Is gold still the canary in the FED’s coalmine

Posted February 7, 2012 at 1:56 am

by Jeff Macke

Unless you owned defensive stocks, 2012 has been an equal opportunity rally. Tech stocks, financials, cyclical names… just about any asset class that isn’t defensive has seen a sharp move higher this year. Both supporting and belying this observation is the price action in gold, typically a safe-haven asset that’s risen 10% so far in 2012.

“We did have a bubble in gold, the bubble popped and we’re now trying to reflate,” says Richard Suttmeir of valuengine.com”

He says that the recent upward trend isn’t as much a return to gold’s past glories but rather a bounce to be sold. For Suttmeier the end of gold’s rally is neigh. He puts the monthly resistance level at $1,836, a relatively minor 6% above current levels, and says a return to levels over $1,900 are a thing of the past.

Naturally gold bugs would disagree, pointing to seemingly endless dollar printing by our government and troubles in Europe as reasons gold will never go out of style as a safe haven. In addition, despite gold’s extended pause, the barbaric metal long-term uptrend support held beautifully towards the end of last year.

None of which is enough to convince Suttmeier to rethink his position. As he sees it, the dollar is going to continue to move higher, almost despite the best efforts of the Fed as there’s simply no where else for global investors to go.

It’s the “best house in a lousy neighborhood” theory of currency investing. If Suttmeier is right, a strong dollar will buy [continue]…

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Most US debt is owned by US investors, not foreigners

Posted January 31, 2012 at 11:41 pm

by Lara Hoffmans

Did you know the US is about to raise the debt ceiling? For the 105th time?

Seems odd another increase is quietly pending since the penultimate increase (that’s right, there was one after that) in August last was preceded by a solid two months of political histrionics, name-calling and hyperbole.

Then S&P downgraded the US! Not because of our ability to pay, mind, which no one debated. But because, according to S&P’s own stated reasoning, of said histrionics, hyperbole, etc. (And after that, US federal interest rates largely fell. Evidently, the market didn’t think much of S&P’s opinion on this matter.)

Though a firestorm could always kick up, the lack of one thus far suggests that neither party finds it politically expedient at this particular point in time (providing further evidence the debt ceiling is an arbitrary, politically motivated marker).

What’s more, it seems politicians’ here-today, gone-tomorrow righteous indignation over debt ceiling raises is tied to some basic misunderstanding about [continue]…

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Is Germany strong-arming Greece?

Posted January 29, 2012 at 11:58 pm

by Joshua Brown

In April 1941, Germany turned its firepower on Southern Europe after its Axis ally Italy was repulsed by the Greek army.  There was a blitzkrieg (called Operation Barbarossa) and a three year occupation along with some major league violence between the Germans and Greeks.  This was no quiet submission.

The aftermath of Nazi occupation was complicated — a civil war in which Greek communists lost to Greeks who were German sympathizers and collaborators during the war. 

What was very uncomplicated was the fact that over 300,000 citizens of Athens died of starvation under the German regime.  This while tens of thousands of other Greeks died in the course of reprisals and uprisings around the country.

It’s an ugly chapter from an ugly century and when wounds so severe have been inflicted, they can easily be reopened – even after the passage of decades.

And so against this backdrop I ask you to consider the latest “idea” coming from German parliament to impose their will on Greece and its citizenry [continue]…

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The Euro: probably not a relic anytime soon

Posted December 1, 2011 at 1:47 am

by Fisher Investments Editorial Staff

Since Greece’s debt-figure fudging first came to light in October 2009, Europe—and specifically, the eurozone—has garnered tremendous media and investor attention.

Along the way, a major source of concern has been the common currency’s future. Today, headlines continue nearly daily regarding the euro’s viability. Above all else, many speculate a sudden, disorderly breakup of the euro is on the horizon.

But as we’ve written, our view is a sudden abandonment of the euro isn’t a likely outcome in the here and now. Let’s review and explore essentially two concepts:

(1) Why a quick end to the euro would likely be problematic, and (2) why that isn’t likely in the immediate future.

Assuming we can agree a return to the barter system is off the table, if the euro is abandoned, something must fill the void—seemingly, national currencies.

If this scenario did occur, it’s likely 15 or 16 of the eurozone’s 17 member nations would be seeking to replace the euro with a lower-valued currency—the probable exception being Germany (and possibly France).

For the majority of these countries, the likelihood is the euro, a currency individuals and businesses use daily and have confidence in the purchasing power of, would be replaced with a question (not German) mark. Assuming a government can effectively enact such a switch is quite a stretch.

Contracts, loans and other matters currently denominated in euros would likely have to be rejiggered—no small matter for eurozone corporations, individuals and other business and government entities.

And there are other issues [continue]…

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The richest, fattest nation on earth

Posted November 29, 2011 at 3:19 am

With maids, nannies, and cooks, many Qataris sit in their air-conditioned villas all day getting fatter and ignoring serious health problems

via The Atlantic

Qatar is a tiny country with a big problem.

This Connecticut-sized nation, sticking out like a loose tooth in the Persian Gulf, is one of the most obese nations in the world, with residents fatter, on average, than even those of the United States, which often takes the cake in such competitions.

