Gold World News Flash |
- GoldSeek.com Radio Gold Nugget: Bill Murphy & Chris Waltzek
- Dollar at 5 month low in Asian trade
- No $2,000/oz. Gold in Forecast
- The ‘How’ of a Collapse Is Not Our Only Concern
- Gold Seeker Closing Report: Gold and Silver End Slightly Higher
- Calculating the "Fair Value" of Gold
- Gold & Silver Rally, 2011 Economic Backdrop "Got to Be Good" for Gold Investors, Says
- In The News Today
- GFMS surprises with their strong prediction on Gold
- Reuters Poll Indicates Up To 60% Of Japanese Companies Impacted By Production, Supply Chain Disruptions
- Why is Silver rising faster than Gold?
- Guest Post: Keeping Capital in a Depression
- If Gold Price Trades Below $1,450 Tomorrow, it Will Likely Signify Lower Prices Coming
- Carl Levin To Refer Goldman To Justice Department, SEC For Misleading Investors And Committing Perjury
- Bruce Campbell: No $2,000/oz. Gold in Forecast
- Silver Offers the Only Positive Return
- Capital Context Update: Dispersion Rising
- Precious Metals Market Report
- More Things
- Gold Channel Remains Key
- Libya: All About Oil, or All About Banking?
- The Long and Short of Spending More Than You Make
- Presenting John Paulson's Complete Les Echos Interview In Which He Is Bearish On Housing, Bullish On Gold
- Gold futures end higher after two-session drop
- Is Your Portfolio Insured?
- Gold $2107
- Gold Daily and Silver Weekly Charts
- Visual Evidence to Disprove the “Gold Bubble” Theory
- George Soros: U.S. dollar ALREADY losing reserve status
- Buying gold coins, what you need to know
| GoldSeek.com Radio Gold Nugget: Bill Murphy & Chris Waltzek Posted: 13 Apr 2011 07:02 PM PDT GoldSeek.com Radio Gold Nugget: Bill Murphy & Chris Waltzek
|
| Dollar at 5 month low in Asian trade Posted: 13 Apr 2011 06:14 PM PDT [url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] ...
|
| No $2,000/oz. Gold in Forecast Posted: 13 Apr 2011 06:03 PM PDT Not long after a New York Times headline quipped, "Now the Gold Rush Is to the Exits," Campbell & Lee Investment Management Cofounders, Bruce Campbell and Joe Lee, hung out their shingles in Oakville, Ontario. That was late in 1999. With the price of the precious metal (PM) sinking toward its lowest level since 1975, when the U.S. abandoned the gold standard, the new investment management company had no reason to focus on PM companies. Obviously, as Bruce tells us in this exclusive Gold Report interview, the company has since shifted its focus.
|
| The ‘How’ of a Collapse Is Not Our Only Concern Posted: 13 Apr 2011 06:01 PM PDT Our recent discussion of whether deflation or hyperinflation will lay waste to the economy elicited hundreds of responses. Two of particular interest are featured below. The first, from blogger Charles Hugh Smith, explains why it may be impossible to know with any certainty which of the two forces will prevail. The second, the thoughts of a Wyoming rancher, suggests that in a crisis, we may discover that our need for protein trumps concerns over gold, silver, Treasury paper and the dollar.
|
| Gold Seeker Closing Report: Gold and Silver End Slightly Higher Posted: 13 Apr 2011 04:00 PM PDT Gold climbed $9.05 to $1462.15 at about 9AM EST before it dropped back to $1451.14 by early afternoon in New York, but it still ended with a gain of 0.08%. Silver surged to as high as $40.743 before it fell back to $40.085, but it then bounced back higher in late trade and ended with a gain of 0.45%.
|
| Calculating the "Fair Value" of Gold Posted: 13 Apr 2011 03:39 PM PDT by Paul Tustain BullionVault Wednesday, 13 April 2011 In the absence of cashflow, judging gold's present "fair value" means analysing it like an insurance actuary would... WITH ITS incredibly constant supply and unsurpassed history as a store of value, physical gold is the wise choice for retained wealth during currency crises. But for new buyers, is today's price too high? From post-war Austria to Argentina a decade ago, it is clear that holding gold offers insurance against many levels of currency crisis – something which a growing number of economic historians, such as Reinhard and Rogoff and Niall Ferguson, thinks increasingly possible in the developed West today. Across long periods of history, from imperial Rome through to Elizabethan London and late 20th century America, the value of gold in terms of the goods and services that it can buy has remained remarkably stable. It is commonly noted that one ounce of gold could buy a good suit of clothes...
|
| Gold & Silver Rally, 2011 Economic Backdrop "Got to Be Good" for Gold Investors, Says Posted: 13 Apr 2011 03:38 PM PDT London Gold Market Report from Adrian Ash BullionVault Weds 13 Apr., 11:00 EST Gold & Silver Rally, 2011 Economic Backdrop "Got to Be Good" for Gold Investors, Says GFMS THE PRICE OF PHYSICAL gold investment bars in wholesale trading regained half of the week's near-2% drop on Wednesday in London, touching $1462 per ounce as global stock markets ticked higher and government bonds eased back. European Brent crude oil rallied to $121 per barrel after losing 6% in two trading days, while Kuwait suspended oil exports due to sandstorms, and Libya's new "contact group" of politicians called for Colonel Gaddafi to quit. Silver bullion held above $40 per ounce – and rose against non-US currencies – as the Dollar edged the Euro back down from new 15-month highs. "For the first time in history, private investor holdings now exceed official-sector holdings," said Philip Klapwijk – executive chairman of leading precious-metals consultancy GFMS Ltd – at a presentation in L...
|
| Posted: 13 Apr 2011 01:27 PM PDT Jim Sinclair's Commentary The modest recovery is fragile. The talking heads that fancy themselves as conservatives call for an end to QE2. The second QE ends their precious equity market will implode along with the so called recovery. There is only one primary purpose of QE, and that is to provide buyers for government paper when there are not enough to carry the deficit. All other claims for the primary purpose of QE are dribble. The damage has been done. Currency induced cost push inflation is locked into place. The course has been set in place and deviation is impossible. The dollar will seek lower levels. Gold will scream past $1650. Las Vegas home prices fall below 2000 levels with no relief in sight Posted: Mar. 29, 2011 | 7:30 a.m. Maybe this is the Final Four. Home values in Las Vegas, Atlanta, Detroit and Cleveland are now below January 2000 levels, according to a report released Tuesday. The Standard & Poor's/Case-Shiller 20-city index shows price declines in 19 cities from December to January. Eleven of them are at their lowest level since the housing bust, in 2006 and 2007. The index fell for the sixth straight month. The only market where prices rose was Washington, D.C., where homes prices gained 0.1 percent month over month. "The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery," said David Blitzer, chairman of the Index Committee at Standard & Poor's. The pain is not uniform, however. It is worse in cities where foreclosures and short sales are dominating the market and pushing home prices down. That includes Detroit and Cleveland, which are struggling with weak local economies. And it includes Las Vegas, Miami, Phoenix, and Atlanta, which are also reeling from overbuilding during the housing boom. Las Vegas has led the nation in foreclosures since the subprime mortgage crisis emerged, knocking down home prices 60 percent from their peak. The median new-home price fell 9.2 percent from a year ago to $188,900 in February, the lowest it has been since 2002 when it was $183,557, Las Vegas-based SalesTraq reported.
