Archive - Apr 20, 2011

Over the weekend, University of Texas made headlines after disclosing it was the first major institution to take delivery of $1 billion in gold, although still keeping it in the Comex system. Today, the CEO of the management company Bruce Zimmerman was on Strategy Session providing the rationale for his action to David Faber. First some prehistory: "We began buying gold in September of '09 at about $950 an ounce. Our average price is at about $1,150. We've invested around $750 million in gold over that twelve months and it now has a value around $1 billion." On what Texas thinks of gold (no surprise here): "The role gold plays in our portfolio is as a hedge against currencies. The concern is that we have excess monetary and fiscal stimulus. I noted
a couple of days ago, i think there was a story out about Bernanke
mentioning that while they may not increase quantitative easing, they
may not necessarily reduce their exposure either. So i think that may be
a signal that will continue to have a good deal of monetary stimulus.
We read every day what's going on in DC and across the states. We'll see
what fiscal policies look like. It remains a concern for us." As to the specific reason for demanding delivery: "We had gotten to a size and our thought was that we probably will
have our position for a longer as opposed to shorter term, although we
could sell at any time. But rather than continuously roll the futures
contracts, it became easier and more economical for us to take
possession of the bullion." So how long before many if not all other public fund managers decide the same logic should apply to them as well?

Some extreme sport analogies ...

For all who have been awaiting the release of a video of China's Chengdu J-20 stealth fighter jet, which made its first flight on January 11 of this year, Youku has you covered. In a recently released clip, we can see the J-20 performing high speed taxiing tests at Huang Tian Ba airport, Chengdu. A quick summary of the characteristics of the J-20 can be found here. Of note is the rather loud exhaust noise coming from the "stealth" fighter. One would expect this to be modestly muffled in the final version...

We are living in a weak-dollar fantasy and partying like it's Germany in early 1921 as the Gold Bug Speculators celebrate their wise investments as gold crosses 1,500 an ounce - unfortunately, the value of every other Mark-denominated asset was down 50% by the end of the year.

And now for the latest does of reality from China, which will no doubt be reported by precisely zero of the mainstream media outlets. According to Stratfor, there has been a trucker strike in the Waigaoqiao zone in Shanghai on the morning of April 20. As the attached video reports: "The protests the morning of April 20 were in one of Shanghai’s busiest container ports and they were the result of rising fuel prices and low wages. In 2008, we saw similar strikes over fuel prices as taxi drivers took to the streets across China, highlighting how inflation can easily translate into social issues. These protests come a week after residents gathered in the Sonjiang district in Shanghai on April 13 in protest of cheng guan officials, also known as urban management officials, were said to have beaten a pedestrian in a traffic dispute and Shanghai is also the area where we saw the largest gathering during the Jasmine Movement on February 27." So how much longer will China be able to pretend that its USD-pegged monetary policy, not to mention the Fed's inflation exporting efforts is contained? And how long until China's inability to contain its inflation results in a Tiananmen-lite (or not so lite) redux?

What kind of back-assward world do we live in when the FED has to propose a rule like this?

The quarter AT&T loses iPhone exclusivity is the quarter they report record numbers. Why? They started pushing high end Android phones that more than made up for the iPhone loss. You really can't compete with "less than free"!

Now that TEPCO has finally procured some iRobots (with about a one month delay) with freaking webcams attached to their heads it has released the following stunning footage from inside Reactors 3 and 2, showing the situation in the only reactor which has plutonium as well as one of the reactors to have experienced an explosion. While we doubt the validity of the data, according to IDG the radioactivity level in Reactor 3 is 57 millisieverts/hour. In reactor 2 the radioactivity is disclosed as being too high for workers to enter.

All those who listened to Goldman and sold their oil exposure (to Goldman) may not be delighted to know that WTI is now trading at a higher price than where Goldman advised all their oh so precious clients to dump the black gold. As a reminder on April 12 Goldman released one of three bearish reports on oil expecting brent to drop to $105. In the meantime, cause a sell off in the energy complex. Seven trading days later, those who shorted on Goldman's advice, are now underwater. In the meantime we look forward to Goldman reporting another flawless trading quarter in their Q2 10Q some time in July. Of course by then Goldman's "transitory" deflation bias will be long over.

