Archive - Jan 25, 2011

Oh shit did the market get it's buying on yesterday as investors once again shunned the reality of Europe's tenuous hold on the Euro...

When we reported three days ago that 59 outbound shipments of gold were intercepted at the Egypt airport, we predicted that the country's oligarchs were proactively preparing precisely for what they knew is coming imminently. It has arrived. From Al-Jazeera: "Hundreds of protesters have begun to take to the streets in Cairo,
the Egyptian capital, chanting slogans against the police, the interior
minister and the government, in scenes that the capital has not seen
since the 1970s, Al Jazeera's correspondent reported. Downtown Cairo has come to a standstill, and protesters are now
marching towards the headquarters of the ruling National Democracy
Party. "It is unprecedented for security forces to let people march like
this without trying to stop them," Al Jazeera's Rawya Rageh reported
from the site of the protest."

Markets sluggish this AM heading into the start of the data for the week which features Case/Shiller, Consumer Confidence, and Richmond Fed. Expectations for all seem muted except for Consumer Confidence (54E, 52.5 prior). FOMC the focus tomorrow here, while the myriad of global stories will likely take the stage today.

The UK department of economic "truth, statistics and everything else" sure has learned a thing or two from America. Such as blaming snow for appearing in December. As BLSy as it may sound, it is precisely this that the surprising collapse of the UK economy in Q4 has been blamed on. Per Bloomberg: "Britain’s economy unexpectedly
shrank the most in more than a year in the fourth quarter as
construction slumped and the coldest December in a century
hampered services and retailing." What? They don't have a seasonal adjustment for "cold" winters? How quaint. "Gross domestic product fell 0.5 percent after increasing 0.7 percent in the previous quarter, the Office for National Statistics said in London today. Growth would have been “flattish” without the impact of the weather, it said. The median forecast in a Bloomberg News survey of 33 economists was for an increase of 0.5 percent." And even more shockingly, the GBP fell after the market was shocked, shocked, that the insolvent European continent may just be a little ahead of itself with expectations of interest rate hikes: "The pound dropped after the report, which shows the U.K. recovery faded even before Prime Minister David Cameron’s government increased sales tax to 20 percent this month, which may damp consumer demand this year. The data may reinforce calls for the Bank of England to hold off increasing its key interest rate to curb inflation." But how will the UK halt what Posen last week called a "temporary surge" in inflation. Does this actually mean that, gasp, surging inflation, temporary or otherwise, is occurring even in very developed countries that suddenly appear to have massive economic slack. But... didn't the.... Chairman.... no, it can't be. He was 100% confident.

You may feel that this is an odd time to write a piece about one of the riskiest sectors in the precious metal investment class, especially as gold and silver prices continue to plummet in the futures markets but the proper time to buy, of course, is when fear is high and prices are low.

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 25/01/11

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.

A visual interpretation...

The poker game ends when one person gets all the chips ...

As we explained in our previous article Seeking an interest rate solution, real interest rates are negative and nominal short term interest rates are near zero. That is not healthy. What is a healthy interest rate? My view is that short term rates should be above 1% to make them positive and closer to 2%. It has caused consumer credit to contract. Of course, banks would argue that a healthy spread is the key to a healthy banking sector. Raising the rate would likely flatten the yield curve. What gives?

Risk was back on to start the week today, with $25b in Fed liquidity helping the campaign. Though safe havens saw some inflows early in the day after reports of a terrorist bombing at Moscow’s Domodedovo Airport (killing 35 and reportedly linked to Caucasus separatists), the dip was bought with semiconductors and alternative energy stocks leading the way.