According to recent studies, roughly half of adults and a third of children in Qatar are obese, and almost 17 percent of the native population suffers from diabetes.

By comparison, about a third of Americans are obese, and eight percent are diabetic. Qatar also has very high rates of birth defects and genetic disorders — problems that, along with the prevalence of obesity and diabetes, have worsened in recent decades, according to local and international health experts.

So what’s going wrong in little Qatar? [continue]…

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Here’s why the euro hasn’t gotten crushed yet

Posted November 11, 2011 at 1:58 am

by Mark Gongloff

Here’s a fun fact you might not have guessed, if you didn’t follow the euro obsessively or for a living: The euro is actually higher on the year.

That’s right, at $1.36 at last check, the euro is up from $1.34 at the end of 2010. It’s well off its high for the year, set in May, of $1.48, but still well off its low for the year, set in January, of $1.30.

You read that right: The euro’s low for the year was in January. In fact, the euro has held up shockingly well in recent months, even as events in the euro zone have come to a head. Given the potential for nightmarish outcomes — including the end of the euro zone itself — you’d think the euro would be a lot lower.

One explanation that gets floated a lot for this is that European banks are selling foreign assets and bringing home euros to patch the gaping holes in their balance sheets left by sovereign-debt meltdowns. That has artificially bolstered the euro in its time of need.

Jens Nordvig, currency guru at Nomura, takes a look at this concept today and finds it about half-right: There’s been a lot of euro repatriation lately, but not necessarily by [continue]….

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Why gold is dropping in face of greek default

Posted November 1, 2011 at 1:55 am

from MoneyEnergy

Over the past 24 hours, the price of gold has plunged as much as $104/ounce, or 10%, ahead of what looks to be an imminent Greek debt default. 

In fact, the past three days have seen the largest consecutive drop in gold prices in 28 years! 

The question is why, you might ask.  Debt problems in the Eurozone would usually encourage investors to flock to the golden “safe haven,” would they not?

In the face of the debasement of currencies worldwide (prompted by the massive quantitative easing led by the Federal Reserve – a process known as exporting inflation), the past year has seen gold climb astronomically, particularly in the summer of 2011. 

So what’s changing now?

The fact is that institutions are clamoring to sell gold in order to take cash and keep cash positions.  This could be for a variety of reasons.  One, gold is seen as having [continue]…

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America regains economic dominance?

Posted October 26, 2011 at 2:02 am

The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap with China in a clutch of key industries. The current account might even be in surplus.

by Ambrose Evans-Pritchard

Assumptions that the Great Republic must inevitably spiral into economic and strategic decline — so like the chatter of the late 1980s, when Japan was in vogue — will seem wildly off the mark by then.

Telegraph readers already know about the “shale gas revolution” that has turned America into the world’s number one producer of natural gas, ahead of Russia.

Less known is that the technology of hydraulic fracturing — breaking rocks with jets of water — will also bring a quantum leap in shale oil supply, mostly from the Bakken fields in North Dakota, Eagle Ford in Texas, and other reserves across the Mid-West.

“The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d),” said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea.

Total US shale output is “set to expand dramatically” as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since [continue]…

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The 147 companies that control everything

Posted October 25, 2011 at 12:20 am

by Bruce Upbin

Three systems theorists at the Swiss Federal Institute of Technology in Zurich have taken a database listing 37 million companies and investors worldwide and analyzed all 43,060 transnational corporations and share ownerships linking them. They built a model of who owns what and what their revenues are and mapped the whole edifice of economic power.

They discovered that global corporate control has a distinct bow-tie shape, with a dominant core of 147 firms radiating out from the middle. Each of these 147 own interlocking stakes of one another and together they control 40% of the wealth in the network. A total of 737 control 80% of it all. The top 20 are at the bottom of the post.

This is, say the paper’s authors, the first map of the structure of global corporate control.

The occupy movement will eat this up as evidence for massive redistribution of wealth. The New Scientist talked to one systems theorist who is “disconcerted” at the level of interconnectedness, but not surprised.

Such structures occur commonly in [continue]…

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The euro crisis rolls on…

Posted October 16, 2011 at 4:17 pm

from the Pragmatic Capitalist

At this point in the Euro saga, it’s clear that all roads lead to Rome.  That is, Italy has become the true endgame.  

If the contagion in Greece and Portugal spreads then the larger countries like Spain and most importantly, Italy, have the potential to cause massive turmoil in the region.  Italy alone carries more sovereign debt than Portugal, Ireland and Greece combined.

I think the bogey here is still the sovereign bond markets.  As our friend Martin noted this morning, credit is not improving in Europe and if Italian bond yields are any sign it’s clear that they’re calling BS on this latest fix.  

As long as the Euro crisis remains unresolved the bond vigilantes in Italy (yes, unlike the USA, they have real bond vigilantes because of their status as a currency user) will push the envelope as budgets deteriorate and austerity fails to generate a sustainable recovery. 

Remember, fixing the banks does not fix the currency crisis [continue]…

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