Gold World News Flash |
- International Forecaster August 2010 (#4) - Gold, Silver, Economy + More
- Gold Market is not “Fixed”, it’s Rigged
- Gold in a Bull Market, Stocks in a Bear Market
- Gold and Financial Crisis
- Gold and Deflation
- James West: Financial System Headed South
- Gold is My Asset Pick for the Next 10 Years: Marc Faber
- Krugman to the Fed: Do More!.. Carbon Rises Anyway
- Selected Charts From Trader Dan Norcini
- Does Gold Mining Matter?
- Weekly Cheat Sheets
- Guest Post: Learning How Theta Can Be Utilized to Trade Gold
- How To Front Run The Fed With The Best Of 'Em
- Norway's SWF Posts a 5.4% Loss in Q2
- Implications from the Treasury Yield Curve
- Is a Crash Coming?
- HP’s Hurd Crisis Creates A Value Play
- The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism (Part 3)
- Hoenig: Fed Policy a “Dangerous Gamble”
- Ackman Suckers Fannie and Freddie?
- Adrian Douglas: Gold market isn't 'fixed'; it's rigged
- Adrian Douglas: Gold market isn't 'fixed'; it's rigged
- Weekend Poll: Buffett Or Gross - Inflation Or Deflation? (Or Neither)
- Signs of the Times
- Buffett Vs Gross, Or Inflation Vs Deflation - Who Is Right?
- Jim O'Neill Is Back
- 1000 Restaurants And Shops Accepting Gold In Malaysia
- Weekly Chartology; Goldman Introduces Its Own Version Of Rosenberg's SIRP For A Low GDP Growth Environment
| International Forecaster August 2010 (#4) - Gold, Silver, Economy + More Posted: 15 Aug 2010 04:04 AM PDT As we explained in the last issue that when GDP figures are again revised we would find 2nd quarter GDP growth was really 1.3% to 1.5%, not 2.4% revised down from 3.7%. This experience points out the really bogus nature of government statistics. Several months ago we projected that without QE the economy in the 3rd quarter would result in 1% growth and minus 1% in the 4th quarter.
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| Gold Market is not “Fixed”, it’s Rigged Posted: 15 Aug 2010 04:00 AM PDT In 1919 the major London gold dealers decided to get together in the offices of N.M. Rothschild to "fix" the price of gold each day. While this was notionally to find the clearing price at which all buying interest and all selling interest balanced the possibility for market manipulation and self-dealing is inherently systemic in such a cozy arrangement.
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| Gold in a Bull Market, Stocks in a Bear Market Posted: 15 Aug 2010 03:00 AM PDT To me, the title is stating the obvious. To many, such talk is ridiculous. To paperbugs, Gold is a bubble about to pop and only stocks make you money over the long haul. To paperbugs, capitalizing the word "Gold" labels me a tinfoil hat wearer, while to me, capitalizing the phrase "federal reserve" (not federal and has no reserves) is blasphemy.
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| Posted: 15 Aug 2010 02:35 AM PDT At what point does a market crash translate to a lengthy bear market and/or an economic recession? This question was taken up by a celebrated historian of the early 20th century, one Otto C. Lightner.
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| Posted: 14 Aug 2010 07:30 PM PDT By Frank Holmes CEO and Chief Investment Officer I have been speaking and writing about gold’s appeal in a deflationary environment – this is a concept that opposes the conventional opinion that the gold price will not rise without inflation. Those who cling to that singular gold-inflation relationship have not examined the history of gold as money. Whenever there is substantial inflation or deflation, governments tend to either be too slow to react or they overreact with policies, and this is typically good for gold. Interest earned on 90-day Treasury bills below the inflation rate is a signal for governments to try to stop deflation and reflate the economy. When this happens, gold becomes attractive. We are in such an environment now. During these periods, governments usually need to increase their deficits by escalating their borrowings to support the economy. This also supports gold as safe money in addition to its beauty as jewelry. The twin eng...
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| James West: Financial System Headed South Posted: 14 Aug 2010 07:30 PM PDT Source: Brian Sylvester of The Gold Report 08/13/2010 Midas Letter Editor James West is one of the sharpest minds in the gold business, and he puts his money where his mouth is. He owns gold equities, ETFs, coins and even a share of a private Peruvian mine. "Gold is the best investment at this time," he says, a thesis based on the "counterfeiting" of paper currencies and inevitable collapse of the global financial system. In this Gold Report exclusive, James suggests several ways to profit along the way. The Gold Report: James, in a recent issue of the Midas Letter you said, "The world, according to gold, is in an absolute mess." We're not in a gold price mania, so how can the world be in an "absolute mess?" James West: You say we're not in a gold mania, but that depends on the perspective of time. If you look at the gold price chart for the last six months, it has appreciated slightly from $1,075 in February, touched a high of $1,260 in June and is now a bit below $1...
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| Gold is My Asset Pick for the Next 10 Years: Marc Faber Posted: 14 Aug 2010 07:30 PM PDT What can be said about Friday's gold price action, except... "what price action?" Volume was the lowest that I can remember in years. Nothing to see here, folks. Silver's price action was hardly the life of the party on Friday, either. The price drifted below $18.00 a couple of times at the close of London trading... but managed to finish in the plus column as well. Volume was very light. The world's reserve currency started Friday morning in the Far East at 82.6 cents... and nine hours later [3:00 a.m. Eastern time] it had drifted down about 40 basis points to its Friday low of 82.2 cents From there, the U.S.$ slowly worked its way higher... and by the end of New York trading, had risen to 82.93 cents. Here's the 3-year U.S. dollar chart that puts this week's three cent rise into perspective. Despite the big gain in the currency... gold was actually up about $15 on the week. Go figure... and what this all means has not yet been revealed...
