Roger Biduk

By Robert Morley

What do China, India, Brazil, Russia, France and Germany have in common? These countries most often can’t agree on anything. But they are united in one strange—and ominous—way. They blame the United States for wrecking the global economy. And they think the dollar is the wrecking ball.

One rock-solid, foundational belief underpins almost all economic theory in America: faith in the dollar’s unassailable status as the world’s reserve currency. Foreigners hold so many dollars that they can’t afford to stop buying them, the theory goes. Therefore the dollar’s status as the world’s reserve currency is sound. But the dollar is now coming under a concentrated attack. Are American economists about to get schooled?

Angela Merkel summed up the dollar-skeptic viewpoint last year. “Excessively cheap money in the U.S. was a driver of today’s crisis,” she told the German parliament. And America’s solution—even more cheap money—was just setting the world up for another crisis, she said. It was just a matter of time.

Roger Biduk

The irony is that America is completely blind to the catastrophe heading its way. As the economic crisis unfolded at the end of last year, investors made a mad rush out of global stock markets and into other assets. The biggest beneficiary of the panic was the one market large enough and liquid enough to handle the trillions of dollars being moved: the U.S. dollar market. This caused the dollar to surge in value.

America grossly misdiagnosed the demand for dollars as a vote of confidence in the U.S. economic system. In fact, it was primarily a case of investors looking for a place they could quickly and easily get their money in—and out.

Now that the initial panic has subsided, the dollar’s international purchasing power has resumed its former downward trajectory. Since the post-crisis high in March, the dollar has fallen by a portfolio-shredding 10 percent.

America’s foreign creditors are again questioning the wisdom of holding so many U.S. dollars. And they’re looking for a way out.

Roger Biduk

“Leaders from Brazil, Russia, India and China are demanding a greater stake in the management of the global economy and challenging the dollar as the primary denomination for world reserves,” reported Bloomberg about the recent G-8 summit.

But is dumping the dollar just wishful thinking on the part of these nations? Or is there some tangible alternative? Well, how about this: Some think they’ve already minted a dollar-killer.

Russia’s president is pushing to remove the dollar and reinstate some version of a gold standard. Dmitry Medvedev unveiled a newly minted gold bullion coin that he said was a true “symbol of unity,” and “our desire to solve such issues.” It was a test sample of a new supranational currency referred to as the United Future World Currency. Samples were issued to each of the world leaders attending the G-8 summit.

“We are discussing the creation or, to be more correct, the appearance of new reserve currencies,” said Medvedev.

“Debate” about Bretton Woods is flowery code for an attack on the dollar.What is even more surprising is that the dollar assaults have come not only from perennial U.S. antagonists but also from its more democratic allies. At the G-8 summit, French President Nicolas Sarkozy called for a complete revamp of the global currency system, saying that the dollar’s supremacy is outdated. “[W]e’ve still got the Bretton Woods system of 1945,” Sarkozy stated on July 9. “Frankly, 60 years afterwards, we’ve got to ask: Shouldn’t a politically multipolar world correspond to an economically multi-currency world?”

Roger Biduk

Bretton Woods was the historic conference that laid the foundation for a postwar global economy centered on the dollar. “Even if it’s a difficult topic,” Sarkozy said, “There has to be a debate.” “Debate” about Bretton Woods is flowery code for an attack on the dollar.

India too seems to be moving into the anti-dollar camp. Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, is urging the government to diversify its foreign-exchange reserves and hold fewer dollars. India holds over $250 billion worth.

Such a decision could break the U.S. dollar bond market.But the next blow to the dollar may come as a complete surprise to Washington policymakers. Since World War ii, Japan has been a stalwart dollar supporter and a close collaborator with Federal Reserve monetary policy. That may be about to end. For only the second time in 54 years, the opposition in Japan is close to taking over the government. Japan’s economy, like those of the rest of the world, is in severe contraction, and disgruntled voters are upsetting the balance of power and pushing for radical reforms.

Back in May, Masaharu Nakagawa, the chief finance spokesman for the opposition, told the bbc that he was worried about the future value of the dollar. He said that if his party were elected in the upcoming national elections, Japan would refuse to purchase any more U.S. treasuries unless they were denominated in Japanese yen instead of dollars.

Roger Biduk

Such a decision could break the U.S. dollar bond market.

