Gold vs US Dollar

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RIG Cqs Rig

36.25

0.00 (0.00%)

03 May 2024 - Closed

Delayed by 15 minutes

Cqs Rig Investors - RIG

Share Name	Share Symbol	Market	Stock Type
Cqs Rig	RIG	London	Ordinary Share

	Price Change	Price Change %	Share Price	Last Trade
	0.00	0.00%	36.25	01:00:00

Open Price	Low Price	High Price	Close Price	Previous Close
			36.25	36.25

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Posted at 08/7/2011 12:44 by gary1966 steelwatch, Did get another reply but it didn't answer the question I asked. They told me how much the final dividend for 2010 was and when it was paid. Quite unbelievable really. Sent back a curt response and now my query has been passed on to someone who deals with these matters. Why do firms pay for investor relations departments when they are as useless as this. If someone ever talks to management it may be worth mentioning this. The money they save could then be distributed as a dividend. Gary Read Full Thread Reply
Posted at 06/7/2011 13:43 by gary1966 Tilts, I hear what you are saying but they do the investor relations for the company per the CQS website. I assume that you have not had a response yet. Gary Read Full Thread Reply
Posted at 06/7/2011 12:34 by gary1966 Steelwatch, Yes the buy the other day was my only purchase since returning to the fold. I re-iterate however that since when can only shareholders ask a question of a company. I may be a potential investor wanting clarification prior to making a purchase. In fact I wish I had done it this way as the way that Investor Relations are treating me they could go and swivel. This is the latest response that I have received: Dear Mr As your shares are held in a nominee account, we cannot help with your enquiry. Please contact your broker for the information you require. Barbara Lynch Administrator - Shareholder Administration Capita Registrars I have bought these shares through a cheap online broker and they are not going to start asking questions on my behalf for £8 per trade. If CQS investor relations were my wife I would be getting the marriage annulled by now as I cant even get to first base let alone off it. Hope you have more luck than me. Read Full Thread Reply
Posted at 08/6/2009 12:45 by bull_mega is it a cowboy company ???? Any long time investor with company news here??? Read Full Thread Reply
Posted at 24/10/2008 09:05 by steelwatch Proposed Share Placing & Unsecured Facility Agreement (Cqs Rig Finance Fund) For immediate release on 24 October 2008 THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA OR JAPAN Proposed Share Placing and Unsecured Facility Agreement Following the recent exceptional turmoil in financial markets which has resulted in significant falls in the Company's net asset value, the Company announces a proposed share placing to provide stability and a more appropriate capital structure. The Company is currently seeking to strengthen its balance sheet equity through a placing of new ordinary shares in order to reduce materially the level of the Company's gearing. To this end, the Company is in discussions with certain of its shareholders and potential investors and a further announcement will be made in due course. In light of current market conditions, the Company has been managing a reduction in its borrowings. While the Company continues to focus on actively managing its borrowing position in response to continued markdowns across its portfolio, the Company also announces that on 23 October 2008 it entered into an unsecured facility agreement (the "Facility") with RBC Cees Trustee Limited ("RBC") under which US$6 million is being made available to the Company for short term working capital. The Facility carries an interest rate of LIBOR plus 5 per cent. per annum and is repayable at the earliest of the date falling 90 days after the receipt by the Company of a written request by RBC or 23 October 2009, or alternatively by the Company at any time. The Facility has been provided by RBC in its capacity as trustee of certain assets for the benefit of Michael Hintze, Chief Executive of CQS, who holds a majority interest in CQS Cayman LP, the Company's investment manager. The Directors consider, having consulted with the Company's Nominated Adviser, that the terms of the loan are fair and reasonable insofar as the Company's shareholders are concerned. Enquiries: Alastair Moreton Arbuthnot Securities Limited Telephone 020 7012 2000 Secretary Kleinwort Benson (Channel Islands) Fund Services LimitedTelephone 01481 727111 Read Full Thread Reply
Posted at 21/5/2008 16:35 by steelwatch This presentation was delivered by Dr. Benn Steil at the New York Hard Assets Investment Conference, held 12-13 May 2008 at the New York Marriott Marquis on Times Square. Dr. Steil is Senior Fellow and Director of International Economics at the Council on Foreign Relations in New York. He has written and spoken widely on international finance, securities trading and market regulation. NEW YORK (Resource Investor Conferences) -- Thank you very much. Good afternoon, ladies and gentlemen. Right before I came up on stage, someone from the audience came up to me and asked if I had good news or bad news. And since I'm used to speaking at forums on the dollar, my instinct was to say, "bad news." But of course, this is a somewhat different audience at a conference on hard assets. So perhaps it's actually good news. I'll let you be the judge of that when I get to the end of my presentation. A lot of reporters ask me these days whether we're in the midst of a commodity bubble. In fact, next week I'm going to Washington to give a Senate testimony. Our good folks in Congress are examining whether we are in fact experiencing a commodities bubble driven by irrational speculation, and what we need to do about it. My perspective is that the more interesting, and indeed more important, question to ask is whether we're at the end of what I would call a 'fiat currency bubble.' If we go back to the early 1980s, under the Volker effect, inflation, and at least equally importantly inflation expectations, were driven out of the system through a pretty ruthless policy of very tight money, high interest rates. Very tight money. And the period after that, the 