Posted October 19, 2011 at 11:02 pm
by Michael Babad
The gold market is suffering “very real damage,” warns economist Dennis Gartman, who fears that the rally from September’s lows is “now under assault.”
The rally was always disconcertingly tepid; that is, after a vicious decline such as that seen in late August until late September, the bounce, if the market is truly healthy, should have been even more vigorous. It was not, and indeed if anything it was tepid, quiet and placid,” the publisher of the Gartman letter said today.
“Tepid placidity all too often gives way to vigorous selling sooner rather than later.”
Mr. Gartman cited several possible reasons – margin call selling, for example, or central bank sales – and said that “caution and some liquidation are in order before others beat us to the punch.”
Gold is well down from its peak of more than $1,900 (U.S.) and ounce before September’s dip, and several factors are playing into global markets overall, whether they be the troubles of the euro zone, worries over the U.S. economy, or fears of China’s economic growth slowing down.
“The problem with all this is it’s getting tricky to work out what gold’s reaction will be if there was a rescue plan [for Europe] or there isn’t a rescue plan or there is a downgrade and so on,” Mitsubishi analyst Matthew Turner told Reuters.
“The only rational conclusion I can draw is internal factors in the gold market are moving around and establishing a new [continue]…
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Posted October 19, 2011 at 3:55 am
by Mark Duell
It’s been a torrid three years for most people since the world economy began to go into meltdown. But not everyone has suffered.
Investor Kyle Bass has already made millions from the credit crunch and he is set to increase his money by almost 650 times from a Greek default.
He founded hedge fund Hayman Capital in Dallas, Texas, in 2006 in his late 30s after saving $10million from selling bonds for Wall Street firms.
He made millions gambling against the sub-prime mortgage bond market – and now he’s betting on the collapse of whole countries in Europe.
Mr Bass’s story so far has been documented in Michael Lewis’s new book ‘Boomerang: The Meltdown Tour‘ – serialised in The Sunday Times.
Mr Lewis charts how Mr Bass was one of only 15 people who placed ‘enormous bets that vast tracts of American finance would go up in flames’.
Mr Bass believed as the sub-prime market collapsed that the financial crisis was being hidden by rich western governments.
He said these nations had taken on ‘dodgy securities worth trillions’, as worldwide debts doubled over just a few years to $195trillion.
A big issue he identified was large banks being treated as ‘extensions of their governments, sure to be bailed out in a crisis’.
Mr Bass spoke to Harvard economics expert Kenneth Rogoff about sovereign balance sheets and finally realised the scale of the problem when he presented him with some research.
Professor Rogoff told Mr Bass [continue]…
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Posted October 5, 2011 at 3:05 am
Market indicators point to gold nearing a major bottom.
by Przemyslaw Radomski
Recently, investors suffered an average market decline of 6.5% in the equity portion of their investments, the largest fall since the dark days of October 2008, with $1 trillion of paper wealth evaporating in the process.
Speaking of October 2008, it was then that gold prices tumbled 18% as turmoil in global financial markets led to losses in global equity and commodity markets. The precious metal rallied 23% in the next two months.
So why did precious metals take such a fall? As my firm’s correlation matrix showed, over the past few weeks gold had decoupled from stock markets and every time stock markets sold off, gold would rise as investors would seek it out as a safe haven.
However, the Chicago Mercantile Exchange, or CME, began raising the amount of margin it required to buy a gold future with three raises since July.
In total, margins have risen by $5,400. (You had to put more money down to invest.) If you recall, the same thing happened with silver when it went parabolic in the spring.
The CME raised margin requirements four times, amounting to an 84% hike. At that time silver also sold off. Then again, historically, margin hikes are known to be much more important for silver than they are for gold, so it seems there must have been more to the bearish case than just margin hikes.
Another factor influencing the drop was [continue]…
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Posted October 5, 2011 at 2:53 am
from the Bonddad Blog
One of my primary areas of concern has been food prices — more specifically, grains, which form the backbone of our food system. For example, corn is converted into many products which wind their way into prices (corn syrup, etc…) and it’s also used as a feed for cattle.
Wheat and corn are considered substitutes in the feed area as well. And food prices have been rising and are currently at uncomfortable levels as shown in this chart.
However, it appears that could be changing, thanks to the recent rout in commodities [continue]…
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Posted October 4, 2011 at 1:41 am
The sharp drops in precious metals prices have seen a big reduction in commercial net short positions on COMEX for gold – and particularly for silver – showing where the smart money thinks precious metals prices are headed.
by Lawrence Williams
Some encouragement for the beleaguered silver investor may come from the latest CFTC figures on COMEX commercial net short positions for the precious metal.
The figures as at Tuesday 27th September showed silver net short positions plunged to the lowest level since November 2008 – the point where the silver price started its runup from a little over $10 to almost $50 achieved at end April this year.
Silver has since fallen back, at one time to around $26 but is currently, at the time of writing, a little over $30.80 an ounce.
Gene Arensberg’s Got Gold report has published an extremely interesting graphic plotting the COMEX commercial net short positions against the silver price which is reproduced [continue}…
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Posted September 22, 2011 at 11:42 pm
by Charles Sizemore
World stock markets are down this morning on renewed worries of a Greek default. Adding fuel to the fire, President Obama’s proposal to levy a new tax on millionaires—dubbed the “Buffett Rule” after being suggested by billionaire superinvestor Warren Buffett—has drawn a sharp rebuke from Congressional Republicans and threatens to unleash more political instability on a crisis-weary public.
