mdef metals defense energy food

What is MDEF™ Investing? Strategy before tactics. Strategic investments dictate tactical actions in the Metals, Defense, Energy & Food sectors.

- Jeffrey C. Borneman

Metals News

Texas Pulls $1 Billion In Gold From NY Fed

Jeffrey C. Borneman | June 13, 2015

Texas has enacted a Bill to repatriate $1 billion of gold from The NY Fed's vaults to a newly established state gold bullion depository and includes a section to prevent forced seizure from the Federal Government.

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With Its Gold "Vaporized", A Furious Ukraine Turns On Its Central Bankers

Jeffrey C. Borneman | December 2, 2014

Presented with the stunning comment from Ex US Federal Reserve Chairman Alan Greenspan: "Gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments." But so is Defense, Energy and Food. Full article below.

As reported two weeks ago, following a stunning announcement by the head of Ukraine's central bank, Valeriya Gontareva, on primetime TV we learned that (virtually) all of Ukraine's gold was gone, or - in the parlance of Jon Corzine - had "vaporized."

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Greenspan Finds Original Script on Gold: It Really is Money

Jeffrey C. Borneman | October 29, 2014

Former Federal Reserve Chairman Greenspan met with the Council on Foreign Relations yesterday and stunned the Keynesian crowd with a simple but stark admission: "gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments." Oh my ...

Greenspan wasn't finished. As stunning as his reversal was, he finally spoke to the real economic problem within the US, i.e., the absence of real DEMAND. He confessed that quantitative easing (QE) helped asset prices (inflation) but "didn't do much for the real economy," reports Zero Hedge.

The first tenet we learned in economics class was the law of "Supply & Demand." Astute investors have always understood the deadly flaw in the understanding of this principle: It is not the law of Supply & Demand but in fact the reverse. It is the law of DEMAND & Supply.

DEMAND drives capital. Capital always chases DEMAND. America - and by extension, all world economies - have ample supply but now lack DEMAND. How did Greenspan address this?

“Effective demand (emphasis mine) is dead in the water,” he admitted, adding: "The effort to boost it via bond buying 'has not worked,' but 'boosting asset prices has been 'a terrific success.' ”

Investors must fully appreciate the breadth and gravity of the message Greenspan intended to convey. Real DEMAND is "dead in the water." This means, of course, that the chain-reaction of increasing Inflation and decreased employment can only intensify. As investors, what does this augur for company earnings and the $20 trillion or so in investing capital held by Americans?

As discussed here, monetary policy "adjustments" haven't worked (and have merely piled trillions of dollars onto the national debt) which leaves only fiscal spending - direct government payments to keep the economy relatively stable with the hope a catalyst for growth and expansion will emerge.

The only success Greenspan was willing to attribute to the QE effort cite was a "boost in asset prices." Aside from the temporary slide in Energy prices, prices for all other goods and services are climbing to the point where the average citizen cannot afford ground beef. Still the IMF wants more - much more - Inflation here in the US, with the hope it will appear in the Eurozone. Inflation is their plan - and it is their only plan.

The world is heading to a pivot point, a tectonic shift in the status quo. While much of it is planned, unexpected events will have an impact as well. Regardless, it is the reason the MDEF™ Investing strategy was created: Own only the essential market sectors that both governments and individuals must rely on for survival. As events unfold, and DEMAND for non-essential goods and services wane, investing capital rotates into areas of confirmed need and reliable returns.

If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

Big Gold Moves

Jeffrey C. Borneman | September 26, 2014

Speed Chess is not limited to Defense transfers ... Excellent recap of Gold movement, reasoning and proposed law changes in the article below. Most investors will be stunned to know the manipulation of UK key currency, precious metals, and interest rate benchmarks are still legal. 

With the London gold fixing process being so central to the determination of the world gold price, any moves by the UK authorities to criminalise manipulation of the gold fixing price are welcome.

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U.S. Mining Winning The Costs Race

Jeffrey C. Borneman | August 13, 2014

Article by Forbes below worth reading ...