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| Krugman to the Fed: Do More!.. Carbon Rises Anyway Posted: 14 Aug 2010 07:30 PM PDT Krugman to the Fed: Do More! Saturday, August 14, 2010 – by Staff Report Paul Krugman Paralysis at the Fed ... Ten years ago, one of America's leading economists delivered a stinging critique of the Bank of Japan, Japan's equivalent of the Federal Reserve, titled "Japanese Monetary Policy: A Case of Self- Induced Paralysis?" With only a few changes in wording, the critique applies to the Fed today. At the time, the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates — the usual tool of monetary policy — were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more. That was malfeasance, declared the eminent U.S. economist: "Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to...
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| Selected Charts From Trader Dan Norcini Posted: 14 Aug 2010 07:30 PM PDT View the original post at jsmineset.com... August 14, 2010 01:00 AM Dear CIGAs, Click charts to enlarge this week's action in the HUI/Gold Ratio, Gold/Bonds Ratio, Comex Gold and Continuous Front Month Gold with commentary from Trader Dan Norcini ...
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| Posted: 14 Aug 2010 06:05 PM PDT
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| Posted: 14 Aug 2010 02:48 PM PDT
The week's notable moves in swaps, swaptions, yields, asset swaps and mortgages. Pay particular attention to the fireworks in the 6.0 swap, the 4.5/5.0 swap, and the 4.5 butterfly. Thank you Fed.
Source: Morgan Stanley
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| Guest Post: Learning How Theta Can Be Utilized to Trade Gold Posted: 14 Aug 2010 02:30 PM PDT
Submitted by Chris Vermeulen of The Gold and Oil Guy A fundamental knowledge of Theta is imperative in order to understand the mechanics and construction of option strategies. In many cases, Theta is either the profit engine or the means by which experienced option traders reduce the cost of opening a new position. Theta can even take an ETF that pays no dividend and create a monthly income stream utilizing a technique known as a covered call write. The most exciting thing about options is their versatility. You can trade them in so many different ways. A trader can define a positions’ risk with unbelievable precision. When traded properly utilizing hard stops, options offer traders opportunities that stocks and futures simply cannot provide. Theta allows option traders to write spreads which generally offer nice returns with very limited risk. Theta is the fundamental reason behind the slow and relentless deterioration of option values over time. As a series of options gets closer to expiration, Theta becomes a very powerful force. As stated in the previous article, the final two weeks of option expiration put Theta into overdrive. Courtesy of Optionsuniversity, the two charts listed below illustrate the rapid decay of Theta.
These charts illustrate effectively that option contracts which are out of the money and consist entirely of time premium decline rapidly in value on their way to 0 potentially. While Theta must be respected, it is Theta’s relationship with implied volatility that really makes it a force that must be monitored closely. While I will not discuss implied volatility in this article, in future articles it will gain considerable attention. Implied volatility is paramount in every decision that an option trader makes. Ignoring implied volatility and Theta is a recipe for disaster, the kind of disaster where an entire trading account is wiped out in less than 30 days. In most of the trades that I place, Theta is regularly a profit engine. I never purchase options naked, in every option trade that I construct I am utilizing some form of a spread in order to mitigate the ever present wasting away of time premium. In many cases, Theta is the driving force behind my profitability. In any other case, Theta decreases the cost for me to purchase options allowing me to minimize my risk to an acceptable level. Vertical spreads come in two variations: debit spreads and credit spreads. A vertical spread is a multi-legged option trade which involves more than one strike price. As an example, we will assume that GLD is trading around $119/share. If I were to have placed a call credit spread trade at the close on Thursday I could have sold the GLD August 120 call strike and purchased the GLD August 121 call strike, thus receiving a credit in my account. At current prices as I type, the August 120 call strike would have resulted in a credit to my trading account of $53 dollars while the August 121 call strike would have resulted in a debit in my account of $29 dollars with a one lot position size. If I were to place this trade, I would have a strong feeling that the price of GLD was going to decline. The reason this trade is called a vertical credit spread is because the total trade results in a credit to my account of $24 dollars less commissions. The vertical aspect of the trade is based on the arrangement of the positions on the options board, also called an option chain. When an option trader places a credit spread, they are relying on time decay, Theta, to provide them with profits. In many cases, option traders will utilize vertical spreads to play a directional bias. In the example above, the bias on GLD would be to the downside. However, the maximum amount I can lose is limited because I purchased the 121 call. The most I can lose is $100 dollars minus the credit of $24 dollars. Thus, the worst case scenario for this call credit spread would be a loss of $76 dollars for every contract I had put on. If I had put on 5 contracts, my loss would have been limited to $380 dollars plus commissions. A call debit spread is constructed exactly the opposite direction. If I believed that gold was going to increase in value I could buy 1 August 120 GLD call for $53 dollars and sell 1 August GLD 121 call for $29 dollars. Notice that the sale of the GLD 121 call reduces the cost of the GLD 120 call. By selling the GLD 121 call, I reduce the cost of this spread down to $26 dollars. However, my maximum gain is limited to $74 dollars minus commissions. The point of this illustration is more to focus on the way Theta helps option traders in practical situations. When an option trader utilizes a credit spread, Theta operates as the profit engine. When an option trader does the exact opposite by placing a debit spread, Theta acts to reduce the overall cost of the spread reducing the overall risk exposure. As one can see, understanding Theta is crucial when trading options. While vertical spreads are very basic, they can provide nice returns while having the unique ability to control risk with an extremely tight leash. In future articles, we will dissect the various option trading strategies which option traders can utilize in different situations, at different points within the option expiration cycle. While this article will conclude the basic overview of Theta, future articles will discuss intimately the key relationship that Theta and implied volatility share. In closing, I will leave you with the famous muse of Benjamin Franklin, “Time is money.” Get our Free Weekly Options Education Articles and Options Trading Signals by joining out free newsletter at www.OptionsTradingSignals.com Chris Vermeulen – Gold Analyst/Trader J.W Jones – Independent Options Trader
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| How To Front Run The Fed With The Best Of 'Em Posted: 14 Aug 2010 02:12 PM PDT
Now that QE Lite, or whatever one calls it, is here, the most appropriate market strategy reverts back to March of 2009, when life was very simple: "Buy what the Fed is buying." And with the benefit of QE1 in hindsight, namely the Fed's prior purchase of $700 billion in Treasurys in 2009, it is possible to determine precisely which bonds the Fed will focus on, and which are likely to be excluded, thus benefiting the least from the latest bout of monetization. Morgan Stanley has come up with a list of which bonds are likely to be targeted by the Fed in the upcoming 5 Open Market Operations beginning on August 17 and continuing through September 1. Those looking for a quick (and levered) return on investment will be wise to pick up the issues determined as most likely to be monetized, while potentially shorting those that are ineligible for buybacks. First, focusing on Treasurys which are likely to be excluded, Morgan Stanley's Igor Cashin uses the criteria of avoiding names for which there already exists a heightened demand, such as those that are CTD (Cheapest To Deliver) into September and December future contracts, as well as those trading "special" in repo. Additionally, as the Fed SOMA is limited to owning a maximum of 35% of any given issue, there are quite a few names which are already ineligible for further purchases, as well as many which are approaching the ineligibility threshold. More from Morgan Stanley:
A summary version of the ineligible USTs is presented below: these should most certainly be avoided for the purposes of frontrunning the Fed over the next two weeks, or potentially used in ultra short term and ultra leveraged pair trade combinations.
