To paraphrase Miller Tabak equity strategist Peter Boockvar, a political science degree on Wall Street may be more important than a finance degree these days. Since the crisis created the need for unprecedented government intervention, stocks are influenced just as much by policy decisions as they are by fundamentals and valuations.
Last week's announcement of the "Volcker Rule" and President Obama's digs at the "banker [who] puts the rest of us at risk for his own selfish gain" in the State of the Union address are just the latest examples.
Be afraid, Be very afraid.
Dick Bove, bank analyst at Rochdale Securities, believes the growing acrimony between Washington and Wall Street could have devastating consequences. "If the President and Congress continue down the path that each
DAVOS, Switzerland (Reuters) - The Bank of England estimates governments the world over have spent or committed a staggering $14 trillion to prop up the financial system following the fall of Lehman Brothers in September 2008.
The end of QE is nigh! Cue much hand-wringing over the gilt market and the potential impact of future tightening on equity markets.
But David Owen, of Jefferies Fixed Income, on Wednesday, has a nice exploration of a deflationary-doom scenario:
Here’s the thrust of his argument:
Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.
A low global interest rate environment and concern about inflation should see gold prices gain further traction this year after a stellar 2009 and temper the dollar's recent gains, a Reuters poll showed.
The median forecast from a poll of 60 analysts conducted in January suggests gold will average $1,150.50 an ounce this year, 13 percent above 2009's median price, according to Reuters data, of $1,014, and marking a tenth successive year of gains.
Investors' love affair with gold may appear to have cooled, but that would be a misleading conclusion to draw from the fall in physical holdings of the precious metal.
Gold's popularity will return because investors fear inflation and sovereign downgrades, even if the U.S. currency continues its ascent and makes the precious metal more expensive for holders of other currencies.
Since Paul Volcker stood by Barack Obama a week ago as the US president unveiled banking reforms devised by “this tall guy”, the “Volcker rule” has provoked angst on Wall Street and in Washington.
Critics complain that it is a populist measure designed to distract attention from the Democrats’ political woes; that it is impractical; that it would put US banks at a disadvantage to European ones; that its target is wrong; and that it would let investment banks escape.
Quantitative easing effectively means providing the financial system with liquidity well in excess of organic commercial demands and conventional open market operations. The Fed does this by expanding its balance sheet extraordinarily, hence the spectacular growth in 'excess reserves' of commercial banks.The Fed does this for several reasons. The first obviously is to supply reserve capacity to the banks when their own reserve base has deteriorated badly to the point of insolvency. A second reason is to permit the Fed to expand its Balance Sheet in an extraordinary manner, in order to absorb assets that cannot be marked to market by a commercial bank without significantly damaging their own balance sheet. A third reason of course is to take an accommodative stance with regar
The price of silver should continue to rise in 2010 – and could even temporarily exceed the 28-year high of $21 an ounce that was reached almost two years ago, says Eugen Weinberg, head of commodity research at Commerzbank.
He believes the metal will particularly benefit from a rebound in the world economy, as well as gaining momentum from an expected rise in the gold price.
He points out that the correlation between the two metals has generally been very strong over the past five years as silver is still being ascribed monetary features that are largely attributable to its ancient role as a monetary metal.
Gold ended 2009 on a disappointing note as a sharp correction resulted in by far the worst December performance since the bull market began in 2001. The yellow metal, nevertheless, posted its ninth consecutive higher year-end close and enjoyed its third best year out of the past nine by appreciating 25 percent. However, what transpired in December deserves closer examination.
Gold bugs are forever telling you to buy gold because it is 'nobody else's liability'. It's become one of those hackneyed phrases that has almost lost its meaning.
But recent events in Venezuela give us a nice illustration of what that phrase really means. And there's a stark, but important message for savers everywhere.
Inflation is currently running at 27% in Venezuela. That's just the official figure. You can expect the real number to be considerably higher.
Even though the U.S. financial system nearly experienced a total meltdown in late 2008, the truth is that most Americans simply have no idea what is happening to the U.S. economy. Most people seem to think that the nasty little recession that we have just been through is almost over and that we will be experiencing another time of economic growth and prosperity very shortly. But this time around that is not the case. The reality is that we are being sucked into an economic black hole from which the U.S. economy will never fully recover.
