There is a hideous hissing noise escaping from the world economy, the piercing sound of deflating ambitions. Any hopes that, in this crisis, we would find an opportunity to redesign our system of capitalism and finance are all but forlorn. Any prospect that the leading nations would overhaul either the banking system or the wider framework that ties our economies together, and so prevent another crisis, has pretty much disappeared.
We know this because, this weekend, finance ministers from the G20 will meet in London (ahead of a heads-of-state summit in Pittsburgh), shake hands and breathe a collective sigh of relief that the worst of the crisis is over. The world has been informed that their main order of business will be to find some way of restrainin
Trace Mayer writes some good stuff, but his recent Massive Institutional Gold Market Change article hypes an midly interesting strategic development in the gold market. There are two statements he makes which are not correct.
“gold demand that was previously satisfied with physical bullion through forward contracts between private parties can now be satisfied with unallocated gold accounts”
This is the key on which the whole article hangs. The problem is that a significant majority, if not all, of institutional forwards are already settled via unallocated. Accordingly, this move by CME is not “a massive change” in the ma
Gold madness is under way, and no one — as far as we can tell — has a good explanation as to why.
Here are some observations and views we’ve come across:
MF Global noted a potential knock-on effect from the soon-to-be closed DB double long crude oil fund, as money is reinvested into gold.
MF Global, however, also said the best explanation they had heard was of possible buying by a central bank.
We noted, gold lease rates (LIBOR-GOFO) are still negative. On September 2 the lease rate came in at -0.03419 and on September 3 it came in at -0.04116.
Dennis Gartman of the Gartman Letter — who is not a goldbug — last week alerted readers to some important technical resistance factors in euro-and sterling-denominated gold.
In the lead up to the Crash of '87, the Hong Kong stock market was booming along with every other stock market. This was an opportunity not lost on to the local controlling Chinese families in Hong Kong, who dived not only headlong into the stock market but also into a futures contract listed over the Hang Seng index by a fledgling Hong Kong Futures Exchange. So insatiable was the Chinese appetite for these new-fangled index investments that demand pushed the futures into a steep premium over the level of the underlying physical index.
An opportunity was thus presented to experienced, foreign, derivatives trading investment banks. By shorting the futures contract (which requires no borrowing) and buying a replicating basket of Hang Seng 225 stocks on the stock exchange, f
Several reports are coming out of China that there is pressure on state-controlled organisations - notably the country's main sovereign wealth fund, China Investment Corporation (CIC) to rapidly build investment in non-Chinese enterprises. While the CIC itself, with apparent access to some $300 billion in funds - and the possibility of more from the government - may be concentrating on hedge funds and other investment entities, there is another sector for Chinese state-owned companies looking at major investment in commodities. Indeed with the funds available as China seems to be dumping its US dollars in favour of more concrete assets, virtually no minerals sector is safe from Chinese participation.
China's key stock index recovered its poise on Tuesday, rising nearly 0.5 percent after diving 6.7 percent the day amid liquidity concerns and worries that lending growth may slow in the country. In August alone, the Shanghai Composite lost nearly 22 percent, snapping a seven-month winning streak.
If those stock gyrations are hard to stomach, there are other investment options to help ride out the wild swings in China, according to Martin Hennecke, associate director at Tyche.
What about you? Sold your gold lately? Sold your gold due to an inevitable correction coming due? Sold your gold because of a tremendous short position build up with the bullion banks? Sold your gold because the bullion banks are so smart and always right? Sold your gold because of an imminent deflationary collapse which would bring down gold prices to absurd lows of $300 or less?Well, the list of bearish arguments goes on and on but the reality is that nothing fundamentally has ever changed. In other words, those very same fundamentals which took gold up from $250 in 2001 to almost $1000 today are still in place.
The failure of some of the nation's largest banks in 2008, including Washington Mutual, Wachovia and IndyMac, and scores of smaller banks this year came at a price. The Federal Deposit Insurance Corporation's fund that insures the country's deposits now stands at $10.4 billion, down from $45.2 billion the prior year.