So which Treasuries is the Fed most likely to purchase? According to Morgan Stanley, those most suitable for "buybacks" (yes, yes, it's not a buyback) are those which are cheapest on average on the Treasury spline for the Zero Vol Asset Swap Curve. In order of upcoming auctions that would mean: the 7.25 of 05/15/2016; the 3.0 of 2/28/2017; the 1.375 of 2/15/2013; the 7.5% of 11/15/2024; and the 1.375 of 1/15/2013. In other words:
So in this centrally planned market of ours, why take risk? The Fed is now telegraphing where the free money is, and as such it would be imprudent to avoid grabbing at least some of it. We urge readers to do their homework, but in this particular case (unlike that horrendous steepener trade that Jim Caron just can't get away from, and which we will discuss later) it appears MS is spot on. Yes, the upside won't make one's year, but those who wish to pick a few unlevered bps should have ample opportunity over the next 6 or so months as the Fed proceeds to gobble up a selection of bonds that virtually everyone who has made a lifestyle out of frontrunning the Fed will be gunning after. In other words, this is your chance to front run those who front run the Fed.
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| Norway's SWF Posts a 5.4% Loss in Q2 Posted: 14 Aug 2010 02:03 PM PDT
ai5000 reports, Norway's SWF Posts Q2 Loss Due to European Debt Crisis, BP Spill:
Emma Rowley of the Telegraph reports, Norway takes &ound;860m hit over BP oil spill:
You can read the entire Q2 report from NBIM by clicking here. I quote the following from page 11: Given the volatility in Q2, it's pretty amazing that there was only one minor breach of guidelines. Keep an eye on Norway's sovereign wealth fund (SWF) as it represents an increasingly important source of global liquidity. In fact, large sovereign wealth funds are providing lots of liquidity to global markets which many analysts tend to ignore, much to their detriment.
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| Implications from the Treasury Yield Curve Posted: 14 Aug 2010 11:37 AM PDT
Here is a derivation of implied 1 year forward rates on treasuries. A 1 year treasury forward is close enough (for government work) to get an idea of when the market projects the Fed will start moving rates upward. If you imply the Fed responds with hikes because a recovery is already happening, this data tells a little more where general sentiment is at. For the sake of robustness, I purposefully designed this to work with very few input points, necessitating a basic a smoothing mechanism. From this, there is a small amount of error, but nothing meaningful. The obvious interpretation here is that the treasury markets as of today do not project a meaningful recovery will start until 2012, with the end of cycle not happening until 2017. Post 2017, I'll venture to say 25 basis points of 1 year treasury forward movement per year is not actually projected Fed Funds policy change, but instead accounting for normal upward sloping yield curve behavior, where investors want to be paid extra for taking more interest rate risk from longer duration bonds.
And a snapshot of the treasury curve from November 2006, the "golden age" of securitization:
For more analysis, go to http://scriabinop23.blogspot.com.
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| Posted: 14 Aug 2010 09:09 AM PDT 10 Reasons to Be Cautious Could Wall Street be about to crash again? This week's bone-rattlers may be making you wonder. I don't make predictions. That's a sucker's game. And I'm certainly not doing so now. But way too many people are way too complacent this summer. Here are 10 reasons to watch out. 2. The Fed is getting nervous. This week it warned that the economy had weakened, and it unveiled its latest weapon in the war against deflation: using the proceeds from the sale of mortgages to buy Treasury bonds. That should drive down long-term interest rates. Great news for mortgage borrowers. But hardly something one wants to hear when the Dow Jones Industrial Average is already north of 10000. 3. Too many people are too bullish. Active money managers are expecting the market to go higher, according to the latest survey by the National Association of Active Investment Managers. So are financial advisers, reports the weekly survey by Investors Intelligence. And that's reason to be cautious. The time to buy is when everyone else is gloomy. The reverse may also be true. More Here.. Technical Gauge and Its Creator Sense Stock Gloom; 'Good Conspiracy Theories'? More Here.. 
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| HP’s Hurd Crisis Creates A Value Play Posted: 14 Aug 2010 08:44 AM PDT
Dian L. Chu, Economic Forecasts & Opinions  Carly Fiorina provided a strategic vision for HP in combining Compaq Computer and HP, which in retrospect, turned out to be a brilliant acquisition. However, acquisitions often require a different type of leadership from an operational standpoint, and Mark Hurd`s talents were just what the doctor ordered in meshing these two diverse companies into one cohesive technology machine. Then add in the future acquisitions by HP, and his skill set really fit the bill.
