barron's!  This week was a relative busy one, those of you (few!) who know us personally know that "we don't get out much" they say...  Well we did this week (Tuesday night dinner with another couple, the two ladies then went to the opera), Wednesday featured Tai Chi class followed by two episodes of "Dexter" (Season Four, our kid says Season Four is the best, so far very good...), Thursday we saw the new movie "The Three Stooges" (if you liked the show, you'll like the movie), Friday we went to see the Marlins play baseball in their brand new ball park (very nice).  So, to our friends and family who say we don't get out: pffft!

Barron's Cover Story is "Can the Dow Stay Relevant?"  Many know that Dow is an index of 30 stocks, but measure in a peculiar and quite imperfect way.  Stock market pros typically follow the S&P 500, which is better suited for both diversity and for using market value of companies in its index (where the Dow just measures share price, that's it).  Apple and Google are clearly big enough companies to be warranted being in the Dow, but the problems is that their very high share prices would skew the Dow a lot.  And yet, the Dow is known and watched closely.  There is not a simple way out of this contradiction: either the Dow changes to become more relevant (but at the cost of making the index behave differently than in the past), or not making the changes and becoming more irrelevant as time goes by.


Alan Abelson writes about the woes of Walmart's recent outing of its corruption in Mexico (to get building permits, etc.).  Mexico, corrupt?  Who would have thought of that?  Total bribes paid: $24 million, that's million not those peskier numbers like billions and trillions).  Investigations and lawsuits are coming writes Abelson.

He then goes on to write that Bernanke's position may have eased a bit.  With the weaker than expected economic growth figures just out, it may make it easier for him to do a QE 3 when the time comes.  Briefly, the growth was a lower than expected 2.2%, and spending by consumers went up, so their savings rate went down (to 3.9% vs. 4.5%).

Abelson then finishes with a piece on how bank robberies have gone DOWN in recent years.  It seems that banks keep less cash on-hand (the average bank robbery nets only $8623.00...  Nicholas Colas: "It's tough to imagine a good hacker getting out of bed for the $8623 average take of the modern robber."


Pump-Price Politics!  A short article by Jim McTague takes some umbrage with president Obama blaming it all on the speculators...

Miriam Gottfried wites another short piece: "Dear Robot: Hire Me!", in which even the Cover Letters going out along with the resume are getting read by computers rather than humans.  The main downside: "Unusual letters -- even strong, creative ones -- might get no extra credit."


"He Said:"

"Europe is similar to the Soviet Union in the way that the euro crisis has the potential of destroying, undermining the European Union."

-- George Soros

They sure do quote him a lot...


Michael Santoli writes positive piece on eBay (ticker: EBAY).  I do not have an opinion on eBay.  I will mention, though, that Zero Hedge's "Rocky Racoon" sells numismatic coins on eBay and is happy with their service.

Lawrence C. Strauss writes a bullish piece on Thermo Fisher Scientific (TMO).  They sell a broad spectrum of lab equipment mostly in medical and biotech, but some to general industry.  They also are getting stronger around the world, including local production for local sale in China.  This is a company I might look at.

Mark Veverka writes an optimistic  piece on Oracle (ORCL).  Oracle is kind of late to "The Cloud" and has been slow to move into the space of putting "unstructured data" (think pictures, email, health care records, etc.).  This hgas now changed, although Oracle has competitors with products that have been out a little longer.  Oracle is a company I have long watched.  They are pretty mighty even if it takes them awhile to take up new technologies.  If it's important in "their space", they always seem to get around to it.  In that sense, they are like Google.


"D. C. Current" author Jim McTague writes the disappointing news that President Obama is the first president to politicize the White House Web Page.  President Clinton first set that one up, and until now it has been free of blatant politicking until now.  Officials at the White House deny that the page is political, it is all "official business."  Sure.

Note to Barron's management:  Jim McTague is one of your very best, give him a raise!


Tiernan Ray ("Technology Week") writes about Apple (AAPL)...  I guess that he pretty much HAS TO, with Apple being the largest company int he world (by market value).  He writes that the future of the iPhone is a little bit uncertain, but that Apple will likely have continued success.  "Even if growth slows, the larger picture is that Apple is one of the very few companies able to marshal the tremendous resources required to make these phones smaller, faster, lighter, possessed of longer-lasting batteries, and to get them to market everywhere in the world."

He then writes a small but interesting piece on how it is difficult for smaller companies in the smart-phone space to get enough of the ever-sophisticated chips.  Only Samsung Electronics and Apple have that problem solved.  Qualcomm is working on it with their manufacturing partner Taiwan Semiconductor Manufacturing (TSM), the latter to boost capital investment by 42% more than planned for.


Mark Veverka (busy this week) writes ("Plugged In") that Amazon (which also beat the consensus numbers, and whose stock moved up 15% last week) may have an even better future in that its "Cloud" presence (Amazon Web Services) is moving right along.


