IMF Upbeat, Goldman Downbeat … Plus Fun Tax Facts

I’ve got good news, and bad news. Which would you like first?

I admit that I am usually someone who likes to deal with the bad news first. Yet today, I flipped a coin to aid in my decision, and the "good news first" side won.

So, starting with the former, today we learned that the International Monetary Fund (IMF) has boosted its forecast for global economic growth by a slight tenth of a percent to 3.5%.

This tenth of a percent isn’t what one would call mighty. But the 3.5% figure (if it happens) would represent the fastest global economic growth rate in five years.

Here’s the money quote from IMF Chief Economist Maurice Obstfeld:

"Acceleration will be broad-based across advanced, emerging, and low income economies, building on gains we have seen in both manufacturing and trade."

Hey, that’s solid enough for me to be optimistic. Same goes for the details of the IMF’s call for the various global regions.

The IMF maintained its forecast for U.S. growth at 2.3% for 2017. However, the organization ratcheted up its outlooks for all five of Europe’s largest economies.

And despite the reality that is Brexit, the UK was the economy that got the biggest hike. Its growth forecast rose 0.5 percentage point to 2% growth for the year.

Asia also scored a bump, as the IMF hiked China’s growth forecast a tenth of a percentage point to 6.6%. It also increased Japan’s outlook by 0.4 percentage point to 1.2%.

The really optimistic thing about the IMF forecast is that it remains upbeat despite the latest geopolitical flare-ups in Syria, North Korea and Afghanistan.

Yes, I realize the forecasts were likely calculated before the bombs and bellicose blustering started flying last week. Still, the IMF could have been really conservative with its prediction by citing the geopolitical uncertainty as a reason to be cautious.

So, the fact that global growth remains on track is the good news.

As for the bad news, well, you never want to get earnings from a bellwether financial that causes its share price to fall more than 4% in reaction.

Yet that’s what’s happened today with Goldman Sachs (GS).

The premier investment bank reported uncharacteristically weak Q1 earnings. Today’s report represents a rare miss for the Wall Street behemoth.

GS shares fell nearly 5% today.

Goldman said its Q1 net income came in at $2.26 billion, or $5.15 a share, on revenue of $8.03 billion. Although those metrics were up from the same period a year ago, all three failed to meet analyst expectations.

As you know, disappointing the consensus Wall Street forecast is usually going to put the hurt on your stock. And in this case, because of Goldman’s status as a bellwether for not only the banking industry … but also for the economy and the markets at large … it’s not a surprise that stocks followed GS lower.

Despite its difficulties in Q1, my take is that the shortfall was much more of an execution issue within the company’s trading division that’s responsible for the miss.

Remember that the company’s No. 2 man, Gary Cohn, left GS to take the job of White House economic adviser in the Trump administration. So, it appears the leadership transition in Q1 ran into a few bumps in the road.

The bottom line is that GS is a great company. But even great companies can fail to execute in any given quarter.

Lesson learned.

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Today is officially Tax Day, which means you have until midnight tonight to file your federal return.

In honor of this infamous yearly deadline, I thought I’d try to lighten up the mood with a few fun facts regarding Tax Day.

The following comes to us from the libertarian-oriented Reason.com:

Just in time for the filing deadline, here are a few tips and facts you may not know about America’s Rube Goldberg hellscape of a tax code. They include:

  Americans spend 6 billion hours every year doing taxes.

  Parents can claim a kidnapped child as a dependent until the child is declared dead or turns 18.

  If a boat has a toilet, kitchen and sleeping quarters, it can be considered a house for tax purposes.

  Babysitters and nannies can be written off as childcare expenses.

  You can deduct up to $1 million in mortgage interest across two different houses.

  The estate tax can be partially avoided by moving assets into a family-owned LLC or FLC.

  The U.S. tax code is over 72,000 pages and growing.

  Olympic medal winnings are tax-free. Nobel Prize winnings are considered income.