Is the company currently undervalued after this recent selloff? Let`s examine some future catalysts that could possibly restore some value to this company`s stock price and market cap.
So what is fair value for HP over the next six months? This will depend upon a myriad of factors like the global economy, investors finally feeling comfortable enough with the economy and wanting more return being motivated to move out of Bonds into equities, does the HP board absolutely nail the CEO choice, does the HP slate buzz inspire investors, etc. But a reasonable valuation applied to HP from the current forward looking P/E projections puts this stock at fair value given our current environment in the range of $48 - $55 a share by year end.
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| Posted: 14 Aug 2010 07:02 AM PDT
From The Daily Capitalist Until I began to examine the Dodd-Frank financial overhaul bill I had no idea that it would so significantly change the direction of the United States. It's scope is so vast and pervasive that it is difficult to grasp its totality. I wrote this article to try to explain this and why I believe it is so important for us to understand it. Because of its complexity it was not possible to do this briefly, so I wrote this major "white paper" and divided it into four parts to make it easier to digest. Please stick with me for the next few days; your eyes will be opened. Part 3 We continue to look at the Act's provisions. Regulation of Derivatives and ABS Recall that one of the major themes behind the Act is that the “murky” world of “exotic” instruments such as credit default swaps and asset backed securities (ABS) added unacceptable risk to the financial system. The goal of the Act is to provide “transparency” and “accountability” for those engaged in such instruments. The SEC and Commodity Futures Trading Commission (CFTC) will regulate derivative markets. The CFTC is involved because they regulate the futures and options markets which are included within definition of “derivatives.” The new rules:
The Wall Street Journal ran an article exploring the world of farmers and futures contracts. Farmers rely on forward contracts to hedge their risks. What was interesting is the conclusion of the article: “There is no real understanding if the Act will exempt, say farmers who use futures as a hedge, or make it more difficult for them to hedge.” Office of Credit Ratings To regulate credit rating agencies, a new Office of Credit Ratings is established. The most significant outcome of the Act is that investors are allowed to sue the rating agencies. They are now treated like other “experts” such as lawyers and accountants and are subject to the same liabilities. There are basically only three credit rating agencies, Standard & Poor’s, Moody’s Investor Service, and Fitch Ratings. They are referred to as Nationally Recognized Statistical Rating Organizations (NRSROs) under the Act. These private companies are sanctioned by the SEC and the Treasury to give credit ratings. A kind of monopoly if you will. Basically you can’t sell a security to the public without a rating from one of these companies. When the rating agencies figured out what the legislation was doing to them, they promptly notified their clients that they couldn’t use their ratings in ABS securities registrations. That apparently put a halt to the ABS market and caused Ford to pull a pending offering. This caused the SEC to postpone the rules for six months until they figure out what to do. This rule is actually a good thing in my opinion within the current regulatory structure. The failures of the rating agencies were part of the problem with the mortgage backed securities market. It is apparent that it wasn’t just that they didn’t understand the risk involved, rather they ignored it. If a lawyer gave an opinion that caused investors to lose money because of the lawyer’s negligence, the lawyer gets sued. Why not the rating agencies? Office of Investor Advocate A new Office of Investor Advocate is set up within SEC; plus there is an Investor Advisory Committee. There are a number of provisions promoting “corporate democracy” such as allowing shareholders to nominated directors, to vote a non-binding resolution on executive pay and retirement packages, and establishes new rules governing corporate compensation committees. One of the aims of the legislation was to discourage corporations from paying “excessive” compensation to their executives, in the belief that it encouraged short-term thinking while sacrificing long-term stability. The most significant rule is that the SEC is granted discretionary rule making authority to establish new standards of conduct for broker-dealers and investment advisers when providing personalized investment advice to retail customers. The concept is that the broker must act in the ”best interest of the customer without regard to the financial or other interest of the broker-dealer or investment adviser providing the advice.” This gets close to making broker-dealers act in a fiduciary capacity to its retail customers. Bureau of Consumer Financial Protection A new agency, the Bureau of Consumer Financial Protection, has the task of regulating consumer financial products such as, checking accounts, private student loans and mortgages. The agency will have the authority to "deal with unfair, abusive and deceptive practices.” The new bureau will set standards for credit cards. Certain penalties are eliminated, reducing bank profits, which will raise costs for consumers in other areas. This has nothing to do with the bust, but rather is an exercise of power by the Democratic majority to impose politically popular “consumer friendly” rules that limit penalties that upset credit card users and borrowers. New mortgage lending rules are established: prepayment penalties are limited, banks must lend on the basis of the borrower’s ability to repay, borrowers must submit more data showing they have the ability to pay, loan brokers and loan officers can’t be compensated for steering customers to a particular type of loan or rate, and new appraisal regulations establish rules on appraiser compensation. A new Office of Housing Counseling is established within HUD. This new agency is described as follows:
The creation of this agency is not encouraging. It is yet another wasteful bureaucracy within a vast federal structure. The Act increases the requirement to qualify as an "accredited investor," the kind of investor one must have to avoid SEC registration for private placements. Accredited investors must now have a $1 million net worth excluding the value of their primary residence, whereas the old rule was simply a $1 million net worth. Federal Insurance Office This is new. Generally insurance companies are regulated by the states. The reason many insurance companies incorporate separate entities in each state is to avoid federal regulation. But, while most regulation is still relegated to the states, a new Federal Insurance Office can step in and take over a company if it threatens “financial stability”:
Remember AIG? Nothing, it appears, is beyond the reach of federal control. Like other powers granted by the Act, the new FIO can basically regulate any insurance company it finds to be a threat to financial stability. Regulation of Investment Advisors Formerly mildly regulated private investment advisors are now required to file a statement with the SEC describing their activities. The law applies only to those advisers with $150 million under management. Private family offices are exempt. Hedge Fund Regulation Large hedge funds and fund advisers ($150 million plus) must “register” with the SEC. Many large funds already register so this will only affect the smaller funds. Extraterritoriality of the Act This is one of the aspects of the Act that seems to be passed over by commentators, but the Act grants the regulators the power to extend control over economic activity normally beyond the jurisdiction of the federal government. Gibson Dunn explains the new extraterritorial provisions of the Act as follows:
I am sure this new authority will be tested in the courts, and perhaps the Morrison case may give us hope these vague powers will be deemed unconstitutional, but the intent of the Act is to allow no foreign refuge. The federal government’s extraterritoriality push is part of a larger move toward supranational regulation of financial companies. Since the 2008 crash, countries have been meeting under the auspices of the Bank of International Settlements to discuss international financial stability. One of the outcomes of these efforts will be the new Basel III requirements regarding bank capital and liquidity structures. For example, the minimum Tier 1 leverage ratio for banks worldwide will be 3%. Is Your Gold Conflict Free? The Act condemns ‘conflict’ minerals from the Democratic Republic of the Congo, and as such the SEC will draft rules to assure a conflict free chain of custody to prove they are not from sources deemed exploitative such as local warlords. The minerals include gold which is produced by artisanal miners in certain areas. The SEC will produce a map of Congo to aid buyers. For Part 1, see here. For Part 2, see here. Monday, the final Part 4: a look at the consequences of the Act.
