Wrapping Up

364
Sat, Jul 21, 2012 - 12:23pm

The Turd is wrapping up his relaxation extravaganza this weekend and he'll be back at his post bright and early on Monday. Until then, here's some stuff for the weekend.

First of all, some charts. Let's start with the metals. Both have flat-lined, which is interesting because a flat-line usually precedes some type of dramatic move, either up or down. We see this sometimes on the short-term charts. We rarely see this play out over days on the hourly charts but here we are. My personal feeling is that we are very close to a significant break OUT and UP. We'll go into more detail on this on Monday.

And you should probably listen to this:

EXCLUSIVE- Bill Murphy's London Source: "Big Gold & Silver Moves Coming in August"

And the grains are, quite literally, ON FIRE. Though they are susceptible to a sharp pullback here, the forecast isn't getting any better. And it's still July. Yikes. Here's the latest forecast for Kansas City, Missouri. Right in the middle of corn and soybean country.

And here are your weekly charts showing new all-time highs in both corn and beans. The DAG, which we first discussed here a few weeks ago near $9, is closing in on $15, too.

The latest CoT was kind of a bummer. For the reporting week, gold rose $9 and silver rose 44c. In the face of that, The Gold Cartel added over 6000 new net shorts and The Evil Empire added just over 1000 new net short in silver. Not a disaster but not real encouraging, either. The only positive in the report is in the LargeSpecShortSheep category for silver where the LSSS added another 1,123 gross shorts. This brings their total up to over 20,000 at 20,775 and lowers the LargeSpec net long ratio to just 1.37:1. Again, for perspective, on 4/5/11, the LargeSpec net long ratio was 4.04:1 based upon 48,890 longs and just 12,105 shorts.

Three items of reading material for you. First, this interesting piece from John Aziz. It's worth considering. https://azizonomics.com/2012/07/21/why-is-the-fed-not-printing-like-crazy/

Next, Detlev Schlichter has written another excellent article: https://papermoneycollapse.com/2012/07/happy-interventionists-the-economists-attack-on-your-property/

And, finally, some interesting perspective from KWN's "London Trader". Note that there are no price targets or forecasts. Just a simple and concise analysis of demand fundamentals. https://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/7/20_London_Trader_-_The_LBMA_Gold_Price_Fixing_Scheme_Is_Over.html

OK, that's all for now. I hope everyone has a safe and relaxing weekend and I look forward to getting back to "business as usual" on Monday.

TF

p.s. When I return, I expect the "Main St" thread comments to return to "normal", too. Main Street is where we discuss the metals, the economy and issues dealing with the end of The Great Keynesian Experiment. It is not the place for subjects like Zionist conspiracies and Chemtrails. All are certainly welcome to discuss those items here but it needs to be done in the forums. https://www.tfmetalsreport.com/forums/conspiracy-theories. Thank you in advance for your cooperation.

About the Author

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  364 Comments

SRSrocco
Jul 21, 2012 - 1:37pm

THE SLAUGHTER IN MINING

THE SLAUGHTER IN MINING PROFIT MARGINS BEGINS

Freeport just came out with their 1st half 2012 financial results and it was terrible. Even though they had a slowdown at their Indonesian Grasberg mine in the first quarter, the real damage was due to the prices paid for Copper and Moly. I knew that profit margins were going to get clobbered this second half, but Freeport’s net income declined nearly 50%.

Freeport McMoRan Copper & Gold is more a base metal company, but they do produce a substantial amount of gold. In 2011, Freeport produced 1.4 million oz of gold.

If we look at the chart below we can see just how horrible their YOY (year over year) financial results have been:

Total revenues for the first half of 2012 fell $2.4 billion compared to the same period in 2011…. or a 21% decline. You would think if production volumes decreased, so would the cost of sales. In the highlighted RED AREA, you will see that in Jan-Jun 2011 cost of sales were $5.43 billion on revenues of $11.52 billion. However, if we look at Jan-Jun 2012 we see that Freeport’s cost of sales actually increased to $5.6 billion on much lower revenues of $9.0b billion.

WHAT’S THE DEAL??

The next chart shows how lower metal prices on top of increased costs are killing profit margin by miners:

If we look at the data in more detail, we find out that the GOLD PORTION of Freeport’s first half financials actually helped buffer the losses. Overall copper production declined 10%, whereas gold production fell a staggering 38%. Moly did not change all that much. If we compare some of the data, we can see just how bad the base metal prices are destroying Freeport’s margins:

2011 Jan-Jun Copper Sales = 1,928 million lbs X $4.24 = $8.2 billion

2012 Jan-Jun Copper Sales = 1,754 million lbs X $3.61 =$6.3 billion

Difference in total Copper Revenue = $1.9 billion (this is the majority of Freeports losses)

However, if we take the same amount of 2012 Jan-Jun sales and multiply it by last years copper price per pound of $4.24 we get the following:

2012 Jan-Jun Copper Sales = 1,754 million lbs X $4.24 =$7.4 billion

Difference in total Copper Revenue (based on last year copper price) = $800 million

—————————————–

Here we can see that the price difference from $4.24 (1H 2011) to $3.61 (1H 2012) becomes the larger killer of revenue. Even though copper production fell 10% which was bad enough, the price of copper Freeport received fell 15%.

