Once in a great while you find or learn something that is so unbelievably good, that you have to hear or read it over and over again, often from different sources or perspectives, before the truth of it actually starts to sink in and really make sense. Perhaps it’s that initial bewilderment that has served to curb much of any demand from the fixed income markets for this otherwise “golden” opportunity. Fortunately, this is great news for those that eventually arrive at a deeper understanding of why these Gran Colombia Gold bonds are so darn good… and it is why these bonds are well deserving of overweighting in our high performing FX2 fixed income portfolios.
A sensational discovery has been made of Stalin’s secret Androgen lab in the village of Kraskovo, Russia. New declassified documentation was made public last week by Igor Sokolov.
On February 2, 1933, the Androgen lab was created by Stalin’s executive order. Alchemists were tasked with finding a recipe for an elixir of immortality, to give Stalin and his colleagues eternal life. They were also tasked with producing gold (based on alchemy) to be used as trade currency.
Precious metals have always been a popular investment among those looking for a hedge against inflation or for a way to decrease the volatility of their portfolios. Although silver is not commonly seen as a high yield investment, it can actually be quite profitable. If you bought silver in July of 2009, when it was worth around $13 an ounce, and sold it in April of 2011, when it was worth $47 an ounce, you would have pocketed a 260% return on your investment over 21 months.
Beyond Belief… this may be the most fascinating debt instrument we have ever reviewed.
Rising with the price of gold, the cash flow and yield of Gran Colombia Gold’s senior secured “Gold Notes” appears to be headed straight into the land of unbelief. Perhaps what we see here is either wrong… or something in this picture seems to have quietly escaped the attention or the view of most other investors in the high yield bond market. Granted, this is not a straightforward and easily understood issue because of the quarterly interest boost linked to its amortized quarterly redemption of principle when the price of gold is higher 1250 per ounce. However, it is precisely this “hard to be understood” feature that is driving its current push into the land of dreams.
First, why is gold moving up?
We talked with experts and they explain the dollar is weakening. They are pricing in rate cuts they expect to U.S. interest rates. Donald Trump lashed out at the Federal Reserve, comparing it to ‘a stubborn child.’ He and the stock market are pushing for lower rates. As rates appear to be going down, gold historically moves in the opposite direction of U.S. currency. This downward push in dollars is pushing gold up.
Is gold being pushed out by cryptocurrencies?
- Interest Rates: The 10-year Treasury is hitting around 2.08%, down from 3.25% just three months ago.
- Oil is down around $53 per barrel. Down from about $65 in April.
- Industrial Production has hit multi-year lows.
- Gold and the dollar are moving up.
These four indicators have many forecasting both a tougher time ahead and a rotation into safe havens. The central focus of concern is the trade wars with China and the new tariffs with Mexico.
- A popular measure of the strength of the U.S. dollar is inching toward its highest level in almost two years, having carved out gains in the past two months. As the greenback marches higher, analysts who predicted its rise in the first quarter, have turned more bearish on bucks, making the case that “the top is in” for the U.S. dollar.
This week, Durig Capital reviews the largest underground gold and silver producer in Colombia. Gran Colombia Gold has staged an amazing transformation from just a short three years ago, when Durig Capital began to carefully follow this issuer. After completing a well-timed and skillfully crafted restructure of its balance sheet early in 2018, the company has consistently continued to smash its production targets, and has once again impressed us with its most recent results for the fourth quarter and full-year 2018.
- There has been an extensive surge in the gold exchange traded fund holdings and there is absolutely no shortage of momentum there. Investors are buying gold as there are many uncertainties heading into 2019.
- Global gold production is expected to be somewhat stable in 2019, with one analytical firm forecasting a fall of half a percentage point and another looking for a rise of less than that.
- Silver production declining 0.7% to 851 million ounces, Analysts look for declines in Asia, South America and Europe, but increases in Africa, North America and Australia-Oceania.
- Russia increase demand for gold as sales were lower in 2018 compared with the previous year. To a greater extent it was caused by the activities of Russia’s Central bank, “which was our most active client this year and which was significantly increasing its gold reserves,” says VTB Capital.
- Gold has been tracking steadily higher through December… On the low side, there appears to be good support at $1,265 and we expect plenty of buying interest around the 200-day moving average at $1,251.” Much of this increased buying pressure is being driven by geopolitical tensions threatening to disrupt global markets, along with uncertainty in stock prices.