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U.S. Mining Winning The Costs Race
Forbes Original Article Date: 2014-08-13

Another Fish, Another Denial Of Resources - Metals

Jeffrey C. Borneman | July 23, 2014

"Alaska’s open-pit Pebble Mine sits on 55 billion pounds of copper, 67 million ounces of gold, and 3.3 billion pounds of molybdenum—$500 billion in value. The Environmental Protection Agency (EPA) wants to keep it there," says Nicolas Loris, an economist at The Heritage Foundation.

Investor alert: It appears the EPA is now phoning-in denials before detailed plans for development are even submitted for projects involving resource-extraction - because of a fish, again. It is actually worse than that: The Pebble Mine denial was based on an environmental analysis of a "theoretical mine that would not come close to meeting state and federal standards for mining activities."

A denial based on science would be understandable but a denial for any other reason speaks to Unicorns and Fairies and sets a dangerous precedent for resource development of any kind in America. 

Even the "scientists and experts serving on the peer review panel of the EPA’s assessment on the Bristol Bay watershed called parts of the (EPA denial) report “hogwash.” 

The point is the EPA is regulating apart from both law and science. Manufactured scarcity  translates to higher prices for Metals, Energy and Food - all now under increased regulations. The MDEF™ Investing strategy was formulated to take advantage of just such moves by regulatory bodies. If you would like to know how the MDEF™ portfolios have performed under such conditions, do contact me directly.

Here's a money quote regarding the Pebble Mine (full article follows):

The EPA’s process, or lack thereof, for proposing conditions on Pebble should be cause for concern for every project in the United States, says Pebble Partnership CEO Tom Collier.

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EPA Proposes to Choke Alaskan Mine Development
Daily Signal Original Article Date: 2014-07-23

Copper is Running - Why Now?

Jeffrey C. Borneman | June 30, 2014

China is marvelous at re-hypothecation of Metals (selling the same ingot multiple times). They have been caught many times and, coming this August, will attempt to manage world trading in the Gold/Silver markets. But why is copper running?

It's simple: All the short -trades are covering and this will be negative news when the shorts are done. In normal times, copper runs higher as construction of buildings, etc., heats up. No time today for me to write more on this so I'm posting a fine Zero Hedge article below. The point to investors is not to be swayed that economies "are just getting better" based on copper pricing (something I heard twice today on MSM).

Here's the relevant money quote (full article follows):

This must means demand is picking up, right? This must mean the world is ok, right? Chatter is that this morning's home sales 'noise' surprise spike was the catalyst but it appears much more likely that a combination of a continued squeeze of a very-extended spec short position and the ongoing unwind of China's commodity-finance-deals is the real catalyst.

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Copper Surges To 4-Month High
ZH Original Article Date: 2014-06-30

Untapped, Untold Wealth in Metals

Jeffrey C. Borneman | June 16, 2014

Investors need to keep a sharp eye on the push to explore the oceans for Metals and minerals in high DEMAND for high-tech applications. Nations in the Pacific Rim-of-Fire are eager to begin underwater mining for Metals and minerals once out of human reach.

What were once major technological hurdles in deep ocean mining are now considered minor while unforeseen problems will be dealt with on-the-fly, it seems. The bounty is too rich for countries whose land resources are dwindling while DEMAND is increasing. The MDEF™ staff will be monitoring advancements of technologies, legislation and companies going forward. The sheer size of the deposits of valuable Metals and minerals should be too attractive to governments to be stopped by ardent environmentalists, but count on them to try. Here's one money quote (full article follows):  

If only 10 percent of that resource can be recovered it will be one of the largest mineral deposits ever discovered. It is a world class mineral deposit," says the Cook Islands National Seabed Minerals Policy, approved on June 10.

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New Zealand may kick start race to mine the ocean floor
Yahoo News Original Article Date: 2014-06-15

A Strong Case For Holding Physical Gold?

Jeffrey C. Borneman | June 7, 2014

There are Gold investors who will only hold the physical commodity. Their reasons are often very different but the common thread is theft and the stakes were just raised a bit.

I've commented before about the "Tungsten Swap" which is the preferred substitute metal when faking a Gold purchase. Theft of this sort is much more common than generally reported so when a ton of Gold disappears, it makes big headlines. What struck me in the cloak & dagger story was the author's musing at the end, which is the money quote (full article follows):

We can't help but feel this is not the last time as commodity-backed financings are unwound en masse and the underlying collateral found missing... sourcing the underlying by any means will be on the rise.