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| Hoenig: Fed Policy a “Dangerous Gamble” Posted: 14 Aug 2010 06:45 AM PDT Lost in the late-week goings on yesterday (by me at least) during these lazy late-summer days was Kansas City Federal Reserve President Thomas Hoenig's rather remarkable criticism of central bank policy in a town-hall style meeting in Lincoln, Nebraska. Here's a collection of his comments from various sources on the internet:
The annual Fed confab in Jackson Hole later this month should produce a fair number of glares from other central bankers, though Hoenig will likely glare right back. The fact that the gathering is hosted by Hoenig's Kansas City Fed should ensure that.
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| Ackman Suckers Fannie and Freddie? Posted: 14 Aug 2010 06:42 AM PDT
William Ackman at Pershing Square Capital is a very savvy guy. I would not bet against him. He is making a play for a monster busted real estate deal. I am sure he has if figured out. I can’t make sense of it. NYC’s Stuyvesant Town was bought by Tishman Speyer back in the good old days (2006) at a big price of $4.3b. It went into default last year and the equity and Mez debt got taken to the cleaners. There was a $3b senior mortgage. $1.5b was taken down by Wachovia and later put in a $7b CDO. The other $1.5 billion was taken up by our pals at Fannie and Freddie. This a political deal and a business deal. There are many rent controlled apartments in Stuy Town. The city of NY will not let anyone walk on those people’s rights. And Ackman wisely got ahead of this issue with a plan he made public last week. (NYT and NY magazine) He made it clear that he was not going to mess with that problem. Any of those renters with subsidized apartments were welcome to stay. With that issue defused the only remaining questions were (1) what was the price Ackman was willing to pay and (2) how was he going to finance it. The price Mr. A put on it is $3b. Exactly equal to the outstanding 1st mortgage. The way to pay for it? Simple. The existing lenders would restructure the notes and stay in the deal for a very long time. Well done Bill. You plan to buy one of the largest properties in NYC with next to no money down. Here are some of my problems with this transaction. I asked The FHFA (the regulator for Fannie and Freddie) sometime ago about this deal. I will rely on their responses to make some points. The Stuy Town property is not worth $3b. Fitch recently valued the property at $1.8 billion. When I asked about this the FHFA responded:
That’s interesting. The lender thinks their loan is underwater. But Bill Ackman thinks it is money good. So Fannie and Freddie love Bill. He is going to bail them out of a problem. He is going to force F/F to lower the mortgage to a much lower rate and the loss on F/F’s books will just be moved down the road for a decade or so. Everyone will be happy. Except me and few hundred million other taxpayers who have to support it. It does not have to be like this. The value of the Stuy Town property does not have to be artificially inflated. F/F do not have to jump through hoops to avoid an accounting loss. They had credit protection on their holdings of Stuy Town debt:
Color me shocked. They had “enhancements”. In other words they either had some form of CDS or they put the bonds in a CMO/CDO and took back senior tranches. They did not do the latter:
So they have a CDS or insurance contract that protects them from some or all of the losses relating to Stuy Town. If F/F can get out whole today there is no reason for them to stay in this deal. They never should have been in this transaction in the first place. There was a fat coupon on this, but we now know that that the coupon was not enough to compensate for the risk. It was a bad deal from the time it was signed. The evidence of that is the fact that F/F and “other investors” sought credit protection. The real motivation for F/F was the “low income housing credits” that the Agencies needed to fulfill their Congressional obligations. On that subject:
The silly game of housing credits and the GSE is one of the reasons were are in a decade long housing crisis. It is/was a bankrupt concept. It no longer exists. There is no excuse for F/F to roll over and stay in the Stuy Town transaction. This is a “story deal” that is going to come to a head in the next few months. Wilbur Ross is also a player; but he is keeping his cards close. If Ackman wins this one it will prove once again that he is force to be reckoned with and that the taxpayers are suckers. Note: I would love to know if those “enhancements” came from AIG. Wouldn’t that be a kick in the head?  
