The sins of Wall Street in a changing world market
A transplanted Canadian analyzes the remarkable progress of the loonie, the devious ways of Wall Street and a junior mining for fertilizer.
Do you remember when the Canadian dollar was worth 65 US cents?
Mr. John Kaiser does. And he remembers some humbling experiences when he first moved to the United States. He had “to suffer the indignities of clerks picking a Canadian penny out of the mix and pushing it back at me with the declaration that it was no good.”
Recently, at the Calgary airport, he watched a traveller purchase a sandwich for $7.07 Canadian. He had seven Canadian dollars, but when he offered to give exact change in the form of seven U.S. pennies, “the cashier refused and told him that they were not enough.”
How the world has changed, says Mr. Kaiser in his Bottom-Fish Action Report, which he edits from his home in California.
The changes we face are far bigger than the rise of the loonie, he adds, although the dollar’s rise does help explain why Canadians have not fared nearly as well as Americans from the rising price of gold.
No, the biggest change of all is the retreat of the western standard of living as the Asian standard of living rises.
And through it all, Wall Street either doesn’t get it or doesn’t care, says this observer.
We’ll take a quick look at one of Mr. Kaiser’s Speculative Buys in junior mining stocks, and then find out why he thinks Wall Street needs a kick in the capital.
Alternative potash
Amazon Mining Holding Company (TSX/V-AMZ) is a U.K. public company founded by Brazilians and trading on the Toronto Venture exchange.
It is developing Cerrado Verde. This is not another gold mine, but a mine producing Verdete slate, a potash-rich rock which can be converted into a “a slow-release, non-chloride, multi-nutrient, fertilizer product.”
The name of this product, Mr. Kaiser tells us, is ThermoPotash. Amazon’s immediate goal is to establish itself as an “alternative potash” producer. The longer goal is to help Brazil wean itself from dependence on potash imports.
As is the case with so many juniors, there is still work to be done and studies to be completed. But Cerrado Verde, says this editor, “is really an engineering project with major strategic implications that will not be abandoned in a couple of months.”
It is therefore confirmed as a Good Absolute Speculative Value Buy between $1.50-$2.00 range. It closed Friday at $1.73.
Jokers on Wall Street
Mr. Kaiser is no friend to the Wall Street types currently feeling the heat in Washington.
While his favourite sector, rare earth metals, should have had its best month ever thanks to strong signals from the U.S. government, it and the rest of the market sagged from the tremours of the Greek debt crisis.
And all the while “Goldman Sachs and its peers thumped their chests about how they could do no wrong and woe everybody should the Obama administration change the rules so that this elite can no longer get richer for doing little more than rigging the game at the expense of the ultimate mark, the taxpayers, and then adding insult to injury by declaring that this thievery is for the good of everybody.”
Not strong enough for you? There’s more.
“What these jokers on Wall Street do not understand is that the post-industrial world can no longer pretend that it is still in the ascendancy.”
And that’s a problem about which we must do some “serious soul searching,” says the editor.
How wealth was taken away
“Nobody talks about it,” observes Mr. Kaiser, “but the reality is sinking in among ordinary people that the western standard of living as it is conventionally defined has peaked and must retreat as the comparatively much lower per capita Asian standard of living rises.”
Wall Street pretends this is not a problem, he says. In so far as it acknowledges it at all, it simply advises that capital be invested to profit from the rise of Asia.
“That, of course, is of little help to the majority of people who watched their equity evaporate in 2008, and who are now starting to understand how that wealth had been expanded and why it ended up being taken away.”
Wall Street was able to accelerate a credit expansion that masked the flow of capital into the new Chinese frontier by inflating real estate values and creating the illusion of rising wealth.
This illusion was helped by the deflation in the cost of consumer goods imported from China. This in turn was made possible by dumping the cost of worker rights and environmental impact onto the Chinese people, says the editor, a sacrifice China willingly absorbed as an industrial pioneer.
But once the pioneer becomes successful in his own right, the rules of the game change. America is entering an insecure new world in which social security entitlements rest on the shoulders of children and grandchildren “whose job prospects consist of service sector jobs such as Wal-Mart stocking clerks and nursing home attendants.”
Mr. Kaiser paints a rather bleak picture. But he believes the west is not ready for the “hardscrabble battles” that the Asians are willing to fight for a more prosperous future.
You might wonder, he tells his readers, why he, as a speculator in high-risk juniors, shares no sympathy with Wall Street. Simple, he says. My capital is always exposed to great risk.
But Wall Street protects its capital with other people’s money. “The problem with Wall Street is that its denizens think they will be able to stand apart from the fray, and continue to drain a disproportionate share of the wealth generated by economic activity while contributing next to nothing.”
Now too many people have seen this agenda for what it is, and Wall Street can no longer run and hide.
It will be dangerous to take down Goldman Sachs and its ilk, he states bluntly, but it must be done.
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