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Darn Rehypothecation Again in Chinese Metals - Or Outright Fraud

Jeffrey C. Borneman | June 5, 2014

Apparently someone smelled the rat of many tonnes of metals being sold or pledged just too many times. It's know as rehypothecation; it can be considered leveraging and it is legal until someone declares a force majeure. This is also the great fear in the Gold and Silver markets. 

This story received about a minute of airtime in the morning of June 4th with almost a chuckle from the commentators. I assure you, to the traders running to the warehouses to make sure their aluminum or copper was real, this was no joke. If a force majeure were declared in either precious Metal, we would expect a rather large shock-wave to ripple to and fro in world markets. I post this to remind investors that the Gold Fix in Europe is ending early August. It will be time to watch the precious Metals very closely. Here's the money quote (full, short article follows):

In some cases the same shipment can be pledged to more than one bank, fuelling hot money inflows and spurring a clampdown by Chinese authorities. It appears there is a discrepancy in metal that should be there and metal that is actually there.

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Chinese port stops metal shipments due to probe - trade sources
Reuters Original Article Date: 2014-06-05

Should the US Return to the Gold Standard?

Jeffrey C. Borneman | June 3, 2014

Steve Forbes' places the blame for our horrid economy on easy money printing by the Federal Reserve with the savior being a return to the Gold Standard. We already have a Gold Standard but it's color is black ...

Many people, including those brilliant economists like Steve Forbes, claim the US currency is fiat - In only way is this correct. It's fiat in that the USD is not directly linked to any commodity. What isn't acknowledged by even 'the smartest men in the room' is that the USD has been a reflection of the PetroDollar since Nixon's decoupling the USD from Gold in 1971. Today's Inflation is blamed on undisciplined printing of dollars but that is only partly to blame. Inflation rises and falls with the cost of Energy (oil) as does employment, GDP, etc. If ever we had a clear replacement for Gold as the basis for the USD it is Energy; but the relationship is inverse. Is having a currency anchor that is inverse in value unwise? As I've previously written, the US is swimming in oil so it would make sense to drive the cost of Energy to 1999 levels ($1/gal) and watch the economy explode to the upside. Seeing Energy this way, it should be no surprise that the major geopolitcal events taking place now are a mere scrambling for Energy assets? Here's a quote from Forbes which is very accurate (full article follows):

The book is extremely critical of the Fed, especially former Chairman Ben Bernanke and current Chairwoman Janet Yellen. "The Federal Reserve must stop trying to run the banking system and the economy."

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Steve Forbes: Link dollar to gold or face Great Depression II
Washington Examiner Original Article Date: 2014-06-03

Putin Now The Voice of Russia & China Regarding Gold (?)

Jeffrey C. Borneman | May 28, 2014

The Relic Metal is trading down and Russia is taking advantage. What could the US be thinking now that Putin has made statements for both Russia and China?

On the heels of joint war-games and the culmination of the 20 year effort producing a 30-year Energy deal, Putin says Russia and China need to ensure its Gold and Energy reserves are secure. He added " ... and WE (my emphasis) need to think of how to do that keeping in mind the uneasy situation in the global economy." Putin is clearly speaking for both countries. Unprecedented. Investors must understand the attack taking place against the USD. These particular moves are new but not unexpected. The "further steps" Russia/China is considering is why the MDEF™Investing strategy exists. For more information on how this is play out and effects your portfolios, do contact me. Here's the money quote:

Putin also said China and Russia will consider further steps to shift to use of national currencies in bilateral transactions.

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Gold Manipulation to End - Here and Now - By the Chinese?

Jeffrey C. Borneman | May 28, 2014

"Physical demand provides underlying support to gold prices and ultimately dictates the price." What a marvelous quote and summation for any market. Investors forget it is always physical DEMAND that ultimately dictates pricing. 

As the largest buyer of the 'relic' metal continues its accumulation, China is now ready to challenge New York and London as the world's trading center for Gold. China wants the power to allow Gold to seek its own market price - an "un-manipulated" price. This is a line-in-the-sand. As Gold's power travels east, it will draw DEMAND for other commodities and China's ability to affect their pricing cannot be far behind. Nothing happens overnight - until it does. China is attempting to corner the Four-Horsemen of the markets: Metals, Defense, Energy & Food. Here's the money quote (full article follows):

With China's push for an international physical exchange, physical demand will begin to have a stronger influence, thereby ending gold manipulation. This will allow gold to rise to a more appropriate price given the scale of macroeconomic, systemic, geo-political and monetary risks of today.