1990s into the early years of this decade, I would really call the golden age of the fiat dollar. In 1971, of course, the dollar ceased to be redeemable into any hard asset, and it's had some rocky times since then. But that whole period of the 1990s into the early part of this decade was really a golden age when interest rates were very low. In the 1990s, I'm sure many of you remember that central banks around the world sold off most of their gold reserves, and said, "We don't need this anymore. We don't need hard assets. We've got a hard U.S. dollar, managed by a responsible central bank. The stock pays interest. Gold doesn't pay interest. We don't need this stuff anymore." Now, fast-forward to today, and what do we have? Is this Federal Reserve dedicated to price stability? Well, we have a Fed Funds Rate at 2%. We've got consumer price inflation at 4%; wholesale price inflation at 7%; a broad measure of U.S. money to supply growth. M3, interestingly enough, is no longer calculated by the Federal Reserve. We rely on private estimates going at around 17%. It is not surprising that people around the world are beginning to lose faith in this fiat dollar. So I think it's a mistake to characterize what we're seeing now as somehow a commodity's bubble. It may be in the grand historical sweep of things a return to normality; that may not be necessarily a good thing. The world of a responsible fiat dollar may very well be very desirable for all of us. But we have to ask, given the broad sweep of history, whether that's really possible. Okay, so what's at risk here? The first thing I want to establish for you is that the dollar really is very special in the international monetary system. It is very much the world's currency. About two-thirds of world trade is denominated in U.S. dollars, or virtually all international commodities trade denominated in U.S. dollars. Many countries around the world import U.S. monetary policy directly through payment fixed exchange rates. And why do they do that? Because they do almost all of their trade in U.S. dollars. In other words, their interaction with the outside world is in U.S. dollars. If you're in a situation like that, that makes logical sense to import U.S. monetary policy. And how is that reflected in the behaviour of the dollar, vis-à-vis other currencies in the world? Let me show you. There are two relationships that called for virtually every country's currency around the world, except the dollar. Quite interesting. The first one is a positive relationship between depreciation and inflation. This doesn't sound particularly shocking, but when a currency depreciates, the country tends to get inflation. Not particularly surprising. This particular graph shows that relationship for a very large group of developing countries. Interestingly enough, it also holds for the euro. It holds less strongly for the euro, but that positive relationship is also there. What's really rather remarkable is that at least over the course of this decade, it has not held for the U.S. dollar. It's really quite interesting. The main reason why it hasn't held for the U.S. dollar is that, broadly speaking, the U.S. economy is so large and so diverse that when a depreciation is modest, we can substitute domestic production here for what we used to import, which is now at a higher price. But what accounts for this negative relationship? And I think the explanation is that at least until recently, it was confidence in the way the Federal Reserve would react to depreciation and inflation. In other words, when people saw inflation coming in the United States, they assumed that the Federal Reserve would tighten interest rates, and therefore money would flow into the United States in order to take advantage of the higher interest rate. I think if I were to run this regression again at the end of this year, I bet you this relationship would disappear. But it'll be an interesting experiment. The second relationship is even much more interesting than this one. That is, that around the world, again you see a positive relationship between currency depreciation and interest rates. This is a very, very important relationship. That is, if you look at particularly developing countries, when the currency depreciates, interest rates locally go up. And why is that? Because their central banks are not in any meaningful sense sovereign. When they try to lower interest rates relative to what they are in the international marketplace, the currency depreciates and the interest rates in the market have to go back up, often very high, in order to attract the capital back in. So these central banks are not in any meaningful sense sovereign. What's very interesting, again, is that this positive relationship, although it's less strong, even holds for the euro. Really quite remarkable. But it doesn't hold for the U.S. dollar. And what this means is that the Federal Reserve at least until very recently has been sovereign in a very meaningful sense. That is, for example, the Fed would lower interest rates that would generally lead to a depreciation in the dollar, but it was contained. Interest rates were not pushed back up in the U.S. markets as a consequence, and the most important reason is because U.S. investors by and large have put on blinders. They haven't looked at what relative returns are in other currency-denominated assets around the world. The U.S. dollar is the monetary standard, not only here, but for the rest of the world, and this makes our Federal Reserve unique. It gives it unique powers that no other central bank has. But is the dollar a good store of value over a long period of time? What I've done in this particular graph is I've plotted the real effective exchange rate of the U.S. dollar, going back to the 1970s. You'll see on the left side of the figure there is a big spike, which corresponds quite logically to the period of the Volker effect, where the Federal Reserve jacked up interest rates very high in order to restore the credibility of the U.S. dollar, and that explains the spike there. But broadly speaking, since the end of the Volker era, you see the trend has been downward. The U.S. dollar has not looked like a great store of value over, say, the past two decades. Much more