And U.S. homebuilders, citing the effects of never-ending foreclosures, are even more despondent than feared according to the National Association of Home Builders survey released this morning.
With the finance world appearing to teeter on the edge of disaster, one might expect that standby crisis hedge—gold—to rise.
Yet a funny thing happened this morning. The price of gold actually fell sharply.
The spot price of gold has continued to drift lower after surging to new all-time highs above $1,900. As this article is being written, the price has fallen to $1,783 and appears to have lost all momentum.
Gold’s recent weakness comes even as competing crisis hedges have lost their luster. The Swiss National Bank took a sledgehammer to the Swiss franc two weeks ago, pledging to lower its value against the euro. The tactic worked, sending the franc down nearly 10%. U.S. Treasuries—considered by many to be the ultimate safe haven for their liquidity—now yield far too little to be attractive for most investors. The 10-Year note yields a miniscule 1.95%.
Gold’s recent action should be deeply disturbing to gold bugs or to [continue]…
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Posted September 12, 2011 at 3:57 am
by William Pentland
For the past several months, a friend of mine has been telling me about the potentially game-changing implications of an obscure (at least to me) metal named Thorium after the Norse god of thunder, Thor.
It seems he is not the only person who believes thorium, a naturally-occurring, slightly radioactive metal discovered in 1828 by the Swedish chemist Jons Jakob Berzelius, could provide the world with an ultra-safe, ultra-cheap source of nuclear power.
Last week, scores of thorium boosters gathered in the United Kingdom to launch a new advocacy organizing, the Weinberg Foundation, which plans to push the promise of thorium nuclear energy into the mainstream political discussion of clean energy and climate change.
The message they’re sending is that thorium is the anti-dote to the world’s most pressing energy and environmental challenges.
So what is the b-f-d about thorium? [continue]…
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Posted September 12, 2011 at 3:45 am
by Josiane Kremer
Norway’s krone will gain further as investors “desperate” for protection against a deepening European debt crisis turn to one of the few haven markets that isn’t overvalued, said Deutsche Bank AG, the world’s biggest currency trader.
The krone rose more than any other major currency against the franc on Sept. 6, when the Swiss National Bank said it will defend a target of 1.2 against the euro with “utmost determination.” As Swiss efforts to shut the door on franc appreciation force investors to turn elsewhere, the krone will be one of the currencies to fill the vacuum, said Henrik Gullberg, a London-based strategist at Deutsche Bank.
“There is a desperate need for safe havens and the krone is an obvious candidate,” Gullberg said in a phone interview yesterday. “The krone is not significantly overvalued, which is another thing that is attractive.”
The currency has lured investors drawn to Norway’s 10.5 percent budget surplus of gross domestic product last year, the biggest of all AAA rated sovereigns. Norway boasts Europe’s lowest unemployment rate and has been shielded from the worst of the global economic crisis thanks to its oil output.
Income from the energy industry is stored in the country’s $540 billion oil fund, helping support the world’s lowest risk of default, as measured by credit default swaps.
The central bank today warned it would [continue]…
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Posted September 6, 2011 at 3:23 am
by Brett Arends
Maybe everything is about to fall apart. Maybe the Dow Jones Industrial Average is heading back to 6,000. Maybe those of us who survived Hurricane Irene — which brought a devastating, er, breeze and light drizzle to central Boston — should be piling up the sandbags and setting up the shutters for the real hurricane about to come out of our financial system.
After all, all the problems remain. Europe is bust and so are we, economically and politically. The system is a house of cards. Equities remain expensive by some measures. We may well be heading into another recession — assuming, for the sake of argument, that we ever really left the last one.
In Washington and Brussels, political attempts to fix the various crises look about as ordered as this.
But everyone is already so bearish. And you get nowhere in this game agreeing with the consensus.
So while my head is still deeply skeptical, my heart wants to see the silver linings to all these clouds [continue]…
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Posted September 2, 2011 at 1:04 am
by Matt Nesto
It will likely be years before those in the Northeast experience an earthquake and a hurricane in the same the week again (which is fine by me as my home is still dark).
By the same logic, it will likely be many years before we experience another 2-week pop in the stock market comparable to what we’re experiencing now. In fact, stocks are on track for the best 2-week gain on the S&P 500 since July 24, 2009, when the benchmark index was striving to close above the key psychological level of 1000 again.
Whether or not a floor or support has been set at 1100 remains to be seen. But for now, the next proving ground is to the upside 1250, which is already sending signals that it’s not in the mood to be messed. Just look at today’s instantaneous 1% rally on stronger-than-expected ISM Manufacturing data, which had the staying power of ice cream in the sun. The jobs number tomorrow will face similar challenges if it comes in with upside surprise.
Yet somehow, something is going to bust us through that level and carry the S&P 500 back to 1350, according to Doug Cote, Chief Market Strategist at ING.
“We think the 2nd half is going to be stronger,” this former hedge fund manager says, predicting that four key factors will lead an economic growth recovery and market rally.
Cote says “corporate earnings, manufacturing, consumers that are in better shape then commonly believed, and emerging markets” will allow his 2.5 – 3.5% second-half growth outlook to become reality.
He’s also counting on President Obama (and Congress) to [continue]….
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