Mike Hogan (The Electronic Investor") writes of two services that provide (free I guess) nice dashboards/portfolio web pages.  Wikinvest ( and Rover ( or, the word was maybe broken up because it was at the end of the line there).  These two are packed with relevant information and are free of clutter (ads?).  Wikinvest seems more ready for prime time...


Vito Racanelli has a FABULOUS interview with economic and financial historian Niall Ferguson.

***** (five stars)

America is at risk of losing its pre-eminence by becoming a welfare state.  Ferguson in his latest book (Civilization, The West and the Rest) writes that six "killer apps" made the West what it is today: Rich.  The killer apps are:

-- competition
-- science
-- rule of law
-- modern medicine
-- consumerism
-- the work ethic

The "Rest" are starting to catch on to many of these, and so the West (including America, although his is positive on America -- other than our inability to fix our budget problems) is at risk of being surpassed as the "Rest" start taking on more of those killer apps...   Highly recommended, great reading.


Editor Thomas Donlan does some great homework in picking apart the completely fictional nature of Social Security and Medicare.  Their trustees have just issued reports on the health of these entitlements.

He goes into much detail, so I will not.  Needless to say "Government Accounting" is so F.O.S. that it ought not even be believed, even approximately.

Donlan: "That's what we call GAAP -- governmentally absurd accounting principles."  Nice!


In the Market Week section, Vito Racanelli (what, these guys at Barron's seem to run their writers pretty hard?!) writes that because the Bush tax cuts will disappear at the end of 2012 if nothing is done, well that would mean much higher taxes on dividends starting in 2013.  This would obviously be stupid, but it could very well happen.  Racanelli writes that some companies that have a lot of cash might just declare BIG special dividends.  Limited Brands (LTD), DSW (DSW), Stein Mart (SMRT), Carnival (CCL), Saks (SKS), Boyd Gaming (BYD), Campbell Soup (CPB), Buckle (BKE), HCA Holdings (HCA) and Covanta Holding (CVA) are all mentioned as companies that might do this.


"Barron's Europe Go-to Guy Jonathan Buck" writes ("European Trader") that Spain, yes, Spain might offer long-term value.

Well, maybe so.  But, they have a lot of short-term pain to go through first.  I think you can wait on placing bets in Spain.  Hey, just IMO.  Buck knows more than I do!


Jamie Miyazaki writes that there re only two ways to invest in Myanmar now ("Asian Trader").  Both companies are out of Singapore and are micro-caps.  I think that you can wait on further developments in Myanmar before putting any money down on it...


Silver fans may not like Tatyana Shumway's (Commodities Corner") take on silver!  "Silver is the one that doesn't get invited to the birthday party because it bites people; it's nasty." (analyst Sterling Smith).

Trading in "paper silver" is down, and the CME claims to have a 10-year high of 140 million oz in their warehouses.

Demand for Silver Eagles is down some 29.7% from last year (which I believe was very high).

Industrial demand is going down due to the global economy continuing to struggle.

So many people DOWN on silver might make it a contrarian good play.  But, silver IS very volatile...  That's why it does not get invited to the birthday parties...

[Ed. Note: Don't shoot the messenger!]


I like it when I can when I can summarize a Barron's cartoon with just words.  Cartoonist Hafeez has a guru and his student sitting face-face their on mats on the floor.  The guru says: "For security reasons, your mantra needs to be at least six characters long."  I liked it!


Nothing in the Classifieds nor in the Insider Buying and Selling stood out this week for me.


But, the Mighty Peruvian Peruvian Sol keeps stomping on the US Dollar!  This week up a bit over one half of one percent!  At this rate, my next haircut down there will cost me maybe $5.00!

Wednesday, April 25, 2012

Dialoging With Other Bloggers

Many of you readers know that I am in touch occasionally with FOFOA ( and at times with other bloggers.

Recently I have had the chance to exchange views with another (new to me) blogger.  We crossed swords (in a gentlemanly way) at first over the issue of Freegold and my view of what the marginal value of gold is and would be for various kinds of holders (small and large).  We have since found that our views are actually closer together than we first thought, on various topics (economics, role of government and others).  So, anyone interested in Austrian Economics and those who like (or can deal with) math might want to take a look at his apparently specialized blog (as opposed to my looking at various subjects):

Our recent correspondence has been about a mathematical model that might model value of marginal ounces of gold for physical buyers.  I have not thoroughly explored his site, but his comments at Zero Hedge seem pretty intelligent, and what I have seen to date has been pretty good.  In an email to me, he wrote that he (like me) uses his blog to explore and better clarify his thinking, while at the same time getting word out…

Here are some other blogs that are of interest to me, and with whom I correspond:  ß run by a research scientist  ß he runs a nice precious metals forum style website

So, as the next day or two clocks by (check out the US Debt Widget above, it is about to tick over $16 trillion…), I would encourage others to check out the above!


