Archive - Sep 7, 2010

A few preliminary facts on gold from Matterhorn Asset Management:

• It is a fact that gold in US dollars (and many other currencies) has gone up 400% in eleven years or 16% per annum annualised.
• It is a fact that the US dollar has declined 80% in value against gold since 1999.
• It is a fact that the dollar and most other currencies have gone
  down 98-99% against gold since 1913 when the Federal Reserve Bank of New
  York was created.
• It is also a fact that the Dow Jones (and many world stock markets) has declined over 80% against gold since 1999.
• It is a fact that gold has made a new all time monthly closing high in dollars in August 2010.

As to how Matterhorn gets to its 3 gold price targets of $6,000, $7,000, $10,000 read inside...

• Noooo, they lied to us, this can't be: Europe's Bank Stress Tests Minimized Debt Risk (WSJ)
• Captain obvious headline of the day: Strong Yuan Would Hurt China: Economists (Reuters)
• Captain obvious headline runner up: Greece Default Risk Is `Substantial,' Pimco's Bosomworth Says (Bloomberg)
• Peter Orzsag shows why he got out of Dodge: "In the face of the dueling deficits, the best approach is a compromise: extend the tax cuts for two years and then end them altogether." (NYT)
• French unions test Sarkozy in pensions strike (Reuters)
• The Obama Economy: How trillions in fiscal and monetary stimulus produced a 1.6% recovery (WSJ Editorial)
• Get ready for anti-incumbent wave (WSJ)
• GDP plus change in debt - and the US flow of funds (Steve Keen)

And another one wakes up. Better late than never. We wish to remind the Senator that perhaps he should first follow up on why after the SEC "banning" Flash trading, DirectEdge and other exchanges still frontrun orders on a daily basis, and why flash trading continues to lead to, ahem, flash crashes. "U.S. Sen. Charles Schumer urged federal securities regulators to explore ways to slow some high-speed trading at times of market stress and to investigate strategies that have raised concerns of stock manipulation, including one known as “quote stuffing.” Schumer, a New York Democrat, urged the Securities and Exchange Commission to launch a formal inquiry into whether computer-powered trading firms’ rapid entering and canceling of stock orders, called quote stuffing, played a role in the so-called flash crash of May 6, and to more broadly reconsider these participants’ role in the U.S. marketplace."

• Asian stocks fall for first time in five days; Japanese automakers decline.
• Australia extends interest rate pause on concern global growth is slowing.
• Australian Labor Party gains enough seats to form a minority government.
• China's 4 biggest banks lent $32.2B in new yuan loans in August, in line with govt ruling.
• China passenger car sales increased 18% in August.
• China rejects currency pressure.
• China's slowdown in industrial output growth will deepen, Government says.
• Copper declines in London.
• Asian steelmakers rally on Obama's infra plan; Euro drops on bank funds concern.

The Irish-Bund spread is going nuts on reports that the ECB is bidding up sovereign debt once again, together with a WSJ report that the Stress Test was, as everyone with half a brain knew all too well, a blatant lie, and sovereign debt was misrepresented. Earlier, a report in the FT Deutschland suggested that the bailout of Anglo Irish alone, (not to mention AIB and Irish Nationwide) would be sufficient to threaten the country's solvency. Things domestically are no better, after a poll in the Sunday Independent found that 74% of respondents believed the country would default, and preceded earlier news that Irish consumer confidence plunged from 66.2 to 61.4. The IMF's recent expansion and creation of credit facilities is now roundly seen as having focused on Ireland, but many now believe that it may be too late and a Greek-type rescue is in the works as the second domino is about to topple. Hopefully the Irish will figure out the Ambrose Evans-Pritchard was right all along, and that the time to riot is now if they hope to get the same preferential treatment by the ECB/EU/IMF as was afforded to Greece... Because we all know what the endgame is now.

Reality is the great antidote of hope. Whenever my colleagues and friends ask me for my global economic outlook, by the time I’m done, they always provide a cheeky response about the depressing nature of my outlook. However, the outlook doesn't have to be depressing at all for those willing to face reality and take a proactive stance.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 07/10/10