Not that faking coins would be that hard to do. This is the 21st century after all, and if there’s one thing we do well, it’s making copies of things. Given contemporary 3-D laser imaging, a die could be created that mimicked the real deal in perfect detail. It’s not as if you could hold your coin up to the light and see the kinds of safeguards built into paper currency these days.
Predictably enough, counterfeiting concerns eventually hit the Internet. About a year ago, the blogosphere bloomed with doomsday warnings after the publication of a series of articles in Coin World, dealing with the subject of coin counterfeiting in China, where it’s quasi-legal. The Web was abuzz with the worries of coin holders and eBay shoppers, as well as the pontifica
What would you do if you were the Chancellor and you'd just announced that halving the UK's annual budget deficit was "non-negotiable"? There are a few things I think we'd all get sorted in a hurry. We'd cap all public sector salaries at, say, £175,000. We'd cut all benefits to the middle classes. We'd try and make the tax system flatter and less complicated (how hard can it be?). And we'd ban management consultants.
Two Bank of England economists have written one of the most perceptive and forthright papers in the history of central banking: "Banking on the State." Compared with any of the dozens of deadly dull, equation-filled, narrowly focused, recommendation-avoiding, career-enhancing, résumé-padding, utterly useless academic exercises published in the dozen regional Federal Reserve bank journals every month, this paper stands out like a diamond in an immense dung hill.
U.S. Secretary of State Hillary Clinton on Thursday called for China and other authoritarian governments to lift curbs on citizens' use of the Internet, threatening to exacerbate already tense ties with Beijing.
Last year proved to be a good one for hard commodities around the globe. Demand from emerging markets such as China held up better than expected in light of demand contraction in the West.
Gold maintained its apparent ability to defy gravity, helped by a fall in the dollar. Mark Dampier, head of research at Hargreaves Lansdown, says he is likely to continue buying gold "as an insurance policy", despite the lack of industrial use for the metal.
Call it the fractal geometry of fiscal crisis. If you fly across the Atlantic on a clear day, you can look down and see the same phenomenon but on four entirely different scales. At one extreme there is tiny Iceland. Then there is little Ireland, followed by medium-size Britain. They're all a good deal smaller than the mighty United States. But in each case the economic crisis has taken the same form: a massive banking crisis, followed by an equally massive fiscal crisis as the government stepped in to bail out the private financial system.
Size matters, of course. For the smaller countries, the financial losses arising from this crisis are a great deal larger in relation to their gross domestic product than they are for the United States. Yet the stakes are higher in the Amer
The United States government borrowed more money than ever before in 2009, but its largest lender — China — sharply reduced the amount it was willing to lend.
The United States Treasury estimated this week that during the first 11 months of last year China raised its holdings of Treasury securities by just $62 billion. That was less than 5 percent of the money the Treasury had to raise.
That raised its holdings to $790 billion, leaving it the largest foreign holder of Treasury securities — Japan is second at $757 billion and Britain a distant third at $278 billion. But China’s holdings at the end of November were lower than they were at the end of July.
If financial markets are about to blow up as ArabianMoney suggests today, and for once we are in the company of much of the global media, then holders of precious metals are placed in an awkward dilemma.
The lessons of the past couple of years clearly indicate that precious metals get swept down fast in a big global sell off of financial assets. There is a rally into the dollar, rather than into precious metals as a safe haven asset.
January
29
January
Obama's "Venezuelan-style" Policies Will Cause Stock Market Crash, Dick Bove Says
Jan 29 2010 Yahoo News
To paraphrase Miller Tabak equity strategist Peter Boockvar, a political science degree on Wall Street may be more important than a finance degree these days. Since the crisis created the need for unprecedented government intervention, stocks are influenced just as much by policy decisions as they are by fundamentals and valuations. Last week's announcement of the "Volcker Rule" and President Obama's digs at the "banker [who] puts the rest of us at risk for his own selfish gain" in the State of the Union address are just the latest examples. Be afraid, Be very afraid. Dick Bove, bank analyst at Rochdale Securities, believes the growing acrimony between Washington and Wall Street could have devastating consequences. "If the President and Congress continue down the path that each
Continue Reading
29
January
What us, worry? Banks double down on risk
Jan 29 2010 Reuters
DAVOS, Switzerland (Reuters) - The Bank of England estimates governments the world over have spent or committed a staggering $14 trillion to prop up the financial system following the fall of Lehman Brothers in September 2008.
Continue Reading
29
January
Could UK money supply collapse post-QE?
