How Rising Labor Costs Are Impacting World’s Largest Gold Miner

Something quite interesting has taken place at the world’s largest gold miner over the past few years. While certain mining costs, like energy, have declined since the price of oil plummeted from over $100 a barrel in 2013 to an average $43 in 2016, quite the opposite has taken place with the cost of labor.
Barrick Gold, the world’s largest gold miner, is paying a great deal more in labor to produce an ounce of the precious shiny yellow metal than it did just five years ago. How much more? Well, it turns out to be quite a lot.
For example, Barrick Gold only paid $1.5 billion in labor costs to produce 7.8 million ounces (Moz) of gold in 2010. However, this increased significantly in 2015, as Barrick paid $1.86 billion in annual payroll to produce 6.1 Moz of gold. While the labor cost only increased $360 million in 2015 versus 2010, total gold production declined by 1.7 Moz.
I took the annual payroll data from Barrick Gold’s Sustainability Reports, shown in the table below:

This post was published at SRSrocco Report on February 19, 2017.

S&P 500 Earnings Stuck at 2011 Levels, Stocks up 87% Since

Grounded in some sort of new reality? LOL
The S&P 500 stock index edged up to an all-time high of 2,351 on Friday. Total market capitalization of the companies in the index exceeds $20 trillion. That’s 106% of US GDP, for just 500 companies! At the end of 2011, the S&P 500 index was at 1,257. Over the five-plus years since then, it has ballooned by 87%!
These are superlative numbers, and you’d expect superlative earnings performance from these companies. Turns out, reality is not that cooperative. Instead, net income of the S&P 500 companies is now back where it first had been at the end of 2011.
Hype, financial engineering, and central banks hell-bent on inflating asset prices make a powerful fuel for stock prices.

This post was published at Wolf Street by Wolf Richter ‘ Feb 19, 2017.

Tax Reform: The Good, the Bad, and the Really Ugly – Part Three

‘We have a system that increasingly taxes work and subsidizes nonwork.’
– Milton Friedman
‘You must be the change you wish to see in the world.’
– Mahatma Gandhi
‘Real change requires real change.’
– Former Speaker of the House Newt Gingrich
Today we come to part 3 of my tax reform series. So far, we’ve introduced the challenge and begun to describe the main proposed GOP solution. Today we’ll look at the new and widely misunderstood ‘border adjustment’ idea and talk about both its good and bad points. What follows may make more sense if you have first read part 1 and part 2. Next week we’ll explore what I think would be a far superior option, though one that is based on the spirit of the current proposal. If House leadership thinks they can get the present proposal through (doubtful), then they should stop messing around and do something really controversial by changing the entire terms of engagement. As my friend Newt Gingrich has often told me, ‘John, real change requires real change.’
Warning: There is something in this series to offend almost everyone. Everything is fair game. If nothing else, I hope that no one can accuse me of simply talking the Republican book. I think this letter will pretty much eviscerate the key component of the proposed Republican tax plan. I hope the plan will be seriously changed. Many of you have direct contacts with your Senators and Representatives on both sides of the aisle. I urge you to send this letter to them and talk to them. This is one of the most serious national conversations we have ever had.

This post was published at Mauldin Economics on FEBRUARY 19, 2017.

Barclays: “Equities Rushed To Price In The Reagan 1986 Tax Cuts Before Crashing In 1987”

With concerns rising that the market has gotten well ahead of itself over the practical reality of Trump tax cuts – most recently voiced by Goldman which over the weekend said that “we are approaching the point of maximum optimism and S&P 500 will give back recent gains as investors embrace the reality that tax reform is likely to provide a smaller, later tailwind to corporate earnings than originally expected” – Barclays decided to look at one of recent history’s most notable tax regime changes: the Reagan tax cuts.
What it found was interesting.
First, the market wastes no time in factoring in any to corporate taxes and according to Barclays calculations, corporate tax cuts get 85-90% priced in very short order. As an example, Barclays points out that the Reagan 1986 tax cuts showed that equities price in the benefits quickly. Perhaps too quickly.

This post was published at Zero Hedge on Feb 19, 2017.

The Reflationary Window: Open How Wide For How Long?