|
| GFMS surprises with their strong prediction on Gold Posted: 13 Apr 2011 01:24 PM PDT Dear CIGAs, GFMS is generally known to be a tad conservative on their predictions of the gold price. That is why today's report from the consultancy surprised me. They are calling for gold to surpass $1600 before this year is out. The following story from Dow Jones Newswire service is very good. You can read the entire story here: http://blogs.wsj.com/source/2011/04/13/streets-are-paved-with-gold/
|
| Posted: 13 Apr 2011 01:23 PM PDT
Even though US companies have yet to step up and indicate just how badly they have been affected by the Japanese quake (which could take a while: one of the benefits of massive inventory stockpiling), Japan is not that lucky. According to a Reuters poll the March 11 catastrophe has negatively affected nearly 60 percent of Japanese companies, disrupting production and supply chains."The special survey of 400 large firms was taken between March 25 and April 11 in tandem with the monthly Reuters Tankan, a poll of corporate sentiment... While Japanese companies are likely to be squeezed by production disruptions in northern Japan, as well as power shortages and supply woes, they may not feel the same pain as after the collapse of Lehman Brothers, when lending markets froze. "The impact of this earthquake will not be on the same scale as the Lehman crisis," said Soichiro Monji, chief strategist at Daiwa SB Investments, a Japanese asset management firm." Considering money markets froze up, stock plunged 40% and the world virtually ended in the months following Lehman, that's probably good news. As for the bad news: "Nearly 70 percent of respondents said difficulty in acquiring materials or parts was the single biggest problem in righting their businesses, a sign that supply chains remained hampered." And considering the bulk of Japanese production is export oriented, it is only a matter of time before these disruptions spread globally. From Reuters:
Full poll here. The following is a table of the results of a special Reuters poll, taken between March 25 and April 11. A total of 400 Japanese firms were surveyed with an average response from about 210 companies. ----------------------------------------------------------------------------- 1. Did the March 11 earthquake impact your production facilities or services? ----------------------------------------------------------------------------- YES NO Overall...........................58%.....................42% Manufacturers.....................62%.....................38% Non-manufacturers.................54%.....................46% ---------------------------------------------------------------------------------------------- 2. To what extent has your production or ability to supply services been restored to prequake levels? ---------------------------------------------------------------------------------------------- FULLY RESTORED 80+ PCT 50-80 PCT UNDER 50 PCT Overall.................26%.................54%...................14%........................7% Manufacturers...........29%.................48%...................13%.......................10% Non-manufacturers.......21%.................62%...................15%........................2% -------------------------------------------------------------------------- 3. Have the disasters negatively impacted your order volumes or sale prices? -------------------------------------------------------------------------- YES NO Overall...........................59%.....................41% Manufacturers.....................56%.....................44% Non-manufacturers.................62%.....................38% -------------------------------------------------------------------------------------- 4. To what extent have your orders volumes and sale prices returned to prequake levels? -------------------------------------------------------------------------------------- FULLY RESTORED 90+ PCT 50-90 PCT UNDER 50 PCT Overall..................2%.................41%...................50%.........................8% Manufacturers............0%.................30%...................56%........................15% Non-manufacturers........3%.................53%...................44%.........................0% ------------------------------------------------------------------------------------------------ 5. What has been the biggest obstacle to resuming your business? POWER FACILITIES ACQUIRING KEEPING REACHING CUSTOMERS, REPUTATIONAL MATERIALS STAFF SUPPLIERS DAMAGE Overall...........64%..........24%........69%......24%...................28%.................17% Manufacturers.....67%..........29%........80%......19%...................21%.................16% Non-manufacturers.59%..........18%........55%......30%...................36%.................19% ------------------------------------------------------------------------------------------------ 6. Will you move factories or offices or change your customers or suppliers? HAVE ALREADY DONE SO ARE CONSIDERING NOW ARE NOT CONSIDERING Overall..........................4%..........................17%.............................79% Manufacturers....................4%..........................18%.............................79% Non-manufacturers................5%..........................15%.............................79% ----------------------------------------------------------------------------------------------
|
| Why is Silver rising faster than Gold? Posted: 13 Apr 2011 01:00 PM PDT Silver is breaking new records today at almost $40 and gold is touching new highs of $1,458. Looking back, over the last few years we have seen gold rise from around $312 to $1,458 a rise of 4.67 times and silver from around $6 to $40 a rise of 6.67 times.
|
| Guest Post: Keeping Capital in a Depression Posted: 13 Apr 2011 12:54 PM PDT
Submitted by Doug Casey of The Casey Report Keeping Capital in a Depression Nothing is cheap in today’s investment world. Because of the trillions of currency units that governments all over the world have created – and are continuing to create – financial assets are grossly overpriced. Stocks, bonds, property, commodities and cash are no bargains. Meanwhile, real wages are slipping rapidly among those who are working, and a large portion of the population is unemployed or underemployed. The next chapter in this sad drama will include a rapid rise in consumer prices. At the beginning of this year, we saw the grains – wheat, corn, soybeans and oats – go up an average of 36% within one month. In the same time frame, hogs were up 30.7%. Copper was up 29.1%. Oil was up 14%. Cotton was up 118%. Raw commodities are the first things to move in an inflationary boom, largely because they’re essential to everything. Retail prices are generally the last to move, partly because the labor market will remain soft and keep that component down, and partly because retailers cut their margins to retain customers and market share. We are in a financial no-man’s land. What you should do about it presents some tough alternatives. “Saving” is compromised because of depreciating currency and artificially low interest rates. “Investing” is problematical because of a deteriorating economy, unpredictable and increasing regulation, rising interest rates and wildly fluctuating prices. “Speculation” is the best answer. But it may not suit everyone as a methodology. There are, however, several other alternatives to dealing with the question “What should I do with my money now?” – active business, entrepreneurialism, innovation, “hoarding” and agriculture. There’s obviously some degree of overlap with these things, but they are essentially different in nature. Active Business Few large fortunes have been made by investing. Most are made by creating, building and running a business. But the same things that make investing hard today are going to make active business even harder. Sure, there will be plenty of people out there to hire – but in today’s litigious and regulated environment, an employee is a large potential liability as much as a current asset. Business itself is seen as a convenient milk cow by bankrupt governments – and it’s much easier to tap small business than taxpayers at large. Big business (which I’ll arbitrarily define as companies with at least several thousand employees) actually encourages regulation and taxes, because their main competition is from small business – you – and they’re much more able to absorb the cost of new regulation and can hire lobbyists to influence its direction. Only a business that’s “too big to fail” can count on government help. It’s clearly a double-edged sword, but running an active business is increasingly problematical. Unless it’s a special situation, I’d be inclined to sell a business, take the money, and run. It’s Atlas Shrugged time. Entrepreneurialism An entrepreneur is “one who takes between,” to go back to the French roots of the word. Buy here for a dollar, sell there for two dollars – a good business if you can do it with a million widgets, hopefully all at once and on credit. An entrepreneur ideally needs few employees and little fixed overhead. Just as a speculator capitalizes on distortions in the financial markets, an entrepreneur does so in the business world. The more distortions there are in the market, the more bankruptcies and distress sales, the more variation in prosperity and attitudes between countries, the more opportunities there are for the entrepreneur. The years to come are going to be tough on investors and businessmen, but full of opportunity for speculators and entrepreneurs. Keep your passports current, your powder dry, and your eyes open. I suggest you reform your thinking along those lines. Innovation The two mainsprings of human progress are saving (producing more than you consume and setting aside the difference) and new technology (improved ways of doing things). Innovation takes a certain kind of mind and a certain skill set. Not everyone can be an Edison, a Watt, a Wright or a Ford. But with more scientists and engineers alive today than have lived in all previous history put together, you can plan on lots more in the way of innovation. What you want to do is put yourself in front of innovation; even if you aren’t the innovator, you can be a facilitator – something like Steve Ballmer is to Bill Gates. It will give you an excuse to hang out with the younger generation and play amateur venture capitalist. This argues for two things. One, reading very broadly (but especially in science), so that you can more easily make the correct decision as to which innovations will be profitable. Two, building enough capital to liberate your time to try something new and perhaps put money into start-ups. This thinking partly lay in back of our starting our Casey’s Extraordinary Technology service. Hoarding In the days when gold and silver were money, “saving” was actually identical with “hoarding.” The only difference was the connotation of the words. Today you can’t even hoard nickel and copper coins anymore because (unbeknownst to Boobus americanus) there’s very little of those metals left in either nickels or pennies – both of which will soon disappear from circulation anyway. We’ve previously dismissed the foolish and anachronistic idea of saving with dollars in a bank – so what can you save with, other than metals? The answer is “useful things,” mainly household commodities. I’m not sure exactly how bad the Greater Depression will be or how long it will last, but it makes all the sense in the world to stockpile usable things, in lieu of monetary savings. The things I’m talking about could be generally described as “consumer perishables.” Instead of putting $10,000 extra in the bank, go out and buy things like motor oil, ammunition, light bulbs, toilet paper, cigarettes, liquor, soap, sugar and dried beans. There are many advantages to this. Taxes– As these things go up in price and you consume them, you won’t have any resulting taxes, as you would for a successful investment. And you’ll beat the VAT, which we’ll surely see. Volume Savings –When you buy a whole bunch at once, especially when Walmart or Costco has them on sale, you’ll greatly reduce your cost. Convenience –You’ll have them all now and won’t have to waste time getting them later. Especially if they’re no longer readily available. There are hundreds of items to put on the list and much more to be said about the whole approach. The idea is basically that of my old friend John Pugsley, which he explained fully in his book The Alpha Strategy. Take this point very seriously. It’s something absolutely everybody can and should do. Agriculture During the last generation, mothers wanted their kids to grow up and be investment bankers. That thought will be totally banished soon, and for a long time. I suspect farmers and ranchers will become the next paradigm of success, after being viewed as backward hayseeds for generations. Agriculture isn’t an easy business, and it has plenty of risks. But there’s always going to be a demand for its products, and I suspect the margins are going to stay high for a long time to come. Why? There’s still plenty of potential farmland around the world that’s wild or fallow, but politics is likely to keep it that way. Population won’t be growing that much (and will be falling in the developed world), but people will be wealthier and want to eat better. So you want the kind of food that people with some money eat. I’m not crazy about commodity-type foods, like wheat, soy and corn; these are high-volume, industrial-style foods, subject to political interference. And they’re not important as foods for wealthy people, which is the profitable part of the market. Besides, grains are where everybody’s attention is directed. But there are other reasons I’m not wild about owning any amber waves of grain. Anything you want to plant will practically require the use of a genetically modified (GM) seed from Monsanto. I’m not sure I really care if it’s GM; all foods have been genetically modified over the millennia just by virtue of cultivation. And $1 paid to Monsanto typically not only yields the farmer $5 of extra return, but produces lots of extra food – which helps everybody. But I wouldn’t be surprised if someday the giant monocultures of plants, all with totally identical purchased seeds, don’t result in some kind of catastrophic crop failure. This is a subject for another time, but it’s a thought to keep in mind. In any event, agricultural land is no longer cheap. But I don’t suggest you look at thousands of acres to plant grain. Niche markets with niche products are the way to fly. I suggest up-market specialty products – exotic fruits and vegetables, fish, dairy and beef. The problem is that in “advanced” countries – prominently including the U.S. – national, state and local governments make the small commercial producers’ lives absolutely miserable. Maybe you can grow stuff, but it’s extremely costly in terms of paperwork and legal fees to sell, especially if the product is animal based – meat, milk, cheese and such. Niche foods are, however, potentially a very good business. Eternal optimist that I am, I see one of the many benefits of the impending bankruptcy of most governments as again making it feasible to grow and sell food locally. Above all, though, this isn’t the time for business as usual. You’ll notice that “Working in a conventional job” didn’t occur on the list above. And I pity the poor fools working for some corporation, hoping things get better.
