PGM Capital – Blog
25Dec/150

Happy Holidays Wishes from The PGM Group

By Eric Panneflek

  

During the holiday season more than ever, our thoughts turn gratefully to
those who have made our progress possible
.

It is in this spirit we say, simply but sincerely...

 

We are looking forward serving you in 2016 and beyond, to the best of our abilities.

We herewith wish you and your family happy holiday season,
and a new year of health, happiness and prosperity.

 The PGM Group Team.

29Nov/150

Chinese Yuan moving closer to Joining the IMF SDR

By Eric Panneflek

Dear PGM Capital Blog readers,

In this weekend blog article, we want to elaborate on the fact that the Chinese Yuan, has moved closer in joining the prestigious IMF Special Drawing Rights currency basket.

On Saturday November 14, the IMF staff and chief Christine Lagarde, officially green lighted the acceptance of China's currency - the Renminbi or Yuan - into the IMF's foreign exchange basket, also known as the Special Drawing Rights.

The recommendation paves the way for the IMF executive board, which has the final say, to place the yuan on a par with the U.S. dollar Japanese yen, British pound and Euro at a meeting scheduled for coming Monday, November 30.

Joining the Special Drawing Rights (SDR) basket would be a victory for Beijing, which has campaigned hard for the move, and could increase demand for the yuan among reserve managers as well as marking a symbolic coming of age for the world's second-largest economy.

IMF chief Christine Lagarde said in a statement that the staff experts, in their report to the IMF board, ruled the yuan or renminbi (RMB)

"meets the requirements to be a 'freely usable' currency."

That was a key hurdle to the yuan joining the yen, dollar, pound and euro in the Fund's "special drawing rights" currency basket, seen as the leading currencies of international commerce.

The executive board, which represents the IMF's 188 members, is seen as unlikely to go against a staff recommendation and countries including France and Britain have already pledged their support for the change.

This would take effect in October 2016, during China's leadership of the Group of 20 bloc of advanced and emerging economies.

At this point only an explicit veto by US political interests deep behind the stage can derail the CNY's ascension into the SDR. The United States, the IMF's biggest shareholder, has said it would back the yuan's inclusion if it met the IMF's criteria.

PGM CAPITAL COMMENTS:
The IMF SDR - a virtual currency whose value is currently based on the yen, euro, pound and dollar - is an international reserve asset that the IMF uses for emergency lending to its members.

While SDR is not a freely traded currency, it serves as an international reserve asset. The IMF issues its crisis loans valued in SDRs, which came in handy during the financial crisis when it helped bolster member nations’ official reserves.

China, now the world's second-largest economy, asked last year for the yuan to be added to the grouping.

But until recently the yuan's exchangeability on international markets has been too tightly controlled by Beijing for it to fully qualify.

This year, China has rolled out a flurry of reforms recently to liberalize its markets and also help the yuan meet the IMF's checklist, including scrapping a ceiling on deposit rates, issuing three-month Treasury bills weekly and improving the transparency of Chinese data.

The United States, the Fund's biggest shareholder, has said it would back the yuan's inclusion if it met the IMF's criteria, a U.S. Treasury spokesperson said, adding:

"We will review the IMF’s paper in that light."

If a decision to include the yuan is made on coming Monday, November 30, the actual inclusion could take place as late as September 30, 2016, giving Beijing more time to prepare.

Some currency analysts say making the yuan the fifth currency in the basket could eventually lead to global demand for the currency worth more than US$500 billion.

While the inclusion of the yuan would be a public acknowledgement of China’s clout in the global economy, it would also put further pressure on the government to take steps toward creating a more open, market-oriented economy.

In a statement the PBOC said:

"The inclusion of the RMB in the SDR basket would increase the representativeness and attractiveness of the SDR, and help improve the current international monetary system, which would benefit both China and the rest of the world"

Until next week.

Yours sincerely,

Suriname Times foto

Eric Panneflek

25Oct/150

Why Investing in Phosphor can be Lucrative

By Eric Panneflek

phos-set

Dear PGM Capital, Blog readers,
In this weekend blog article we want to discuss with you why investing in phosphorus which plays a key role in most life processes, va

Phosphorus is a nonmetallic chemical element with symbol P and atomic number 15. There are several forms of phosphorous, called white, red and black phosphorus, although their colours are more likely to be slightly different.

  • White phosphorus is the one manufactured industrial; it glows in the dark, is spontaneously flammable when exposed to air and is deadly poison.
  • Red phosphorus can vary in colour from orange to purple, due to slight variations in its chemical structure.
  • Black phosphorous, is made under high pressure, looks like graphite and, like graphite, has the ability to conduct electricity.

