Germany’s missing gold, ServiceMaster and Michaels IPO

Germany’s missing gold, ServiceMaster [SERV] and Michaels [MIK] IPO

Gold bullion bars. (Via Wikipedia)
Gold bullion bars. (Via Wikipedia)

WASHINGTON, June 24, 2014 — One of the major problems in so-called Western democracies is the complicated machinery of duplicity that ruling oligarchs employ to keep the rigged monetary roulette wheels spinning. John Q. Public barely understands how he’s being played, and the Maven is often lost in the funhouse himself.

Take Germany and the small matter of just where its gold reserves are hiding. Many moons ago, the bulk of Germany’s gold reserves were parked, allegedly, in the Manhattan vaults of the U.S. Federal Reserve. Recently, however, the German government, apparently nervous about the existence of that gold, has been moving to repatriate much of it back to their own vaults. But by and large, that hasn’t been happening.

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The reason why? That “safe” German bullion may no longer physically exist. We’ll rely on an extended quote from ZeroHedge to explain the current mess as clearly as possible:

More than 18 months ago, on January 16, 2013 Germany’s central bank, the Bundesbank, announced that it will repatriate to Germany all 374 tonnes it had stored with the Banque de France in Paris, as well as 300 tonnes held in Manhattan by the New York Federal Reserve, by 2020.

Despite a lag of 18 months, the Bundesbank, as the Federal Bank of Germany is often called, has only managed to bring home a tiny 37 tonnes of gold.

A paltry 5 tonnes of that came from the U.S., the rest from Paris. The US Fed holds 45% or roughly $635 billion of the total 3,396 tonnes of gold Germany have in reserve, the world’s second largest gold reserves.

This has prompted, not surprisingly, renewed questions whether Germany’s gold still exists in those Manhattan vaults or if it has been melted down, leased or even sold.

With doubts about the whereabouts of Germany’s gold still prevalent, it appears that either Chancellor Angela Merkel’s ruling coalition or the ECB, has decided to attempt to put the matter to rest.

Bloomberg reported yesterday that the German campaign to repatriate German gold from the U.S. has ended. The Bloomberg story was headlined ‘German Gold Stays in New York in Rebuff to Euro Doubters’ and the first sentence was ‘Germany has decided its gold is safe in American hands.’

However, the leader of the German gold repatriation movement, “Repatriate our Gold,” Peter Boehringer immediately refuted the Bloomberg article.

Germany’s official position at the moment appears to be to downplay this uncomfortable situation while still looking to get its gold back in Germany under its own government’s lock and key.

The greater question — too complicated to get into here — involves increasingly clear evidence that, via paper contracts and ETFs, the international banking system is lending and re-lending physical gold reserves to keep gold’s price under $1300 per ounce as regularly as possible.

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The reason, perhaps, is to disguise the fact that most Western nations, including the U.S., are attempting to inflate their currencies while concealing these efforts from average taxpayers. You know, those hapless bagholders like you and the Maven who continue to suffer from subpar wages and high food costs and fuel inflation on the retail level.

ZeroHedge, of course, for all its counter-trend usefulness, is a gold-bug site at its core. However, the site, as well as related sites, for all their gold partisanship, continue to offer compelling evidence that monetary systems are being massively manipulated to insulate government, oligarchs, and plain old fat cats from the kind of misery index that average Western rubes bagholders taxpayers have been suffering from for, oh, the last six or seven years or so.

All this, in turn, leads us to question the continuing, persistent, but light-volume rally still underway on Wall Street after the massive fail of both the Street’s and the Maven’s fear of a generally predictable “sell in May” stock market swoon in 2014. A correction that, thus far, has not happened.

As a result, even amidst the instability and unanswered existential questions of our era, the Maven and others have been tip-toeing back into the market, still holding large cash reserves and feeling at least slightly foolish in retrospect.

But with the Iraq mess — persistently mishandled by our lawless Administration — the Ukraine mess, and the never-ending Federal suits against the nation’s banks (and stockholders and savers) for actions the government essentially forced them to take, our system, our markets, our investors, and our citizens remain more vulnerable than we can remember in our lifetimes to even the most predictable of market shocks.

So we tend to remain monetarily conservative in our investment choices, setting things up so we can exit at any time with either profits or minimal losses.

We continue to allow our shorter term bond positions to expire as they are called or mature and we are not establishing new ones. We continue to opportunistically pick up new preferred stocks at a discount when we can. We continue to invest minimally in REITs, MLPs, and related ETFs on a case-by-case basis. And we slip into and out of IPOs hoping to reap some quick short-term gain even with our broker’s restrictions on flipping.

Above all, with the quarter ending, with short squeezes and (illegal but permitted) window-dressing underway, and with pre-July 4 holiday trading levels already uncommonly light (favoring hit-and-run HFTs), we remain on the outlook for treachery even as we sneak in the occasional buy so we don’t completely miss this very weird and unexpected bull run.

Today’s trading tips:

See above for the general scenario. We ourselves were out of town for a week up in scenic Portland, Maine and environs with limited connectivity, so we put in stops on various stocks to protect ourselves while we were gone. In addition, we’ll be gone again late this week up in beautiful downtown Cleveland, so we’ll do the same. And columns here will be light.

But in the meantime, the IPO market is heating up again and we’re looking at two familiar names in particular: ServiceMaster (proposed symbol: SERV), and Michaels (proposed symbol: MIK). The former is the ubiquitous mold and home disaster cleanup company that also peddles homeowner warranties and owns and operates the Terminex pest control service. The latter, as most home hobbyists and crafts fans already know, is the equally ubiquitous nationwide chain of big-box craft centers.

Both companies were taken private several years ago, pre-Great Recession, by the usual vulture capitalist suspects. And they’re now being trotted out again so we can buy the shares ourselves at likely inflated prices, rewarding the vultures with our own hard-earned dollars — paid to them as special dividends after the offer — for the privilege.

That said, some of these companies are still so profitable in their niches that they often make money for new shareholders anyway. For that reason, we’re investigating both for possible purchase when they go public later this week. SERV will price, at least as of now, tomorrow evening after the close (June 25), while MIK will price the evening of June 26 (Thursday) to begin trading Friday morning.

We’ll try to give you an update on these, likely close to the pricing. Our research sources these days seem to hold off on their final recommendations on IPOs, often late into the evening they’re supposed to be priced, making it tough for us to relay the info to you and tough for the Maven to make a final decision.

One more IPO is available to us this week. (Not all IPOs are available at all brokerages.) That’s NextEra Energy Partners (proposed symbol NEP), a spin off of Florida-based utility NextEra Energy (NEE, the former Florida Power and Light). This appears to be an MLP that should offer a decent dividend.

But offers like these, while fairly decent in the long run, tend to drop below the offer on the IPO. So, while we’ve put in for shares of NEP, along with SERV and MIK, we’re not sure whether we’ll actually go through with purchasing shares when the pricing is announced. Ditto the other two for that matter.

Our tendency right now is to buy shares in SERV and MIK while skipping NEP for now. But as those last minute reports come in, we could change our minds.

As far as your own portfolios are concerned, only take a look at these or any other IPOs if you can afford to take a risk, as near-term volatility can be high — and scary. And be sure you read the offering prospectus, if not on paper then online. Look carefully at how IPO funds will be used and make sure you’re comfortable with that — particularly in the case of SERV and MIK, which are emerging from a leveraged buyout (LBO) situation.

Make sure there are at least even odds that you, yourself, might make some money on these. Rest assured that the vulture capitalists already have.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17