|
| If Gold Price Trades Below $1,450 Tomorrow, it Will Likely Signify Lower Prices Coming Posted: 13 Apr 2011 12:41 PM PDT Editors Note: Please note we posted incorrect gold and silver prices in Franklin Sanders Commentary yesterday, due to no fault of Franklin Sanders. The correct prices are now posted. Our apologies for any confusion caused. If only gold was 1242 and silver 18.59, I think we can safely say you will never see those prices for gold and silver again on goldprice.org! Gold Price Close Today : 1454.90 Change : 2.00 or 0.1% Silver Price Close Today : 40.235 Change : 0.177 cents or 0.4% Gold Silver Ratio Today : 36.16 Change : -0.110 or -0.3% Silver Gold Ratio Today : 0.02765 Change : 0.000084 or 0.3% Platinum Price Close Today : 1772.50 Change : -0.70 or 0.0% Palladium Price Close Today : 763.10 Change : -0.40 or -0.1% S&P 500 : 1,314.41 Change : 0.25 or 0.0% Dow In GOLD$ : $174.35 Change : $ (0.12) or -0.1% Dow in GOLD oz : 8.434 Change : -0.006 or -0.1% Dow in SILVER oz : 304.98 Change : 0.17 or 0.1% Dow Industrial : 12,270.99 Change : 7.41 or 0.1% US Dollar Index : 74.99 Change : 0.139 or 0.2% If you were waiting for a meaningful message from the US DOLLAR INDEX today, you might as well go search the Collected Speeches of Barak Obama for wisdom. Today it rose 13.9 basis points to trade now at 74.992. Notice, if you are not already bored to death by this performance, that it just could not QUITE close over the magic 75.00 number. The stench of death and weakness clogs the air. The dollar's leprous colleagues, the euro and yen, did not edify, either. The euro closed at 1.4441, and appears to have hit its new high yesterday and reversed, but follow thru must confirm. The yen has with great spirit and verve rallied up to its 200 day moving average. Don't count on it penetrating. Lats price I saw was 83.86Y/$ (119.24c/Y100). A reader rebuked me for my clumsy description of the relation between bonds and yields. It is true that the nominal value of a bond depends on the interest rate stated on its face, but that wasn't what I was trying to point out. Rather, the price of bonds varies inversely with market interest rates. If rates rise, bond prices fall; if rates fall, bond prices rise. Yield is what the bond will in fact return, taking into account its stated interest rate and market rates. Stated rate never changes, but yield changes with market interest rates. So when bond prices fall without the Federal Reserve changing its benchmark interest rate, that implies the market expects (1) lower dollar prices, or (2) higher interest rates. Test on Friday. STOCKS did nothing to build confidence today. Dow's low came at 12,224.45, a little below its 20 day moving average (12,231), then closed 7.41 gigantic points higher at 12,270.99. S&P500 darted, bobbed, and weaved at a perfectly glacial pace, adding 0.25 -- yes, 1/4 of a point -- to close 1,314.41. I feel sort of ashamed about all badmouthing stocks so much -- feel sorry for them, so I'll try to say something really nice about them today. STOCKS are the mercurochrome in the Investing Medicine Chest, but they could hurt worse. They could be the tincture of iodine. I don't have a lot of good news about GOLD and SILVER for y'all, but I do have some richly exciting suspicions. The GOLD PRICE rose $2.00 by the time Comex closed, to $1,454.90. High struck at $1,462, low at $1,450.95. This is not strong at all, but it's not a breakdown, either. Two things can happen from here: gold can rise, or gold can fall. Wait, wait, that's not as dumb as it sounds. Gold's behavior could be consistent with two opposite outcomes. First, the 5 day chart might be showing us a completed A-B-C correction, with the low yesterday at $1,444. Arguing for that is the uptrend in place (higher highs and lower lows) since Tuesday's low. The rise we saw from yesterday's low to today's high could be the first leg up of a renewed rally. Exciting suspicion, but I have yet another. First, tho, the "Gold can fall" outlook. Gold failed to meet, let alone better, this week's high, so Monday's key reversal has still capped the market and will force it further down. If gold trades below $1,450 tomorrow, it will likely signify lower prices coming. Trading above $1,465 makes higher prices and a renewed rally more likely. The SILVER PRICE offers more exciting suspicions still. As with gold, the 5day chart shows an embryonic uptrend from Tuesday's low. It may have completed a correction. More than that, silver closed up 17.7c (no big deal) at 4023.5cd, yet in the aftermarket has traded up nearly 40c to 4062c. And that trading from yesterday's low looks like a rallying move. Yet these remain only exciting suspicions, o'ershadowed by that gold's Monday key reversal, and silver's failure to rise today above yesterday's high. Silver must hold 3960c or tumble quickly earthward. Overhead, clearing 4080c and trading on up would signal the correction is very small and the rally is resuming. On this day in 1742 Georg Fredric Handel's Messiah was performed for the first time in Dublin. The fellow who wrote the libretto, whose name nobody remembers, wrote to a friend saying that his libretto was magnificent but he wasn't so sure about Handel's music. He might have spoken a bit prematurely. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com © 2011, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down. Whenever I write "Stay out of stocks" readers inevitably ask, "Do you mean precious metals mining stocks, too?" No, I don't. 
|
| Posted: 13 Apr 2011 12:23 PM PDT
Yesterday JPMorgan, today Goldman (again) and Deutsche Bank. Following the completion of a two-year report by the Senate Permanent Subcommittee of Investigations into the role of Goldman and other banks in the housing collapse, the FT reports that "US Senate investigators probing the financial crisis will refer evidence about Wall Street institutions including Goldman Sachs and Deutsche Bank to the justice department for possible criminal investigations, officials said on Wednesday." According to Carl "Shitty Deal" Levin, head of the subcommittee, "banks mis-sold mortgage-backed securities and misled investors and lawmakers. “We will be referring this matter to the justice department and to the SEC [Securities and Exchange Commission],” he said. “In my judgment, Goldman clearly misled their clients and they misled Congress.” Bloomberg further clarifies: "At a briefing today, Levin said he believed Goldman Sachs executives weren’t truthful about the company’s transactions in testimony before the subcommittee at an April 2010 hearing. He said he would refer the testimony to the Justice Department for possible perjury charges...In my judgment, Goldman clearly misled their clients and they misled the Congress.” Levin said. And Deutsche Bank's Greg "I am short your house" Lippmann was not spared either: "Republicans and Democrats signed off on the report, which said Greg Lippmann, Deutsche’s top CDO trader, referred to assets underlying the securities as “crap” and “pigs” at the same time as his bank was selling them to clients. Prior to the crisis, Mr Lippmann built a short position in CDOs, betting that they would fall in value, even though Deutsche had a large long position on the securities." Just more smoke and mirrors? Or are we getting to a critical mass where even the very corrupt judicial system will have to respond? From FT:
And from Bloomberg:
Will Goldman's $550 million settlement have been in vain? Hardly. After all the ball is now back in the SEC's court. And as everyone knows the SEC is merely a stepping stone for incompetent prosecution lawyers before they find much better paying jobs where they can continue their careers as incomponent defense lawyers on Wall Street.