I am thinking (but have not yet decided) of just kicking the doors open of my blog, and just go “full retard” (pimping my blog more openly).  It looks like one of my main fears of doing so, namely that of “Computer Monsters” coming to get me has been resolved.  

Reader comments are encouraged!


I have some ideas of new articles to write.  One of them will probably be a “Basic Facts” article on silver.  Which is fine, but I REALLY need a full-throated and knowledgeable Silver Bull to come and write a Guest Post (“The Case For Silver” or similar) at my blog.  I clearly prefer gold for holding the bulk of $-value of my holdings, but I want to see a good case argued for silver.

Any volunteers or authors needing fame?


Finally, I read an amusing line I had not seen before (at Zero Hedge’s Z Chat – Warning Label: very addictive!), but is probably seen all over:

“Everyone now has a blog.”

Seems so true, no?

Sunday, April 22, 2012

Unfair Review of Barron’s -- Dated 23 April

Blogger has just changed everything re publishing pieces, I am not sure how this is going to appear, so we will just have to see how this goes...

This review will be shorter than normal, because we were very busy this weekend, I am trying to figure out HOW to publish & edit pieces and because Barron’s was a little disappointing.


The Cover Story (“Outlook: Mostly Sunny”) is this spring’s Big Money Poll, in which Barron’s asks portfolio managers what their views are on various asset classes for the next year.

54% of the respondents are bullish or very bullish.  This number is in line with with the last two times they ran their Big Money Poll.  After American stocks, they (on the average) wre most bullish on Latin AMerican stocks (53%), Asian stocks (50%), the US Dollar (43% and real estate (41%).  They were most bearish on U.S. Treasuries (81%), Cash (44%) and gold (39%).  Re gold, 30% were bullish and 31% neutral.  So slightly negative on gold.

Favorite stock to buy among the Big Money guys?  AAPL

“Most Overvalued” stock among the Big Money guys?  AAPL  Go figure.


Alan Abelson had some fun with the Bare Secret Service escapade down in Cartagena, Colombia recently.  He suggests that Party Animals might feel at home on Wall St. if they get fired...

He then goes on to write sentiment has changed in some investor polls, becoming a bit more bearish, which might mean that the market is going to keep going up.

Abelson finishes with some observations on how speculators are jacking up the price of oil and gasoline, estimates vary (15% - 50% -- the latter seems very high to me).  But, he (and all of us) can be sure that the Congress will sic the CFTC on those speculators...


Michael Santoli (“Streetwise”) says that “your grandmother’s stocks” have been among the best performers lately:

Colgate-Palmolive (CL)
Walt Disney (DIS)
Kimberly-Clark (KMB)
McDonald’s (MCD)
Nike (NKE)


There is a small article (by William Waitzman) on silver.  There has been less demand for Silver Eagles, but more demand by China on silver itself, along with the silver ETFs having more buyers.


Debbie Carlson writes (“Down - but Far From Out - on the Farm”) that farm land prices in the Corn Belt have been moving up around a 25% average over the last year.  Could be a bubble.  And, as most farmers are older than the average US citizens, this could mean more farmland lands on the market in coming years driving prices down.  But, lower prices would then perhaps bring investors back to farmland...


Kopin Tan writes a piece (“Devon Energy: Undervalued, Underrated”) that is bullish.  DVN has very low debt,lots of cash and is drilling in all kinds of places.  Might be a good bet. 1.2% dividend yield.


Tiernan Ray writes of the great prospects for MSFT at “Technology Week”.  It’s not just Windows 8 but other products on the way.


Gene Epstein interviews John Taylor, Professor of Economics at Stanford University.  Short version: Prof. Taylor thinks that short term stimulus spending is no good.  Permanent tax cuts are.  Taylor does not like QE either.


“D. C. Current” author Jim McTague writes about the growing anger (and court cases) about high fees charged by banks, credit card companies and their intermediaries to retailers, who are very upset.  This one is an issue to keep an eye on, especially if you own bank stocks.


Editor Thomas Donlan argues that even if “automatic cuts” wre to happen late this year, that it would not be a big deal our maintaining military superiority (and hence security).  I agree.


In the Market Week section, Vito Racanelli argues that although natural gas prices will likely stay down for a while (way too much supply), eventually this will turn around and prices will go up.  He thinks 2 - 3 years.  Drilling rig counts are already down.  He notes that Cheniere Energy (LNG) just got permission to build a BIG LNG export facility at Sabine Pass, LA.  This will likely take some 3 years to build before any gas gets exported.  But, LNG outside the USA is pricers MUCH HIGHER than in the USA.

