Month: June 2014

Bank Deposit Vs. Interest Rate

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There is a very interesting correlation between bank deposits and the deposit interest rates that I haven’t noticed yet.

Whenever yields are low, be it that the government lowers interest rates or imposes taxes on deposits. The result is that people will flee out of bank deposits and move their money either into equities or gold. Or anything else for that matter. This is because investors are searching for yield on investment. If interest rates are low, they will find a better use for their money than putting it in a bank.

Take Spain for example. Ever since the treasury yields peaked out in 2012, the same happened in the bank deposits in Spain.

Spain 10 Year Yield

As you can see here, the peak in Spain deposits (green chart) can also be found in 2012.

Eurozone deposits

Spain's tax on deposits

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Today I read about the new tax on Spanish bank deposits.

I wonder how fast the deposit outflows will accelerate in Spain’s case, because the trend is not good. See the precipitous decline in Spanish deposits (green). I’m waiting for the May 2014 numbers to come out soon.

I also think the negative rate from the ECB will have its effects soon.

Actually, a tax on deposits is just the same as negative interest rates. It all comes to your money being routed to the government either through inflation or through taxes…

Eurozone deposits

Spain\'s tax on deposits

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Today I read about the new tax on Spanish bank deposits.

I wonder how fast the deposit outflows will accelerate in Spain\’s case, because the trend is not good. See the precipitous decline in Spanish deposits (green). I\’m waiting for the May 2014 numbers to come out soon.

I also think the negative rate from the ECB will have its effects soon.

Actually, a tax on deposits is just the same as negative interest rates. It all comes to your money being routed to the government either through inflation or through taxes…

Eurozone deposits

Spain’s tax on deposits

Posted by

0

Today I read about the new tax on Spanish bank deposits.

I wonder how fast the deposit outflows will accelerate in Spain’s case, because the trend is not good. See the precipitous decline in Spanish deposits (green). I’m waiting for the May 2014 numbers to come out soon.

I also think the negative rate from the ECB will have its effects soon.

Actually, a tax on deposits is just the same as negative interest rates. It all comes to your money being routed to the government either through inflation or through taxes…

Eurozone deposits

Gold Price Disconnected from Central Bank Balance Sheets

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With this correlation between central bank balance sheets Vs. gold in our minds, we can confidently say that gold will have to move to $2000/ounce in a hurry to balance out all the money printing in this world.

Central Banks Vs. Gold Price
To help you monitor the balance sheet expansion, you can check this chart daily. Look how Japan is almost winning the race from Europe.

Stock market overextended

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When GDP growth gets consistently revised downwards while the stock market goes up every day, we get an overextended TMC/GDP ratio at 121.3%. Yes, we are in a stock market bubble. The question is, when will it pop? Keep your finger on the sell button.
First it was 0.1% GDP growth, then it was -0.1%, then it was -1% and suddenly today they reported -2.9% GDP growth. Incompetent people…

Avino Silver Tripling Its Production

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Do you remember my call on Avino Silver? Well, today Avino Silver made new highs, surging more than 60% in just two weeks.

The near term catalyst is that it has everything set to triple its production in the second half of this year. I expect at least a cash flow of $40 million, which means the market cap of this company will at least double from here. While this is happening, the silver price is now even surging as shorts are covering their managed money short positions, which I talked about here. And more of those silver short positions are still to be covered…

So basically we have 2 catalysts for Avino Silver. I predict that Avino Silver will shoot past $3/share in a few months.

Inflation expectation is rising

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The latest CPI numbers are out and we see that yoy inflation rates are now at 2%. I expect inflation to go higher in the future, because I see that the capacity utilization rate for May 2014 has been up to 79.1 for the total industry.
For mining, the capacity utilization rate even goes to 91, the highest in decades. I guess the mining industry is working at near full capacity and that’s good for commodities to go higher.

Remember, when the CPI goes up and bond yields drop, gold goes higher. And that’s exactly what is happening now. Bond yields are lower and CPI is higher.

Stock Screener: Take Three: Tai Cheung Holdings

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Remember my post on KYN and my post on SIMO? The stock has gone up 6% and the other stock has gone up 15% since we bought it and now it is time to move on.

Track record 2-0.

If I don’t have any ideas anymore what to buy, I use the stock screener.

What you want to do is filter on 4 attributes: market cap, P/E, dividend yield and percentage change.

1) Market Cap: do not choose small companies as they are mostly fraudulent or don’t have sustainable earnings. Don’t choose big companies because these are not volatile enough to get fast profits from. I’d filter between 200 million and 4 billion.

2) P/E ratio: choose the companies with the lowest P/E ratio, these companies are dirt cheap while still having earnings. Cheap is below P/E of 5. But do not choose below P/E of 2 because those are mostly companies that are going bankrupt or have bad growth.

3) Dividend yield: always choose companies that have dividends, because these companies have real earnings and can prove they have sustainable earnings to reward investors. The higher the better of course, but don’t push it above 7% as those companies probably don’t have the money to pay out dividends on a regular basis. I’d go for companies with dividends between 3% and 7%.

4) Volatility: don’t choose companies that are so volatile. Maximum year over year change should be between the 20% range.

We use the exact same parameters as above.

And we find that there are some candidates in the real estate sector. Everybody is bearish real estate in China, but that’s a contrarian indicator to me:

– Xinyuan Real Estate Co., Ltd. (ADR) is Chinese real estate, and we know that there is a risk to invest in Chinese real estate, so I wouldn’t choose for this investment. I would rather look at Hong Kong.

– Tai Cheung Holdings has a pretty nice and stable dividend of 5%, which you won’t get in U.S. treasuries. Hong Kong real estate will continue to flourish. I see this holding is investing in Tuen Mun, which is a place many mainland Chinese people buy real estate in, because it is very near China. It is also below book value. Good candidate so I will choose it. Look for the symbol:

HKG:0088 or TAICY.

Let’s keep this stock screener thing going and see if this isn’t the easiest way to make money! (without even knowing what the company is doing)