Jeff Randall: When going gets rough, banks yell for nanny

By Jeff Randall
The Telegraph, London
Wednesday, March 26, 2008

Bank customer: "What's the difference between a recession and a depression?"

Bank manager: "In a recession, you lose your job. In a depression, I lose mine."

Remarkable, isn't it, just how quickly champions of laissez-faire solutions can become advocates for state intervention? All it takes is for their gravy train to break down.

When freedom to play with barely any restrictions was making them rich beyond imagination, big-shot financiers applauded "light-touch" regulation. The looser the rules, the louder they cheered.

Now, however, as credit is crunched, losses mount, and prospects for lucrative employment come under threat, many titans of unfettered enterprise are suddenly crying out for nanny.

Not for them the tough love of supply and demand. No, sir. These are desperate times, requiring generous measures of tender, loving care.

The essential plumbing of commerce, it is alleged, has become dysfunctional. Or, as Josef Ackerman, chief executive of Deutsche Bank, said: "I no longer believe in the market's self-healing power."

Whyever not? Nowhere on the tin does it say that markets will correct themselves without someone being hurt. Indeed, for markets to function properly, pain, somewhere along the chain, is inevitable.

Markets work because they create winners and losers, not jobs-for-life security. Financial Darwinism doesn't just underpin the survival of the fittest; it ensures the extinction of pea-brained dinosaurs.

Corporations with too much fat and insufficient speed end up in evolution's Room 101. This is often forgotten when the trees are full of fruit.

In his book, "The Final Crash," Hugo Bouleau (the nom de plume of a City investment manager) predicts: "Reckless lending will come back to haunt many a greedy banker and catch up with those directors that set excessive sales targets, forcing bank employees to fund unsuitable projects, chase ever riskier clients, and sell inappropriate investment products."

This process is already under way in London and New York. Had it occurred anywhere else, one could be sure that Wall Street and the City would be nodding their approval.

After all, job losses = cost reductions; company insolvencies = sector consolidation; falling prices = buying opportunities. Great value is often found on a rubbish tip.

"But hang on a minute," the bankers yelp. "It's happening in banking. Banking. That means us."

Yes, boys, I'm afraid it does.

A smack by the invisible hand of market forces no longer seems such a good idea, does it? Far more appealing is the soft touch of Other People's Money. Cue: chorus of calls for taxpayers' funds to rescue distressed lenders.

We are told by the banks that they are too important to be allowed to fail, that their operations are so inextricably linked with the real economy we would be plunged into a 1930s-type calamity if a big one went under.

Forget moral hazard, we are urged; it's in everyone's interest to bail them out.

Those who got us into this mess are demanding that we get them out of it. They put a gun to our heads, insisting that, without immediate action, everyone will feel their pain. (Funny, I don't recall feeling the joy of their jackpot bonuses.) Catharsis for a few will lead to nemesis for many.

Central banks seem to agree, so the Federal Reserve fixes a deal at Bear Stearns. This is no Northern Rock, a haven for small savers, but one of Wall Street's most egregious examples of knock-'em-down-drag-em-out investment banking.

At a time when so many Americans are losing their homes, it's hard to think of a company less deserving of state support.

Paul Krugman, professor of economics at Princeton University, forecasts: "As Bear goes, so will the rest of the financial system. And if history is any guide, the coming taxpayer-financed bailout will end up costing a lot of money."

The banks have landed us in this bad place because, over many years they learnt how to wriggle out of regulation. Special investment vehicles were created to park risk. Derivatives were invented that became the financial equivalent of Frankenstein's monster -- they took on a life of their own. In short, there emerged a parallel system of Wild West behaviour.

The banks' cocktail of greed and irresponsibility will, I'm sure, produce a wave of fresh regulation to clamp down on recent excesses.

Many of the new strictures will be counterproductive -- they always are -- in the same way that Sarbanes-Oxley legislation, after Enron and WorldCom, drove public share offerings out of New York and into London.

Never mind. For hyper-ventilating politicians -- those who can think of nothing better than sticking their fingers into the free-enterprise pie -- the sub-prime mortgage mess has turned into a two-inch tap-in. It's an unmissable chance to justify far-reaching extensions of their activities.

Christopher Fildes, who graced these pages for many years, once warned that while bankers and investors are counting their losses, the next worst thing is "the spectacle of finance ministers ... and their supporting cast of bag carriers and sherpas hurrying to meet each other and to think of something that they or their spokesmen can subsequently announce. They are tempted at such times to take initiatives."

One dreads to think.

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Peter Grandich Special Alert!

"Ever since the spring of 2003, when gold was barely over $300, I’ve maintained a very bullish stance, with the exception of a couple of shortterm correction beliefs along the way. After basically tripling from its low and dramatically outperforming the U.S. stock market during that timeframe, gold remains mostly a barbaric relic (I think that’s how Mark Haines and his like would describe it) to almost all on Wall Street. THANK GOD IT DOES!!! When the moment arrives that they finally embrace it, yours truly will head for the door and don’t stand in my way..."