As I mentioned before, Gold actually helped buffer some of Freeport’s losses even though its gold production declined a whopping 38%. Here are the figures:

Jan-Jun 2011 Gold Sales = 836,000 oz X $1,466 = $1.2 billion

Jan-Jun 2012 Gold Sales = 554,000 oz X $1,639 = $908 million (-24%)

But, if we were to used last years price and applied to the large decline in gold production this would have been the result:

Jan-Jun 2012 Gold Sales = 554,000 oz X $1,466 = $812 million (-32%)

——————————————————-

The damage done to Freeport’s first half financials were mainly due to its copper and moly metals. The price Freeport received for both copper and moly fell 15% compared to the same period last year. However, the average gold price they received actually increased 12%.

I believe the large gold miners (Barrick, NewMont, Goldcorp, Newcrest, AngloGold and etc) will not suffer much damage to their profit margins first half year compared to last year. This is because the price of gold was much higher in the second half of 2011 than the first half.

On the other hand, the major silver companies will show a big decrease in profits due to the fact that silver hit its high in the first half of 2011.

Stay tuned for more analysis as the results come out….

¤
Jul 21, 2012 - 1:44pm

Left or right?

Which way do you lean in life?

The center is where you'll find balance.

https://www.onlinecollege.org/left-or-right-brain

Think~Puddle of Mudd

Video unavailable

https://www.azlyrics.com/lyrics/puddleofmudd/think.html

Everyone have a great weekend!

QE to infinity
Jul 21, 2012 - 2:13pm
Cipher
Jul 21, 2012 - 2:24pm

@Larry...initially @ Katie Rose

No problem, and your welcome. I am very pleased you got something out of it. Feels good to help out, if only through a video, and it sounds like it had the same effect on you as it did me.

I couldn't agree more with your assessment of it as well. I truly hope all the preppers that have an interest in gardening (experienced or novice) watched it because it really is that great of a documentary/educational video, and it might just save your life one day...who knows.

One last time here it is:https://backtoedenfilm.com/

Cipher

GM Jenkins
Jul 21, 2012 - 2:40pm

Real yields

10 yr yields measured in various hard assets are at all time lows. I think this is important. Jim Rickards has said the Fed/Treasury *wants* gold to go up (they just don't want it to get disorderly, which would wake people up from their comfortable naps). I think he's right bec the government's #1 concern right now is finding a way to keep feeding itself as it grows bigger, uglier and more grotesque. It can't have gold go down for the same reason it can't have yields go up; the gov very much cares about how much it has to (theoretically) pay you in gold (i.e. ultimate currency) every year for the privilege of borrowing $1000. I have some graphics on how quickly and steadily that amount has been falling here https://screwtapefiles.blogspot.com/2012/07/weekly-metals-post-game-show...

AgNovice
Jul 21, 2012 - 2:51pm

Tractor vs. 250oz

This weekend's dilemma: small tractor with PTO and full set of implements (front end loader, backhoe, disk, cultivator, forklift, snowblower, etc.) on a trailer - or 250 shinies.

Colonel Angus
Jul 21, 2012 - 2:59pm

didntbuildthis + TAKE THE TRACTOR!!!

I was looking for a picture of Obama having the Nobel Peace Prize with something like

World Peace: you definitely didn't build that

If the tractor is in good, usable condition I'll give you 250 oz. of silver for it.

Roger Godberd
Jul 21, 2012 - 3:17pm

Work in progress...?

Obama....still building!

Roger Godberd
Jul 21, 2012 - 3:20pm

How 'bout them apples?

The previous record for most deficit spending during a presidency was set by President George W. Bush (see table 1.3 in the White House’s Historic Tables). During Bush’s 8-year administration, total deficit spending was $3.402 trillion. That’s a truly extraordinary and reckless sum. It’s also $1.768 trillion less than deficit spending in just four years under Obama. Per year, deficits under Bush averaged $425 billion. Per year, deficits under Obama (according to his own numbers) will average $1.293 trillion — or more than three times as much.

Because the gross domestic product (GDP) nearly always grows from year to year, the most favorable way to view Obama’s deficit spending is as a percentage of GDP. Surely he can’t look as bad in that light, right?

Well, prior to Obama, our annual deficit spending had only exceeded 6.0 percent of GDP during the Civil War, World War I, and World War II. Except during those huge conflicts, our deficits had never exceeded 6.0 percent of GDP in any year — not during the Great Depression, not at the height of the Cold War defense buildup, not ever. But that’s no longer the case. During Obama’s four years in the White House (and, again, using his own numbers), annual deficit spending will average 8.4 percent of GDP.

That’s nearly double the average annual level of deficit spending under any other post-War president. As the following chart shows, this has truly been a historic presidency — more profligate than any other by far:

https://www.weeklystandard.com/blogs/painful-cost-obama_629745.html

DayStar AgNovice
Jul 21, 2012 - 3:20pm

Tractor V. Ag

GATA's London Trader who has an excellent track record says silver is due to explode in August. I guess it depends on how desperate you are for a tractor. You could buy it, and sell it to the guy who offered you 250 oz when the price of Ag goes up. Sort of a futures contract.

DayStar

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