Saturday, May 28, 2011


Castle built of Sand:
Saving the Euro or saving the nations which one comes first is the question of debate. European economies are struggling to survive the Euro and not the nations. They want bailout but to that extent to which the political image of financial management is not shattered keeping the upcoming elections in the Euro nations. When Greece was bailed out last time various measures were decided to be implemented to for the coming years starting from 2011.After the first anniversary of collapse the conditions remains the same. In fact government representatives fooled the citizens and the world market by portraying false and lucrative and even reduced figures of Defaults. The whole share of the blame cannot be passed to European leaders but a part of it goes to financial media too. The financial media was buys in hiding the reason for collapse and were busy to design bailout plans rather than bringing the real truth.

The debacle of Europe was not created by European leaders alone. The political war of Euro and Dollar formulated the cool minded long term disaster planning by some US and European leaders. In my last article a year back I depicted the story.

The Lethargic Governments Deeds: Privatization
Today Greece is planning to go for real execution of stake sales in its public owned companies. . In other words it can be termed as Disinvestments. This debacle of today should not have risen if GREECE had acted in real terms towards the earlier privatization programme of 50 billion euros. Today the world markets are rattled due to lethargic government in Greece. Among these assets sales some prominent and lucrative ones are stakes in the telecoms firm OTE, state-owned Postbank and the ports of Athens and Thessaloniki. The Greek government controls a 74% stake in each of those companies. It’s quite hard to say about the quality of assets after the debacle of Euro but it will be a good long term bet to invest in these companies. The government now hopes to rise up to 5.5bn euros through asset sales by the end of 2011, up from an initial target of between 2bn euros and 4bn euros that it had been aiming for just a few weeks ago. But is quite very hard to say till now that how much real execution will be implied. Their is a strong protest among the citizens of these nations about disinvestments.Political rivals of the current government of these nations are intensifying the protest.

No other Revenue Earnings Avenues:
Greece is having no other way than going for a disinvestment since its other government revenue earning mechanism are already to much high as compared to any other nation. Payroll tax of Greece for employees stands at 28% and workers stands at 16% taking the total to 44% tax rate in Greece. Greece is having a VAT rate of 19%.Hernce any hike of rate from these levels will only create more problem on the long term recovery of consumption and GDP growth. One of the hardest fact is this that we all know that Greece is having a deficit number of 150% of the GDP where as in real terms it stands at 875% of the GDP.I did not write any thing wrong neither you read any thing wrong. Taking the pension liabilities and future unfunded other liabilities the deficits climbs to 875% of the GDP.

Small questions for readers:
Now 3 questions for my readers what the government representatives did to bring this debt and what they will do in future and where Greece stands. I will leave the answer for my readers to give.

I find the decision of not providing immediate funds to Greece for payment is an ideal step. IMF and ECB steps are realistic to reduce the fats of the Greece governments. IMF and ECB has made it clear that it will not release new funds or buyouts of bonds for Greece without a comprehensive European support package to cover future years. Easy money will only keep on flowing and debts will be climbing the hills of burden. No one is having any plan of how the funds will be paid back later on. Today US came up with so many Quantitative measures, flooded the streets with easy money but no mechanisms of recovery of the debt raised on its face. Infact the government and other financial heads of these economies get fever, thinking upon the recovery measures of easy money. Greece is having an unemployment rate of 21% followed with an average rate of around 24% in Euro nations.

Greece is not the last to fall or go for disinvestments’ will not be surprised to see a similar thing coming from US. And if they delay more easy money more assets bubbles and more speculators money in the bank accounts and end of the world in real terms. Infact the speed at which we are travelling towards financial disasters we may not have to wait till 2012.Moreover I find only one prominent buyer and investors moving around every street of every nation China.

Quality of Sale and Buy:
The biggest disinvestment with which the Greece will open up the doors is Balkans telecom giant OTE. stake sale. In June Greece will sell 16% stake of OTE. It has called up Germany's Deutsche Telekom. The company currently controls 30% of OTE, the largest telecom operator in the Balkans which employs some 30,000 people in Albania, Bulgaria, Romania and Serbia. OTE this month reported a net profit of 30.2 million euros ($42.5 million) in the first quarter of the year, a fall of 54.1% from 2010. In February, OTE announced cost cuts worth some 32 million euros but managed to raise 500 million euros in a three-year bond sale. Hence as I repeat again quality of assets which will be displayed for sales needs more attentions.

Be ready for some cross border news of new deals. But gain all these deals will be financial leveraged deals rising further spread out collapse and erosion of capitals and savings of shareholders.