importantly, it hasn't looked like a very good store of value over the course of this decade, vis-à-vis hard assets. In this particular graph, I plot the price of oil over the course of this decade. The top line is the price of oil measured in U.S. dollars. The middle line is the price of oil priced in euros. And the bottom line? What you see is very flat. That's the price of oil and gold. And it's very - you see it's very, very flat. And that shouldn't surprise people because as we go back to the era of the gold standard from about 1880 until the outbreak of the first World War, in 1914, prices around the world in countries that were on the gold standard were also remarkable flat. The figure looked just like this. So gold is behaving as it has historically. Now, let's step back for a second, and ask what if the dollar became just another currency. What do I mean by 'just another currency'? I mean a currency that behaves like all the others, with a positive relationship between depreciation and inflation, and most importantly, between depreciation and interest rates. In other words, if a currency depreciates, interest rates in the market go up. That's not science fiction. We're experiencing this right now. The Fed is pushing down very, very hard with short-term rates, the federal fund rates. But if you look at medium- and longer-term interest rates in the market, they are headed up. What does that mean? It means the Fed becomes impotent. What do I mean by that? If you look at textbooks on macroeconomics, they explain the most important function of a central bank. Countries need a central bank because they act as lenders of last resort. That is, in a banking crisis, for example, when people panic about whether their savings are secure they would run to the bank to get their money out before the money disappears. But the central bank can reassure them by printing money to make sure that the local banks, the private banks, have enough money to give back to the depositors. In the developing world, this does not work at all. And it's not because the people believe that the banks are going to fail. They know the governments will always bail out the banks. But they believe that when the central bank prints the money, it's going to lead to inflation and depreciation. So what do they do? They go to the bank, withdraw their money, and sell it for dollars immediately. So what happens to the central bank reserves? They plummet. And then the central bankers and the treasury officials fly to Washington to meet with our treasury officials and the IMF. There is no lender of last resort in the developing world. We are the lenders of last resort, because in a financial crisis around the world, what people need is dollars, not local money. But what if our Fed became just another central bank? Is that science fiction? Well, over the past few months we've seen record flows from the United States into foreign currency-denominated bond funds. Very interesting, bond funds. People are looking for safe investments, but they're looking for nondollar-denominated investments. So, given that our Fed has been very much acting like a lender of last resort lately, trying to support liquidity in the market, participating in a bail-out of Bear Stearns, people in this country may be beginning to get very nervous about this, about how much money is being printed. And if they do become very nervous, they will ultimately behave just like people around most of the world. That is, when the Fed tries to behave as a lender of last resort, people will go to their financial institutions, withdraw their money, and then sell it for euros or some other currency, or perhaps for hard assets. And if they do do that, the Fed no longer has powers of a lender of last resort. Second, financial crisis becomes much more severe. Let's fast forward a long way, and let's ask if people really fundamentally lost confidence in the dollar, and people around the world started to save in euros and trade in euros, and countries started borrowing in euros, and we ourselves were obliged to trade in euros and borrow in euros because people didn't want to hold dollars. What would that mean? That would mean that we ourselves would be subject to financial crises just like developing countries. What is a currency crisis? That is when investors local and foreign lose confidence that the country has enough foreign money, hard money as it were, to pay its debts. If we were to become obliged to borrow in euros and trade in euros, then we would be subject to these same forces. I'm certainly not saying that this is around the corner, but in economics, we're always talking about tendencies: And it's a tendency that's important, and it's a tendency that we have to pay attention to in terms of adapting our policies. Finally, America begins to lose influence in the world. In terms of the value, the purchasing value of our economic aid, our humanitarian aid, our military aid; all of that will go down. It will buy us less influence in the world. But think how the U.S. uses the fact that the dollar is such an important trade vehicle now, in order to disrupt the activities of our adversaries like Iran and North Korea. We are intercepting financial flows going through the international banking system because they're denominated in dollars, and because they're going to financial institutions that have to do business in the United States. If people don't have to do international business in euros, you will see banks springing up around the world - significant banks, no longer boutiques - who do not do any business in the United States because they won't have to. These transactions will start going on in euros or some other currency, and we will become impotent in this regard. We will not be able to use this as a tool of foreign policy. Now, what are the alternatives to the dollar that are out there? It's easy to say the dollar is at risk, but remember, we have to use something else if there weren't a hard dollar for us to trade in, and save in and borrow. I mean the obvious one is the euro. And indeed, if you look over the course of the decade so far, people have very much seen the euro as an alternative to the dollar, and that's reflected in this slide. In this slide, I graphed over