Jonathan Buck (“European Trader”) says that the pain in Spain will increase.  But, he thinks it will likely escape from a Greece-style future dependent on outsiders.  But, if they DO go down, everyone will be betting next against Italy and, yes, France...

“Commodities Corner” author Simon Constable writes that anhydrous ammonia (one of the nitrogen based fertilizers) price is very high despite low NatGas prices (its main feedstock). being priced so low.  Nitrogen fertilizer prices are more tracking the demand and high price of corn vs. the low feedstock prices.  Meaning that some fertilizer companies are making LOTS of money.  But, that may not continue forever, especially if NatGas prices go up or farmers switch over to soybeans (which do not need nitrogen fertilizers).

The Mighty Peruvian Sol storms higher, more than overcoming its slight dip last week.  It rose 0.4% vs. the US$.  Take that!

Thursday, April 19, 2012

Basic Facts: Platinum And Platinum Group Metals

I got some nice feedback from my article on basic facts about gold ( and one reader asked me if I would do similar articles for one or more other precious metals.  So here you are, "Veyron", you're famous!  Today I tackle platinum and the other "platinum group metals".

Much of the information about these metals comes from, thanks wiki!

I chose to write about platinum (and its cousins) because Pt is my second largest $-value holding among the precious metals.

Below is a small table showing the atomic number and chemical symbol of each platinum group metal:


All of the platinum group metals are used to some degree or other in electrical contacts, including spark plugs for cars.

Platinum (Pt)

Platinum is the least reactive metal, it is only dissolved by Aqua Regia (25% nitric acid and 75% hydrochloric acid) and has a melting point of 1768 degrees C (Celsius, so quite a bit more using degrees Fahrenheit).  Platinum is corroded by halogens (chlorine, etc.), cyanides, sulfur and alkalis (sodium, etc.).  Platinum is much rarer than gold, there is approximately 10 times as much gold as platinum.

The specific gravity (density) is 21.45 g/cc.

Platinum is fairly hard for a precious metal (Mohs hardness of 4 - 4.5, Mohs hardness is NOT a good measure of hardness, but it is familiar to rock collectors, etc.).  (Gold has a Mohs hardness of 2.5, rather soft).

Platinum can hold a lot of hydrogen gas (although palladium can hold even more).

Wikipedia writes that platinum salts are somewhat toxic to the eyes and skin, but the metal itself is not.

South Africa produces roughly 80% of the world's platinum, Russia about 11% and there are much smaller amounts produced by other countries (including the USA, in Montana).

Wikipedia also writes that in 2006 there were about 239 tonnes (metric tons, equals 1000 kg or approx. 2200 lbs) sold:

 Sector                                                           tonnes

Vehicle Catalytic Converters
Chemical Industry Catalyst
Various Minor Applications

It is not clear how much platinum is used by investors, probably not much.  There are lots of places you can buy platinum coins, mostly on-line, although some coin stores do carry them.

Palladium (Pd)

Palladium is the next easiest to buy of the platinum group metals.  Canada for a few years made Palladium Maple Leafs, I am not sure if they still do.  Russia (USSR) also made two sizes of "Ballerina" palladium coins.  I do not know if they are still made or not.

Palladium has a density of 12.02 g/cc, melts at 1555 degrees C and has a Mohs hardness of 4.75.

Palladium has two interesting properties that may make it play a more prominent role in the future:

1)  It is impermeable to all gases except hydrogen

2)  It can store up to 700 times its volume of hydrogen

The above two properties may become very important if they ever get fuel cell technology working well.

Palladium's main use in is catalysts, but there is some use as jewelry and a very small amount held by investors (like me!).

In 2007, Russia produced 44% of the world's Pd, followed by South Africa producing 40%, Canada 6% and the USA 5%.

Rhodium (Rh)

Rhodium is the last of the three platinum group metals that are available in investment coin form ( also sells rhodium, but not in coin form.

Rhodium has a density of 12.41 g/cc, melting point of 1964 degrees C and a Mohs hardness of about 6.0 (harder than glass and similar to steel).

Rhodium is extremely rare, exported by South Africa and Russia.  Annual world production is only about 25 tonnes.

Almost all rhodium is used as a catalyst (especially used in vehicles).  Rhodium does have uses in alloys with other platinum group metals and is also used in monitoring neutron flux levels in nuclear reactors.

Rhodium is also fairly well known for its dramatic price swings.  A few years ago, the price of rhodium soared to a bit over $10,000 per toz!  It is now around $1350, priced below both gold and platinum.

Ruthenium (Ru), Iridium (Ir), Osmium (Os) and one more!

Ruthenium, like the other platinum group metals has a high resistance to chemical attack.  The density is 12.45 g/cc, melting point of 2334 degrees C and has a Mohs hardness of 6.5 (harder than most steels).  Only some 12 tonnes of Ru are produced each year, and the world reserves are thought to be some 5000 tonnes.  It is used to harden platinum alloys, to improve corrosion resistance in titanium, and to make wear resistant electrical contacts.  A new use of Ru is as a component 3% or so) for high-temperature single-crystal superalloys used for turbine blades in jet engines (see below re Rhenium).