We are not holding our breath for regulators to find anything that a bribe here and there won't confirm was perfectly in line with the law. Full Senate report (link):
|
| Bruce Campbell: No $2,000/oz. Gold in Forecast Posted: 13 Apr 2011 11:29 AM PDT Source: Brian Sylvester of The Gold Report 04/13/2011 Not long after a New York Times headline quipped, "Now the Gold Rush Is to the Exits," Campbell & Lee Investment Management Cofounders, Bruce Campbell and Joe Lee, hung out their shingles in Oakville, Ontario. That was late in 1999. With the price of the precious metal (PM) sinking toward its lowest level since 1975, when the U.S. abandoned the gold standard, the new investment management company had no reason to focus on PM companies. Obviously, as Bruce tells us in this exclusive Gold Report interview, the company has since shifted its focus. The Gold Report: Tell us a little bit about Campbell & Lee Investment Management. Bruce Campbell: We provide investment management for individuals. We have continued the same positive, long-term track records we had at larger places but because we are smaller, we can have more fun and be a little bit more nimble. TGR: So, you give your clients at least some exposure t...
|
| Silver Offers the Only Positive Return Posted: 13 Apr 2011 11:28 AM PDT When thinking about an investment, the best managers look for returns that beat what they perceive to be average. In the long run, wealth is a relative measure—today, even the poorest people are wealthier than the richest people five hundred years ago, though we'd still say that today's poor are poor. Investments work along the same lines, with the simple concept being that an investment must have performance that is preferable to your current financial trajectory, and it must have a return that beats holding money in cash, as well as the negative returns incited by inflation. Whether or not you are a current silver holder or not, ask yourself one simple question: what price would it take for you to sell your metals or buy government debt? At what rate would it be favorable for you to invest your money in stocks, bonds or any other investment? Now, take that number, which is likely quite high, and compare it to past performance of all the markets out there. You can compare ...
|
| Capital Context Update: Dispersion Rising Posted: 13 Apr 2011 10:47 AM PDT
From Capital Context HY underperformed once again and while close-to-close comparisons will leave most with the perspective that it was a dull day, we see rising dispersion as investors begin to differentiate names more effectively. After reaching down to yesterday’s lows/wides, both IG credit and S&P futures managed to creep back up to close all but unchanged. Intraday swings were much less in credit than equities though but post Obama’s deficit speech we did see a continuation of the up-in-quality trade in credit as stocks limped back up to VWAP (only to lose it to the downside into the close).  This week has seen a re-emergence in the 2s10s30s correlation (tick-for-tick) with S&P futures. There seemed little impact in the US from what macro data we saw today as retail sales managed a modest beat and inventories came in lower than expected but it was enough to get us up to Friday’s low print in S&P futures (and Friday’s wides in IG credit) before the bell. That was the best we saw for the day as we slid for the rest of the day as JPY-based carry pairs increased their dispersion and dropped in general (AUDJPY was pretty much unch close to close). HY and IG closed pretty much at their wides of the day (with HY legging down further after the close) even with breadth relatively strong in single-names (more index overlays as we have seen IG widen 6 of the last 7 days and for 5 days in a row).
This dispersion reduces the FX carry trades ability to drive risky assets (think US stocks) and we note that once again DXY, ADXY, and TWI USD did very little on the day. We discussed carry trades at length recently but point out that the rise in vol among FX pairs reduces their attractiveness (even if intervention is on your side) and the elimination of the GC-IOER arb maybe has forced firms back into the ride-the-curve trade that was so popular in Q2-3 2009 – the 2s10s30s carrry trade. Gold and Silver outperformed the dollar today but moves were not as spectacular as in recent days and certainly showing no signs in the latter of the pullback we expected (though we favor Gold longer-term over the higher-beta silver – its better for our heart that way). The main themes that we see evolving are a modest rotation from equity to credit (reducing beta overall) and the up-in-quality shift in credit – favoring IG credit (safety or sanity?) – both of these are causing a useful rise in dispersion among credits and equity relative valuations. Issuers are taking advantage and the calendar remains heavy (much more IG than HY though – its not quite as easy as it was) with AA’s 10Yr note issued at a rather surprisingly $2.7 rich to the implied CDS curve’s value (someone wanted/needed some barely IG paper to fill their book and was willing to pay up) as AA’s CDS curve steepened on the day. All this frivolity in the primary market is certainly not indicated in secondaries though where we see another mixed picture today when looking at TRACE flows. Not only are we seeing more divergence among the sectors and rating cohorts on a day-to-day basis but the action is becoming more consistent rather than one-off derisking days. We had mentioned some expectation of a more idiosyncratic unwinding in secondaries (and single-name CDS) after the initial index overlays of the last few weeks, and we are starting to see it in bonds now – despite another week of decent inflows (except for poor old Munis). Today saw net selling pressure overall in secondary bonds from the buy-side among TRACE flows with Tech, Cons NonCycs, and Financials. Basic Materials was sold the most which we suspect was to make room for the new AA issue (which topped the sold list in that sector) but certainly seems like buy-side bond chaps are cooling on the idea of Miners and preferring Ags (despite silver and gold managing modest gains on the day and closing near highs of the day). Treasuries saw 10Y and 30Y outperforming as 2Y rallied but stabilized for much of the late day. 5-6bps of compression in yield at the longer-end impacted thge 2s10s30s butterfly that we mentioned and certainly didnt help stocks on that side. The duration extension in Treasuries was also evuident in corporates with 1-12Y buckets seeing net sellers while bonds more than 1Y maturity were actively bought (the super short-end <1Y was bid also). Vol was relatively uneventful top-down as OPEX dominates once again but we did see skews modestly rising and note that single-name vol was bid relative to indices which is reflected in the drop in implied correlation (but we suspect this is OPEX related as much as any real flow).  HY dispersion has begun to rise notably and IG is starting to rise recently. In pure credit land, you may be able to tell but we are noticing a significant pick up in dispersion or more accurately a bigger focus on idiosyncratic risks. Correlation (equity and credit implied) has dropped modestly recently but less technically the distribution of spreads is increasing and skewing wider as lower beta names are outperforming modestly. As is usual, HY dispersion will tend to rise before IG (as distressed names are singled out – see Dynegy today!) but even with the up-in-quality trade that is playing out recently, IG is starting to shift also. The chart is comparing high and low percentiles for the current IG and HY index names. A focus on credit fundamentals may just pay off at this point (as opposed to blindly buying everything systemically which we say oh-so-irreverently) especially if we see the credit cycle turning as we suspect it is. Aggregating all our bottom-up name performance saw our brioad credit index rally modestly on the day (reflecting what we said earlier about positive breadth) as tighteners outnumbered wideners by just under 3-to-1. Most sectors rallied on average except for Capital Goods, Media, and to a small extent Basic Materials. Leisure and Consumer Cyclicals saw the best risk-adjusted performance on the day. It is worth noting though that moves were very small in general (less than 1% of all names moved more than the aggregate average) as most concentrated on a handful of idiosnycratic names and the indices (while