The global manufacturing purchasing manager index is comfortably above the 50 threshold signaling expansion. Importantly, the upturn is fairly synchronized, with improvement visible in the US, Europe, and Asia. This corroborates the upward adjustment in global bond yields we’ve seen in recent months.
A big source of recovery in global industrial momentum in the past year has emanated from China. But growth tailwinds from real interest rate relief and fiscal expansion are set to wane in the second half of 2017, while protectionist elements of proposed US tax reform pose risks to EM growth prospects more generally. Those countries with the highest percentage of exports and trade surplus with the US as a share of GDP are most at risk of any combination of tariffs or border adjusted elements of US corporate tax reform.
One of the primary axes of debate around the sustainability of US growth momentum revolves around how to interpret the surge in soft, survey measures of economic activity – namely consumer and business confidence – relative to expectations, running well ahead of the hard data – barometers of the health in the housing, industrial, labor, household, and retail sectors. We have some sympathy for the view that the survey data usually leads hard data, and that the pickup in confidence reflects a revival in long-dormant animal spirits which is feeding higher capacity expansion and hiring plans, particularly among small firms in the NFIB survey. But the large gap between the sentiment-oriented readings of the growth outlook and the mediocre pulse of coincident real time data underscores how great expectations for a sizeable upgrade in the plane of US economic growth are. Fears of secular stagnation have done an 180 degree turn to supreme confidence about the growth outlook in the last few months. The New York Fed’s primary dealers’ survey has extended expectations for the longevity of this business cycle, such that the median respondent now thinks the expansion will last twice as long as expected just a year ago.

This post was published at FinancialSense on 02/17/2017.

White House May Change Calculation Of US Trade Deficit, Boosting Trade War Odds

In the latest surprising announcement to emerge from the Trump White House, the WSJ reports that the Trump administration is considering changing the way the U. S. trade deficit is calculated, a shift that would make America’s trade gap appear even greater than it has been in recent years, potentially making future trade skirmishes and wars with America’s export-heavy trade partners far more likely.
According to WSJ sources, the White House is considering not counting re-exports from the US trade balance: i.e., excluding from U. S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged. Such an approach would inflate trade deficit numbers because it would typically count goods as imports when they come into the country but not count the same goods when they go back out.
As the WSJ notes, data on trade balances and surpluses, widely followed by Congress, are at the center of a political battle over whether existing trade agreements should be retained, renegotiated or tossed out altogether. Should the change be implemented, it would have a stark effect on data involving countries that have free trade deals with the U. S., and in some cases the new methodology would even change a trade surplus into a trade deficit.

This post was published at Zero Hedge on Feb 19, 2017.

Greenspan on Gold: Three Stages

“When our friends get elected, they aren’t our friends any more.” — M. Stanton Evans
My deceased friend Stan Evans became deservedly famous for this law of politics.
This law applies to high-level appointments.
Back in the days when I was starting out in my career, Alan Greenspan wrote an article for Ayn Rand’s Objectivist newsletter. It was pro-gold standard. It has been reprinted all over the Web. Back then, only a handful of us knew about it. I reviewed it in 2007 here:
personally launched the modern era of extreme intervention by the Federal Reserve in order to stop a collapse in the stock market. That took place in the second month of his chairmanship at Federal Reserve. It was in late October, 1987. The American stock market had dropped by 20% in one day. Around the world, other markets had dropped by a comparable percentage. No one knew why then. No one knows why now.
Greenspan and the Federal Reserve Open Market Committee intervened the next day to inject fiat money into the banking system in order to stop the collapse. That was the beginning of what became known as “Greenspan’s put.” Stock market investors knew from that point on that the Federal Reserve would not allow the market to fall significantly. That carried through right until Bernake’s intervention in 2009.

This post was published at Gary North on February 18, 2017.

Democrats Suggest Invoking The 25th Amendment Unless Trump “Gets A Grip”

After questioning President Trump’s sanity earlier in the week, it appears Democrats have found another narrative to cling to – invoke the 25th Amendment unless Trump “gets a grip.”
With a growing number of Democrats openly questioning President Trump’s mental health.
Rep. Earl Blumenauer (D-Ore.) in a floor speech this week called for a review of the Constitution’s procedures for removing a president. He warned the 25th Amendment of the Constitution falls short when it comes to mental or emotional fitness for office.
Sen. Al Franken (D-Minn.) during a weekend interview with CNN’s ‘State of the Union’ said that ‘a few’ Republican colleagues have expressed concern to him about Trump’s mental health.