Iridium has a density of 22.56, very close to the densest element (Osmium).  Ir has a very high melting point of 2466 degrees C and has a Mohs hardness of 6.5.  Iridium has very high hardness and strength properties beyond Mohs hardness, which is means that it is used where very tough and hard metal is needed in components, but being so hard, it is hard to work with.  Wiki: Despite these limitations and iridium's high cost, a number of applications have developed where mechanical strength is an essential factor in some of the extremely severe conditions encountered in modern technology.[4]  Iridium becomes a superconductor at 0.14 degrees Kelvin.  Ir is the most corrosion resistant metal known (I do not know how that remark squares with platinum being the least reactive metal).  Not even Aqua Regia dissolves Iridium.  An alloy of platinum and iridium was used to fabricate the "Standard Meter" and "Standard Kilogram", both are in Paris.  Annual production is around 3 tonnes.  Iridium is found in MUCH higher amounts in meteorites than in the crust of the earth and the "K-T Boundary" (Cretaceous-Tertiary Boundary, some 65,000,000 years ago in the geologic record), it is thought that this is what remains from the big meteorite that hit the Yucatan and killed off the dinosaurs, in that so much of the debis after impact got blown into the atmosphere and then settled worldwide.  Wiki has one more interesting thing about iridium: It is thought that the total amount of iridium in the planet Earth is much higher than that observed in crustal rocks, but as with other platinum group metals, the high density and tendency of iridium to bond with iron caused most iridium to descend below the crust when the planet was young and still molten.  

Osmium has the highest density of any known metal (22.59, just barely higher than iridium).  It's melting point is 3033 degrees C (over 5000 degrees F) and has a Mohs hardness of 7.0.  Like iridium it is used in electrical contacts and instrument pivots.  Osmium is the rarest stable (non-radioactive) metal on the planet and is found at an average concentration of 0.05 ppb (or 50 parts per trillion).  Neither the producers of osmium nor the US Geological Survey report on osmium production.  The USA uses about 2000 troy oz each year, and so it is inferred that the annual production is less than 1 tonne.

Rhenium (Re), while not a platinum group metal, is expensive, rare and shares some applications with those metals.  Rhenium will have a future in the superalloys mentioned above (with ruthenium), tehg next generation of turbine blades for jet engines will use rhenium and ruthenium.  Rhenium is priced by the kilo, priced out to the troy oz it would run some $140 / oz.


So how can one buy platinum group metals?  I will deal with the three rare ones (for which there are no coins) as they are hard to get, and not really suited for investment purposes.  There is one company (there may be more, probably is, for researchers, etc.) that can supply these three (Ru, Ir and Os) in small quantities:

Take a look at their osmium for sale,one troy ounce is only $940!  Smaller sizes available. is part of Metallium Inc., and is specially geared to selling small amounts of almost every element, mostly to researchers, hobbyists and collectors (yes, there are collectors of the chemical elements).

There is another company out of the UK that sells many minor metals to the wholesale trade.  They are very good at sourcing rhenium, for example.  The company is called Lipmann Walton & Co. Ltd., their website is shows the Periodic Chart and the metals they sell (dark blue squares, bright white letters):

Click on the highlighted metals to see more details or contact us.


And for investing in platinum and the other two (palladium and rhodium)?  The below table shows specifications of various platinum coins available for sale, the Pt Noble is actually from a private mint (The Pobjoy Mint).  Note that Canadian Palladium Maple Leafs (1 troy oz only) and the Cohen Mint 1 toz rhodium coin are also available.

1 toz US Pt Eagle
1/2 toz US Pt Eagle
1/4 toz US Pt Eagle
1/10 toz US Pt Eagle
1 toz Pt Noble
1 toz Canadian Pt M.L.
1 toz Australian Pt Koala
1 toz Canadian Pd M.L.
1 toz Cohen Mint Rh

American Platinum Eagle information is from and

Note!  The O.D. (Outer Diameter) of the Pt Eagle is the same as the Gold Eagle!  This means that you can stack the Pt Eagles in the same plastic tubes ("US Mint" tubes) as the gold ones.  These tubes are how many stackers collectors store their Gold Eagles, the tubes themselves snugly hold them (and so "control" or measure the 32.70 mm measure).  These tubes hold up to 20 Gold Eagles and 23 Platinum Eagles.


Here is spot pricing (at least as of 19 April 2012).  Note that small buyers (that's us!  Shrimps!) will pay quite a bit more than these prices as there is not nearly as much liquidity for many of these metals.

Market Prices for Metals


Wednesday, April 18, 2012

Ameru News!