Japan is America’s second-most important creditor nation—lending the U.S. billions of dollars each year. If Japan won’t lend unless America pays it back in yen, then China and other major lenders may quickly follow suit. This would eliminate America’s ability to use inflation to cheat on its debt payments. America’s debt burden would soar, interest rates would jump, and national default—Argentina-style—could be staring America in the face within months instead of years.

“America is making a terrible mistake which will result in the greatest fall in all of mankind’s history!” Tim Thompson wrote for the Trumpet in 2000. “As soon as America is no longer a safe place for foreign money, that money will be gone. And once the foreign money is gone, it will leave us with a mountain of debt that we cannot repay.”

What Japan is proposing could be the first steps of a great exodus from the U.S. bond market and consequently the end of the dollar as the world’s reserve currency.

America’s leaders seem blind to the looming dollar revolt. Global economies are in crisis. Unemployment rolls are soaring. People want answers and solutions. The jobless will demand action, and culpable politicians will look for scapegoats and distractions. The first step, blaming the U.S. and its currency for the global recession, has already begun.

A new global currency—and leveraging it to knock the U.S. down—will be the solution.

The highly trained economic theorists who keep telling us that foreigners can’t afford to stop supporting the U.S. are about to get reeducated at Reality U.

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Roger Biduk;

These are not recommendations to buy/sell/hold but some stocks that were movers during the week

Gold Star Resources (GSC) shares jumped 10% to 16 cents on Monday after the micro cap resource company reported the signing of a letter of intent with Bengal Bight Ghana Limited to acquire a 100% interest in the hydrocarbon rights of Bengal's Tiampoum Mining Concession in southeastern Cote d'Ivoire, near the border with Ghana.

Kangaroo Media (KTV) added 13% at 4.5 cents as the manufacturer of hand-held wireless audiovisual multi-functional entertainment systems and the PGA TOUR announced the signing of a four-year agreement to provide golf spectators attending select TOUR events with a personalized multimedia experience service. Using the Kangaroo TV hand-held device, spectators at featured PGA TOUR events will be able to access an array of real-time video, audio, comprehensive tournament and player data, as well as course layouts.

Roger Biduk;

Reece Energy Exploration (RXR) shares climbed 25% to $1.16 on Tuesday after the oil and gas producer/explorer announced it has entered into an arrangement agreement whereby Penn West Energy Trust (TSX: T.PWT.UN) will acquire all of the outstanding shares of Reece. Each Reece share will be exchanged for 0.125 of a Penn West trust unit. Including the assumption of Reece's debt, the total acquisition cost is expected to be about $92.2 million. Based on the volume weighted average trading prices of Penn West's units and Reece's shares during the 20 trading days ending on March 9, the exchange ratio equates to a price of $1.39 a Reece share.

MedMira (TSX: V.MIR)shot up 18% to 6.5 cents as the developer and marketer of rapid diagnostic technology and solutions said it is has established a private label partnership with Vitest AG, which plans to market and sell the MedMira rapid HIV tests in Africa under the Vitest brand.

Roger Biduk;

Khan Resources (TSX: T.KRI) surge 26% to 39 cents on Wednesday after the micro cap explorer announced the results of its Definitive Feasibility Study (DFS) for its Dornod Uranium Project in Mongolia. The study assumes a long-term uranium price of US$65 per lb U3O8, and a through-put of 3,500 tonnes per day over a 15 year mine life, which will generate an average annual production rate of 3.0 million lbs U3O8, at a cost of US$23.22 per lb U3O8 or US$58.26 per tonne of ore. The initial capital cost of the project is projected to be approximately US$333 million. The above parameters yield a project internal rate of return ("IRR") after tax of 29.1% and a net present value (NPV) at a 10% discount rate of US$276 million. The after tax NPV at 10% using a uranium price of US$70 per lb U3O8 is US$339 million and the IRR after tax increases to 32.5%.

Sirit Inc. (TSX: T.SI) powered 23% higher to eight cents as the provider of radio frequency identification technology reported fourth-quarter revenue that rose to $6.3 million from $5.4 million. Net income for the quarter was $2.1 million. Excluding the future income tax adjustment, the net loss for the quarter is $1.0 million comparable to the $0.8 million loss in the last quarter of 2007.