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| Adrian Douglas: Gold market isn't 'fixed'; it's rigged Posted: 14 Aug 2010 04:57 AM PDT 10:11a Saturday, August 14, 2010 Dear Friend of GATA and Gold: Following research done by GATA consultant Dmitri Speck, GATA board member Adrian Douglas has studied the morning and afternoon "fixing" of the gold price by the major London trading houses and concludes that it is just as much a price-suppression mechanism as the London Gold Pool of the 1960s admittedly was. "The more gold rises overnight in essentially Asian markets," Douglas writes, "the more it is sold down into the PM fix. This was exactly the modus operandum of the London Gold Pool but now it is being done covertly." Douglas, publisher of the Market Force Analysis letter, continues: "Such a consistent manipulative effort would necessarily involve entities with access to large amounts of gold; this implicates central banks, as they are the only entities with large hoards of gold, and furthermore they have a motive for suppressing the price of gold, which is to hide their mismanagement and debasement of their national currencies. Further, the five bullion banks that conduct the fix would have to be complicit because by definition they are responsible for determining the clearing price on the fix, so they must be aware of the impact on price of the selling activities of the entity or entities offering gold in such large quantities that it causes such price aberrations. As the central banks do not trade themselves, it is more than likely that some or all of the banks involved in the fix also act on behalf of central banks. What is irrefutable from this analysis is that the gold market is not 'fixed'; it is rigged." Douglas' analysis is titled "Gold Market Is Not 'Fixed,' It's Rigged" and you can find it at GATA's Internet site here: http://www.gata.org/files/AdrianDouglasGoldMarketRigged-08-14-2010.doc And at the Market Force Analysis Internet site here: https://marketforceanalysis.com/articles/latest_article_081310.html CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php Join GATA here: Toronto Resource Investment Conference The Silver Summit New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth
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| Adrian Douglas: Gold market isn't 'fixed'; it's rigged Posted: 14 Aug 2010 04:57 AM PDT 10:11a Saturday, August 14, 2010 Dear Friend of GATA and Gold: Following research done by GATA consultant Dmitri Speck, GATA board member Adrian Douglas has studied the morning and afternoon "fixing" of the gold price by the major London trading houses and concludes that it is just as much a price-suppression mechanism as the London Gold Pool of the 1960s admittedly was. "The more gold rises overnight in essentially Asian markets," Douglas writes, "the more it is sold down into the PM fix. This was exactly the modus operandum of the London Gold Pool but now it is being done covertly." Douglas, publisher of the Market Force Analysis letter, continues: "Such a consistent manipulative effort would necessarily involve entities with access to large amounts of gold; this implicates central banks, as they are the only entities with large hoards of gold, and furthermore they have a motive for suppressing the price of gold, which is to hide their mismanagement and debasement of their national currencies. Further, the five bullion banks that conduct the fix would have to be complicit because by definition they are responsible for determining the clearing price on the fix, so they must be aware of the impact on price of the selling activities of the entity or entities offering gold in such large quantities that it causes such price aberrations. As the central banks do not trade themselves, it is more than likely that some or all of the banks involved in the fix also act on behalf of central banks. What is irrefutable from this analysis is that the gold market is not 'fixed'; it is rigged." Douglas' analysis is titled "Gold Market Is Not 'Fixed,' It's Rigged" and you can find it at GATA's Internet site here: http://www.gata.org/files/AdrianDouglasGoldMarketRigged-08-14-2010.doc And at the Market Force Analysis Internet site here: https://marketforceanalysis.com/articles/latest_article_081310.html CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php Join GATA here: Toronto Resource Investment Conference The Silver Summit New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth
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| Weekend Poll: Buffett Or Gross - Inflation Or Deflation? (Or Neither) Posted: 14 Aug 2010 04:08 AM PDT
Buffett (Inflation) 8% (17 votes) Gross (Deflation) 25% (52 votes) Stagflation (Bitchez) 26% (53 votes) We Have Passed The Point Where Either Matters 40% (82 votes) Total votes: 204
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| Posted: 14 Aug 2010 04:00 AM PDT We came to see the real America. This week, we had a good look around. Fellow Reckoners will recall that we are on a vagabond's odyssey, traversing the Great Empire in search of a Greater Correction. We began our tour in California, the real estate bubble of the west. It will conclude, if all goes to our back-of-the-envelope plan, in Florida, the real estate bubble of the east. In between – Arizona, Nevada, New Mexico, Texas… We keep our ear to the ground, listening for aftershocks. About an hour north of Houston, beneath the sometimes flight-path of spaceships bound for mysterious skies overhead, sits Lake Livingston. A sleepy little region of abrupt tranquility, the winding streets and charming locals answer to the moniker, "Small Town America," like none we've yet encountered. Great egrets jostle for position in sunset snapshots by the water and sitting out front on the porch appears to be the town's favorite pastime. "The ones with fences, backing onto the lake, they're the multi-million dollar places," a local friend told us while we were driving to a decidedly not-multi-million dollar area of town during the week. "Mostly they're weekend getaways. People come up from the city to go boating or to fish. Then, during the week, the place quiets down again. That's when the locals come out." Driving deeper into the woods, the roads seemed to sprout potholes, first like a teenager's chin sprouts hairs…then like his cheeks sprout pimples. More and more were we grateful for having chosen the 4WD over our rented sedan. "This one sold to a man out west, San Francisco, I think. He wanted to rent it out, you know, use it as an investment. I used to know the previous owner. She moved into a retirement home a couple of years back, sometime after Hurricane Ike," our friend informed us. "But it's been vacant for months now. The father lost his job and couldn't pay the rent, then there was some kind of misunderstanding between the tenants and the fellow from San Francisco. I'm trying to help get it rented now, or sold. It's not easy," she said. The place was a modest, three bedroom brick and tile job on a corner block. The current owner, we learned, had tried to fix the place up a bit. A fresh coat of paint…some new, old-looking wallpaper in the kitchen…some new, old-looking curtains in the living room. The story is painful…and painfully unoriginal. Needless to say, the place isn't renting. Nor is there any interest from buyers. The lawn