the course of the decade how the relative depreciation or appreciation of the dollar vis-à-vis the euro tracks interest rate differentials between the two currencies. So, when the interest rate differential between the euro and the dollar rises - that is, the euro pays higher interest rates relative to the dollar - the euro appreciates. This is a reflection of financial globalization. Investors around the world are now very sensitive to the relative return of assets denominated in different currencies. That, for example, is the root of the so-called carry trade, where people borrow in a currency that looks cheap, and they invest in a currency that looks like it may be expensive. But the euro has some real problems looking out long-term. Let me just describe what it is I mean. Right now, if you look around the world, central banks hold about two-thirds of their reserves in dollars, and only about 25% in euros. What if central banks around the world were to start increasing their holdings of euros very significantly? What would that mean? Well, that would mean further significant upward pressure on the euro. It would mean that people around the world would want to start trading in euros, because if they're holding euros, they have less incentive to trade in something else. Do they want even more euros in order to accommodate trade? In order to supply those euros to the world, guess what? The eurozone is going to have to start running very large current account deficits to supply those euros, just like we run large current account deficits right now to supply the world with the dollars that they want. If that were to happen, think about what the political reaction in Europe would be. The pressure on the European Central Bank to relax monetary policy would be utterly enormous. There might even be pressure for certain member states to leave the eurozone and reintroduce their old national currency. Protectionist pressures would be utterly enormous. I think it would be impossible to ever conclude another round of WTO trade talks. It would lead to enormous protectionist pressure. Also, very recently, one of the major ratings agencies threatened to downgrade U.S. government dollar-denominated debt because of our long-term fiscal obligations. But if you look at the situation in Europe, certainly it's at least as dire as it is here. So the euro is not a natural alternative to the dollar. People trading in euros has its own problems, which probably means that the euro is not a particularly attractive direct alternative to the dollar. So what would come next? Well, if you go down the line of currencies around the world, you don't find many attractive opportunities. And that's why I say if the world were to give up on dollars and give up on euros, they'd probably go back to the old standby, which is gold. And I don't mean by gold, government run gold standard, like we had in the late 19th century. That's politically impossible. Governments will never be willing to subordinate their policies to the constraints of a hard commodity ever again. But why do I think gold could make a comeback if people lose faith in fiat currency? Well, first of all, remarkably, gold has continued to play a role as a sort of shadowed money. In this particular chart, I plot gold prices against the real effective exchange rate of the dollar, going back to 1992. And you see that as the dollar depreciates against other currencies, people put their money into gold. So they haven't forgotten the monetary role of gold. Also, people ask these days, "Is there a bubble in the gold market? Is gold being driven up to irrational levels?" Well, look at this particular figure, which plots the real gold price going back many decades. You see that big spike in the early 1980s? At that time, in current dollars, gold was actually over $2,200 an ounce when people had really lost faith in the dollar as a store of value. So if people were to fundamentally lose faith in the U.S. dollar today, you can see that by historical standards, gold has a long way to go. So how could gold make a revival as a sort of international money? Well, we don't actually need a government run gold standard anymore. There are already private gold banks. They've been growing for some time. Their growth has roughly charted the decline of the dollar. People buy digital shares in gold. Gold is held in vaults by these banks, and you buy digital claims on them, just like when you buy a stock today you don't have a physical certificate. You have a digital representation of that stock. If we all owned digital shares in gold, and we were able to move money from our accounts between us, and we were able to walk around with smart cards carrying representations of this digital gold, we'd be able to travel around the world, and to transact with one another. Think about it. You would go into a café in Sao Paolo, and you would order your cappuccino, and you would pay with a smart card that would debit your account for some flake of gold. And since people have always had confidence in gold as a long-term store of value, there's no reason why it couldn't play that role. So where are we now in terms of my original question? Is the dollar doomed? Well, I would certainly say that the dollar has got some fundamental problems looking forward, and that those problems can't be rectified permanently. What do I mean by that? In the late 1950s, an economist named Robert Triffin posed what he said was a fundamental dilemma in the international monetary system, when a national currency operates as the international currency. It came to be known as the Triffin Dilemma. He said, if a national currency operates as the international currency, it has to supply this currency to the world by running either a large balance of payment deficits, which the United States did in the 1960s, or now when gold is no longer part of the system, the logical equivalent is large current account deficits in order to supply this money to the world. But the problem is that when we do that, people eventually lose confidence in this currency because it can be printed without limit. And that dilemma never goes away. In other words, there are better ways to deal with it. There are worse ways to deal with it. To date, we've dealt