Jan 29 2010 The Financial Times
The end of QE is nigh! Cue much hand-wringing over the gilt market and the potential impact of future tightening on equity markets. But David Owen, of Jefferies Fixed Income, on Wednesday, has a nice exploration of a deflationary-doom scenario: Here’s the thrust of his argument:
Continue Reading
29
January
Funds flee Greece as Germany warns of "fatal" eurozone crisis
Jan 29 2010 The Telegraph
Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.
Continue Reading
28
January
Gold to squeeze out fresh gains in 2010, flatten in 2011
Jan 28 2010 Reuters
A low global interest rate environment and concern about inflation should see gold prices gain further traction this year after a stellar 2009 and temper the dollar's recent gains, a Reuters poll showed. The median forecast from a poll of 60 analysts conducted in January suggests gold will average $1,150.50 an ounce this year, 13 percent above 2009's median price, according to Reuters data, of $1,014, and marking a tenth successive year of gains.
Continue Reading
28
January
The end of the gold love affair? Not for long
Jan 28 2010 Yahoo News
Investors' love affair with gold may appear to have cooled, but that would be a misleading conclusion to draw from the fall in physical holdings of the precious metal.
Gold's popularity will return because investors fear inflation and sovereign downgrades, even if the U.S. currency continues its ascent and makes the precious metal more expensive for holders of other currencies.
Continue Reading
28
January
Volcker has the measure of the banks
Jan 28 2010 The Financial Times
Since Paul Volcker stood by Barack Obama a week ago as the US president unveiled banking reforms devised by “this tall guy”, the “Volcker rule” has provoked angst on Wall Street and in Washington.
Critics complain that it is a populist measure designed to distract attention from the Democrats’ political woes; that it is impractical; that it would put US banks at a disadvantage to European ones; that its target is wrong; and that it would let investment banks escape.
Continue Reading
28
January
Quantitative Easing: We Are All Central Planners Now
Jan 28 2010 Jesse's Café Américain
Quantitative easing effectively means providing the financial system with liquidity well in excess of organic commercial demands and conventional open market operations. The Fed does this by expanding its balance sheet extraordinarily, hence the spectacular growth in 'excess reserves' of commercial banks.The Fed does this for several reasons. The first obviously is to supply reserve capacity to the banks when their own reserve base has deteriorated badly to the point of insolvency. A second reason is to permit the Fed to expand its Balance Sheet in an extraordinary manner, in order to absorb assets that cannot be marked to market by a commercial bank without significantly damaging their own balance sheet. A third reason of course is to take an accommodative stance with regar
Continue Reading
27
January
View of the Day: Silver poised for strong 2010
Jan 27 2010 The Financial Times
The price of silver should continue to rise in 2010 – and could even temporarily exceed the 28-year high of $21 an ounce that was reached almost two years ago, says Eugen Weinberg, head of commodity research at Commerzbank.
He believes the metal will particularly benefit from a rebound in the world economy, as well as gaining momentum from an expected rise in the gold price.
He points out that the correlation between the two metals has generally been very strong over the past five years as silver is still being ascribed monetary features that are largely attributable to its ancient role as a monetary metal.
Continue Reading
27
January
Expect gold to gain more than 30% this year
Jan 27 2010 Sprott Asset Management
Gold ended 2009 on a disappointing note as a sharp correction resulted in by far the worst December performance since the bull market began in 2001. The yellow metal, nevertheless, posted its ninth consecutive higher year-end close and enjoyed its third best year out of the past nine by appreciating 25 percent. However, what transpired in December deserves closer examination.
Continue Reading
27
January
Venezuela illustrates why you should buy gold
Jan 27 2010 MoneyWeek
Gold bugs are forever telling you to buy gold because it is 'nobody else's liability'. It's become one of those hackneyed phrases that has almost lost its meaning.
But recent events in Venezuela give us a nice illustration of what that phrase really means. And there's a stark, but important message for savers everywhere.
Inflation is currently running at 27% in Venezuela. That's just the official figure. You can expect the real number to be considerably higher.
Continue Reading
27
January
20 Reasons Why The U.S. Economy Is Not Going To Recover
Jan 27 2010 The Economic Collapse
Even though the U.S. financial system nearly experienced a total meltdown in late 2008, the truth is that most Americans simply have no idea what is happening to the U.S. economy. Most people seem to think that the nasty little recession that we have just been through is almost over and that we will be experiencing another time of economic growth and prosperity very shortly. But this time around that is not the case. The reality is that we are being sucked into an economic black hole from which the U.S. economy will never fully recover.