As mentioned in my earlier article ( we are having an excellent year down in Peru.  Our total sales this year are about $312,600 as of last Saturday.  Our new strategy ("Three Main Brands"), plus some bearings where we can exploit some niches (Chinese ZWZ for the "Precio Nada Mas" group of our customers) is working out very well for us.  KBC, Iljin and MBS are now 78.5% of our total sales, this will go up as our sales of Koyo, NSK, NTN and Nachi (all from Japan) continue to decline.


(Above list does not include sales of minor brands)

Some of you likely saw the picture in my above referenced article:

That BIG bearing in the back is for Ford Super Duty truck, and is out biggest (heaviest) bearing.  We just sold one:

(     Bearing No.           Qty                Price ($)        Discount)


We also got a new car, a Suzuki Alto.  That brings our fleet up to four vehicles, one car and three minivans.  Below is a picture (generic) of a Suzuki Alto.  We will use the car for collecting money and for errands so that we do not have to use our heavier vehicles (that we use for delivery).

Sunday, April 15, 2012

Review of Barron's -- Dated 16 April

Our weekends have resumed their normal track now.  Saturday Italian class, then buy Barron's.

The Cover Story ("What a Drag!") is about the newly recognized problem of the now huge student debts.  Student loans now are greater than ALL auto loans and are also greater than credit card debt.  The total student loan debt has apparently topped $1 trillion.  [I see this word "trillion" everywhere now]

Author Jonathan R. Laing points the finger at higher tuition as the biggest part of the problem.  He provides a handy graph that shows how tuition has gone MUCH MORE than housing, energy and health care in every year since 1990.  Those of you with children in college, or with a recent graduate (that's us) or with a child soon to go will understand the pain of high tuition.

There are other bad actors in the student debt mess, prominent among them are the for-profit schools (ITT Education, Corinthian, DeVry, Apollo Group and many others).

Right next to his graph of tuition vs. other components of inflation, he provides another handy graph showing the exponential looking rise of tuition from 1996 (approximately $80 billion) to end of 2010 total of $900 billion.

The terms for student loans are harsh.  If they default, they are virtually excluded from the credit economy writes Laing.  No credit cards, no auto loans.  Many students with debt don't even graduate...  Students who leave with big loans are reluctant to fully participate in the "consumer economy" because these loans are not easy to shake off.

And with a bad economy for new graduates, there is a large chunk of our society not living the lives they were expecting.  Some are suing their colleges claiming they made overly-rosy promises about how useful their degrees would be in finding a good job (I do not have a problem with suing arrogant universities).

This is a real problem.  But, it is not in the same league as our larger and bigger debts.  Subprime mortgages are $2.5 trillion for example.


On the next page after the Cover Story finishes, Bill Alpert closely examines ("Clever Is as Clever Does") one of the above mentioned for-profit schools: ITT Educational Services.

It seems that for-profit educational institutions like ITT Tech have had multiple run-ins with regulators and it also seems like a kind-of sleazy business.  Alpert provides a graph showing cost ($) per educational credit.  From a high of $646 (Corinthian, ticker COCO) to a low of $200 (average two-year public college).


The bearish Alan Abelson is back, and tossing bombs at all the R Team candidates!  He mentions that if you did not like the fairly ugly political process in getting Mitt to be the likely nominee, well, you ain't seen nothing yet.  He predicts the general (Romney vs. Obama) will be "really, really ugly."  I would agree.

Abelson then goes on to write about how the gold miners and gold itself.  He mentions a savvy investment pro Alan Newman as predicting a Dow:gold ratio of 5-to-1 (12,000 Dow, $2500 gold).  Newman likes gold, as he sees that the BRICs will likely buy more than they have, so the price of gold is likely to continue upward, and the miners will finally catch a break.

Abelson then looked at the two week drop in the markets (Spain, Google's selfish stock split and other scattered weakness in the economy).  He is not ready to make a bearish call yet, but will not surprise him of the markets continue to head down.


Kopin Tan ("Streetwise") writes that observers see weak earnings growth ahead.

"Sell in April and go away!"

-- Robert Mix


"He Said":

"What drags our entire economy down is when...the gap those at the very, very top and everyone else keeps growing wider and wider and wider and wider."

-- President Obama, promoting his "Buffett Rule"

For me, it is even harder to read his drivel than to listen to it.  ZH-style grade:  - 1


Joanne Kaufman writes a short piece on how colors are back in women's fashion.  And sales have jumped nicely (up 8.5%, better than the expected 4.9%).


Andrew Bary writes a nice bullish piece on Seagate Technology, now sporting a P/E of 4.3 and throwing off a 3.8% dividend yield.  It's cheap says Bary!  Storage is not going away, yes there are some risks, but hard drives are still a lot cheaper than flash drives.  Might be worth a look.