This post was published at Zero Hedge on Feb 19, 2017.

New Political Turmoil In Italy After Renzi Quits As Ruling Party Leader, Triggering Re-election Battle

Two months after an unexpected, landslide loss in the December 4 constitutional referendum which cost him his job as Italy’s prime minister, on Sunday Matteo Renzi quit as leader of Italy’s ruling party, in the process triggering a re-election fight against minority dissidents that threatens the stability of the center-left government, Bloomberg reports. Renzi told a national assembly of the ruling PD that he had handed in his resignation acknowledging he was set back by defeat in last year’s referendum, one day after critics from leftist factions threaten to abandon the Democratic Party.
‘Everything stems from the referendum,’ Renzi told more than 600 party delegates. ‘I feel responsible for the defeat, there is a before and an after. That referendum was a blow for the whole country, starting with the economic system and we must now put the car back on the road.’ Renzi denounced ‘blackmail by a minority’ and infighting that he called ‘a gift’ to the anti-establishment Five Star Movement. He is expected to stand for re-election at a congress in April or May.
As Bloomberg adds, concerns about a party split have pushed Italian bond yields higher and led to the widest spread between Italian and German 10-year bonds since February 2014. The selloff may accelerate as Renzi’s resignation could benefit Five Star, which is neck-and-neck with the party in opinion polls and wants a referendum on Italian membership of the euro area. Renzi has faced challenges to his reformist strategy and leadership especially since losing the referendum, which prompted him to resign as premier and sponsor current Prime Minister Paolo Gentiloni, a Renzi loyalist and fellow PD member, as his successor.

This post was published at Zero Hedge on Feb 19, 2017.

Gold during Reflations

Reflation is coming. We argue that the recent comeback of inflation is negative for the gold market. Why should that be so? Should not inflation support gold, which is considered the inflation hedge? It is true that gold may shine during inflationary times, but a lot depends on the broader macroeconomic picture. Gold entered a bull market in the 1970s, but the U. S. economy was in a stagflation then, i.e. the combination of high inflation and sluggish economic growth. And inflation was high and accelerating. Will this scenario replay now?
The risk of stagflation, and the resulting possibility of a bond market collapse, is one of the largest risks for 2017 pointed out by investors. However, the current rise in inflation seems to reflect the uptick in economic activity and the jump in commodity prices. In other words, we see the return to normality after years of stubbornly low inflation rather than the start of high inflationary pressure. The deflationary forces are still in operation and the rise in oil prices should be limited by the increase in its supply, due to the fracking revolution. Therefore, the recent comeback of inflation should not support gold, as it results from higher economic growth and as it normalizes, not accelerates price dynamics. To put it simply, the increasing interest rates should keep inflation in check, so the yellow metal should not get an inflationary boost.
Other analysts point out that the central banks tighten monetary policy too much in a response to the inflation, which could hamper the economic growth or even lead to a recession. Well, it is possible, but central banks remain accommodative. Surely, they can overshoot, but it will take time to cause some turmoil and support gold (the same applies to the risk of inflation getting out of control – it will not happen suddenly). Therefore, the medium-term outlook for gold looks rather bearish, at least until the long-term upward trend in the U. S. dollar and real interest rates reverses.

This post was published at GoldSeek on Friday, 17 February 2017.

