By Dave Brown – Exclusive to Resource Investing News On Sunday morning, policymakers surfaced with an agreement to bail out the U.S. financial markets with the commitment to creating the written document before the end of the day. The legislation should allow the Treasury to work with cash-strapped homeowners whose mortgages have been purchased by …
By Dave Brown – Exclusive to Resource Investing News
On Sunday morning, policymakers surfaced with an agreement to bail out the U.S. financial markets with the commitment to creating the written document before the end of the day.
The legislation should allow the Treasury to work with cash-strapped homeowners whose mortgages have been purchased by the federal government to refinance into a more affordable mortgage.
The three focal points of the financial bailout include strong taxpayer protections including:
a) Reinvesting in the turbulent financial markets in order to provide economic stability and “insulate Main Street from Wall Street”
b) Reimbursing the taxpayer by a provision of ownership of shares and appreciation in the value of purchased assets
c) Reforming Wall Street through strong Congressional oversight to limit CEO compensation that encourages unnecessary risk-taking and recover bonuses paid based on promised gains.
The deal will also effectively reduce the payment of US$700 billion by 50 per cent, and stipulates that future payments are subject to Congressional review. If other protections have not actually produced a profit within 5 years, the deal will guarantee that tax payers are repaid in full.
The week ahead
Several news events scheduled for next week which will be of particular interest for resource investors include: Tuesday – consumer confidence index, Wednesday – construction spending, Thursday – factory orders and money supply. Friday features the release of the employment situation, which features the unemployment rate, the nonfarm payrolls, the average workweek, and the average hourly earnings. Financial market reactions have frequently been sensitive to this comprehensive monthly set of labour market indicators.
Tungsten: Chinese holding the cards
On Wednesday, Golden Predator Mines (TSX: GP) announced the intersection of near surface tungsten mineralization in drilling at its wholly-owned Springer tungsten project in Nevada. In the previous week, the company announced that it would implement procedures to reduce operational expenses at the Springer Project as a direct result of the current global economic slowdown. These cost-cutting measures will postpone the eventual mill operation of the Springer facility; however all permitting activities and operational readiness programs will continue, which should better prepare the company for returning to regular production status.
This announcement serves a significant impediment to non-Chinese tungsten consumers, as the Chinese produce 90 per cent of global tungsten supply, and consider it a strategic metal. Having reduced exports in the past, some observers fear that any artificial limits on the supply will create inflationary pressures on the underlying price.
Natural Gas: Hurricane recovery slow to materialize
Recovery from the recent hurricanes has been slower than anticipated. The Minerals Management Service noted that “approximately 56.4 per cent of the natural gas production in the Gulf is shut-in“. Despite this release, the U.S. Department of Energy released numbers that indicate inventories were up 51 billion cubic feet for the week ending September 19. The demand for natural gas may also face short term increases as North America and Europe enter winter, and colder weather may prompt people to rely more heavily on natural gas for residential heating.
Copper: Sitting on the fence
On Friday, copper prices were steady in London and Shanghai, after modest overnight gains, but pervading market uncertainty and apprehension generated thinner trading volumes. There was some reassurance when it came to Chinese demand, indicating that the world’s largest copper consumer is drawing down Korean inventories.