Archive - 2010

The World Gold Council has released the latest sovereign gold reserve holdings data. In December, total gold holdings climbed by 132.7 tonnes to 30,117 tonnes. This is the equivalent of 965 million troy ounce equivalents, which at $1,135/Tr Oz comes out to $1.095 trillion. In the grand scheme of things, it seems like a relatively insignificant insurance amount in case the great fractional reserve banking experiment comes to a premature end. The biggest changes in holdings in the September-December period were for the IMF, which sold 212 tonnes of gold, while India (200 tonnes added), Russia (39.3), Sri Lanka (10) and Mauritius (2) all saw an increase in their gold holdings. The top 5 holders of gold continue to be the U.S., Germany, the IMF, Italy and France. China did not adjust its gold holdings in the last three months of 2009.

Poor Greece, and poor Europe: the two are now caught in such an unwinnable tug of war, that the EU is considering unwinding the very fabric of its union (an action, which some say, may not be the worse idea in the here United States) and set the struggling Mediterranean country loose. And if and when that starts, it is game over European Union. Yet posturing will do nothing to change the fact that even as Greek CDS hit an all time high last week, the economic catastrophe in the Ouzo-loving country is accelerating. The latest to join the Greek bashing goon squad is Deutsche Bank, with a note released on Friday, which highlights the key dangers to the country: the ability to finance deficits, capital flights, and an outright default if money does not turn up from under the mattress.

Valuehuntr.com is offering extra incentive to help the victims of the earthquake in Haiti. Please take advantage of this opportunity and contribute to the Red Cross through his site. A donation won't make up for past sins but will represent a charitable start to the new decade.

A summary recap of the bullish groupthink gripping the Barron's Roundtable. As David notes: "The emerging consensus is that everything is just going to be fine and that we should expect nothing more than a second-half economic slowdown, and that if there is a sharper turndown the monetary and fiscal spigots will be turned on even harder. The market is seen no worse than fair-value. Treasuries remain the enemy."

The age old question rises: with everyone bullish, who is selling?

Amusingly, of the top 10 large hedge fund winners in 2010, only 6 are above their high water mark. And if what we are hearing about some of the other "winners" is true, make that less than 50%. Curiously, Jim Simons who is currently enjoying his retirement in some country with no collocation facilities whatsoever, lost out to the robot onslaught: Medallion was up a mere 38%, roughly the same as RIEF's S&P underperformance in 2009. And speaking of, we will have some interesting things to say about Medallion/RIEF in a few days.

We are of the view that the gold market will likely be dominated mainly by the demand side of the equation in 2010. We believe that the likely decline in investment demand for ETFs, year on year, will play a pre-eminent role as a swing factor in our supply-and-demand balance in 2010. Jewellery, industrial and dental demand will likely strengthen marginally year on year. The secondary supply of scrap will depend on the gold price but will likely remain above 50% of mine supply. Central banks will likely become net purchasers while de-hedging will reduce significantly as the major players in this arena accelerate their 2009 de-hedging activities. Our calculations show a large oversupply of around 420 tonnes in our supply-and-demand equation for 2010." - Credit Suisse

Greg Mankiw provides a useful primer on runaway inflation done right... and done Ben. Yet his warnings that inflation may be stealthily approaching, sure to risk the ire of deflationists everywhere, may be very much irrelevant: the Fed, which is entering the bottom ninth on the great failed Keynesian experiment realizes it is running out of cards. The one thing that is certain, is that no matter what the true final outcome, the Federal Reserve will certainly miss the Goldilocks landing strip by a mile. And the political and economic ramifications of the Fed's outright failure will be tremendous.

Two of UK's largest hedge funds, Bluecrest and Brevan Howard, are making or considering moves out of London to Geneva. London's mayor, Boris Johnson, is worried that thousands of the City's bankers will flee to escape higher taxes and more regulations. Will the rush to Geneva spell trouble for global regulators?

• Must read: Did foreigners cause America's financial crisis? Or what happens when all your debt and equities are belong to us (Newsweek)
• Ben Bernanke's term running out as Senate democrats try to set a vote (The Hill)
• Banks set for record pay, and you thought Goldman was bad - Morgan Stanley prepares to fork over a stunning 63.8% of revenue as compensation (WSJ)
• Dark pools may face pricing disclosure rules, EU watchdog says (Bloomberg)
• In defense of the case against HiFTers (Cassandra)
• Senate to vote on PAYGO legislation to clear way for debate over debt ceiling (The Hill)
• Dubai flare up 2.0? Abu Dhabi's Dubai aid shrinks to $5 billion (Reuters)

RANsquawk 18th January Morning Briefing - Stocks, Bonds, FX etc.

From the MSM I was getting a sense that the Census hiring might be a factor in the employment story. I don't think it adds up to a hill of beans.

An extended analysis of TIC, FMS, DTS and TreasuryDirect data confirms that while Indirect bidders (aka Foreign Investors) continue to bid up US Government securities, their interest in the short end of the curve has not only declined, but accelerated redemptions have left Indirects with a heavily weighted long bond exposure. This raises the following questions: are inflation expectations once again vastly premature, who keeps buying the short-end at record low yields, and what kind of event will be responsible for the unwind of the groupthink idea of the day: the curve steepener?

What will happen when the 26-mile long tanker convoy carrying 127 million barrels starts offloading since the oil storage trade is no longer as profitable?

I am so tired of the absolute nonsensical and foolish approach in regards to Banker Bonuses taken by both the Obama administration as well as the bankers themselves. Here's what is really going on and what should should be going on if we lived in a world that was dependent on telling the truth, prudent financial management, reduction of systemic risk, and if a cure to our banking system malady is genuinely being sought.

Again, if you’re hung-up on the markets and making money, and think we’re profiting from such little plugs, don’t click here. Read-on if you think you’re cooler than the next guy (in a James Dean kind of way), like to spend money, like cars and hope to re-kindle the magic of a true, open air roadster in the purest, more expensive sense.