is long and dust gathers on the fans… All in all, the Lone Star State fairs pretty well compared with the rest of the nation when it comes to full-blown housing crises. "Only" 11,727 foreclosure postings were filed last month in Texas, or approximately 1 in every 819 housing units. Postings were down 3.7% from June. In case you're wondering, Nevada took top dishonors for the 43rd straight month, with one in every 82 housing units receiving a foreclosure filing in July. California, Florida, Illinois, Michigan and Arizona ate the lion's share of the rotting real estate carcass, with those five states accounting for more than half of the nation's foreclosure total. Contrary to mainstream economists' projections, housing has not stabilized this year. Far from it, in fact. Last month alone, 325,299 properties across the US received a notice of default, auction or bank repossession, according to RealtyTrac. That's one in 387 households. It was the 17th consecutive month notices exceeded the 300,000 mark. Although down 10% year-on-year, the expiration of various governmental stimulus measures saw July's number jump 4% from the previous month. Lenders seized 92,858 properties in July, the second-highest monthly tally since RealtyTrac began keeping records in January 2005. "The numbers are exploding due to unemployment and economic displacement," said Rick Sharga, senior vice president of marketing at RealtyTrac. "We will see them get a lot worse unless we see some job creation." This worsening trend will come as no surprise to anyone who realizes that unemployed people can't pay mortgages, of course…which is perhaps the reason so many mainstream economists missed it altogether. Fellow Reckoners will recall neo-Keynsian torchbearer, Paul Krugman, announcing on his New York Times Blog that Obama's stimulus package would keep unemployment below 9%. The $787 billion "emergency" package (which the Congressional Budget Office later revised upwards to $862 billion) was, by the government's own accounting, supposed to create 3-4 million jobs. Let's take a quick look at how that panned out: Initial jobless claims last week rose a fraction to 484,000, the highest in six months, according to the Labor Department. "This is simply awful," The Daily Reckoning's favorite economist, David Rosenberg, wrote in a note this week. "If claims [go] back up above 500k, for at least a few weeks, double-dip risks will rise materially… "…98% of the time when Household employment contracts three months in a row, we are already in a recession or about to head into one," Rosenberg continued. "Who knows? Maybe we'll be lucky and this will be the other 2% this time around." Currently, more than 4.4 million people are collecting unemployment benefits nationwide, while an additional 5.3 million are receiving emergency and extended payments. So, where does that leave housing? What is to become of all those long lawns and dusty fans across America? Longer and dustier, would be our guess. Supply remaining equal, prices are generally driven by demand. For a border state like Texas, securing additional demand ought to be a cinch. According to the Phoenix New Times, a kind of Village Voice paper we picked up while in Arizona a few weeks back, some 100,000 immigrants – both legal and illegal – have fled the Copper State and its infamous Senate Bill 1070. Most have moved, or will move, to neighboring states. Driving the back roads of Livingston, Texas, we notice most fences display one of two signs: "For Sale" or "Keep Out." The immigration debate is one for another day, Fellow Reckoner. For now, we'll simply point out these strange and worrying signs of the times. Joel Bowman Signs of the Times originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| Buffett Vs Gross, Or Inflation Vs Deflation - Who Is Right? Posted: 14 Aug 2010 03:50 AM PDT
Some days ago, Business Week pointed out that "Warren Buffett shortened the duration of bonds held by his Berkshire Hathaway Inc. after warning that deficit spending could force inflation higher." As the article further pointed out, twenty-one percent of holdings including Treasuries, municipal debt, foreign-government securities and corporate bonds were due in one year or less as of June 30, Omaha, Nebraska-based Berkshire said in a filing Aug. 6. That compares with 18 percent on March 31, and 16 percent at the end of last year’s second quarter. The conclusion: "It may be a sign that Buffett expects interest rates to start rising, maybe sooner than the conventional wisdom." Yet very curiously, as we pointed out, another capital markets titan, Bill Gross with his trillion+ in fixed income securities courtesy of Pimco's numerous asset managers, has done precisely the opposite. As the chart below demonstrates, Gross' flagship Total Return Fund has been doing the inverse of Buffett, and has been actively increasing the duration of his bonds over the past two years, with the current blended maturity profile being the most long-end weighted in years: in fact the percentage of bonds maturing in 3 years or less is now the lowest it has been since October 2008. Using the above logic, it would signify that, unlike Buffett, Gross is now more primed for deflation than ever. In the great inflation-deflation debate, this will be the primetime heavyweight cagematch to watch. Between Buffett's empire and Pimco's FI monopoly, one of the two will have to lose. Our question of the weekend is who will it be?
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| Posted: 14 Aug 2010 03:38 AM PDT
After a brief hiatus, Jim O'Neill is back, and this time is taking it easy on taunting the bears. In his weekly letter he has some rather lucid questions, the first one of them being the observation of the paradox of the surging Chinese trade deficit in light of the weakening renminbi. O'Neill states: "the GS trade weighted CNY has actually weakened by around 1.75pct since they “ de-pegged”, by “undershooting” the rise of the Euro, Yen et al." Don't anyone tell Schumer that China's whole revaluation bluff was nothing but (and in fact a smokescreen for further devaluation) or there will be more theatrical demands for blood. O'Neill also looks at recent Chinese regulatory developments and notes that the push "to bring any off balance sheet vehicles for disguised lending, back on the balance sheet, and to be prepared to raise fresh capital" is sensible but hopes that "if this is going to be implemented, if necessary, offsetting stimulatory measures would be introduced." Sure enough, China also has to pay for the Keynesian funeral for a long, long time. Not surprisingly, O'Neill looks at the one-time record pick up in the German economy courtesy of a massive EUR devaluation and extrapolates far into the millennia: "there seems to be a belief that Germany is on the verge of a jobs “ miracle” , and there is more and more talk of a period of stronger domestic demand." Sorry no. It is nothing like that and is purely a function of the ever more volatile seesawing in key FX crosses, on a trendline to global deleveraging contraction. Germany merely borrowed from the future courtesy of a plunge in EURUSD. It is already paying for this now and this quarter's data will be a major disappointment. Much more from O'Neill in this week's note, which is now far less permabullish than the Jim of even two months ago.
