Want to hear the optimists’ case for the eurozone’s future? Austerity programmes coupled with a weak euro might just save it. The argument is that fiscal indiscipline has caused the crisis. Austerity must therefore solve it. A weak euro and a global recovery would cushion the impact of austerity. In addition, the financial guarantees and the bans on short sales would see off the speculators. End of crisis.
The optimists have not had a good crisis so far. This will not change. Here is why.
Last week I heard something that almost caused me to lose my temper. It came from the lips of Herman Van Rompuy, a profoundly uninspiring man who, somehow, is European Council President.
Van Rompuy's position makes him, on paper, the most senior policy-maker in the European Union – with its 27 member states and 500 million people. No one elected him to high office and few voters know what he thinks. Until his elevation was stitched up in the well-upholstered Eurocrat backrooms of Brussels, his EU-wide profile was zero.
The downgrade could not have come at a more dreadful moment. The EU's €750bn "shield" for eurozone debtors has halted an incipient run on Club Med banks, but it has failed to restore full confidence for the obvious reason that such a guarantee cannot plausibly be extended from Greece to Portugal and then to Spain. The sums are too large, the number of solvent creditors too reduced, the intra-EMU politics too poisonous.
The endlessly entertaining Hugh Hendry, who gave Jeffrey Sachs a royal beatdown yesterday and pretty much discredited the Columbia professor for life, is back in this interview with Money Week's Merryn Webb, in which he once again is not afraid to make "bold" statements. Such as that hyperinflation is pretty much inevitable, that China is the functional equivalent of the Next fashion chain in the 1980s, that instead of listening to idiots on TV who just talk their high beta books, investors should buy the largest and safest stocks. Interestingly, Hendry actually suggests a viable way to fix America's problems, which would require China to write off its US debt, thus "securing the health and vitality of China's biggest customer." Alas, we don't think it wou
The dollar's recent strength has been explained by most market analysts as a result of the euro weakness rather than any fundamental support for the greenback. In fact, a closer look at the dollar's chart - particularly the dollar index - suggests the currency may be primed for a collapse.
The dramatic dollar index rise from $0.81 to $0.87 in recent weeks shows the chart's developed a dramatic and possibly dangerous parabolic trend. This trend has four important features.
Gold's long rally paused briefly in May, but analysts say it is far from over. Even though the price of an ounce of gold has fallen 3.6 percent to $1,204.25 as of May 25 from a record $1,249.40 on May 14, the median prediction in a Bloomberg survey of 23 traders, analysts, and investors suggests it may reach $1,500 by the end of the year, a 25 percent gain from today's level. "You could see gold go up another $1,000," says Evan W. Smith, who helps manage $2 billion at U.S. Global Investors in San Antonio. In 2006 he correctly predicted that gold would reach $700 an ounce within two years. "All of the turmoil and problems we've seen in Europe are just another reminder that there's a lot of value in gold as a safe haven," he says.
Gold is one of the more mysterious assets in the financial markets. It's volatile at times to the point of inducing vertigo and fans of the precious metal assert, somewhat contradictorily, its prowess as a hedge against both inflation and deflation.
It's also been one of the best investments of the last several years, outlasting the equity bull market and performing well when so many assets have succumbed to big declines.
The euro is beset with fiscal calamities that threaten its downfall, and markets in the U.S. are roiled by uncertainty over the government's financial regulatory legislation. But don't worry. Treasury Secretary Timothy Geithner meets with European finance officials today to discuss the economic situation. According to a Treasury Department statement, they will focus on "measures being taken to restore global confidence and financial stability." So everything is under control.
The ratio of silver prices to gold may drop by as much as a third within three years because of improving industrial demand, according to broker GoldCore Ltd.
An ounce of gold bought about 66.4 ounces of silver in London yesterday. The attached chart shows the ratio has been declining since 1991, and may fall toward 45, the average over the past century, according to GoldCore. The second attached chart shows silver’s rising trend since October 2008.
Silver “is both a precious metal like gold, and a huge amount of silver gets used in industrial applications,” Mark O’Byrne, executive director of GoldCore in Dublin, said in an interview. “It’s almost inevitable that over time the ratio will revert to
It seems Gartman's call last week to 'rush for the exits' was purely a belief that the precious metal was overbought, temporarily.
And he was right. Last week, gold slid 4.2%, the most since December. However, after 4 consecutive days of losses "gold has bottomed," he tells the desk.
Gartman suggests it's okay to buy - "I think we see a continued move out of euro and other currencies and into gold," he adds.
The M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.
They were parachuted in during the Second World War to fund local resistance to the Germans and now, with a population mired deep in another — if very different — crisis, British gold sovereigns once again are the foreign currency of choice in Greece.