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China Launching “Global Gold Exchange” In Shanghai
Zerohedge Original Article Date: 2014-05-27

Proof of Gold Manipulation, Fines and ... Now What?

Jeffrey C. Borneman | May 24, 2014

We didn't need today's confirmation that Gold (and other precious Metals) are routinely manipulated downward. It is nice to see it, though.

I've said many times that I am not a Gold bug. Gold should be in every portfolio, either the physical or paper, but in proportion to asset risk assessment. However, I want to pose a question to the investor that owns no Gold or precious Metals hedge: What will happen to the wealth of citizens of countries like China or India who prize Gold when it eventually becomes un-manipulated? What will happen to the wealth of those who own only assets in USDs? I ask this from an Inflation perspective. If you are an investor and do not know the answer to this question, do contact us. Here's the money quote from another "We got your proof right here" story (full article follows):

So yes: it is now a fact that gold is manipulated by various commercial banks, and that those gold "raids" one sees every morning usually around the time of the London fix aren't accidental at all but are entirely designed to reprice the market, but how deeper does the rabbit hole go?

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India and Its Gold Problem

Jeffrey C. Borneman | May 21, 2014

The prohibition of alcohol in the United States was a poor lesson on the previous government in India. Prohibition of Gold spawned a massive exodus of Indian currency.

The excellent timeline below shows how India attacked Gold to protect its currency only to fail as countable currency disappeared into the black market of Gold smuggling. Reminder: This August comes release of the Gold "Fix" in Europe. Perhaps Gold will finally see its modern day iteration as money. Here's the money quote (full article follows):

but one thing is certain: in the absence of private sector manipulation now that even the Gold Fixing cartel is imploding, the central bank manipulators, especially those at the BIS will have to work overtime in selling paper gold to compensate for what may well be a tsunami of pent up physical purchases out of the country with the 1.2 billion population.

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The War On .. and For ... Gold

Jeffrey C. Borneman | May 16, 2014

Geopolitics is the study of how "we" (the world) got "here" right "now." All we have as humans are stories - trillions of them intertwined - and the further we get away from these stories they fade to become our collective history.

It is said too often that history is written by the victor. This is certainly true in some cases, but some histories are crystal clear. Take the history of money: What money actually is should be taught early and often as Financial Literacy. Take the history of Gold vs Money (currency) - how many of us can explain our own paradigm by our understanding of it? Most of all human history revolves around it like a month to flame but few can explain it; so are baffled by how "we" got "here" right "now." It's late on a Friday and I'm just musing but wanted to share the article below by way of this muse. It's worth the time (no money quote):

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Gold and Geopolitics
GoldBrokers Original Article Date: 2014-05-16

The Silver Fix Ends This August - What To Expect

Jeffrey C. Borneman | May 15, 2014

No trader or large investor I know doesn't think the Metals market isn't manipulated. JP Morgan proved even the largest trading desks can fall off the proverbial cliff of manipulation.

But enough is enough for The Fix. Come August 17, 2014 we lose a key player in the silver market. Will the price rise to natural leves (what all owners of the physical wants)? Probably not as silver is a global commodity. The point is liquidity will dissipate making trading much more expensive. The article below is worth the read: here's the money quote:

If the silver Fix is adding liquidity to the market, as I believe, then when it disappears the bid-ask spread will widen. The silver price will become more volatile, as will the silver basis.

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The End (of the Silver Fix) Is Nigh
ZeroHedge Original Article Date: 2014-05-15

BOAML Wants Your Gold (Now Please)

Jeffrey C. Borneman | May 12, 2014

We've noted many times in the past that calls by GS or BOAML to "sell" is merely an effort to depress the price while they fill rather large orders. This is not rocket-science. They are, after all, trading companies.