Very soon Italy's government is planning to bring forward 35bn-40bn euros (£30bn-£35bn; $49bn-$56bn) of austerity measures to this June in response. So party is not yet over.Infcat EURO PRIVITIZATION begins.....

Saturday, May 7, 2011


In Ancient Egypt and Medieval Europe, it was often more valuable than gold. Till today the same theory is followed. But last week the world market of metals were rattled with the fall of silver and gold. Silver made the steepest decline compared to 1983 levels of fall in the last  week.

Margin Crash Ride
Silver prices plunged across the world market keeping every one on the table of quest of what made the fall. Base metal prices were very much over leveraged or over brought in the past couple of months on a continuous basis. Silver is expected to have another correction from the last weeks closing by another 5% to 10%.

Silver will correcting is not only die to over bought ad over stretched valuations but also due to as New York Comex exchange have hiked the margin requirements to 84% making the requirements to raise up from $11,745 to $21,600. The margin requirements for hedgers are increased from $8,700 to $16,000.

Two days prior to this, the COMEX had also raised margin requirements. On April 27th, margin for initial contracts were increased from $11,745 to $12,825 and margin for maintenance contracts was increased from $8,700 to $9,500. As margin prices increases, this forces the market players to come up with more margins for playing in silver.
The collapse in silver prices on Thursday May 5th, triggered by the COMEX margin increases, indicates that many players were forced to liquidate positions to match the margin requirements going to hit floor from 9th of May. Before the increases, margins were about 5% of the value of a futures contract, which is for 5,000 ounces. After the plunge in prices, the cost after May 9 would be about 12% of a contract, using today’s settlement. The last two margin increases by the COMEX, after silver had already declined by over 17%.To add fuel to the fire liquidation of silver holdings by a hedge fund run by George Soros was also executed at that point of time.

Your Demand and My Silver Investments.
In my last article I depicted the story of the upcoming growth of demand of silver which played according to its vomited words in the article. Silver is not only a being treated a as a substitute of Gold but also being extensively used in alternative energy segment. The industrial applications of silver, increased by almost 21% to 487.4 million ounces.

In 2010 we find the demand for silver coming from global investment and fabrication demand. According to World Silver Survey demand of silver during 2010 increased despite of a 38% average increase in the price of silver to $20.19. The increase in silver prices during 2010 was the largest price gain since 1980.Silver investments demand increased by 40% in 2010 to 279.3 million ounces, double of 2009.

When we sneak into the ETF growth of silver globally we find a staggering growth to 582.6 million ounces during 2010, an increase of 114.9 million ounces over 2009. When we dig into the global use of silver in primary components we find some interesting growth demand:
• Silver used in coin and medal production rose by 28% to 101.3 million ounces.

• Sales of U.S. Silver Eagles reached 34.6 million, far ahead of the previous record of 29 million reached in 2009.

• Sales of bullion coins by mints in Australia and Canada also hit new highs.

• Investors also purchased 55.6 million ounces of silver in the form of bullion bars during 2010.

• Silver fabrication demand hit a ten year high of 878.8 million ounces, an increase of almost 13% over 2010.

• Jewelry increased by 5%, showing the biggest increase in demand since 2003.

Silver is going to make new records not only in 2011 but also in the next 3 years. We made an extensive research where we found that new demand for silver consumption is increasing.

• New industrial applications using silver are expected to account for an additional 40 million ounces of demand by 2015.

• Silver's unique chemical properties are constantly leading to new industrial demand, one example being the development of products using silver as an antibacterial agent.

But with the increase of the demand of silver we need to keep in mind that procurement of silver form mines needs higher attention. silver production increased by a very modest 2.5% during 2010 to 753.9 million ounces. We need to keep an eye on the explorations being carried out by the largest silver producer in 2010 was Mexico, followed by Peru, China, Australia and Chile.

So by now my investors my research colleges and other layman of the industry might be clear about the upcoming demand of the Gold Substitute .This demand will make the price of silver to touch new heights in the coming days. The recent crash of silver price is an buying opportunity and it should be used accordingly. I have come across few investors who are fighting with anxiety of the recent fall as they have purchased at higher levels. A simple advice for them is that silver is a long term assets and not like short term. Its a commodity and should not be entangled with other asset classes.
Silver should be bought at lower levels as they long term demand makes the price of silver to shine more than the original shine of silver. Silver should be brought and regarding these margin hikes and other activities one needs to treat them as a buying opportunity. Invest in silver for long term withering out the short term hiccups.

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