Once again, too, they are offering a tangible sense of security amid turbulent uncertainty. In the 1940s, as the only reliable currency available, much of it was hoarded in trunks, under floorboards and buried in gardens. Any respectable girl’s dowry included a cache of sovereigns.
It's been the amazing, runaway boom of the past decade. If you'd put your money into gold at the lows about 10 years ago, you'd have made a nearly 400% return. That's left pretty much everything else—stocks, China, let alone housing—in the dust.
But with gold now trading near record highs, the big $1,200-an-ounce question is obvious.
Is the gold rush over?
Some smart people wonder. "The time to buy gold was in 1999, not 2010," Harvard professor Niall Ferguson tells The Wall Street Journal—though he added that momentum might still drive it higher. Others will tell you that "the smart money got out of gold months ago." But then people have been saying that for years.
In the Spring of 2009 I had the privilege of being invited to write a piece on gold for the publication of my friend, Dr. Marc Faber. In it, I articulated an unequivocally bullish outlook on gold, which was then trading at $800 or so per ounce. I could not have been clearer in my conviction:
"I can find no better time than now to recommend its purchase to others. Some will say that US$800 gold seems expensive. I would suggest the contrary: that a few years from now, sub-$l,000 gold will feel like a true gift."
Stocks traded over the past week with all the panache of the drunk uncle at a shotgun wedding, stumbling through four and a half weak-kneed sessions before snapping to attention at last call in the final half hour.
The concept of a random walk doesn't really do the week justice, as the selling virus that started in China and Greece last month suddenly developed into a worldwide pandemic that saw the major developed markets lose more than 7% and emerging markets lose 10%-plus.
Paul Krugman’s latest analysis claiming there is no threat of inflation or a Greek-style collapse in the US and that a Japanese-style deflation was the real risk to the US economy, was simplistic (Opinion, May 24th). A knowledge of history and monetary history is important in these times and Mr Krugman, unlike Harvard historian Niall Ferguson, does not have that important historical perspective.
History has shown that printing money and deficit spending is no panacea to recessions and economic crises and is the preserve of misguided politicians as seen in banana republics in the 20th century and empires in decline throughout history.
For Angela Merkel, leader of the eurozone's richest country, a queue is forming of high-quality adversaries. As she tips German Geld und Gut into the furnace of a rescue package for the euro, while going it alone in a misguided ban on market "manipulators", the brass-neck Chancellor has infuriated domestic voters, angered her EU partners (in particular the French) and invited the so-called wolf pack of global traders to do its worst.
Gold prices are volatile. Gold fell over $50 last week, but was now surging over $15 to $1,193 an ounce and is looking to retest the $1,200 level. Investors sell gold for cash when equities plummet, and bargain-hunters buy up gold at "discount" prices resulting in a strong tug-of-war for prices. Aside from eurozone sovereign debt issues, there are five other fundamental factors that contribute to gold's double digit price moves.
Given all the recent chaos in financial markets around the globe, I thought I would step back and try to shed light on the commotion, taking a view from 10,000 feet in an attempt to get to the heart of the issues.
What the world is witnessing is the continuing epic battle between the printing press and excessive debt held by governments at the federal, state and local levels, as well as too much leverage on the part of the world's financial institutions.
May
31
May
The false trail of austerity and a weak euro
May 31 2010 The Financial Times
Want to hear the optimists’ case for the eurozone’s future? Austerity programmes coupled with a weak euro might just save it. The argument is that fiscal indiscipline has caused the crisis. Austerity must therefore solve it. A weak euro and a global recovery would cushion the impact of austerity. In addition, the financial guarantees and the bans on short sales would see off the speculators. End of crisis. The optimists have not had a good crisis so far. This will not change. Here is why.
Continue Reading
31
May
Herman and his Frankenstein euro have done enough damage already
May 31 2010 The Telegraph
Last week I heard something that almost caused me to lose my temper. It came from the lips of Herman Van Rompuy, a profoundly uninspiring man who, somehow, is European Council President.
Van Rompuy's position makes him, on paper, the most senior policy-maker in the European Union – with its 27 member states and 500 million people. No one elected him to high office and few voters know what he thinks. Until his elevation was stitched up in the well-upholstered Eurocrat backrooms of Brussels, his EU-wide profile was zero.
Continue Reading
31
May
Spain is trapped in a 'perverse spiral' as wage cuts deepen the crisis
May 31 2010 The Telegraph
The downgrade could not have come at a more dreadful moment. The EU's €750bn "shield" for eurozone debtors has halted an incipient run on Club Med banks, but it has failed to restore full confidence for the obvious reason that such a guarantee cannot plausibly be extended from Greece to Portugal and then to Spain. The sums are too large, the number of solvent creditors too reduced, the intra-EMU politics too poisonous.