the rest were just reracks from dealers). It was not until spreads traded above 500bps did we see any names really moving and the bias there was wider (consistent with our earlier observations). YRCW, MBIA Inc, Polyone, Cablevision, and Gap Inc. were the risk-adjusted worst performers while Community Health (over-reaction yesterday?), MGM Mirage, RESCAP, Continental Airlines, and JetBlue were the best risk-adjusted performers in credit today. Transports were worst while Gaming (high beta and small industry) was best on the day. Contextually, today was much more about implied vol moves than credit or equities with the latter two practically unch at the aggregate average while vols rose in all but financials. Only 36% of our universe agreed on direction today (24% improving and 12% deteriorating) and the remaining 64% were split 29-35 in favor of credit outperforming while stocks dropped. Tech was only sector to see average spreads widen while average stocks rose in price as basic Materials, Capital Goods, Healthcare, and Consumer (Cycs and NonCycs) all saw average spread compression while average stock prices fell. Lunchtime themes remained mostly in tact with lower quality credits underperforming in vol (rising vol) and CDS (widening spreads) relative to higher quality but we did see the crossover space (BBB+ to BB) dominate the best performing stocks today. Stocks definitely rotated out of Capital Goods (as we said in the Midday Movers) while credit was unch for these lower beta names. Dynegy was the worst reklative performer (and we note we have been highlighting it recently from a credit perspective) as new broke of its hiring a restructuring firm (5Y spreads >1200bps now). The Bottom Line for us is that the same themes remain in place (equity to credit preference, up-in-quality credit, and rising dispersion or idiosyncratic risk), all of which warrant concern over equity levels. While earnings are supposedly the mother’s milk of stock prices (someone really smart told me that every day this year?), we are reminded that free cash flow is the real driver and profits are a levered result of GDP growth which is being downgraded lemming-like as we speak. While credit availability remains good for IG issuers, the potential for relevering (shareholder-friendliness) may be tainted if US CEOs continue to behave like Japanese CEO did in the 80s/90s – expecting lower than trend growth they hoarded and burned through cash. We like IG-HY decompression, HY 3s5s flatteners, Financials underperforming non-financials, and would remain fully hedged in The A-List for now. Our ETF Arb is stable and has more room for upside. Europe Not a very pretty day in Europe as it look sincreasingly like Greece will restructure and growth expectations are slowing in general. SovX moved back above 170bps and we saw further decompression in financials (most notably the rise the senior-sub spread is telling). Financials underperformed non-financials but we did see XOver tighten modestly as its higher beta names (Dixons for instance) rallied handsomely and steepened. The weakness in Main (especially given our comments above on the US up-in-quality trade) is driven almost exclusively by the decompression in financials. Remember that Main is exposed to much more mainstream financials than IG is in the US (more insurers). In fact Main ex-financials actually managed a 0.5bps tightening today as financials widened 2bps.  EM risk has stopped rallying in the last few weeks as the rise in oil prices potentially swings from profitability to demand destruction. All of the major and peripheral European countries saw their spreads widen today – some considerably – and we note that Spain is now above 220bps (25bps wider this week alone). The recovery from intraday lows for Brent priced in EUR today managed to help many of the CEEMEA names recover as they outperformed SovX notably. Slightly off topic, we do note that EM spreads have not particpated in the ebulience of the oil market (and its expected windfalls?) as much as we might have expected suggesting credit market participants see less sanguine growth for these nations (or more likely just a rise in turmoil that necessitates relatively wider spreads). It seems that once we get past a certain price in oil (around $65 for Brent in EUR terms) that the balance between the producers (which dominate the EM index) and growth/turmoil becoems more balanced – just a thought. Asia Asian sovereigns were mixed to modestly tighter with only NZD slightly wider. While not exactly Asia, we note that ZARJPY was the worst performing carry pair while NZDJPY was the best today (almost a 2% divergence between the two) as we discussed above with the dispersions among these pairs. Asian banks were the worst hit overnight but at the aggregate both Japan and Asia Ex-Japan managed to tighten modestly today with Japan outperforming (we suspect on more government LSAP efforts). Aussie spreads were very weak idiosyncratically (though unch at the index) once again with financials underperforming (in our favor for our systemic short Aussie financials vs ITRX AUS). Wesfarmers and CSR were the worst relative performers on the day. Index/Intrinsics Changes CDX16 IG +0.12bps to 95 ($0 to $100.19) (FV -0.31bps to 92.61) (24 wider – 64 tighter <> 56 steeper – 62 flatter) – No Trend. Spreads were mixed to mostly wider in the US with IG worse, HVOL improving, ExHVOL weaker, and HY selling off. IG trades 4bps wide (cheap) to its 50d moving average, which is a Z-Score of 1.3s.d.. At 95bps, IG has closed tighter on 143 days in the last 588 trading days (JAN09). The last five days have seen IG flat to its 50d moving average. HY trades 17.4bps wide (cheap) to its 50d moving average, which is a Z-Score of 1.4s.d. and at 445.89bps, HY has closed tighter on 65 days in the last 588 trading days (JAN09). Indices typically underperformed single-names with skews widening in general. Comparing the relative HY and IG moves to their 50-day rolling beta, we see that HY underperformed by around 4bps. Interestingly, based on short-run empirical betas between IG, HY, and the S&P, stocks outperformed HY by an equivalent 5.6bps, and stocks outperformed IG by an equivalent 0.3bps – (implying IG underperformed HY (on an equity-adjusted basis) but moves were rather small today in general). Among the IG names in the US, the worst performing names (on a DV01-adjusted basis) were RR Donnelley & Sons Company (+3.5bps) [+0.03bps], Dell Inc. (+3bps) [+0.02bps], and SLM Corp (+3bps) [+0.02bps], and the best performing names were Alcoa Inc. (-4bps) [-0.03bps], ERP Operating LP (-2.25bps) [-0.02bps], and Caterpillar Inc. (-2bps) [-0.02bps] // (absolute spread chg) [HY index impact]. Among the HY names in the US, the worst performing names (on a DV01-adjusted basis) were Levi Strauss & Company (+10.25bps) [+0.1bps], Rite Aid Corp (+11.92bps) [+0.1bps], and Belo Corp (+7.5bps) [+0.08bps], and the best performing names were Community Health Systems Inc (-34.75bps) [-0.33bps], Tenet Healthcare Corporation (-19.16bps) [-0.19bps], and Residential Capital, LLC (-17.5bps) [-0.18bps] // (absolute spread chg) [HY index impact].
|
| Posted: 13 Apr 2011 10:45 AM PDT By Catherine Austin Fitts I am headed over to middle Tennessee to join Franklin Sanders for our Precious Metals Market Report this Thursday evening. The silver and gold markets continue to be strong - with silver and gold reaching new nominal highs this last week. Franklin and I want to discuss what is supporting the continued rise. [...]
|
| Posted: 13 Apr 2011 10:42 AM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! April 13, 2011 02:26 PM [LIST] [*]Interesting interview [*]Hey buddy can you spare a dime? [*]U.S. lacks credibility-no? [*]Politicians lying – say it ain’t so [*]Central banks net buyers of gold [*]I never thought I say this – you were right Biden [/LIST] [url]http://www.grandich.com/[/url] grandich.com...
|
| Posted: 13 Apr 2011 10:42 AM PDT courtesy of DailyFX.com April 13, 2011 07:08 AM Weekly Bars Prepared by Jamie Saettele A break of long term trendline support in gold is needed in order to suggest that an important top has formed. The trendline is at 1371 this week. Continue to favor the upside towards long term channel resistance, which intersects with 1600 in the next several months. The 161.8% extension of the 1381.80-1449.70 rally is an objective at 1521. Short term support is 1441 and a drop below 1413.50 (April low) would be a sign that a top may be in place....