with it pretty well. And what do I mean by that? If you go back to the mid-1980s when the current account deficit in the United States was under 3%, a lot of economists were saying that the current account deficit was unsustainable. Well, recently the current account deficit hit 7%. So obviously they were wrong back then. And why were they wrong? Because people around the world grew in terms of their confidence in the dollar, and therefore demanded more and more dollars. But we may finally have reached the point where people say, "Enough. We've got enough of this stuff, and we don't trust your management of the dollar anymore." And that's a very dangerous situation to be in. At this point, I'd like to stop and I'd be very happy to take your questions. MODERATOR: All right. Thank you so much. Those are very interesting insights. So we've got some time for questions. Please speak loudly and stand up. Thank you. DR. BENN STEIL: Okay, the question was would we not see more barter even internationally in the future if people lost confidence in currencies like the dollar. In other words, they don't even need a currency. Would that be a good summary of your question? He's saying that countries are already doing this now. It's called 'triangulation.' And indeed, after the collapse of the Soviet Union, we saw that a lot of the trade within the exSoviet Union went on in terms of barter. That is, when people don't have a reliable currency to use, they do in fact turn to barter. But, of course, the advantages of having a reliable currency are utterly enormous. Barter is not a particularly efficient way to trade. It's just the best alternative if we happen to lack an international vehicle that people do have confidence in. So, I think you're right. We probably will see more barter, and there's no reason why we can't when we've got a very, very large, for example, international oil market, and institutions are taking large positions in commodities such as oil, you could see more barter. Do I think that the international economy will ultimately run on some sort of barter basis? No, I don't. I think the pressures for all of us around the world to consolidate around some currency, whether that be the dollar, the euro, gold or something else that I haven't dreamt up, are enormous because of those benefits. MODERATOR: Dr. Steil, when you go to Washington, I can't see the politicians liking this message very much, because they seem to see the Federal Reserve as a piggy bank for constituents in a sense. Do you see the possibility at any point in the near or long term where there could be a revision of the Federal Reserve's mandate back to a hard money standard? DR. BENN STEIL: Well, in fact, Congressman Ryan has proposed that we at least make the Federal Reserves mandate unitary. That is, price stability. It's quite interesting that since the euro was created in 1999, until relatively recently in 2007, the fact that the European Central Bank had a single-mandate price stability, we had a dual mandate, really looked more, shall we say, cosmetic than real. I think most of us assumed that the Federal Reserve was really pursuing price stability because they believed that in the medium to long term there was no fundamental tradeoff between price stability on the one hand, and growth and employment on the other. Now we see that that's not the case. The Fed, in fact, is operating according to a dual mandate, and is putting its emphasis on the growth and employment side, whereas the European Central Bank is keeping its emphasis on price stability. Whether they're doing a great job at it is another question, but it's clear that they're operating according to a different philosophy. I could see, if this Bernanke Fed experiment ended in disaster - in other words, if inflation really did spiral out of control - that there would be serious talk in Washington about moving to a single mandate. I would think it probably politically impossible to get to a situation where people in Washington would want some sort of asset-backed currency. That, I think for them, would be taking too much of politics out of the operation of monetary policy. AUDIENCE: Do you think these central banks, who once caused us to spiral over 1,000, would void their current agreement and start selling more just to hold the price down to avoid what the public would think of as runaway inflation? DR. BENN STEIL: I missed the beginning. AUDIENCE: Do you think central banks would start selling, and void their own agreements to limit the sales, which they have now, by selling much more of their gold in order to try to hold the price down once it starts spiralling up? DR. BENN STEIL: My view is that if you look at the central banks around the world that represent our major creditors like in Asia and the Middle East, the big concern is the following: We hold too many dollars, too many dollar-denominated assets. We'd like to redenominate them, but this is tough. If we all decide to redenominate them, say, in euros, we're going to take a big capital loss on what we currently own, and we don't want to do that. So how do central banks get out of that dilemma? My view is that they're going to begin surreptitiously to buy out hard assets. For example, there was recently, I think it was about a week or two ago, a piece I saw on CNN.com, talking about how commodity price inflation may in fact be driven by monetary policy in the United States. And one private bank economist said, "This is ridiculous because the dollar, since last September, has only gone down by 11%, but oil prices have skyrocketed far more than that. If people are selling dollars for oil, then obviously the exchange rate, vis-à-vis other currencies, doesn't go down." Central banks, I think, unlike this particular economist, understand that. So if they want to make sure that the value of their dollar-denominated assets don't go down vis-à-vis other currency-denominated assets, the easiest way for them to do that is by buying commodities like gold. AUDIENCE: They haven't done that. DR. BENN STEIL: They haven't - well, they haven't done it yet. But you understand that at some point, you reach a sort of tipping point. In other words, government officials tend to believe that the private market is full of