Continue Reading
31
May
Hugh Hendry Warns To "Prepare For Hyperinflation"
May 31 2010 Zero Hedge
The endlessly entertaining Hugh Hendry, who gave Jeffrey Sachs a royal beatdown yesterday and pretty much discredited the Columbia professor for life, is back in this interview with Money Week's Merryn Webb, in which he once again is not afraid to make "bold" statements. Such as that hyperinflation is pretty much inevitable, that China is the functional equivalent of the Next fashion chain in the 1980s, that instead of listening to idiots on TV who just talk their high beta books, investors should buy the largest and safest stocks. Interestingly, Hendry actually suggests a viable way to fix America's problems, which would require China to write off its US debt, thus "securing the health and vitality of China's biggest customer." Alas, we don't think it wou
Continue Reading
31
May
Dollar Primed for Collapse by End June: Charts
May 31 2010 CNBC
The dollar's recent strength has been explained by most market analysts as a result of the euro weakness rather than any fundamental support for the greenback. In fact, a closer look at the dollar's chart - particularly the dollar index - suggests the currency may be primed for a collapse.
The dramatic dollar index rise from $0.81 to $0.87 in recent weeks shows the chart's developed a dramatic and possibly dangerous parabolic trend. This trend has four important features.
Continue Reading
28
May
The Gold Rally May Not Be Over Yet
May 28 2010 Business Week
Gold's long rally paused briefly in May, but analysts say it is far from over. Even though the price of an ounce of gold has fallen 3.6 percent to $1,204.25 as of May 25 from a record $1,249.40 on May 14, the median prediction in a Bloomberg survey of 23 traders, analysts, and investors suggests it may reach $1,500 by the end of the year, a 25 percent gain from today's level. "You could see gold go up another $1,000," says Evan W. Smith, who helps manage $2 billion at U.S. Global Investors in San Antonio. In 2006 he correctly predicted that gold would reach $700 an ounce within two years. "All of the turmoil and problems we've seen in Europe are just another reminder that there's a lot of value in gold as a safe haven," he says.
Continue Reading
28
May
Money managers continue to like gold over cash – Reuters via Mineweb
May 28 2010 Mineweb
Gold is one of the more mysterious assets in the financial markets. It's volatile at times to the point of inducing vertigo and fans of the precious metal assert, somewhat contradictorily, its prowess as a hedge against both inflation and deflation.
It's also been one of the best investments of the last several years, outlasting the equity bull market and performing well when so many assets have succumbed to big declines.
Continue Reading
28
May
The Recovery Starts With Sound Money
May 28 2010 Wall Street Journal
The euro is beset with fiscal calamities that threaten its downfall, and markets in the U.S. are roiled by uncertainty over the government's financial regulatory legislation. But don't worry. Treasury Secretary Timothy Geithner meets with European finance officials today to discuss the economic situation. According to a Treasury Department statement, they will focus on "measures being taken to restore global confidence and financial stability." So everything is under control.
Continue Reading
27
May
Silver May Outperform Gold, Cutting Ratio: GoldCore Technical Analysis
May 27 2010 Business Week
The ratio of silver prices to gold may drop by as much as a third within three years because of improving industrial demand, according to broker GoldCore Ltd.
An ounce of gold bought about 66.4 ounces of silver in London yesterday. The attached chart shows the ratio has been declining since 1991, and may fall toward 45, the average over the past century, according to GoldCore. The second attached chart shows silver’s rising trend since October 2008.
Silver “is both a precious metal like gold, and a huge amount of silver gets used in industrial applications,” Mark O’Byrne, executive director of GoldCore in Dublin, said in an interview. “It’s almost inevitable that over time the ratio will revert to
Continue Reading
27
May
Gold at $36,000 Not as Ridiculous as It Sounds?
May 27 2010 24h Gold
Gold has reached record highs in recent weeks, but it will continue to rise, Ben Davies, CEO of Hinde Capital told CNBC Wednesday.
Gold should be viewed not as a commodity, but as a cash supplement, Davies said.
“There’s been such proliferation of currency,” he said. “As a consequence, gold is very undervalued.”
“I could be really obtuse and say $36, 000,” he said. “But actually it’s not as ridiculous as it might sound.”
Continue Reading
27
May
Gartman: Gold Sell-off Is Over, It's Time to Buy!