Jim Bianco, president of Bianco Research in Chicago doesn't believe depositors need worry, because the government has the power of the printing press to make good on FDIC insurance. But he is troubled. "As a taxpayer you should be concerned because this could be another potential drag and possibly a significant drag on the U.S. Treasury and bloat the already record federal deficit," he says, echoing a Wall Street Journal editorial on Tuesday, suggesting th
Gold prices typically rise in September, an analysis of the historical record shows, as the start of holiday seasons in the world's biggest gold-consuming countries tends to drive up demand.
Gold made gains for the past 16 out of 20 Septembers. That's a better track record than any other month of the year, a MarketWatch analysis of gold prices measured by the London fixing showed.
Since 1988, this global benchmark for gold prices gained an average 3.4% from the end of August to the end of September. It rose more than 5% in September in the past seven out of 20 years.
Bewildered, the TSA agent held my 10-ounce silver bar up to the light as if it could possibly be see-through.
Apparently he had never seen such a thing before and thought that it might possess magical powers. Or perhaps that I might.
“Why are you traveling with this?”
Simultaneously delighted and angered, the immediate reactions that popped into my head ranged from “none of your damn business,” to launching into my sound money diatribe… just for effect, I carry around a $10 trillion Zimbabwe note and ask if they think it is more valuable than my silver.
I'm aghast by the lack of protest at this proposed re-appointment. The near-universal praise for Bernanke shows how little we've learnt from this credit crunch and how easily such a fiasco could happen again.
There's a grave danger Bernanke's "solution" to the crisis – rampant money-printing and ultra-low interest rates – could yet result in a dollar crisis, soaring inflation and the end of America's financial hegemony. I don't want to see that happen, but I think it could.
Bernanke will remain the world's most important policymaker even though his pre-crisis actions contributed mightily to the financial meltdown. A former academic at the heart of the US establishment for years, he was chairman of the President's Council of Eco
In his latest deliberation on the gold market, specialist gold analyst Jeff Nichols believes that gold has reached a turning point with purchases from official sources - Central Banks and sovereign wealth funds - perhaps outweighing sales as attitudes to the metal as a reserve asset become much more positive.
In particular Nichols points to China and Russia as two key nations with relatively low proportions of gold in their reserves as likely to be net buyers in the future - even if only soaking up gold from their own domestic production which otherwise would come on to the market. China announced earlier this year, for example, that it had moved 454 tonnes of gold into its reserves since 2003 - but still has only about 1.5% of its assets in gold. China's accounting sy
vents are imminent on three fronts you might think are a priori distanced from each other: rare earth elements, H1N1 and silver.
H1N1, the A-type influenza virus that looms large across the top half of our planet, already has scientists and industrial researchers testing experimental disinfectants, triage diagnostic tools for airports and hospitals and silver-embedded sterilizers for doorknobs, water fountains, bandages and viral-prone surfaces.
Silver is fast becoming a select ingredient for hospital surfaces, plasters, clothing and a wide array of medical devices.
Investment strategist John Licata reckons gold remains one of the best asset plays in the world. With recovery on the horizon, silver is also seen as a good investment - in part because a pickup in manufacturing will drive up demand. While it may be premature to claim economic recovery, copper is not seen as serving as the traditional harbinger of a return from recession this time. The rationale? Good economic news-while too inconsistent to make recovery imminent-is already baked in to copper's climb this year.
Corporate credit has seen the steepest rally in almost a hundred years, according to Morgan Stanley. Hedge funds are reviving the final bubble play of early 2007, writing put options on long-dated "volatility" contracts to wring out extra profit.
It is as if the Great Contraction – as the Bank of England now calls it – was just a random shock, as if we should naturally expect "V-shaped" resurgence to take us back to where we were. Yet that is what precisely we are being told will not and cannot happen.
"The current financial crisis is unlike any others," says the Bank for International Settlements. Lasting damage has been done. The "cumulative output loss" is likely to reach 20pc of GDP in the ma
The Elliott Wave Financial Forecaster was roundly hated by many MarketWatch readers because of its irritating pessimism throughout the late, lamented bull market.