herders, speculators who tend to move in one direction or another en masse, at any given point in time. Central bankers definitely herd in their behaviour. That's what they did in the 1990s when they all started selling gold. So it wouldn't be particularly surprising if they all started buying commodities at the same time as well. AUDIENCE: Yes, thank you. My name is (inaudible). I'm with (inaudible) here in New York. We're a (inaudible) firm. It's good to see you again, Dr. Steil. Where are we with regard now that the North American union, which apparently was signed in 2005 by President Bush - in my analysis, where there's been a reluctance on Congress' part to admit to the third part of NAFTA, which is the economic integration of the United States with Canada and Mexico. So where now with - if you could tease out (inaudible) any with free trade agreements, typically the developed economies get somewhat eviscerated. The experts who work with the academics involved in crafting NAFTA had said that right up front in one of their midterm reviews in a 1999 publication that ran. But it's certainly back. So now if there's the concern by people with some insight, the major investment banks who have their insight with regard to the political undertow, and realize that (inaudible) regarding NAFTA and this new union, I mean do we (inaudible) into political concerns about the constitution, economically, (inaudible) speaking to your point? What I'm getting at here with the dollar, with regard to - as I'm saying, we saw this happen in East and West Germany, and we've seen this happen in Europe with some of the Warsaw Pact countries coming into the EU. So are we there? DR. BENN STEIL: Well, in terms of economic integration, for better or for worse, depending on where you come down on that picture, in my view for the worse, we seem to be moving away from economic integration on several levels. If you go back to the late 1990s, again, what I would call the golden age of the fiat dollar, opinion polls in Mexico routinely showed very high percentages of the population supporting Mexico adopting the U.S. dollar as the currency. Indeed, Ecuador and El Salvador did precisely that in 2000 and 2001. It's interesting that the Mexican population was not saying, "We want to produce a new currency like an 'amero' or something like that." They were saying, "We would consider seriously the possibility of taking the U.S. dollar managed by an independent Federal Reserve as our currency." That debate has been very longstanding in Canada as well. I think it's fair to say that those ideas are now far from anybody's mind. In terms of why there are questions about economic integration, as all of you, the two candidates for the presidency from the Democratic Party are both lobbying strongly to renegotiate NAFTA. Both of them are against a free trade agreement with Colombia - so I think the political forces that were previously, certainly in the 1990s, in favour of economic integration, and indeed more monetary integration, are now in significant retreat. AUDIENCE: What are the (inaudible) commodity group an early warning sign of a run on paper currencies, versus to what extent it is simply a matter of economic fundamentals? DR. BENN STEIL: I think it's much more the first point. In other words, that people are looking for alternative stores of value, at least temporarily, while they try to figure out where the international monetary system is going. In other words, if you want to explain this terrifying apparent shortage of food that we now have in the world, I don't think you could possibly explain it based upon enormous growth in the world's appetite for food over the past three quarters. It just can't be done. No doubt the rise in energy prices is partly due to the increase in demand from countries like China, and that has fed into food prices because of, for example, the conversion of farm acreage to the production of biofuels. But you couldn't possibly explain this enormous run up in food and energy prices on the basis of economic fundamentals, as you said. I think it's very much a reflection of the fact that institutions are looking for some safe haven, while they evaluate whether dollar-denominated assets are still safe over the long term. I should emphasize that I think this is a very unfortunate thing for the global monetary system. But the Federal Reserve is going to have to reestablish its credibility very quickly in order to stop this from moving at a much greater pace. AUDIENCE: The idea of the digital gold card, as you mentioned, internationally, it seems if the world would ever get to that point, it would require really an earthquake in the financial markets to get the governments of the world to do something like that. So being that such a thing could happen maybe in the far-out future, what is your likely scenario we're going to see with the dollar in the short- and medium-term future? DR. BENN STEIL: Okay, the first thing I would emphasize is that if such a system were to emerge, it would be done over the kicking and screaming of the governments. It would certainly not be done with their cooperation. In fact, I would expect them to resist it as mightily as they could possibly do. I think what you would see at least as an intermediate stage is more money flowing into euros, which for better or for worse, is the natural alternative because of the size of the eurozone, because of the fact that euro-denominated financial markets are becoming more liquid. So I think that's the only natural alternative in the coming years. My concern, as I expressed previously, is that that would lead to a very significant further appreciation of the euro, which is likely to lead to an enormous protectionist backlash out of Europe, which I think could be deadly for the global economy. AUDIENCE: Hello, my name is Raymond (inaudible). I was wondering, with $800 trillion in derivatives that is flowing out there; how much has it weakened our federal control of the dollar at the Federal Reserve, and what has it done to our banking system? And where do we go from here with that? DR. BENN STEIL: Well, the Federal Reserve controls the shortest of short-term interest rates through the Federal Funds Rate. As the global financial markets expand, and