- Is gold a sell, Gold prices are primarily getting support on the back of safe-haven buying due to concerns about the health of the global economy and heightened volatility in risk assets.
- Upbeat US data and signs of easing trade tensions between Washington and Beijing limited demand for the metal. Robust sales during the U.S. holiday shopping season indicated consumer confidence was not entirely dented by recent volatility in the U.S. stock markets.
- The Dow is having its worst start to a Thanksgiving week since 1973. The three U.S. major indexes ended the day lower than where they started in 2018. Damage in the tech sector is one of the main drivers behind the recent turmoil, and there is no lack of bad signs.
- The recent sell-off started when Fed Chairman Jerome Powell said that rates were a long way from neutral, sparking questions about whether Fed officials were going to increase the cost of borrowing money more than forecast.
- A vicious US stocks sell-off wiped away the entire gains made by investors in 2018.
- Whether technology stocks can slough off the worries will depend on whether the companies can continue to deliver strong earnings growth even if the global economy does soften significantly. Recent earnings reports from major tech companies have done little to reassure investors.
- Gold prices have gone in the wrong direction, losing about $100 in the price per ounce and leading gold exchange-traded funds to year-to-date losses near 5 percent. As investors fear that the end of the bull market in stocks is near and volatility in stocks continues, gold may get some attention.
- Libor, A key measure of what banks charge each other to borrow dollars for three months recorded its biggest daily rise in eight months on expectations that the U.S. Federal Reserve would increase short-term lending rates next month.
- Previous: Are Markets Pricing in a Global Slowdown?
- Previous: Is Fed Tightening Going to Cause a Recession? Many Experts Think Yes!
- British politicians in favor of leaving the EU criticized the agreement reached after more than a year and a half of negotiations. The UK has become bound to the EU under unfavorable terms and MPs floated the idea of unseating Prime Minister Theresa May.
- Come hell or high water, Britain is legally out of the EU on March 29, 2019. May’s deal would create a transition period lasting until December 2020 to give Britain and the EU time to hash out a final agreement on trade and other matters.
- The looming prospect of a no-deal Brexit is spooking markets. The Sterling tanked and the cost of U.K. government debt rose. Britain’s state-owned bank RBS fell by 9%. While a no-deal Brexit would be priced in ahead of the actual event, there would clearly be considerable market disruption.
- Experts say no chance for a second Brexit referendum. UK’s deal on the table or a ‘no deal. Option B would be to extend the deadline. This would mean that Brexit has not been delivered.
- EU and UK negotiators are hammering out a document this weekend to outline the kind of relationship they intend to have with one another. The EU is determined to keep calm and carry on with the deal.
- Gold scaled a near one-week peak as investors sought cover from market turmoil after Britain’s long-awaited draft agreement to leave the EU was thrown into chaos, helping Gold hold its ground against a rising dollar.
- Risks are piling as “significantly.” Headwinds such as looming Fed hikes, a housing market that is rolling over and growth and trade-war worries festering.
- Strong earnings may not be enough to move the barometer for tech because sentiment is so negative. Investors have to pick their spots in tech right now. GDP could be the kiss of death. If GDP falls, techs will get crushed
- Midterm elections loom over the stock market as Republican control of the White House and both houses of Congress will end after a two-year stretch. That could be bad news for stock investors. The worst stock market returns have come when the president is a Republican, and the Republicans and the Democrats each control one house of Congress.
- Gold is likely to continue to benefit from stock market volatility and weakness, short-covering and rising risk aversion. The potential catalysts for increasing geopolitical risk include tensions over Italian government finances and mounting pressure from the West on Saudi Arabia over the death of dissident journalist Jamal Khashoggi.
- Short-term bond funds are offering more yield than they have since before the financial crisis plus investors aren’t getting paid much more to invest further out the maturity spectrum.
- Q3 FAANG Earnings Likely to be Solid: investors’ darling and the biggest driver of the nine-year bull run.
- Previously: Stock Market: Buy with Both Arms or Bubble Ready to Bust?
- Moringstars top rated bond SMA during higher interest rate spikes, this short term fixed income investment SMA provided the best 1,3 & 5% year track record in high yield fixed income again according to Morningstar.