Silver Wheaton Corp. (TSX: T.SLW) announced on Thursday that it entered into an agreement to acquire Silverstone Resources Corp. (TSX: V. SST) in a transaction worth $190 million. Silver Wheaton is set to acquire all of the outstanding common shares of Silverstone, exchanging 0.185 common shares of Silver Wheaton for each common share of Silverstone. The transaction values Silverstone at $1.47 per common share. Shares of Silverstone Resources jumped 16% to $1.45.

Chariot Resources (TSX: T.CHD) was up 20.8% to 14.5 cents following news that its board of directors has adopted a shareholder rights plan. Chariot notes that the Plan has been adopted to prevent any “creeping take-over” of the company and preserve its ability to obtain the best value for all shareholders in connection with any change of control transaction. Chariot says it is not currently aware of any specific or pending take-over bid.

Roger Biduk;

Golconda Resources (TSX: V.GA) surged 66% to 15 centson Friday after the company announced that it has made application to the British Columbia Ministry of Energy, Mines and Petroleum Resources for a work permit to proceed with a trenching program relating to its Mitchell Creek placer property in northern British Columbia. Golconda says it plans to conduct its exploration program on the 1,375 hectare Mitchell Creek property with the goal of advancing the project to production. The property is held by Golconda under option.

Kinbauri Gold Corp. (TSX: V.KNB) announced that it has filed a revised preliminary economic assessment or scoping study for its El Valle/Carles project in Spain. The company notes that under the base case scenario, the results reveal a pre-tax NPV (10% discount rate) of CAD $146M and an Internal Rate of Return ('IRR') of 44%. Using current metal prices and exchange rates, the project now has a pre-tax NPV (10% discount rate) of CAD $232M and an IRR of 59%. Total mineral resources for the project were estimated as of March 12 to be Measured: 2.36Mt at 3.6g Au/t and 0.85% Cu, Indicated: 4.00Mt at 5.4g Au/t and 0.80% Cu and Inferred: 7.26Mt at 5.4g Au/t and 0.45% Cu. Shares of Kinbauri gained 11%, to 44.5 cents.

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Roger Biduk writes:

This is from the Stockhouse Canadian Small and Micro Cap Report for Jan. 15.

A coal play heated up on upwardly revised projections Thursday, while a defence contract boosted a tiny tech stock.

Hillsborough Resources (HLB) shares climbed 16% to 21.5 cents on Thursday after the small coal miner said it has budgeted to produce 520,000 tonnes of Quinsam products during calendar year 2009, all of which has been contracted. Its upwardly revised projections for 2009 call for an average blended sales price of CDN$125/tonne, which includes 300,000 tonnes into the international market at US$137/tonne with an assumed average exchange rate of CDN to U.S. of $0.838.  

Roger Biduk; As well, shares of Seprotech Systems (SET) shot up 20% to six cents as the manufacturer of water and wastewater treatment systems reported that the Canadian Department of National Defence (DND) has selected Seprotech to support two classes of water purification systems with Repair and Overhaul Services, Engineering support and Field Service support. The standing offer is for an initial two-year period estimated at $2.5 million with an option to extend for an additional three, one-year periods. The estimated total value of the five-year standing offer is $6 million.

Weststar Resources (WER) shares powered 15% higher to 15.5 cents after the micro cap explorer said it has signed a letter of intent with Derex Drilling Services, to begin a first phase drill program on its Tobin Lake Coal prospect in Saskatchewan.

Wi-LAN Inc. (WIN)meanwhile, announced that Samsung Electronics has signed a license agreement related to certain patents of Wi-LAN in the area of wireless technology. The multi-year agreement covers all wireless products sold by Samsung. Wi-LAN stock popped 8% to $1.69.

Roger Biduk; Shares of Arianne Resources (DAR) jumped 13% to 4.5 cents after the junior explorer reported drilling results from the Pau Zone, one of the three mineralized zones of its Lac a Paul phosphorous-titanium property in Quebec, which included an average grade of 10.32% P2O5 (phosphorus pentoxide) on the entire length of the hole, or 141 metres.

And, Dia Bras Exploration (DIB) Thursday announced its intention to complete a private placement for maximum proceeds of $1.7 million through the issuance of 28,333,333 units at a price of six cents per unit. The net proceeds will be used to initiate the engineering study for the construction of an on-site mill at its Bolivar copper-zinc mine and for general corporate and working capital purposes. Its shares surged 25% to 7.5 cents.

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