"D. C. Current" author Jim McTague writes that parts of the US Government are finally looking harder at HFT, the May 6, 2010 Flash Crash and related robot-trading topics.

I think McTague calls this issue correctly: no real change is coming in regulating HFT...  So, yes.  Another Flash Crash sure could happen.  Now.  In the future.


Barrons' "Europe Guy" Jonathan Buck writes that France is likely to vote for Socialist Francois Hollande.  Hollande has favors an astonishing 75% tax rate on those making over $1 million euros.  That could spark an exodus of wealthy people to London, Frankfurt and Zurich...  Hollande is looking to raise lots of other taxes as well.  Nothing about spending cuts.

"... bad for business, and even worse for the French economy."


Tiernan Ray ("Technology Week") writes of the plight of Sony.  Sony, so dominant when I was young, cannot seem to get its mojo back.  He writes of various hook-up possibilities, but the clock is ticking for Sony...


Alexander Eule ("Our Gadget of the Week") wirtes up two interesting new "Cloud" programs.  The first is Dropbox, which gives anyone 2 gigabytes of cloud-storage for free!  The icon would appear on your screen as just another storage drive.  Drop dead simple it seems.  I am going to have to check that out, I will advise my readers is my experience with Dropbox is good.

Eule also writes that GoodReader works with iPad and is a polished document-viewer and editor.  Highlight text, write summaries of .pdf's , etc.  He likes it.


Mark Veverka ("Plugged-In") writes of his interest in some buzz about Facebook turning over its Bing search engine to Facebook...  This would likely help both Facebook and Microsoft in their battle with Google.


Economist Gene Epstein interviews Charles Calomiris, a professor of financial institutions at Columbia about the big flaws in Dodd-Frank.

Calomiris contends that the partial repeal of Glass-Steagall had little to do with the financial and housing crises.

And that Dodd-Frank is doing next to nothing to strengthen our financial system.  A waste of time and resources.

A nice and dense interview for those interested.


In the Market Week section, Vito J. Racanelli takes a look at a sector of interest to me: makers of natural gas fueled engines for trucks.  Small company Westport Innovations (WPRT) makes such a system and has joined up with Cummins (CMI) in a JV of some type.  The problem is that Cummins and Navistar have plans of their own for NatGas engines...

Racanelli also provides a graph showing the HUGE outperformance of the "Sell in May and go away" notion. $100 invested in 1945 each October and sold in April would yield a return of $9000!  BUYING in May and selling in September yields $99, a one dollar loss...  Hmm....

"Commodities Corner" author Leslie Josephs says coffee prices are likely to go up, and explains her reasons why.

The Classifieds have some interesting looking items.  Two estates are up for sale.  A North Dakota farmer is seeking individuals interested in investing in farmland (, I will look into that and report back.

In the "144 Filings" I note that insiders have sold LARGE amounts of Apple (almost $48 million), LinkedIn ($46 million -- Red Flag here) and TD Ameritrade ($30 million).

Finally, the Mighty Peruvian Sol took a break in its rise in value vs. the US dollar, it slipped a modest 0.02%.

Friday, April 13, 2012

Gold: Basic Facts For The 99%

Some time ago, I learned that, even though I am a big fan of gold, that I knew very few basic facts about gold!  The purpose of this article is to put into one nice little place basic information on gold (and provide links) for the smaller investor.

The density of gold is 19.30 grams / cubic centimeter (19.3 times denser than water).  Densities and brief comments on other metals will be given further below.

Gold is one of the least reactive metals, very few chemicals attack it (from wikipedia):

-- potassium and sodium cyanide (some gold mining uses cyanide to extract gold)
-- mercury (which makes an amalgam with gold)
-- aqua regia (25% nitric acid, 75% hydrochloric acid)


Gold Holdings and Reserves

There are approximately 165,000 metric tonnes of gold held around the world (that works out to about 5.3 billion troy ounces -- information on weights and measures will be discussed below).  This figure is accepted by almost all serious gold analysts.  Of that total:

52% is held in jewelry form
18% is held by central banks (or governments)
16% is held in investment form (bars and coins)
12% is held by industry
2% is unaccounted for

The total official gold holdings (December 2010) are about 30,808 metric tonnes.  The top 10 countries/organizations hold the below amounts (tonnes):

Country/Organization:                                          Amount

United States of America
Federal Republic of Germany
International Monetary Fund
Italian Republic
French Republic
People's Republic of China
Swiss Confederation
Islamic Republic of Iran
Russian Federation
State of Japan

China reportedly bought approximately 40 tonnes recently, and is also believed to be accumulating gold more quickly than they report (Saudi Arabia may also have more gold than they state: 322.9 tonnes).

ETFs and similar hold approximately 2159 tonnes.

There are about 50,000 tonnes "in-ground" verified resources by publicly traded gold mining companies.