In fact right now, it looks like pessimism has paid off. Over the past 12 months through July, EWFF is up 11.4% by Hulbert Financial Digest count, versus negative 20.03% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.
Over the past three years, the letter has achieved an annualized gain of 3.58%, against negative 5.78% annualized for the total return Wilshire 5000. Over the past 10 years, the letter has achieved a 1.2% annualized gain, compared to negative 0.26% annualized for the total return Wilshire.
We haven't gotten to Bedford Springs yet. We're still sitting in the airport lounge in Paris. Summer is over. It's back to work...12 hours a day...just like we've worked for the past 39 years.
When we were in college we had no money. In the summer we had to work two jobs to try to save enough cash to continue. One summer, we worked in a boatyard in Annapolis early in the morning...then, we did an evening shift painting television towers. Painting the towers was such dangerous work our poor mother begged us to quit. But the money was good - $5.25 an hour - so we had to keep at it. More about that in a minute...
We've only got a minute before they call our flight, so we'll make this short. Nothing much happened in the markets on Friday...except that the price of gold rose $1
September
4
September
Boom and bust capitalism won't be fixed
Sep 04 2009 The Telegraph
There is a hideous hissing noise escaping from the world economy, the piercing sound of deflating ambitions. Any hopes that, in this crisis, we would find an opportunity to redesign our system of capitalism and finance are all but forlorn. Any prospect that the leading nations would overhaul either the banking system or the wider framework that ties our economies together, and so prevent another crisis, has pretty much disappeared.
We know this because, this weekend, finance ministers from the G20 will meet in London (ahead of a heads-of-state summit in Pittsburgh), shake hands and breathe a collective sigh of relief that the worst of the crisis is over. The world has been informed that their main order of business will be to find some way of restrainin
Continue Reading
4
September
No Massive Institutional Gold Market Change
Sep 04 2009 Gold Chat Blog
Trace Mayer writes some good stuff, but his recent Massive Institutional Gold Market Change article hypes an midly interesting strategic development in the gold market. There are two statements he makes which are not correct. “gold demand that was previously satisfied with physical bullion through forward contracts between private parties can now be satisfied with unallocated gold accounts” This is the key on which the whole article hangs. The problem is that a significant majority, if not all, of institutional forwards are already settled via unallocated. Accordingly, this move by CME is not “a massive change” in the ma
Continue Reading
4
September
What's driving paper gold?
Sep 04 2009 The Financial Times
Gold madness is under way, and no one — as far as we can tell — has a good explanation as to why.
Here are some observations and views we’ve come across:
MF Global noted a potential knock-on effect from the soon-to-be closed DB double long crude oil fund, as money is reinvested into gold.
MF Global, however, also said the best explanation they had heard was of possible buying by a central bank.
We noted, gold lease rates (LIBOR-GOFO) are still negative. On September 2 the lease rate came in at -0.03419 and on September 3 it came in at -0.04116.
Dennis Gartman of the Gartman Letter — who is not a goldbug — last week alerted readers to some important technical resistance factors in euro-and sterling-denominated gold.
Continue Reading
4
September
Fear That China May Renege
Sep 04 2009 FNArena
In the lead up to the Crash of '87, the Hong Kong stock market was booming along with every other stock market. This was an opportunity not lost on to the local controlling Chinese families in Hong Kong, who dived not only headlong into the stock market but also into a futures contract listed over the Hang Seng index by a fledgling Hong Kong Futures Exchange. So insatiable was the Chinese appetite for these new-fangled index investments that demand pushed the futures into a steep premium over the level of the underlying physical index. An opportunity was thus presented to experienced, foreign, derivatives trading investment banks. By shorting the futures contract (which requires no borrowing) and buying a replicating basket of Hang Seng 225 stocks on the stock exchange, f
Continue Reading
3
September
Chinese sovereign wealth fund dumping dollars for strategic investments like gold
Sep 03 2009 Mineweb
Several reports are coming out of China that there is pressure on state-controlled organisations - notably the country's main sovereign wealth fund, China Investment Corporation (CIC) to rapidly build investment in non-Chinese enterprises. While the CIC itself, with apparent access to some $300 billion in funds - and the possibility of more from the government - may be concentrating on hedge funds and other investment entities, there is another sector for Chinese state-owned companies looking at major investment in commodities. Indeed with the funds available as China seems to be dumping its US dollars in favour of more concrete assets, virtually no minerals sector is safe from Chinese participation.