Phosphorus is essential for plant growth. It stimulates growth of young plants, giving them a good and vigorous start. Phosphorus management and nutrition has both economic and environmental implications, it is a required element for all things that live, have lived or will live. Without Phosphorus plants will not grow, animals, including humans, can not survive, and the world as we know it will cease to exist. As a mineral, phosphorus is what living organisms use to convert food into energy. In humans and other animals, phosphorus is literally what holds our DNA together. In plants, Phosphorus is what allows plants to make cell walls, and to reproduce.

PHOSPHORUS CHEMISTRY IN SOILS:
Phosphorus exists in soils in organic and inorganic forms. Organic forms of P are found in humus and other organic material. Phosphorus in organic materials is released by a mineralization process involving soil organisms. The activity of these microbes is highly influenced by soil moisture and temperature. The process is most rapid in warm, well-drained soils.

The dominant application of phosphorus is in fertilisers, which provide phosphate as required for all life and is often a limiting nutrient for crops. Phosphorus, being an essential plant nutrient, finds its major use as a constituent of fertilizers for agriculture and farm production in the form of concentrated phosphoric acids, which can consist of 70% to 75% P2O5. Global demand for fertilisers led to large increase in phosphate (PO43–) production in the second half of the 20th century. Due to the essential nature of phosphorus to living organisms, the low solubility of natural phosphorus-containing compounds, and the slow natural cycle of phosphorus, the agricultural industry relies on fertilisers that contain phosphate. A major form of these fertilisers is superphosphate of lime, a mixture of two salts, calcium dihydrogen phosphate Ca(H2PO4)2 and calcium sulfate dihydrate CaSO4·2H2O, produced by the reaction of sulfuric acid and water with calcium phosphate.

Below image shows the Phosphorus Cycle from Soil to Crop and visa versa.

The Phosphorus cycle

Phosphorus movement of agricultural land to surface waters can accelerate eutrophication. This is the process in bodies of water of stimulating algal growth which ultimately die and decay in the water, and deplete available oxygen. The reduced oxygen levels ultimately result in reduced higher-order aquatic plant and animal populations. Animal manures and bedding materials contain significant amounts of phosphorus in organic forms.

PHOSPHORUS ESSENTIAL TO BONE HEALTH:
Calcium and Phosphorus are essential to human life. In vivo, the ionic forms of calcium and phosphorus combine to form calcium phosphate.

There are several stages of human life when the calcium and phosphorus requirements are most critical. First, in utero, followed by childhood anabolism, and later during puberty when there is a strong requirement for growth hormone. Bone mineralization
only slows after the epiphyseal plate has closed.

Below Image shows the cycle of Phosphorus in the human body

Phosphorus in Human body

PGM CAPITAL COMMENTS:

Phosphorus is a limited natural resource that is non-renewable. Phosphorus, unlike nitrogen and carbon, does not have an atmospheric source. It does not rain to earth in precipitation. It is a land based element that is found when mountains have been uplifted and then are eroded. The phosphorus cycle is from the land to living organisms and back to the land. The thing to remember is that there is only a finite amount of phosphorus. As the human population expands, there is less phosphorus available for things like crops. Like Oil, Phosphorus is reported to have peaked in 1988, according to an article posted by Professor Chris Rhodes called “Peak Minerals.” On the other hand data from the Global Phosphorus Research Initiative (GPRI) indicates peak production of Phosphorus to happen in 2033 as can be seen from below chart.

Peak Phosphorus

According to Petter Jensen, professor at the University of Biotechnology and Environment in Oslo, phosphorus will soon be a rare and valuable resource.

Based on the above mentioned information, we expect that the price of phosphorus should increase dramatically because of current usage and economic practices that are tied directly to other natural resource peak events. Peak oil, peak coal, and even peak water are all putting pressure on alternative energy sources such as bio-fuels. That is the link to phosphorus. Phosphorus is needed to grow plants, to make fertilizers, and increase crop productions.

Bio-fuels expand to include not only grains, but also corn stalks, wheat chaff, and other items, which means that all of the phosphorous that was recycled in plant waste is now consumed in the bio-fuel process and lost to the system. This also means that peak phosphorus is going to reach a critical limit faster. That means that natural resources needed to grow food are going to become exhausted more quickly.

Due to the above, it does not matter if Phosphorus peaked in 1988 or if it will peak in 2033. The fact remains that as one of the critical natural resources supply is not going to live up to demand. Therein lies the opportunity not only for peak phosphorus, but also in all of the factors that lead up to it. Knowing where to invest as times change is a critical component for controlling income in the future.

Below chart shows the correlation between the global population and phosphate production.

World populaion vs phosphorus productionThe above means that food, will become very expensive in the future, which might lead to wars and social unrest.

Our research team has discovered several ETFs that invest in fertizers, Phosphorus producing companies and companies in the food value chain.

Before following any investment advice, please consider your investment horizon, financial position and risk tolerances and keep in mind that commodity prices as well as stocks of their miners may be very volatile and that sharp corrections may happen in the short term.

Until next week.

Yours sincerely,

Suriname Times foto
Eric Panneflek