The Federal Reserve Bank of New York (FRBNY) holds gold as well.  A small amount of US gold is held there, but not much.  The Federal Reserve holds gold for other countries, who have decided to store it there for security and convenience (about 98% of the gold at the FRBNY is owned by foreign central banks).  The FRBNY holds about 7000 tonnes.  Note that the Federal Reserve (as a whole) owns no (or very little) gold, as the gold was taken from them in 1933, the Fed owns gold certificates worth (nominal) about $11 billion (at $42.22 / oz), these certificates are not redeemable into gold nor are they transferable.

The gold owned by the USA is mostly held at Ft. Knox and West Point, with smaller amounts held at US Mints in Denver and San Francisco (with a very small holding at the FRBNY).


Weights and Measurements Pertaining to Gold

Gold is typically measured in troy ounces.  1 troy ounce weighs about 1.097 avoirdupois ounces (the ones we normally use).  1 troy ounce also weighs 31.103 grams.

A metric tonne (or, just "tonne") weighs 1000 kg, or just a bit over 2200 lbs.  1 tonne of gold = 32,150.7 troy ounces.  Above gold holdings and reserves are listed by tonnes held.

A kilo of gold = 32.151 troy ounces

Gold purity is typically measured in "karats" (jewelry mostly) or fineness.  24 kt gold is pure gold, 999 (999 parts / 1000) fine is considered to be pure gold as well.  Gold coins are usually found in 22 kt (916.7 fine) and 24 kt (999 fine).  Older US coins that circulated until 1933 are 900 fine.  Gold is a very soft metal, and so is often alloyed with other metals to make it harder.


Specifications of Popular Gold Bullion Coins

(troy oz)
(troy oz)
1 oz American Gold Eagle
1/2 oz Eagle
1/4 oz Eagle
1/10 oz Eagle
1 oz Krugerrand
1 oz American Buffalo
1 oz Canadian Maple
1 oz Australian Kangaroo
1 oz Chinese Panda

The American Gold Eagle is 91.67% gold, 5.33% copper and 3.00% silver

The Krugerrand is 91.67% gold and 8.33% copper.  The Eagle is NOT exactly the same ("clone") as is commonly believed.


Fake Gold Bars and Coins

There have been two reports (with pictures or videos) of gold bars "salted" with tungsten, one at Heraeus (Germany) and one more recently in the UK.  Both were bars with perhaps 30% tungsten inside.  These bars would weigh slightly less pure gold.  Tungsten is used as its density is 19.25, less than 1% different than gold.

Bron Suchecki of the Perth Mint has recently written ( that it is likely that there are very few fake gold bars in circulation.  Many circulating gold bars are melted down and/or recycled, and this means that if there were LOTS of these salted bars out there, more would have been found.

There have been NO reports of tungsten filled gold bullion coins.  Tungsten is very hard and has a very high melting point, so it is VERY hard to work with.  It is thought that tungsten salted gold coins will not be a big threat for at least a little while.

There ARE fake numismatic (collectible) gold and silver coins.  They are typically made in China, they make them out of gold and silver, but they are counterfeits of rare collectible coins.

Below are various metals and their densities, the below are of interest because they could conceivably be used to counterfeit gold and silver:

Gold (Au) 19.30
Tungsten (W) 19.25
Platinum (Pt) 21.45 least reactive metal
Iridium (Ir) 22.56 found in meteorites and the "K-T" Layer
Osmium (Os) 22.59 densest metal
Lead (Pb) 11.34 does not "hold a strike"
Silver (Ag) 10.49
Palladium (Pd) 12.02 Canada produces palladium coins
Rhodium (Rh) 12.41 buy at and

The second fake bar was detected by a scrap dealer who weighed a 1 kg bar and saw that was 2 grams too light.  Future counterfeiters could add a tiny amount or iridium (heavier than gold) to make the weight exactly right...  The "K-T" Layer mentioned above is a thin layer of rock from about 60,000,000 years ago that is found worldwide, it is believed to have been deposited by the impact of the large meteorite that struck Yucatan at that time.

Lead is an obvious candidate for faking silver, but lead does not "hold a strike", because lead is so soft.  Lead is so much lighter than gold that lead counterfeits would be spotted very quickly.


Gold Information Sources and Commentary

Much of the information came from wikipedia.  Here are some specific places I got information for this article:

Near real time gold price information is available in a lot of places, but the two that I use the most are:


I read about gold at the above two (they aggregate gold articles as well) and the below:

and of course:



One of my highly valued readers suggested that I pass along other basic information as below:

Where do you buy gold?

1) At the coin shop (that's where I buy mine)

2) Online there are lots of people selling gold:

  -- many others, the above two are well known.

Help in Spotting Counterfeit Coins  <-- a balance that is cheaper than the Fysch  <-- for calipers and scales