Continue Reading
26
January
Is That Gold Bar for Real?
Jan 26 2010 GoldSeek
Not that faking coins would be that hard to do. This is the 21st century after all, and if there’s one thing we do well, it’s making copies of things. Given contemporary 3-D laser imaging, a die could be created that mimicked the real deal in perfect detail. It’s not as if you could hold your coin up to the light and see the kinds of safeguards built into paper currency these days.
Predictably enough, counterfeiting concerns eventually hit the Internet. About a year ago, the blogosphere bloomed with doomsday warnings after the publication of a series of articles in Coin World, dealing with the subject of coin counterfeiting in China, where it’s quasi-legal. The Web was abuzz with the worries of coin holders and eBay shoppers, as well as the pontifica
Continue Reading
26
January
It's time to raise the minimum wage
Jan 26 2010 MoneyWeek
What would you do if you were the Chancellor and you'd just announced that halving the UK's annual budget deficit was "non-negotiable"? There are a few things I think we'd all get sorted in a hurry. We'd cap all public sector salaries at, say, £175,000. We'd cut all benefits to the middle classes. We'd try and make the tax system flatter and less complicated (how hard can it be?). And we'd ban management consultants.
Continue Reading
26
January
Bernanke's Doom Loop
Jan 26 2010 GoldSeek
Two Bank of England economists have written one of the most perceptive and forthright papers in the history of central banking: "Banking on the State." Compared with any of the dozens of deadly dull, equation-filled, narrowly focused, recommendation-avoiding, career-enhancing, résumé-padding, utterly useless academic exercises published in the dozen regional Federal Reserve bank journals every month, this paper stands out like a diamond in an immense dung hill.
Continue Reading
26
January
Factbox: Sources of tension between China and U.S.
Jan 26 2010 Yahoo News
U.S. Secretary of State Hillary Clinton on Thursday called for China and other authoritarian governments to lift curbs on citizens' use of the Internet, threatening to exacerbate already tense ties with Beijing.
Continue Reading
25
January
Which metals will outshine gold?
Jan 25 2010 The Telegraph
Last year proved to be a good one for hard commodities around the globe. Demand from emerging markets such as China held up better than expected in light of demand contraction in the West.
Gold maintained its apparent ability to defy gravity, helped by a fall in the dollar. Mark Dampier, head of research at Hargreaves Lansdown, says he is likely to continue buying gold "as an insurance policy", despite the lack of industrial use for the metal.
Continue Reading
25
January
An Empire at Risk
Jan 25 2010 Niall Ferguson
Call it the fractal geometry of fiscal crisis. If you fly across the Atlantic on a clear day, you can look down and see the same phenomenon but on four entirely different scales. At one extreme there is tiny Iceland. Then there is little Ireland, followed by medium-size Britain. They're all a good deal smaller than the mighty United States. But in each case the economic crisis has taken the same form: a massive banking crisis, followed by an equally massive fiscal crisis as the government stepped in to bail out the private financial system.
Size matters, of course. For the smaller countries, the financial losses arising from this crisis are a great deal larger in relation to their gross domestic product than they are for the United States. Yet the stakes are higher in the Amer
Continue Reading
25
January
Debt Burden Now Rests More on US Shoulders
Jan 25 2010 The New York Post
The United States government borrowed more money than ever before in 2009, but its largest lender — China — sharply reduced the amount it was willing to lend.
The United States Treasury estimated this week that during the first 11 months of last year China raised its holdings of Treasury securities by just $62 billion. That was less than 5 percent of the money the Treasury had to raise.
That raised its holdings to $790 billion, leaving it the largest foreign holder of Treasury securities — Japan is second at $757 billion and Britain a distant third at $278 billion. But China’s holdings at the end of November were lower than they were at the end of July.
Continue Reading
25
January
Should You Arbitrage Silver for Gold Now?
Jan 25 2010 SilverSeek
If financial markets are about to blow up as ArabianMoney suggests today, and for once we are in the company of much of the global media, then holders of precious metals are placed in an awkward dilemma.
The lessons of the past couple of years clearly indicate that precious metals get swept down fast in a big global sell off of financial assets. There is a rally into the dollar, rather than into precious metals as a safe haven asset.
Continue Reading