|
| Libya: All About Oil, or All About Banking? Posted: 13 Apr 2011 10:20 AM PDT
Libya: All About Oil, or All About Banking?Courtesy of Ellen Brown, originally published at Truthout  Several writers have noted the odd fact that the Libyan rebels took time out from their rebellion in March to create their own central bank - this before they even had a government. Robert Wenzel wrote in the Economic Policy Journal:
Alex Newman wrote in the New American:
Newman quoted CNBC Senior Editor John Carney, who asked, "Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power? It certainly seems to indicate how extraordinarily powerful central bankers have become in our era." Another anomaly involves the official justification for taking up arms against Libya. Supposedly it's about human rights violations, but the evidence is contradictory. According to an article on the Fox News web site on February 28:
Whatever might be said of Qaddafi's personal crimes, the Libyan people seem to be thriving. A delegation of medical professionals from Russia, Ukraine and Belarus wrote in anappeal to Russian President Medvedev and Prime Minister Putin that after becoming acquainted with Libyan life, it was their view that in few nations did people live in such comfort:
They maintained that the international community had been misinformed about the struggle against the regime. "Tell us," they said, "who would not like such a regime?" Even if that is just propaganda, there is no denying at least one very popular achievement of the Libyan government: it brought water to the desert by building the largest and most expensive irrigation project in history, the $33 billion GMMR (Great Man-Made River) project. Even more than oil, water is crucial to life in Libya. The GMMR provides 70 percent of the population with water for drinking and irrigation, pumping it from Libya's vast underground Nubian Sandstone Aquifer System in the south to populated coastal areas 4,000 kilometers to the north. The Libyan government has done at least some things right. Another explanation for the assault on Libya is that it is "all about oil," but that theory, too, is problematic. As noted in the National Journal, the country produces only about 2 percent of the world's oil. Saudi Arabia alone has enough spare capacity to make up for any lost production if Libyan oil were to disappear from the market. And if it's all about oil, why the rush to set up a new central bank? Another provocative bit of data circulating on the net is a 2007 Democracy Now! interview of US Gen. Wesley Clark (Ret.). In it he says that about ten days after September 11, 2001, he was told by a general that the decision had been made to go to war with Iraq. Clark was surprised and asked why. "I don't know!" was the response. "I guess they don't know what else to do!" Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan and Iran. What do these seven countries have in common? In the context of banking, one that sticks out is that none of them is listed among the 56 member banks of the Bank for International Settlements (BIS). That evidently puts them outside the long regulatory arm of the central bankers' central bank in Switzerland. The most renegade of the lot could be Libya and Iraq, the two that have actually been attacked. Kenneth Schortgen Jr., writing on Examiner.com, noted, "[s]ix months before the US moved into Iraq to take down Saddam Hussein, the oil nation had made the move to accept Euros instead of dollars for oil and this became a threat to the global dominance of the dollar as the reserve currency and its dominion as the petrodollar." According to a Russian article titled "Bombing of Lybia - Punishment for Ghaddafi for His Attempt to Refuse US Dollar," Qaddaffi made a similarly bold move: he initiated a movement to refuse the dollar and the euro and called on Arab and African nations to use a new currency instead, the gold dinar. Qaddafi suggested establishing a united African continent, with its 200 million people using this single currency. During the past year, the idea was approved by many Arab countries and most African countries. The only opponents were the Republic of South Africa and the head of the League of Arab States. The initiative was viewed negatively by the USA and the European Union, with French President Nicolas Sarkozy calling Libya a threat to the financial security of mankind; but Qaddafi was not swayed and continued his push for the creation of a united Africa. And that brings us back to the puzzle of the Libyan central bank. In an article posted on the Market Oracle, Eric Encina observed:
Libya not only has oil. According to the International Monetary Fund (IMF), its central bank has nearly 144 tons of gold, in its vaults. With that sort of asset base, who needs the BIS, the IMF and their rules? All of which prompts a closer look at the BIS rules and their effect on local economies. An article on the BIS web site states that central banks in the Central Bank Governance Network are supposed to have as their single or primary objective "to preserve price stability." They are to be kept independent from government to make sure that political considerations don't interfere with this mandate. "Price stability" means maintaining a stable money supply, even if that means burdening the people with heavy foreign debts. Central banks are discouraged from increasing the money supply by printing money and using it for the benefit of the state, either directly or as loans. In a 2002 article in Asia Times titled "The BIS vs National Banks," Henry Liu maintained:
He added, "Applying the State Theory of Money, any government can fund with its own currency all its domestic developmental needs to maintain full employment without inflation." The "state theory of money" refers to money created by governments rather than private banks. The presumption of the rule against borrowing from the government's own central bank is that this will be inflationary, while borrowing existing money from foreign banks or the IMF will not. But all banks actually create the money they lend on their books, whether publicly owned or privately owned. Most new money today comes from bank loans. Borrowing it from the government's own central bank has the advantage that the loan is effectively interest free. Eliminating interest has been shown to reduce the cost of public projects by an average of 50 percent. And that appears to be how the Libyan system works. According to Wikipedia, the functions of the Central Bank of Libya include "issuing and regulating banknotes and coins in Libya" and "managing and issuing all state loans." Libya's wholly state-owned bank can and does issue the national currency and lend it for state purposes. That would explain where Libya gets the money to provide free education and medical care and to issue each young couple $50,000 in interest-free state loans. It would also explain where the country found the $33 billion to build the GMMR project. Libyans are worried that NATO-led airstrikes are coming perilously close to this pipeline,threatening another humanitarian disaster. So, is this new war all about oil or all about banking? Maybe both - and water as well. With energy, water and ample credit to develop the infrastructure to access them, a nation can be free of the grip of foreign creditors. And that may be the real threat of Libya: it could show the world what is possible. Most countries don't have oil, but new technologies are being developed that could make non-oil-producing nations energy independent, particularly if infrastructure costs are halved by borrowing from the nation's own publicly-owned bank. Energy independence would free governments from the web of the international bankers and of the need to shift production from domestic to foreign markets to service the loans. If the Qaddafi government goes down, it will be interesting to watch whether the new central bank joins the BIS, whether the nationalized oil industry gets sold off to investors and whether education and health care continue to be free. Photo: A line of rebel trucks wait at the western entrance to Ajdabiya, Libya, on April 11, 2011. (Photo: Bryan Denton / The New York Times)
|
| The Long and Short of Spending More Than You Make Posted: 13 Apr 2011 10:00 AM PDT Breakfast was a real drag, as the kids were whining more loudly than usual about money, and how they needed some money, and how they didn't have any money, and how they were the only people they knew that were not dripping with cell phones and iPods and reader tablets and all that stuff, like this was supposed to make me rush out and buy them these things so that I don't damage their fragile self-esteem and ability to make friends, so that they can call and text each other all day and night about how much they hate me, and hatch their little plans to put poison in my food or something; you never know with kids, you know what I mean? Anyway, I said, my mouth full of fabulous fried eggs and crispy bacon (instead of the usual fruit and whole-grain cereals with no-fat milk crap I usually have to eat, because my wife was out of town), "You brats can have the biggest, baddest electronic gizmos made. You can have so many of the freaking things, in fact, that you will need a cart to carry them all around. Just get jobs and then use the money to buy them, like everybody else, ya little blood-sucking parasites!" This is where my wife would usually intervene, chastising me for yelling at them and telling me to be quiet and consoling the kids. But (and this is the important point) she ain't here now. So, finally, I had the chance to, uninterruptedly, explain to what appear to be congenital idiots, for the thousandth time, how the horrible Federal Reserve creates excess money, see, which increases the money supply, which increases prices. "This," I explained, "is just the 'prices side' of the problem. Now let's look at the 'income side' of the ledger. I don't make any more money than I made three years ago. Something has got to give, and in this case, it is you. Simple as that!" I naturally left out the ugly part about how I make the same money, and am lucky to get it, because I am lazy and incompetent, unless I want to pay attention to what I am doing, which I do in inverse relation to how well my golf game is going, like after that unexpected, beautiful, soaring 4-iron I hit last week! Straight as an arrow flew the gleaming ball, shining in the sun, right at the flag, landing picturesquely perfectly on the green before rolling magnificently to 3 feet from the cup, which I then 3-putted for a bogie and happy to get it. But what a memory! Back from my delightful reverie to the disagreeable pouting faces of the kids, they let me know that they still do not see the problem. Suddenly, I hit upon the idea of explaining, "If I make $1,000 per day, but my expenses are $1,200 a day, and getting higher every day, where am I going to get money to buy you stuff?" At this they started laughing at me, and mocking me, and saying, "You never made a thousand dollars a day in your life! And you never will, either, because you are stupid and mean and cheap and a terrible father who enjoys seeing his children suffer! Boo hoo hoo! Look at us suffer!" The point was well taken, and I quickly rephrased that to "If I make $200 a day and my expenses are $220 a day, how long can I last?" Again they started laughing in hooting derision, saying, "$200 a day? Don't make us laugh, you liar!" As a last resort, I resorted to the truth. I said, "Okay, if I make minimum wage of $7.25 an hour and I spend $8 an hour, how long can I continue before I am bankrupted and I have to send you kids to foster homes?" which thankfully diverted the conversation as to the pros and cons of that shocking happenstance, where I took the "pro" side. I was happy not to have to explain it to them that I am using so much money to buy gold and silver as a desperate, frantic response to the price inflation that is guaranteed by the Federal Reserve creating such inflation in the money supply, especially by committing the Big Unholy Sin (BUS) of using freshly-created money to buy government debt. Keeping from having to confront the kids about it is the hard part, because buying gold and silver is so easy that people say (fill in the blank). If you answered, "Whee! This investing stuff is easy!" then congratulations! You are waaaAAAAaaaay ahead of the vast majority! The Mogambo Guru The Long and Short of Spending More Than You Make originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2 .