May 27 2010 CNBC
It seems Gartman's call last week to 'rush for the exits' was purely a belief that the precious metal was overbought, temporarily. And he was right. Last week, gold slid 4.2%, the most since December. However, after 4 consecutive days of losses "gold has bottomed," he tells the desk. Gartman suggests it's okay to buy - "I think we see a continued move out of euro and other currencies and into gold," he adds.
Continue Reading
27
May
US money supply plunges at 1930s pace as Obama eyes fresh stimulus
May 27 2010 The Telegraph
The M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.
Continue Reading
26
May
Greeks give new meaning to idea of sovereign wealth
May 26 2010 The Times
They were parachuted in during the Second World War to fund local resistance to the Germans and now, with a population mired deep in another — if very different — crisis, British gold sovereigns once again are the foreign currency of choice in Greece.
Once again, too, they are offering a tangible sense of security amid turbulent uncertainty. In the 1940s, as the only reliable currency available, much of it was hoarded in trunks, under floorboards and buried in gardens. Any respectable girl’s dowry included a cache of sovereigns.
Continue Reading
26
May
Is Gold the Next Bubble?
May 26 2010 Wall Street Journal
It's been the amazing, runaway boom of the past decade. If you'd put your money into gold at the lows about 10 years ago, you'd have made a nearly 400% return. That's left pretty much everything else—stocks, China, let alone housing—in the dust.
But with gold now trading near record highs, the big $1,200-an-ounce question is obvious.
Is the gold rush over?
Some smart people wonder. "The time to buy gold was in 1999, not 2010," Harvard professor Niall Ferguson tells The Wall Street Journal—though he added that momentum might still drive it higher. Others will tell you that "the smart money got out of gold months ago." But then people have been saying that for years.
Continue Reading
26
May
Gold Will Keep Going Up
May 26 2010 Forbes
In the Spring of 2009 I had the privilege of being invited to write a piece on gold for the publication of my friend, Dr. Marc Faber. In it, I articulated an unequivocally bullish outlook on gold, which was then trading at $800 or so per ounce. I could not have been clearer in my conviction:
"I can find no better time than now to recommend its purchase to others. Some will say that US$800 gold seems expensive. I would suggest the contrary: that a few years from now, sub-$l,000 gold will feel like a true gift."
Continue Reading
26
May
Seven worries for Wall Street, and what's next
May 26 2010 MarketWatch
Stocks traded over the past week with all the panache of the drunk uncle at a shotgun wedding, stumbling through four and a half weak-kneed sessions before snapping to attention at last call in the final half hour.
The concept of a random walk doesn't really do the week justice, as the selling virus that started in China and Greece last month suddenly developed into a worldwide pandemic that saw the major developed markets lose more than 7% and emerging markets lose 10%-plus.
Continue Reading
26
May
US heading for lost decade?
May 26 2010 The Irish Times
Paul Krugman’s latest analysis claiming there is no threat of inflation or a Greek-style collapse in the US and that a Japanese-style deflation was the real risk to the US economy, was simplistic (Opinion, May 24th). A knowledge of history and monetary history is important in these times and Mr Krugman, unlike Harvard historian Niall Ferguson, does not have that important historical perspective.
History has shown that printing money and deficit spending is no panacea to recessions and economic crises and is the preserve of misguided politicians as seen in banana republics in the 20th century and empires in decline throughout history.
Continue Reading
25
May
Whatever Germany does, the euro is finished
May 25 2010 The Telegraph
For Angela Merkel, leader of the eurozone's richest country, a queue is forming of high-quality adversaries. As she tips German Geld und Gut into the furnace of a rescue package for the euro, while going it alone in a misguided ban on market "manipulators", the brass-neck Chancellor has infuriated domestic voters, angered her EU partners (in particular the French) and invited the so-called wolf pack of global traders to do its worst.
Continue Reading
25
May
Top 5 Reasons Gold Prices Move
May 25 2010 The Street
Gold prices are volatile. Gold fell over $50 last week, but was now surging over $15 to $1,193 an ounce and is looking to retest the $1,200 level. Investors sell gold for cash when equities plummet, and bargain-hunters buy up gold at "discount" prices resulting in a strong tug-of-war for prices. Aside from eurozone sovereign debt issues, there are five other fundamental factors that contribute to gold's double digit price moves.
Continue Reading
25
May
Europe's dilemma: Print money or cut debt?
May 25 2010 MSN
Given all the recent chaos in financial markets around the globe, I thought I would step back and try to shed light on the commotion, taking a view from 10,000 feet in an attempt to get to the heart of the issues.
What the world is witnessing is the continuing epic battle between the printing press and excessive debt held by governments at the federal, state and local levels, as well as too much leverage on the part of the world's financial institutions.
Continue Reading