The term "smurf" was coined to call attention to those who followed such advice. The opposite is true as well: calls to "buy" are merely to offload positions from various clients and the smurfs follow right along. The money quote below on BOAML's call today to sell Gold is interesting as the relic Metal is not far the called-for "top," meaning; if it breaks this number, it will go higher. Gutsy call by BOAML, let's see how much fruit falls from the tree on this one. Money quote here (full article follows):

Further gains should not exceed 1315.70 (May-05 high) AND CAN'T EXCEED the Mar-14 high at 1331. Downside targets are seen to 1215.

Some "Why's" of Gold

Jeffrey C. Borneman | May 11, 2014

I consider myself a serious money manager, economist and financial historian.

If you are a serious investor, you probably understand the value of articles about Gold's movements during times of 'conflict' - and the wisdom to monitor them until disproved. The article below raises, not a few, interesting questions. I apologize if anyone thinks the source 'suspect' but current events in Gold seem to fit the historic meme:

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Original Article
21stCenturyWire Original Article Date: 2014-03-21

Where is the GOLD Going?

Jeffrey C. Borneman | May 10, 2014

If you like graphics, the article below presents a wonderful picture of where Gold is flowing.

If you like graphics, the article below presents a wonderful picture of where Gold is flowing. The biggest non-secret around is the that price of Gold is the most manipulated of all earth Metals. Remember: it is the "relic" Metal. According to past Fed Chair Bernanke, it is also the "unusual asset," "disaster insurance" and in direct answer to the question "Is Gold money?" Bernanke replied, "No. It is a precious metal." Indian and Chinese DEMAND for Gold says otherwise. Here's the money quote (full article follows):

Lifted by a continued surge in Asian gold sales, consumer demand for gold reached an all-time high in 2013 at 3,893 tonnes. Amazingly, 54% of this demand came from two places: India and China.

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Original Article
ZeroHedge Original Article Date: 2014-05-10

Slowing DEMAND - Q1 GDP

Jeffrey C. Borneman | May 1, 2014

It is not a question of "if" a market rotation into "need" from "want" will take place - DEMAND dictates it

Watching heads explode on MSM on the terrible Q1 GDP print. Buried in the details we find two key pieces of data. The first: " ... investment on equipment (Cap-Ex), another key economic cog, fell 5.5% to mark the biggest drop in almost five years." CEOs are paid real money to protect their companies (not waste money on non-returning investments). CEOs see much lower DEMAND, hence lower Cap-Ex. NOTE: Always look at the comparisons to '08-'09, a particularly bad economic environment.

The second is the export numbers: "Exports (-7.6%) fell faster than imports (-1.4%) to push the trade deficit higher and also act as a drag on growth." This number speaks to dwindling world-wide DEMAND and with no catalyst for growth across the globe (with the exception of "conflict[s]"), we can expect continued layoffs, calls for higher minimum wage and cover for the Fed to continue - if not raise - the QE. 

It is not a question of "if" a market rotation into "need" from "want" will take place - DEMAND dictates it. Here's the story:

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First-quarter U.S. GDP barely rises, up 0.1%
By: Jeffry Bartash Market Watch Original Article Date: 2014-04-30

Defense Spending Continues (Even away from the US)

Jeffrey C. Borneman | May 1, 2014

The new bucks mean to bolster the Kingdom's Defense as the US "pivots" to Asia.

Why would Saudi Arabia need a fleet of killer-drones? Few remember that when Ayatollah Khomeini returned to Iran in 1979 he declared a war on the (Sunni) Saudi Royal Family for control of OPEC, the ME, and by extension, the world. The Iran/Iraq war was fought because the Sunni leader (Saddam Hussein) of Iraq would not lay down arms and attacked Iran first. Iraq was, literally, in the way of a direct attack by Iran on the Saudi Kingdom. The old-saw Saudi leadership is all but gone now. The new bucks mean to bolster the Kingdom's Defense as the US "pivots" to Asia. in their minds, killer-drones are have many advantages as the threat has never abated. Here's are the money quotes (full article follows):

Saudi Arabia and smaller countries like the UAE are trying to get their hands on whatever they can...


As long as there’s a market, there’ll be an incentive to build cheaper and more powerful drones, and the club of drone-armed countries will continue to grow. As Horowitz puts it, "What we know about the history of military technology suggests it will be really difficult to keep a lid on this.

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Saudi Arabia joins the killer drone arms race
By: Russell Brandom The Verge Original Article Date: 2014-04-05