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| 1000 Restaurants And Shops Accepting Gold In Malaysia Posted: 14 Aug 2010 03:19 AM PDT Paper money is so old hat. While De La Rue - which makes banknotes for 150 currencies - struggles with production problems and management turmoil, in one part of Malaysia, they are looking at an ancient alternative - gold. In a move applauded by some local Muslims, the state government of Kelantan said it was introducing a new monetary system featuring standardised gold and silver coins based on the traditional dinar and dirham coins once used by the Ottoman Empire. Nik Abdul Aziz, the state's chief minister, spoke in visionary terms of an economy in which state civil servants would be paid in the new sharia currency, and the poor would be protected against inflation by the intrinsic value of the precious metals used to produce it. About 1,000 shops and restaurants in the state have said they will accept the new currency, which follows an earlier issue of gold dinars in 2006. The coins comply with traditional Islamic teaching on the use of coins with intrinsic value as a medium of exchange, rather than paper money. More Here.. 2000 Layoffs. 25 Supermarket Store Chain Closing In Atlantic Area More Here.. Market Closes After 67 Years More Here.. 
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| Posted: 14 Aug 2010 03:04 AM PDT
In a surprising act of lucidity, David Kostin recently reduced his 2010 S&P target from 1,250 to 1,200. Now, the Goldman strategist has penned his own version of David Rosenberg's SIRP (Safety and Income at A Reasonable Price), by introducing two strategies for a low GDP environment: Low Operating Leverage And Dividend Growth (LOL-DG - yes, we prefer Rosenberg's acronym).Hopefully, this means that the GARP abortion is finally dead and buried. Kostin clarifies this new recommendation, after various client meetings: Clients were most interested in discussing our recommendation to buy stocks with low operating leverage and sell firms with high operating leverage. The weak US GDP growth forecast and specter of deflation means top-line sales increases will be hard to achieve. Firms with low operating leverage should benefit from stable margins and less risk of negative EPS revisions and should outperform companies with high operating leverage. We suggest buying a basket of 25 stocks with low operating leverage (Bloomberg ticker: The intuition behind our low vs. high operating leverage trade has two components: First, Goldman Sachs Economics forecasts US GDP will post average annual growth of 1.9% in 2011, near the low of the 51 economists surveyed by the Blue Chip Economic Forecast. Consensus growth forecast averages 2.8%. The earnings models that equity analysts use to forecast EPS estimates incorporate a GDP growth rate assumption. If consensus 2011 GDP growth (2.8%) falls towards the Goldman Sachs estimate (1.9%), then consensus sales projections will have to be slashed because GDP and sales are correlated. As a result, earnings estimates will also have to be reduced. Negative EPS revisions should be more modest for firms with low operating leverage compared with companies with high operating leverage. EPS revision differential should drive relative share price performance. Second, profit margins have already returned to near-record levels for the overall market (2Q reached 96% of prior peak). The prospect that profit margins will continue to rise meaningfully from already elevated levels is becoming more difficult to embrace given a weak US economy will retard top-line revenue growth. Significant cost savings have been realized during the past year but incremental margin improvement will be more challenging. Buy High Dividend Growth: Lower potential upside to the US equity market favors buying stocks offering a combination of both high initial dividend yield and strong dividend growth. Our basket of 40 S&P 500 stocks have an estimated cash-return-on-cashinvested of 3.9%, more than 200 bp higher than the equal weighted S&P 500. The stocks have a larger market cap, higher current annualized dividend yield, and faster expected dividend growth than the equal-weighted S&P 500. Essential beach reading: Our 2Q 2010 S&P 500 Beige Book We included verbatim excerpts from 56 company conference call transcripts in our quarterly S&P 500 Beige Book. We highlighted 5 key themes: Theme 1: Uncertain economic outlook but Europe better-than-feared. Managements were positive on 2H outlook but tempered it with caution around the consumer. Views differ across sectors, with Industrials and Materials generally more positive and Health Care more conservative. Examples: F, MCD, NKE, KMB, JPM, MS, UNH, JNJ, ETN, FDX, GE, BA, V, XRX, FCX, OI. Theme 2: Focus on margin improvement. Corporate margins continue to benefit from 2009 cost cuts and lean hiring. Many firms guided to flat or slightly higher sequential margins in 2H and seem to be placing a higher priority on margin levels than other performance metrics. Managements indicated that much of the previous cost cuts will remain “permanent”. sExamples: NKE, CL, COP, MHS, CMI, GE, LMT, WM, XRX. Theme 3: Disciplined hiring practices. Corporations remained tentative in their hiring practices, waiting for stronger signs of stabilization. Many firms cited high unemployment and weak sentiment as reasons for caution. Lean payrolls may help companies protect their margins in a slowing economy. Examples: AMZN, KMB, MMM, UPS, PAYX, AKS, ETN. Theme 4: Use of large cash balances. Corporate cash balances remain high and companies continued to pay down debt, raise dividends, and buyback stock in 2Q. The desire to expand margins and capture limited growth opportunities has curtailed investment spending. Examples: F, CAT, GE, UPS, AMZN, PEP, MMM, X. Theme 5: Mitigated impact from currency moves. Many firms hedge their near-term FX exposure. Managers noted that a persistently strong USD could be a headwind. If the USD weakens against the Euro it could be a mild positive for profits as hedges roll off. Examples: KO, FDX, UPS, MCD, NKE.
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A zero policy rate during a crisis is understandable, but a zero rate after a year of recovery gives legitimacy to questions about the sustainability of the recovery and adds to uncertainty.
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