global financial derivatives expand, the Fed controls less and less of the yield curve, as it were. They're still an incredibly important actor on the global monetary stage, but they play less and less of a role over time. And I think they have to take that more deeply into account in their thinking, in terms of understanding how the markets are going to react to what they're doing. As I emphasized before, they've been trying very hard to push interest rates down in order to stimulate consumption and borrowing. But in fact, medium- and long-term interest rates, which are the really crucial interest rates in terms of determining economic activity going forward, are actually going up. And I don't see that reflected seriously enough in the Fed's thinking. MODERATOR: All right, we have time for one more question. Very brief, please. AUDIENCE: Okay, after (inaudible) mentioned in the early 1970s to use a basket of commodities in currency. However, that's never been really accepted by the world. So what has to be done for digital gold to be stable for currency? DR. BENN STEIL: The basket idea has a lot of attractions in the abstract, because I have to emphasize gold is not, in any sense, a nirvana currency. We certainly did see periods in the 19th century, for example, where the supply of gold went way up, and therefore prices went up, and then it came down, and prices went way down. Over the longer term, it certainly led to a price stability we've not seen under fiat currency, but a basket of commodities would have all the benefits of diversification that all of us as investors like. The problem with a basket is I think it's too abstract for people to connect with as a long-term standard of value. In other words, a basket is probably going to have to be run by some sort of institution, and people will probably over time lost faith in the institution. The reason why I suggest that digital gold may have more attraction for people is because a system based on one commodity with unique monetary properties like gold does not have to be run by an institution. You can have a competitive market developing around gold as an international monetary standard. So that's the reason I think gold would probably make a better money than a commodity basket that would have to be managed by some large institution. Click here to download PowerPoint Presentation of slides. Dr. Benn Steil is a Senior Fellow and Director of International Economics at the Council on Foreign Relations in New York. He's also the Editor of International Finance and a co-founder and managing member of Efficient Frontiers, LLC, which is a market consultancy. His latest book is Financial Statecraft: The Role of Financial Markets in American Foreign Policy. It was named one of the best business books of 2006 by Library Journal. Dr. Steil gave a presentation to the Senate today, entitled "Financial Speculation in Commodity Markets: Are Institutional Investors and Hedge Funds Contributing to Food and Energy Price Inflation?" Read Full Thread Reply
Posted at 09/3/2008 09:50 by steelwatch Soaring oil price reinforces returns for rig investorsWilliam Hutchings 29 Feb 2008 The record rise in the price of oil to beyond $100 (68) a barrel last week underlined why UK hedge fund manager CQS Management launched a specialist oil rig finance fund just over a year ago. Providing debt for the construction of oil rigs, which typically cost $500m, helped CQS give investors a return of almost 12% last year on its Rig Finance fund, which it floated in 2006 on the Channel Islands Stock Exchange. These returns are just ahead of last year's hedge fund average and about five percentage points more than Lehman Brothers' Aggregate Bond index. The commissioning of new rigs, which typically take five years to complete, might come to an abrupt halt if the oil price falls below $20 a barrel. Global oil exploration companies spent two decades avoiding this expense the last time that happened, in the mid-1980s. They focused on making the most of their existing equipment to exploit waters of the Gulf of Mexico and North Sea. But oil companies expect the price to remain above $40 for at least the rest of this decade, according to Mark Conway, head of credit trading at CQS and senior portfolio manager for the CQS Rig Finance fund. A more likely risk is that something will go wrong during a rig's construction or once it has been put to work. CQS has tried to mitigate these risks by using oil industry veterans alongside its staff with financial expertise in a development that epitomizes the way hedge fund managers expand into relatively obscure areas in the search for returns. CQS, with about $10bn of assets under management, floated its rig finance fund 14 months ago to buy bonds used to finance the construction of oil rigs and other related infrastructure. The shares are traded on London's Alternative Investment Market and, following a secondary share issue, the fund has £100m (133m) of assets under management. It is the only quoted fund of its kind, and one of only a few investors in bonds issued to build oil rigs and related infrastructure. Other participants in the estimated $5bn market have included banks and general bond funds, such as those run by Pioneer Investment Management and Axa Investment Managers. The bonds' coupons are to be paid from leasing out the rigs. Contracts, agreed a year or two before construction is completed, normally last for between three and seven years. The kind of ocean rig that would be used to develop fields such as those discovered off the coast of Brazil would be hired for the equivalent of more than $600,000 a day, while maintenance costs less than $200,000 a day, meaning the rig should cover its construction costs after about three years. Rigs typically have a 20-year working life. The bonds typically account for about 70% of the finance required to construct the rigs and other equipment, with the remainder stumped up by equity providers that bear the brunt of cost overruns or income shortfalls. Conway said CQS performed due diligence to reduce the risk of investment. He said: "The construction company and yard needs to have experience of building this kind of thing, and you have to go there to meet the people. There was a situation in China in the middle of last year where inspectors found the wrong steel was being used in a rig and construction had to be stopped for a month." The fund's board of directors include chairman Michael Salter, who has worked in the offshore infrastructure sector for almost 30 years; Bruce Appelbaum, a former head of oil company Texaco's global exploration and new ventures business; and Gavin Strachan, a director of a drilling market intelligence provider with 25 years experience in the offshore infrastructure sector. Dual listing also allows some of the funds traded on Aim to be held inside your Isa. Mick Gilligan, of broker Killik & Co, notes that several Aim funds can be held in an Isa because of a Channel Islands listing, including Utilico Emerging Markets, Close AllBlue, Geiger Counter and CQS Rig Finance. Read Full Thread Reply