Priebus: Take Trump Seriously When He Calls The Press “The Enemy”

Reince Priebus, the White House chief of staff, doubled down on Trump’s vocal warnings to the press and advised Americans to take President Trump’s attacks on the media ‘seriously,’ following the president’s denunciations of the press as the ‘enemy.’
‘There’s been a debate about when to take the president seriously,’ CBS’ John Dickerson said in a ‘Face the Nation’ interview with Priebus Saturday. ‘He recently tweeted that the press was the enemy of the American people. Should we take that seriously from him?’
‘Well, I think you should take it seriously,’ Priebus replied. ‘I think that the problem we’ve got is that we’re talking about bogus stories like the one in the New York Times, that we’ve had constant contact with Russian officials. The next day, the Wall Street Journal had a story that the intel community was not giving the president a full intelligence briefing. Both stories grossly inaccurate, overstated, overblown, and it’s total garbage. So we spend 48 hours on bogus stories. And the American people suffer. So I do think it’s a problem. And I think that the media needs to, in some cases — not every case, John — but in some cases really needs to get its act together.’
“The enemy?” CBS anchor John Dickerson pressed. Well, maybe not so much the media as their corporate owners.

This post was published at Zero Hedge on Feb 19, 2017.

At a Turning Point in US History, Shepard Smith Denounces Trump

Shepard Smith’s denunciation of Trump is even more courageous and important than Edward R. Murrow’s denunciation of Senator Joe McCarthy in the early 1950s. Murrow was denouncing a demagogue with great power, but the subject of his historic words was not the President. He was a Senator.
Unlike Smith, Murrow also had the backing of a supportive news organization. Murrow was a media giant of his age. Murrow knew that he could move the country. Smith is one of manys of semi-famous news anchors. His position within the news industry, and especially within his organization was not secure. He could not be certain of the fallout from his act of bravery.
Murrow stood against a dangerous man, but as powerful as he was, McCarthy was only a Senator. Smith was calling out a demagogue with even greater power, the President of the United States. Smith did so from within an organization run by an oligarch, and master propagandist who has consistently supported Trump. Smith knew that he was talking to an audience that would largely be antagonistic to his views.

This post was published at Wall Street Examiner by Lee Adler ‘ February 19, 2017.

“There’s Something Weird Going On”: Jeff Snider On The Global Dollar Shortage

The first time we explained that one of the biggest risks facing a world in which the dollar is the reserve currency is a global USD shortage, was in mid-2009, when we wrote “How The Federal Reserve Bailed Out The World.”
At the time, the IMF calculated that just ahead of the financial crisis, “major European banks’ US dollar funding gap had reached $1.0 – 1.2 trillion by mid-2007. Until the onset of the crisis, European banks had met this need by tapping the interbank market ($432 billion) and by borrowing from central banks ($386 billion), and used FX swaps ($315 billion) to convert (primarily) domestic currency funding into dollars.” The IMF then extrapolated that “were all liabilities to non-banks treated as short-term funding, the upper-bound estimate would be $6.5 trillion.”

This post was published at Zero Hedge on Feb 18, 2017.

Concerns Grow About A Nuclear “Incident” In Europe After Spike In Radioactive Iodine Levels

Concerns about a potential, and so far unsubstantiated, nuclear “incident”, reportedly in the vicinity of the Arctic circle, spread in the past week after trace amounts of radioactive Iodine-131 of unknown origin were detected in January over large areas in Europe according to a report by the Institute for Radiological Protection and Nuclear Safety, the French national public expert in nuclear and radiological risks. Since the isotope has a half-life of only eight days, the detection is an indication of a rather recent release. As the Barents Observer adds, “where the radioactivity is coming from is still a mystery.”
The air filter station at Svanhovd – located a few hundred meters from Norway’s border to Russia’s Kola Peninsula in the north – was the first to measure small amounts of the radioactive Ionide-131 in the second week of January. Shortly thereafter, the same Iodine-131 isotope was measured in Rovaniemi in Finnish Lapland. Within the next two weeks, traces of radioactivity, although in tiny amounts, were measured in Poland, Czech Republic, Germany, France and Spain.
Norway was the first to measure the radioactivity, but France was the first to officially inform the public about it.
“Iodine-131 a radionuclide of anthropogenic origin, has recently been detected in tiny amounts in the ground-level atmosphere in Europe. The preliminary report states it was first found during week 2 of January 2017 in northern Norway. Iodine-131 was also detected in Finland, Poland, Czech Republic, Germany, France and Spain, until the end of January”, the official French Institute de Radioprotection et de Sret Nuclaire (IRSN) wrote in a press release.

This post was published at Zero Hedge on Feb 19, 2017.