|
| Posted: 13 Apr 2011 09:47 AM PDT
Two days ago John Paulson had an extended interview with Les Echos which however received little coverage in the US, supposedly since the interview was in French, and also because it was behind a paywall. Since the interview does provide some incremental perspectives by Paulson, it is useful to recreate it in its entirety. Specifically, Paulson is now far more bearish on US housing, blaming it on Frank-en-Dodd, and he continues to be as bullish as ever on gold. To wit: "Over time, the price of gold will rise in proportion to the creation of paper dollars. In an inflationary environment where the demand for protection increases, the price of gold can rise even further. Historically, gold has always been a safe haven against inflation and a safe haven in times of political instability. Today we face both risks." As for whether or not we will have QE3: Paulson is not the guy to ask. He is as confused as the Fed presidents. From Les Echos interview with John Paulson What do you think the impact of the Japanese crisis will be on the economic recovery and global financial markets? From a human perspective, it is obviously a tragedy. Economically, I do not think the Japanese crisis will have a major impact on overall recovery. Japan accounts for 8% or 9% of the global economy. This disaster could slow the growth of Japan's GDP by 2% this year, according to most estimates. There will be a particularly sharp drop in growth in the first quarter. But growth will resume in Japan next year already because of the reconstruction. Ultimately, this could reduce the overall growth of a quarter point this year, 4.5% to 4%, if one refers to forecasting the International Monetary Fund (IMF). This is not a significant event on the scale of the global economy. What is the main threat to the strength of U.S. recovery? To me, the major risk for the U.S. recovery is stagnating housing market. According to the latest figures, house prices are slightly down. Lack of funding limits the scope for private home purchases in the United States. Currently, banks have handcuffs. They can not do anything against borrowers if they default on their loans. The private sector is frozen because of regulatory uncertainty on foreclosures. Banks do not want to grant mortgages because their rights are guaranteed. Today, housing starts are at their lowest level for fifty years! That is why we have a recovery with slow job creation. We are at a lower level than 300,000 new homes a year against a peak of 2 million in 2007 (which had helped create 8 million jobs). Without restarting the housing sector and a minimum of 1 to 1.2 million homes built annually, it's hard to have a real strong recovery. Have you lowered your expectation of a rebound by 8% to 10% in property prices in 2011? Yes. When I made this prediction last year was before the reform Dodd-Frank 2010. Since then, banks have virtually halted lending for home financing because of the lack of clarification on the rules. This will be difficult to have a rebound in property prices this year. But with any luck, if banks start to reconnect with mortgages, we could have a real estate recovery in 2012 and 2013. Does that mean you consider the financial reform of Wall Street as a failure in this regard? Yes. It could hinder the recovery. It is a text-heavy (2,000 pages!) And poorly thought to be very difficult to implement. This reform precipitated mainly driven by an emotional reaction. The result is that it creates numerous conflicts and uncertainties. As Alan Greenspan, I think it will create market distortions. The European approach based on Basel III is much better and more flexible. The temptation to over-regulate is counter-productive. The financial crisis was linked to the fact that banks had excessive leverage and too many risky assets. The solution is not to try to dictate to banks what they can do or not do, but to require them to strengthen their capital to absorb potential losses and hold less risky assets. Can we say, however, that Wall Street banks have changed their practices by learning from the crisis? Absolutely. They have drastically reduced their leverage and have a much more conservative leverage structure. Do you think the Obama administration has changed its attitude vis-`-vis the business community since the last midterm elections? Initially, the Obama administration attempted to increase taxes, the traditional Democratic approach. They are doing a step back today to further support the private sector to foster job creation. Barack Obama has changed its policy and granted aggressive tax incentives to boost investment and stimulate growth. The weak point remains the financial reform. With a little hope, there will be changes to eliminate the negative aspects of this reform. What do you think of the criticisms of quantitative easing implemented by the Fed to stimulate the economy? Do not forget that we have experienced the worst recession since the Great Depression. This necessitated the use of unconventional means to avoid economic collapse. In this sense, the monetary stimulus and fiscal stimulus provided by the government have been very useful to help get the economy get back on track. The problem is that the quantitative recovery is not without consequences and creates the potential for inflation. Currently we have no inflation because we still have overcapacity. But the risk exists. It is undeniable that this monetary expansion is equivalent to running the printing press. It remains to be seen whether the Fed will reduce the recovery before it becomes inflationary. Who will refinance U.S. since China and Pimco now seem reluctant to buy Treasury bills? There are serious uncertainties about the exit strategy of the Fed. I'd be very surprised if there was a third round of QE. While many economists believe that the U.S. debt remains at a manageable level, sooner or later it will reach a threshold that will be a problem. Today, our federal debt is still at a relatively reasonable (around 65% of GDP), but if we add the local debt of the States and local governments are approaching the level of 100% of GDP which begins to be close to that of Greece or Portugal. It is a very serious potential problem. The U.S. does not have the ability of unlimited borrowings. Do you think the dollar could lose its status as the term "safe haven", even if it remains the dominant currency today? It's a possibility. But we must look at the currencies in relative terms. The UK is committed in the same way that the United States in terms of monetary stimulus. The euro has its own problems. In these times of uncertainty for paper based currency, I feel more secure in holding gold. Given the risks of inflation in three to five years and the volatility of the euro, gold offers good protection against the paper currencies devaluation and even the possibility of generating a return on fixed investment. In addition to our investment funds in gold which represents only 3% of our assets under management, we created a class of shares for our other strategies denominated in gold. And about 40% of our investors have chosen this option. We were the first fund to launch this voluntary investment class one month after the launch of the first round of quantitative easing by the Fed in March 2009. Do you think the gold price has still not reached a plateau? Indeed. Over time, the price of gold will rise in proportion to the creation of paper dollars. In an inflationary environment where the demand for protection increases, the price of gold can rise even further. Historically, gold has always been a safe haven against inflation and a safe haven in times of political instability. Today we face both risks. How do you explain the accusations of destabilization of the euro you been in the fall of 2009 when your fund has been cited in a survey by the Department of Justice? It was a total misunderstanding. First, we were not present at the so-called "lunch ideas," where we discussed the euro. Above all, we're not a macro fund and we take no position on the currency. The European Directive on hedge funds has undoubtedly helped to clarify our strategy and our position through a better dialogue with European authorities. On the crisis of the euro, I think it is limited to Greece, Ireland and Portugal and I am quite optimistic about the stabilization plan implemented. How do you respond to critics on the excessive size of hedge funds? Actually, I see no reason to worry about our size or our excessive influence. Although we are the third largest hedge fund with $ 36 billion in assets, we are 100 times smaller than BlackRock, which manages $ 3,000 billion. We are very small in terms of asset management. Our specialty is to invest in the event arbitrage. In recent years, our main goal has been to help companies avoid bankruptcy or emerge from bankruptcy, or to help them repay their debts to recapitalize. In total, we invested over 20 billion dollars over the past two years to help companies restructure, both in Europe and the United States, and emerge stronger from the recession.
|
| Gold futures end higher after two-session drop Posted: 13 Apr 2011 09:04 AM PDT By Myra P. Saefong and Sarah Turner Gold for June delivery climbed $2, or 0.1%, to close at $1,455.60 an ounce on the Comex division of the New York Mercantile Exchange. The contract had tallied a loss of $20.50 in the past two sessions. In the final hour of trading Wednesday, gold briefly touched a low of $1,452. Analysts blamed the move on a spike in the U.S. dollar…. "Look at the dollar — it's rallying and breaking away from the 75 mark," said Charles Nedoss, a senior market strategist at Olympus Futures, referring to 75 as a "critical level" for the dollar. … Even though gold prices have declined recently, the market has held on to Tuesday's 10-day moving average of $1,449.30, said Nedoss. A close above that 10-day moving average Wednesday is "very positive and bodes well for higher prices," he said. … "We do not expect heavy losses here given continuing economic uncertainty, the ongoing unrest in the [Middle East and North Africa] region, renewed euro-zone debt fears and, most importantly, short-term inflation pressures due to high food and energy prices," Andrey Kryuchenkov, an analyst at VTB Capital, said in a note to clients. [source]
|