Continue Reading
3
September
Go for Gold and Silver: Strategist
Sep 03 2009 CNBC
China's key stock index recovered its poise on Tuesday, rising nearly 0.5 percent after diving 6.7 percent the day amid liquidity concerns and worries that lending growth may slow in the country. In August alone, the Shanghai Composite lost nearly 22 percent, snapping a seven-month winning streak.
If those stock gyrations are hard to stomach, there are other investment options to help ride out the wild swings in China, according to Martin Hennecke, associate director at Tyche.
Continue Reading
3
September
Last Chance to Buy Gold below $1000?
Sep 03 2009 GoldSeek
What about you? Sold your gold lately? Sold your gold due to an inevitable correction coming due? Sold your gold because of a tremendous short position build up with the bullion banks? Sold your gold because the bullion banks are so smart and always right? Sold your gold because of an imminent deflationary collapse which would bring down gold prices to absurd lows of $300 or less?Well, the list of bearish arguments goes on and on but the reality is that nothing fundamentally has ever changed. In other words, those very same fundamentals which took gold up from $250 in 2001 to almost $1000 today are still in place.
Continue Reading
3
September
"It Could Get Ugly Very Fast": Banking Crisis Grows, FDIC’s Funds Shrink
Sep 03 2009 Yahoo News
The failure of some of the nation's largest banks in 2008, including Washington Mutual, Wachovia and IndyMac, and scores of smaller banks this year came at a price. The Federal Deposit Insurance Corporation's fund that insures the country's deposits now stands at $10.4 billion, down from $45.2 billion the prior year.
Jim Bianco, president of Bianco Research in Chicago doesn't believe depositors need worry, because the government has the power of the printing press to make good on FDIC insurance. But he is troubled. "As a taxpayer you should be concerned because this could be another potential drag and possibly a significant drag on the U.S. Treasury and bloat the already record federal deficit," he says, echoing a Wall Street Journal editorial on Tuesday, suggesting th
Continue Reading
3
September
Gold shines in September, analysis of 20 years' data shows
Sep 03 2009 MarketWatch
Gold prices typically rise in September, an analysis of the historical record shows, as the start of holiday seasons in the world's biggest gold-consuming countries tends to drive up demand.
Gold made gains for the past 16 out of 20 Septembers. That's a better track record than any other month of the year, a MarketWatch analysis of gold prices measured by the London fixing showed.
Since 1988, this global benchmark for gold prices gained an average 3.4% from the end of August to the end of September. It rose more than 5% in September in the past seven out of 20 years.
Continue Reading
3
September
Moving Gold Overseas
Sep 03 2009 International Man
Bewildered, the TSA agent held my 10-ounce silver bar up to the light as if it could possibly be see-through.
Apparently he had never seen such a thing before and thought that it might possess magical powers. Or perhaps that I might.
“Why are you traveling with this?”
Simultaneously delighted and angered, the immediate reactions that popped into my head ranged from “none of your damn business,” to launching into my sound money diatribe… just for effect, I carry around a $10 trillion Zimbabwe note and ask if they think it is more valuable than my silver.
Continue Reading
2
September
Four more years of Bernanke is a problem, not a solution
Sep 02 2009 The Telegraph
I'm aghast by the lack of protest at this proposed re-appointment. The near-universal praise for Bernanke shows how little we've learnt from this credit crunch and how easily such a fiasco could happen again.
There's a grave danger Bernanke's "solution" to the crisis – rampant money-printing and ultra-low interest rates – could yet result in a dollar crisis, soaring inflation and the end of America's financial hegemony. I don't want to see that happen, but I think it could.