To read the rest of Peter Grandich's newsletter please click HERE

Peter Grandich: Special Alert on Northern Dynasty

Northern Dynasty Minerals (NDM-TSX-V $16.10, NAK-AMEX $15.17)—

Who said “I love it when a plan comes together?” The largest gain I believe I have ever been a part of was Nevsun Resources back in the mid-1990s when it went from $1 to $21. I have felt for quite some time that NDM can surpass this when all is said and done. I first became involved with NDM at just 94¢. And, I’ve said since it was around $5 that it could end up worth at least $25. But, it’s been an uphill battle from the very start.
A well-known Canadian-based mining share fund manager called NDM “nothing but dirt” in the early days. Then, one billionaire who has a private lodge in the area (and would like to keep the whole place to himself) financially backed the “opposition” to the Pebble project, creating a mountain of resistance, which in fact has been little more than a molehill. Throw in the fact that the company did all its financings via non-broker placements (try getting coverage from the brokerage community when you’re a junior and not raising money through the brokerage community…a Vancouver Canucks Stanley Cup is more likely), and little recognition was been given to Pebble despite the fact that it is fast becoming the world’s biggest copper-gold deposit.

In just the last couple of weeks, NDM received more coverage than it did for the entire four years I’ve been a shareholder (I worked for the company until July,
2005). Timing is everything, I guess, as the company has announced a major joint venture with Anglo American. This is the project’s second major endorsement.
The first was Rio Tinto’s acquisition of nearly 20% of the outstanding shares of NDM (which now sets us up for even more interesting days ahead).

This JV does many things. For starters:
· Anglo is among the premier mining companies in the world today. It has the financial resources NDM lacked or would have needed to go to the market to raise.
· As noted earlier, this is now the second major mining firm to concurrently endorse the merits of Pebble. This point can’t be underscored enough (no fewer than 16 companies had signed confidentially agreements with NDM). For far too long, NDM was an orphan among the institutional community but with Anglo as a partner and Rio as a major shareholder, I fully anticipate NDM vaulting towards the top of most mining share institutional shopping lists.
· While Anglo has clearly jumped ahead of the other majors, there’s still the other
50% NDM fully controls. A consortium still can’t be ruled out and Rio’s nearly
20% ownership already is incentive for them to see about gaining enough control to be the other partner in Pebble.
· While it’s early, it wouldn’t come as a surprise to me to later learn that NDM has
hired bankers to explore the sale of their remaining ownership, especially once new drill results are released.
· Some recent analyst coverage suggests the shares were worth $50 fully valued, and at a 50% discount $25 ($25 has a familiar ring to it).
This news by no means makes NDM a slam-dunk or without risk. I don’t expect the opposition to now simply pack up and go home, nor are we out of the woods on gold and copper prices falling sharply. But I do think being a near “lone voice” is over for me. Good thing, as my throat hurts and my hands hurt from pounding the table for so long.

Peter Grandich talks about gold to Al Korelin

Peter Grandich interviewed by Al Korelin:

Peter Grandich on gold

The snippet below is taken from today's Peter Grandich Special Alert newsletter.

...I haven’t witnessed a more pronounced bearish mood in the gold market given the least amount of price decline since this secular bull market began five years ago. Not a day goes by where I don’t read yet another formerly bullish forecaster painting a gloomy outlook for gold for the foreseeable future.

The mood among retail speculators is so thick with pessimism you can cut it with a knife. Yet, here we sit this morning with gold still north of $650 and above key support of $640.

One shouldn’t simply discard this marked increased in bearishness. For starters, gold is now in the historically weakest seasonal period of May through August. It’s also been absolutely hammered – not only by aggressive central bank selling, but by a continuing pattern of strange selling on the Comex that almost always is concentrated around the 11 a.m. time frame. The fact that this is when most of the physical buying worldwide shuts down until later in the evening in Asia is no coincidence.

It’s easy to see why gold bulls like me may be scratching their heads wondering why the bullish boat has thinned out, especially when you read so much double-talk like we are currently hearing from a so-called gold expert on one of the most read gold bullion websites. This gentleman can not only talk well from both sides of his mouth, but I often wonder if he and I are looking at the same market?
Make no mistake about it; we remaining gold bulls are on the defensive until such time that gold breaks above the all-important $700 level. Gold must hold above $640 or we are all but certain to see a test of $600 or even $575. (Please put down the gun).
But even if that were to occur (though extremely unlikely), the fundamentals remain solid for gold and by sometime in 2008 (if not sooner), we should be testing the old highs of around $875.

I continue to like the bullish side of silver, platinum, palladium, uranium and cobalt. I’m now firmly on the bearish side of most base metals.