  Monetary damages for wrongful conviction are tax-free.

There you have it, just the kind of fun tax facts that should make you smile …

And really, don’t we all need that today?

***

Gold was its own source of good news today. After rising for a fifth-straight day, it closed Tuesday’s session at $1,294. But if you’ve been buying gold miners, you might have noticed that those traded lower.

In today’s Mining for Money column, Sean Brodrick tells you why. He also shares what that means for you right now …


Mining for Money

Why Big Gold Miners Are Scared
By Sean Brodrick

If you listen hard … in the dark of the night … in the mining fields … you might hear the steady drip-drip-drip of big miners getting the night sweats.

It’s not because of gold prices, which are actually looking quite good.

No, it’s the latest data on gold ore grades.

Gold grade is simply how much gold you get out of a metric ton of rock. If ore grades 1.5 grams per ton, you must move and process a ton of rock to get 1.5 grams of gold.

Does that sound like very little reward for the work? Well, hang on to your mining helmets …

The 2016 average primary gold reserves grade was 1.15 grams per metric ton. That’s a drop of 20% from the current mean process grade of 1.44.

1.15 grams is 0.036 troy ounces. Take a look at the chart …

The data comes via Bloomberg from industry analysts at Metals Focus, after crunching the numbers from Randgold Resources (GOLD), Kinross Gold (KGC), AngloGold Ashanti (AU), Gold Fields (GFI) and other big producers.

Looking at the chart, you can see that gold grades have declined for years. That’s because miners are smart enough to produce the easy stuff first.

Sure, it’s not a straight line. On the right side of the chart, you can see grades went up — for a while — as gold prices peaked and the gold bear market started. That’s because miners wrote off large areas of low-grade reserves they knew would never be profitable.

Now, why are grades going down? They aren’t reclassifying those low-grade deposits again. Not yet. It’s more likely they’re simply running out of the higher-grade ore.

Metals Focus Ltd. reckons the world’s 50 largest gold mines have a mine life of just over 11 years, based on average mine-life reserves remaining.

So how do they solve this problem? I already told you how in my story, "Why Junior Miners are on the Launch Pad."

In other words, big miners will buy projects from junior miners. Or sometimes just buy whole companies lock, stock and barrel. As I wrote in my previous article:

Sure, they’re paying up. They have the cash. They run freaking gold mines, for Pete’s sake. Of course they have the money.

And even though the big miners pay up, they end up spending a lot less money and, importantly, time than if they had tried to find that new project from scratch.

So, who are the big miners likely to buy? I told you the answer to that in another article, "Canadian Stocks are Cheap … But Not for Long!" That’s because Canada is where juniors go to list … AND because Canadian juniors simply represent the best values on the planet.

Let me tell you: 11 years of reserve life is nothing. NOTHING! It can take a dozen years or MORE to bring a new mine online.

These big companies are playing "beat the clock." Time is not on their side. Meanwhile, they have fat treasuries. Of course they’re going to go shopping.

This blue light shopping special is about to start. Get yourself positioned before the big money goes "buy-buy-buy"!

Which miners will be the biggest beneficiaries? I’ll make sure you get that information in the next few days.


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I want to know what you think, so if you have a comment or question about today’s Afternoon Edition topic, or any of the topics we cover, just leave me a comment on our website or send me an e-mail.

Good luck and happy investing,

Brad Hoppmann
Publisher
Uncommon Wisdom Daily

Your thoughts on “IMF Upbeat, Goldman Downbeat … Plus Fun Tax Facts”

  1. Hello Brad,

    Thank you for your information and insights.

    Please note that the word data is plural. Therefore, your sentence above should read:

    “The data come via Bloomberg from industry analysts at Metals Focus, after crunching the numbers from Randgold Resources (GOLD), Kinross Gold (KGC), AngloGold Ashanti (AU), Gold Fields (GFI) and other big producers.”

    Thank you.

Comments are closed.