Remember Japan? From Kyodo: TEPCO Can Not Rule Out Meltdown At Fukushima Reactor. Surely this is bullish for lead, over and above the massive surge in demand for the metal from central banks.

And now for the latest news in the silver meltup: SLV just moved to Hard To Borrow status at Goldman Sachs. This pertains to institutionals who are Goldman Prime Broker clients. Soon coming to every prime broker near you. Comex margin hike imminent now that it is impossible to short the largest silver ETF in the world.

And now for a little variety from the now daily Chinese fraud exposes. Copperfield Research, in taking a break from the spate of unmasking of locally listed reverse merger frauds which how now locked up the Nasdaq halt list, has decided to focus on some potential home grown fraud, exposing what it believes is some local fraud in the form of Nasdaq-listed OCZ Technology Group. From the just released report: "OCZ has parlayed investor and market excitement for solid state drives (SSDs) into an amazing story. From a low of $1.79 last summer, OCZ's stock has steadily climbed more than 350% on a feel good tale told by its CEO. But there is a much darker and sinister side that has been well hidden. It is our opinion that OCZ has misrepresented its SSD growth and has financial irregularities that are nearly impossible to reconcile. We believe that some form of a restatement may be required and that the auditors tick and tie review has some substantial inconsistencies. As such, we have sent our findings to the Securities and Exchange Commission asking for clarification on the multiple sets of numbers that we have uncovered. We believe OCZ's Board has the fiduciary responsibility to form a special committee to examine these discrepancies." The bottom line for those curious where this short-seller sees the stock: "If OCZ trades in-line with the comp group, a generous assumption given OCZ's limited asset value, differentiation, and minimal profitability, a reasonable price target would be between $2.58 and $4.98 per share."

And some more odd news out of Pimco, in which we learn that PIMCO which now has about $74 billion in excess cash, has decided to go ahead and take more investor cash without any direct investment ideas and launch an ETF. From Bloomberg: "Pacific Investment Management Co. plans to offer an exchange-traded fund managed by Bill Gross that will invest primarily in fixed-income securities. Pimco Total Return Exchange-Traded Fund will buy a combination of U.S. and non-U.S. public and corporate debt, the Newport Beach, California-based firm said in filing today with the U.S. Securities and Exchange Commission. The fund may hold as much as 10 percent of its assets in high-yield securities." According to preliminary data Pimco will hold up to 65% in government and corporate bonds. The biggest question: how big this ETF will be is still unanswered. As was first disclosed previously here, however, with the bigger fund negative Gov't debt right now, we wonder if the new ETF will merely whether replicate the larger fund's strategy or serve as a buyer of holdings from the larger fund when there is no other buyer in the market. Lastly, the whole point of having an ETF when anyone who wishes can buy the closed end fund, is just a little suspicious.

The U.S. is just a third world kleptocracy on an Imperial scale. That is of course a road to ruin: let the Elite plunder at will, protected by the Imperial Central State, tax the productive class to fund the armed forces and free bread, and then buy off the lower class with bread and circuses. The only successful model of reconciliation and justice we have is the "truth commissions" in other post-oppression autocratic kleptocracies. In countries that were deeply divided and poisoned by institutionalized injustice and exploitation, the healing process requires a public, transparent "truth commission" in which the guilty are brought forth to confess their sins against the innocent and face the consequences of their actions. If a society cannot rouse itself to cleanse the fundamental injustice at the heart of its institutions, then it is effectively choosing self-destruction. So far, the U.S. is pursuing the Roman Imperial model with an institutional zeal unmatched since Rome's fall. Embedded institutional injustice has a price, a price which rises with every passing day of propaganda and prevarication. Some day the bill will come due and a terrible price paid in full. For those in power, the only concern is that it not be today or tomorrow.