Business News Network interviews Peter Grandich

Peter Grandich, publisher of The Grandich Letter, was interviewed for an hour Friday on "Market Call" on Business News Network in Toronto, where he paid moving tribute to our friend the late "Market Call" host Jim O'Connell, reviewed the prospects for a large number of mining companies, and mentioned the manipulation of the gold market. You'll be able to watch the program at BNN's Internet archive here:

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(Press the Play button once again after the brief adverisment)

Northern Dynasty Minerals – The End Game is Under Way

What follows is a Special Alert newsletter from Peter Grandich regarding Northern Dynasty Minerals (*)

It’s been my firm belief that NDM is the number one target on the shopping lists of the top five or so mining companies in the world today. As hard as it is to imagine this mammoth deposit can get much bigger, the most recent drill results, including the highest grade intersect to date, strongly suggest that when it’s all said and done, the Pebble can be the biggest deposit in the world.
(See http://www.alaskajournal.com/stories/020407/nat_20070204023.shtml).

Simply put, I believe it’s a “must own” for companies like Anglo American, BHP, Newmont, Rio Tinto and other giant mining companies. I have little doubt that several of them have been pursuing it via a lengthy due diligence process.
These companies’ “window of opportunity” was dramatically reduced when Rio Tinto announced it has increased its ownership of NDM shares to 20%.
(See http://biz.yahoo.com/iw/070130/0209057.html).

While such ownership gives them zero interest in the project itself (a key point to grasp), it does give them a leg up. It also should make it clear that Rio is very serious and also believes in the ability for the project to end up being built.

So, on the assumption that there is at least one other interested party, what are the possible scenarios that can unfold?

• Another company makes a bid for all of NDM shares.
• Another company enters into a strategic relationship with NDM whereupon it agrees to pay all further costs, carry NDM throughout and NDM retains a 50% or so interest (thereby leaving that ownership still open for purchase).
• NDM issues new shares to market at a substantial premium that allow the buyer to have similar or equal ownership to Rio’s present ownership.
  

While all three scenarios are okay, the second is better than the first because I believe someone eventually buys NDM’s share of the project. The last one is the best, as it would signal to the whole world that a bidding war is coming.



There remain risks, including the ability for the project to eventually get permitted, a big decline in metals prices and other unknowns, but I personally believe these potential negatives are down the road and NDM is just days or weeks from one of the three scenarios actually unfolding.

Technically, NDM is a little overbought in the short-term but it’s close to breaking out above key resistance in the 10 ½ - 11 area. As you can see, it’s been making higher lows since October and pressing up closer to key resistance.

Please Note – While Grandich Publications hasn’t been engaged by NDM since July of 2005, it is engaged by other Hunter-Dickinson companies.
Copyright 2007, Grandich Publications, LLC., Peter Grandich • Phone 732-642-3992
February 5, 2007 (www.Grandich.com)



(*) Northern Dynasty Minerals, Ltd. 1020-800 West Pender Street Vancouver, BC Canada, V6C 2V6
Toll Free: 1-800-667-2114
Phone: (604) 684-6365
Fax: (604) 684-8092
Email: info@hdgold.com
www.NorthernDynasty.com

TSX-V: NDM $ca 9.85
AMEX: NAK $us 8.32
as of 10:15 a.m. EST

Share Structure: (at December 31, 2006)
Common Authorized Unlimited
Issued: 91,685,519
Fully Diluted: 94,048,890

Special Alert from Peter Grandich: Did we miss the Bell?

"...I actually watched CNBC-TV with the sound on and if I didn’t know any better, I could have sworn they rang a bell for the top in gold and bottom in equities and I missed it. Is it just me, or is anyone else not going to be surprised to see the CNBC-TV anchors all wearing DOW 12,000 hats and blowing those New Year’s Eve gadgets in preparation for the second coming of the great equity bull market?
For the love of God, please just watch CNBC’s counterpart in Canada, http://www.robtv.com just one day so you can realize exactly how biased and unprofessional most of CNBC-TV really is – (and how classy all of ROB-TV is)."

Click Here to read the Special Alert in pdf.

Mining Investment Expert Peter Grandich Interview

Και για να μην ...ξεχνιόμαστε, όσοι και όσες έχετε καταλάβει ότι βρισκόμαστε στις αρχικές ακόμα φάσεις ενός μακρόχρονου Bull Market στα πολύτιμα μέταλλα (generational long term bull market) τί πιό επίκαιρο από τη συνέντευξη του Peter Grandich που ακολουθεί....

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Συνέντευξη Peter Grandich στο ROB-TV

Ένας από τους μεγάλους guru του επενδυτικού στερεώματος, ο Peter Grandich μιλάει στον Jim O'Conell ειδικό συντάκτη του καναδέζικου Report on Business TV, για την ευκαιρία επένδυσης που παρουσιάζεται στο Bull Market του χρυσού αλλά και για μερικές επιλεγμένες μετοχές...