Bernanke will remain the world's most important policymaker even though his pre-crisis actions contributed mightily to the financial meltdown. A former academic at the heart of the US establishment for years, he was chairman of the President's Council of Eco
Continue Reading
2
September
Turning point for gold as Central Banks become buyers
Sep 02 2009 Mineweb
In his latest deliberation on the gold market, specialist gold analyst Jeff Nichols believes that gold has reached a turning point with purchases from official sources - Central Banks and sovereign wealth funds - perhaps outweighing sales as attitudes to the metal as a reserve asset become much more positive.
In particular Nichols points to China and Russia as two key nations with relatively low proportions of gold in their reserves as likely to be net buyers in the future - even if only soaking up gold from their own domestic production which otherwise would come on to the market. China announced earlier this year, for example, that it had moved 454 tonnes of gold into its reserves since 2003 - but still has only about 1.5% of its assets in gold. China's accounting sy
Continue Reading
2
September
Silver, H1N1 & rare earth events are imminent
Sep 02 2009 Stockhouse
vents are imminent on three fronts you might think are a priori distanced from each other: rare earth elements, H1N1 and silver.
H1N1, the A-type influenza virus that looms large across the top half of our planet, already has scientists and industrial researchers testing experimental disinfectants, triage diagnostic tools for airports and hospitals and silver-embedded sterilizers for doorknobs, water fountains, bandages and viral-prone surfaces.
Silver is fast becoming a select ingredient for hospital surfaces, plasters, clothing and a wide array of medical devices.
Continue Reading
2
September
Gold price could still hit $1,200 this year
Sep 02 2009 Mineweb
Investment strategist John Licata reckons gold remains one of the best asset plays in the world. With recovery on the horizon, silver is also seen as a good investment - in part because a pickup in manufacturing will drive up demand. While it may be premature to claim economic recovery, copper is not seen as serving as the traditional harbinger of a return from recession this time. The rationale? Good economic news-while too inconsistent to make recovery imminent-is already baked in to copper's climb this year.
Continue Reading
1
September
Our quarter-century penance is just starting
Sep 01 2009 The Telegraph
Corporate credit has seen the steepest rally in almost a hundred years, according to Morgan Stanley. Hedge funds are reviving the final bubble play of early 2007, writing put options on long-dated "volatility" contracts to wring out extra profit.
It is as if the Great Contraction – as the Bank of England now calls it – was just a random shock, as if we should naturally expect "V-shaped" resurgence to take us back to where we were. Yet that is what precisely we are being told will not and cannot happen.
"The current financial crisis is unlike any others," says the Bank for International Settlements. Lasting damage has been done. The "cumulative output loss" is likely to reach 20pc of GDP in the ma
Continue Reading
1
September
Moment of truth for one of 2008's few money-makers -- and it bets on bearishness
Sep 01 2009 MarketWatch
The Elliott Wave Financial Forecaster was roundly hated by many MarketWatch readers because of its irritating pessimism throughout the late, lamented bull market.
In fact right now, it looks like pessimism has paid off. Over the past 12 months through July, EWFF is up 11.4% by Hulbert Financial Digest count, versus negative 20.03% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.
Over the past three years, the letter has achieved an annualized gain of 3.58%, against negative 5.78% annualized for the total return Wilshire 5000. Over the past 10 years, the letter has achieved a 1.2% annualized gain, compared to negative 0.26% annualized for the total return Wilshire.
Continue Reading
1
September
World Economy Has Never Been in a Fix Like This
Sep 01 2009 The Daily Reckoning
We haven't gotten to Bedford Springs yet. We're still sitting in the airport lounge in Paris. Summer is over. It's back to work...12 hours a day...just like we've worked for the past 39 years.
When we were in college we had no money. In the summer we had to work two jobs to try to save enough cash to continue. One summer, we worked in a boatyard in Annapolis early in the morning...then, we did an evening shift painting television towers. Painting the towers was such dangerous work our poor mother begged us to quit. But the money was good - $5.25 an hour - so we had to keep at it. More about that in a minute...
We've only got a minute before they call our flight, so we'll make this short. Nothing much happened in the markets on Friday...except that the price of gold rose $1
Continue Reading