Posted at 18/7/2006 16:08 by energyi Jubak's Journal Oil backlash? These 5 drillers will still find profits Prices down, earnings up: time to buy Which is why the recent dip, small though it is, in the price of oil drilling and service stocks -- in sympathy with the drop in the price of oil -- is a good opportunity to buy. Earnings, which are likely to explode for the oil service and drilling companies in the third quarter, haven't peaked by any means, and the dual pressures of higher prices and noisy politicians have just pushed the peak of the revenue cycle for these companies further into the future. In my Wednesday morning appearance on CNBC's Morning Call, I recommended these three drilling and service stocks: Weatherford International (WFT, news, msgs) is making the transition from a drilling services company focused almost exclusively on North America to one with a major presence in Europe, the Middle East, and Asia thanks to its acquisition of Precision Drilling. That deal, which closed on Aug. 31, also brought Weatherford 48 land rigs: 33 in the Middle East, 10 in Mexico and 5 in Venezuela. Revenue from these rigs should double by this time in 2006 as utilization and day rates rise. But the advantages of the deal don't end there: Precision had developed new directional drilling technology that promised to give the company a foothold in markets now dominated by the big three service companies of Schlumberger (SLB, news, msgs), Halliburton (HAL, news, msgs), and Baker Hughes (BHI, news, msgs). That technology should gradually enable Weatherford to expand into new markets. The stock now trades at 23.9 times projected 2005 earnings per share and at 17.6 times projected 2006 earnings. Our StockScouter rates the shares an 8 out of a possible 10. Dril-Quip (DRQ, news, msgs) gets its biggest surge in revenue relatively late in the oil drilling cycle, which makes this a good time for this stock. As drillers and service companies work through inventory and see their order books fill up, they place more orders for Dril-Quip products such as specialty casing connectors, mud line suspension systems and sub sea wellhead connectors, where Dril-Quip owns about 30% of the market. The company has doubled its manufacturing capacity since 1998, the last peak in the oil drilling cycle, and now has the capacity to deliver about three times as much revenue as it did that year. Dril-Quip has just sold its first integrated undersea system, breaking into a $1.2 billion market that further increases the company's revenue opportunities over the new two to three years. The stock now trades at 32.3 times projected 2005 earnings per share and 21.9 times projected 2006 earnings. Our StockScouter rates these shares a 7 out of a possible 10.Jim Jubak's newsletter Ensco International (ESV, news, msgs) is a buy on the timing of the contracts for its fleet of 43 jack-up rigs. Only 39% of its fleet is under contract through 2006. In times of weak demand, that would be a problem because investors would be rightly worried about how many of those new rigs would wind up hired and at what rates. But with ocean drilling rigs in very short supply, the lack of contracts becomes a plus because it will allow Ensco International to sign 61% of its rigs to contracts at higher day rates. For example, the company recently signed a new contract with Saudi Arabia's Aramco at a day rate of $81,000, up from the mid-$50,000 range for the old contract. The shares now trade at 23 times estimated 2005 earnings per share but at just 12.6 times estimated 2006 earnings. And there's a good chance, in my opinion, that the Wall Street consensus on 2006 earnings is low. (My own estimate is 25 cents a share higher than the current consensus, for a 2006 forward PE of 11.6). Our Stock Scouter rates these shares a 9 out of a possible 10. And, as always, I have two more exclusive picks for readers of CNBC.com on MSN Money. Transocean (RIG, news, msgs), as a deep-sea drilling specialist, should reap the benefits as the oil industry goes ever deeper in its search for new oil. For example, in a recent sale of Gulf of Mexico leases, rights to the deepwater blocks sold for a record of $202 million, with the ultra-deep block accounting for 48% of total deepwater bids. The backlog for deepwater rigs has continued to climb, rising to 6,134 rig months on Sept. 9, according to Friedman Billings Ramsey, up 10% from the Aug. 5 level. Right now, 2006 is sold out. The Wall Street consensus projects earnings growth at Transocean at 438% in 2005 and at 143% in 2006. I think the 2006 projection, especially, is probably low. The P/E of 34.8 on projected 2005 earnings drops to 13.8 on projected 2006 earnings per share. Our Stock Scouter rates the shares a 7 out of a possible 10. (Transocean is a current member of my Jubak's Picks portfolio.) Cooper Cameron (CAM, news, msgs) acquired Dresser's valve business for just $224 million (or about 0.5 times projected 2005 sales) at the beginning of September. That deal will just about double the size of Cooper Cameron's value business, just in time for orders for post-Katrina rebuilding and to catch the same late-cycle wave as Dril-Quip. The stock now trades at 24.8 times projected 2005 earnings per share of $2.89 and 19.2 times projected 2006 earnings of $3.68. Our StockScouter rates these shares an 8 out of a possible 10. @: Read Full Thread Reply

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