| Posted: 13 Apr 2011 08:45 AM PDT syndicate: 1 Synopsis: Most investors, even the so-called professionals, are woefully unprotected against the risks of a big market crash – Alex Daley gives advice on "portfolio insurance." Also in this edition: Forget currency controls, travel controls are a bigger threat; and, private-sector employees are furloughed, too. Dear Reader, Last week, I wrote an article on furloughs that upset some of our readers from the government sector. Essentially, I pointed out that furloughs are a benefit of government employment. In the private sector, workers don't get furloughed in a budget crisis; they get fired. And I openly noted that I don't have much pity for the furlough complaints. It's better than losing a job. Furthermore, the furloughs likely wouldn't last long. In this case, they never even started. However, my tone was perhaps a bit harsh, and I do apologize for that. Hence, a few readers wrote angry emails accusing me of being insensitive. According to the emails, government employees are just plain folks trying to pay their mortgages. They didn't create the system. The government's runaway spending isn't their fault. Why be insensitive to them? While there's truth to this, I've never been a fan of the "I'm just following orders" excuse. This isn't Libya where we actually could blame a small group of families for ruining everything. (Please no conspiracy theory emails for that sentence.) In some ways, we're all partially responsible for the way this country has turned out – some more than others. Consider that 40% of government workers are members of public unions. They directly pay union dues used to lobby for more inefficiency, higher wages, and more spending. Maybe, these 40% didn't personally introduce the most recent bill to Congress, but they certainly can't claim zero responsibility. And the other 60%? While not everyone who works for the government supports it, I doubt many government employees are writing their congressman with requests to reduce funding for their departments. People rarely bite the hand that feeds them. Furthermore, after some additional thinking, I realized that my original statements were partially wrong. Private-sector employees are furloughed. In fact, they're furloughed every year. Can't remember any furlough days? Have I jumped off the deep end? Not at all. Every time inflation eats away at your earnings and taxes get higher, you get furloughed. You're working the same amount for less. In fact, it's actually worse than a furlough. The worker doesn't stay home, but must work more days to gain the same purchasing power. So, here's the problem. If my statements were insensitive to public-sector workers, aren't the emails sent to me insensitive to other taxpayers? The money paid to government employees comes from somewhere. It either comes from other folks trying to pay a mortgage today, or it can be borrowed and repaid in the future by folks trying to pay a mortgage then. Every time someone in the public sector picks up a paycheck, someone picks up a smaller one in the private sector – now or in the future. It's a zero-sum game. One could say, "Hey, you're right, but why go after the government employees. They're just regular Joes. Let's cut spending on the war or the bailouts." Sure, makes sense, but don't think the mortgage argument isn't circular here as well. Someone puts those armored Hummers together, someone builds those bombers, and someone checks mortgage papers at Citigroup. These are all regular Joes paying a mortgage too. They didn't create the system, and most are doing even less than a public-sector union member to perpetuate it. In fact, it would be hard to cut any spending without a regular Joe getting hurt. So, am I mean and insensitive? Maybe in some ways. But if I'm sensitive to the plight of the government worker, I'm simultaneously being insensitive to other taxpayers. And, to admit my own bias, I feel worse for the private-sector employee. He doesn't have the safety net of government employment (the whole point of my previous piece). When the going gets tough in a recession, the private-sector mortgage payer is the first one to default. The entire system is mean and insensitive. It's based on taxing some people to pay others – whether they are government employees, financial services employees, or workers in the military-industrial complex. Taxpayers are charged arbitrary bills for services many don't want and in some cases even despise. It's a nasty, nasty process that pits different groups in society against each other. I'm sorry if I've hurt anyone's feelings; I'm just trying to call it like I see it. I'm not a politician trying to get your vote here. We've gotten to our present mess exactly by trying to please everyone and not hurt anyone's feelings. We don't want to offend any firefighters, teachers, military personnel and other government employees. At the same time, we don't want to raise taxes and hurt the private sector. So what happens instead? The U.S. government borrows money like crazy and sets us all on a trajectory towards disaster. That's simply not a solution. There's no way to cut expenditures without hurting some decent person who wasn't at all responsible. The only way out of this is getting tough… yes, getting a little insensitive. If not, we'll all be comrades in the soup line together. First, Alex Daley will cover some ways to insure your portfolio against a market crash. Then, Kevin Brekke will discuss new plans to prevent delinquent taxpayers from getting a passport. Finally, I'll add some more notes on forex trading.
|
| Posted: 13 Apr 2011 08:31 AM PDT The 5 min. Forecast April 13, 2011 12:19 PM by Addison Wiggin – April 13, 2011 [LIST] [*]Gold shows resilience… Stuffy British bank forecasts $2,107 inside of three years [*]Frank Holmes tells Zurich audience about the "fear trade," the "love trade"… and why gold isn't in a bubble [*]Major gold stocks merely keep pace with the bullion… Where to find the outperformers [*]Shocking 15.7% increase in the deficit! And why today's big budget speech in Washington is already a nonstarter… [*]Readers carry on with their private debate: Should nontaxpayers be allowed to vote? [/LIST] Precious metals are proving resilient after yesterday's beat-down. Gold is back up to $1,461. Silver spent a few nanoseconds below $40 yesterday and as of this writing sits smartly at $40.56. With regular runs at historic highs, it's no longer cranky gold bugs and dollar bears doing their share of gold price forecasting. Analysts for t...
|
| Gold Daily and Silver Weekly Charts Posted: 13 Apr 2011 08:21 AM PDT |
| Visual Evidence to Disprove the “Gold Bubble” Theory Posted: 13 Apr 2011 08:19 AM PDT Precious metals are proving resilient after yesterday's beat-down. Gold is back up to $1,461. Silver spent a few nanoseconds below $40 yesterday and as of this writing sits smartly at $40.56. With regular runs at historic highs, it's no longer cranky gold bugs and dollar bears doing their share of gold price forecasting. Analysts for the proper, if stodgy, British bank Standard Chartered announced yesterday they are expecting gold to reach $2,107 an ounce by 2014. What's more, they say, "our modeling suggests a possible 'super-bull' scenario," based on a "powerful relationship" between per capita income in Asian emerging markets and the gold price. Standard Chartered estimates that per capita income in China and India will reach 30% of the US level over the next 20 years. On that basis, the bank sees "gold prices rallying up to $4,869 per ounce by 2020, should current relationships between Asian demand and gold persist." Standard Chartered wouldn't find much argument from US Global Investors chief and Vancouver alum Frank Holmes, who was the lunchtime keynote presenter here in Zurich today at the European Gold Forum. For starters, he furnished visual evidence to back up Marc Faber's claim in this space on Monday that gold is not in a bubble.
You'll see the chart follows the trajectory of three bull markets – gold beginning in 1971, the NASDAQ beginning in 1990 and gold again beginning in 2001. "Bubbles require massive leverage," Frank says, and there's no evidence investors are borrowing to load up on gold. For now, gold demand will increase steadily, driven by two of Frank's favorite themes – the "fear trade" and the "love trade." That is, investors buy gold because they fear what the Federal Reserve is doing with its balance sheet…
The result – negative real interest rates. That's when inflation is greater than the nominal interest rate. "Whenever you have negative real interest rates coupled with increased deficit spending," says Frank, "gold tends to rise in that country's currency." Likewise, the two party blockade on fiscal reform writ large in the US Congress. The "love trade," on the other hand, is something alien to North Americans and Europeans. "It is customary in most emerging countries to give gold as a gift to friends and relatives for birthdays, weddings, and to celebrate religious holidays," he explains.
Thus, the point to which Standard Chartered agrees: As incomes rise in China and India, jewelry demand is driving the "love trade." Gold demand in India during the first three quarters of 2010 exceeded all of the previous year. And China was on a pace to exceed the 2009 figures as well… all of that despite a steadily rising gold price all last year. Addison Wiggin Visual Evidence to Disprove the "Gold Bubble" Theory originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2 .
|
| George Soros: U.S. dollar ALREADY losing reserve status Posted: 13 Apr 2011 08:18 AM PDT (Money and Markets) — In July of 1944, 730 financial bigwigs from 44 nations met at the Mount Washington Hotel in Bretton Woods, New Hampshire for a conference in which they recreated the economic world… They established the U.S. dollar as the world's reserve currency. … Now, 67 years later, another conference has just concluded that gives several observers flashbacks to Bretton Woods. Like Bretton Woods, it was held at the Mount Washington Hotel. Also like the original, many of the financial world's movers and shakers were invited. The guest list is said to have included former Fed Chairman Paul Volcker, former British Prime Minister Gordon Brown, and former chair of President Clinton's Council of Economic Advisors, Joseph Stiglitz. The conference organizer? None other than George Soros — the internationalist and mega-investor who, in his own words, sees a pressing need to "rearrange the entire financial order." Soros said that the U.S. dollar is already losing its status as the world's dominant currency, increasingly being replaced by the euro, gold, oil and other commodities. … This is precisely why tangible asset and tangible asset stocks are on a rampage. More than that: This is why you can expect this huge, historic rally in oil, gold, silver, food and basic materials to not only continue but to accelerate in the weeks and months to come. [source]
|
| Buying gold coins, what you need to know Posted: 13 Apr 2011 08:10 AM PDT by Gary North … I am writing this for those readers who did what I recommended, have quadrupled their money (on paper and in digits), but who may be getting cold feet. … Mark Faber, who recommends owning gold as a hedge against a declining dollar, recently wrote this: "In my opinion the Fed funds rate should be at 5% . . . That will provide real interest rates. I don't think the Fed will increase interest rates to a positive real rate. So, I'd say to an investor, he should have at least 20 to 30 percent of his money in precious metals." … WHY GOLD COINS? The problem with today's economy is that it is built on promises and trust. It is therefore built on debt. In the United States, the financial promises always come back to these: 1) The Federal Reserve System will remain the lender of last resort. The problem with these promises is this: the ultimate insurer – the FED – can fulfill its obligations in a deflationary crisis only by hyperinflation. That means that the only sure guarantee against the systemic failure of the American banking system is the destruction of the dollar. If we get the latter, do you want promises to pay gold, which can be settled legally by the payment of digital dollars? Or do you want coins where you can get your hands on them? Read more at… [source]
|
| You are subscribed to email updates from Save Your ASSets First To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
No comments:
Post a Comment