Archive - Sep 22, 2010

Update: Spot now $1,296. The countdown has begun

October Gold settled at $1272.50 per 100 troy ounces on Tuesday, a net loss of of $6.60 for the day. After-hours activity was a different story entirely with a sharp rally after the FOMC minutes triggering an intense rally and prices as high as $1285. October gold was up $19.10 to $1291.80 per 100 troy ounces as of 7:50 AM EST, this morning. The December U.S. dollar index was down .643 to 80.03. October platinum was up $18.60 to $1634.70 per 50 troy ounces. December silver was up 46.5 cents to $21.10.

When the S&P future traded up 7 ticks post FOMC yesterday I stood up and offered to bet that stocks would finish negative on the day. With only a bit more than an hour to go before close, the market having shot up 11 ticks after the announcement and trading up 0.6% on the day, I thought that offering even odds should have been a no brainer for any bull out there. The funny conclusion of this anecdote is that no one took the other side. I even said I would literally shoot myself if stocks finished up on the day... Thankfully they did not though I am still not sure that was a good thing. Bottom line is that nobody seemed to understand or care what stocks were doing: that to me is very scary. - Nic Lenoir

• FTMFW: Europe Debt Crisis Is Over, Declares Spanish Leader (WSJ)... he also murmured that the ECB bailouts will continue until zombification penetration rates improve
• Hilarious: We should clone the robo-trader rather than revile him (HFT)
• Liberal Democrat Conference: 'Oil price could double in return to 1970s style shocks' (Telegraph)
• Ally Financial legal issue with foreclosures may affect other mortgage companies (WaPo)
• Moves to Weaken Yen Not Over, Says Kan (FT)
• Sakakibara Says Yen to Hit Record Despite BOJ Sales (Bloomberg)
• China Shouldn't Fear Floating Exchange Rate, Official Says (WSJ)

The Portuguese auction earlier today was a smashing success, of one considers a rise in the Bid To Cover at the expense of an interest rate increase by over 1%, smashing. The 4 Year bond came at 4.695%, while the 10 Year priced at 6.242%, both printing 100 bps wider than previous. This mirrors the deterioration seen in the recent Ireland bond auction, where the same dynamic was observed. The European periphery is paying ever more to roll its maturing debt. Just wait until these countries have to refi short-term debt at 2%+ differentials: not even the ECB will be able to save the countries from that particular toxic debt spiral.

Gold has just hit a fresh all time record (with equity futures down), as the world has finally awakened to the central banker ruse. With spot touching at $1,293.5 perhaps all those seeing some reversion to the mean occuring in the metal would be better advised to look for a career as robot algos, that do nothing but seek std dev divergences from a VWAP mean. In the meantime, gold will continue to chug along to $5,000+, now that FX interventions is how the central bankers of the world will be spending all their trading hours.

• Asia stocks mixed after Fed said it was ready to do more to recharge the US economy.
• Fed hinted it is becoming uneasy about the outlook, but deferred taking any new steps.
• Fed suggest it could buy more bonds; Way eased for new programme of QE.
• Iceland cuts base rate by 0.75% to 6.25%.
• Las Vegas home sales fall as area unemployment lingers near 15%
• Oil hovers above $75 in Asia after report shows US supplies unexpectedly rose last week.
• UK Business Secretary plans to announce a review of takeovers, executive pay.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 22/09/10

Britain has the largest pensions gap in Europe and people need to put £10,300 a year more on average into their pension pot if they want to keep their current standard of living in retirement, new research claims.

The only significance in the FOMC report for September is that there is no change and they are still clueless and scared. They do see a glass half empty. Here's a brief report.

Tony Boeckh has issued his most recent investment letter, which, at 15 pages, discusses an outlook that can be summarized best as "we really have no clue what will happen" and may have been about 14.5 pages too long. On the other hand, with everyone having surefire money making schemes up their sleeve, and peddling a guaranteed economic outcome, perhaps some outlook humility is precisely what is needed. "Some believe the bull market in gold has just begun. Others believe we are headed for a deflationary depression in which high quality bonds would continue to thrive. Another view is that we are heading into high inflation and a dollar collapse. Yet others believe there will be a return to the good old days of stability and growth. In the time frame of most investors, we are in none of those camps. With bonds significantly overvalued, investors hardly have an edge in that area, except perhaps to go short. High yield bonds are fair value but the weak economic picture suggests growing risk for those companies with poor balance sheets and poor cash flow prospects. Gold as insurance at 5-10% of the portfolio makes sense but only for the long run and only if volatility can be ignored." All in all, some good observations.