Archive - Apr 18, 2013

In perhaps the most boring initial claims release in a long time, the DOL revealed that in the week ending April 13, there were 352,000 new unemployment insurance claims, an increase of 4,000 from the prior week (naturally revised higher from 346K to 348K), and a slight miss of expectations of 350K. So far in 2013, there have been 8 misses and 7 beats of the expected claims number. The DOL also added that two states' claims were estimated in the past week: of course, if these were California and Illinois, one would imagine reality to be quite different than what is reported but who really cares about reality any more.

The $20 billion gold futures sale and concentrated selling of gold futures on the COMEX on Friday and Monday is far more likely to be “nefarious” than the gold fixings in London. The CFTC’s track record to date has not been great and regulatory capture remains a real risk with the CFTC seeming to be reluctant to hold Wall Street banks who may be involved in price manipulation in the futures market to account. After the Libor revelations, it is surprising that there is not more scrutiny and hard questions asked of banks and regulators in this regard. Separately, large institutional fund manager Blackrock said that there was “no visible central bank activity” as the gold price plunged.  They said that gold's fundamentals remain strong and that the fall in price was driven by an outflow of "hot money" and that gold prices are now near the marginal cost of new supply which should provide strong support at these levels and lead to higher prices again. 

There's never a good lawyer around when you really need one! With a 96+% (tens of $billions) loss to equity investors, one would think law firms and regulatory bodies would be chomping at the bit for this one!

Probably the most symbolic photo of the day, courtesy of Breaking911, showing a "huge sinkhole in Chicago due to heavy flooding at 96th & Houston. 3 cars in the hole." No further commentary needed.

Yesterday it was headlines from Bini-Smaghi and Weidmann punching the lights out for the Euro (which as we have been saying all along, needs to be lower not higher to promote some glimmer of hope for Europe). Moments ago it was two new headlines, which if not market crushing on their own, show how increasingly precarious Europe is.

• ITALY PARLIAMENT FAILS TO ELECT PRESIDENT IN FIRST BALLOT
• MERKEL FALLS SHORT OF COALITION MAJORITY ON CYPRUS VOTE

In other words, despite hopes that the Italian political chaos would stabilize following a compromise presidential candidate (which we noted earlier today we would believe when we saw), Italy continues to be an ungovernable chaos. As for Germany, Merkel was forced to rely on opposition votes to pass the critical Cyprus rescue package on which she has literally bet the future of Germany and her political career. While not unexpected, this portends poorly for the Chancellor's September reelection chances, especially if the German anti-Euro party continues its recent surge in popularity in the past few weeks.

• Apple reportedly stops placing Mac component orders (DigiTimes)
• Apple Ordered to Remove Obscene Content From China Store (BBG)
• Texas Ammonia-Plant Blast Kills as Many as 15 People (Reuters)
• Boston Probe Said Focused on Person Dropping Bag at Site (BBG)
• The Chinese cold trade war comes come to roost: US becomes Japan’s top export market (FT)
• Berlusconi, Bersani back Marini in presidential vote (Ansa)
• German parliament backs Cyprus bailout (Reuters)
• China Vows Wider Yuan Movement (WSJ)
• Morgan Stanley Sees Core Earnings Weaken (WSJ)
• Gold Miners Lose $169 Billion as Price Slump Adds ETF Pain (BBG)
• G-20 Draft Affirms Pledge to Avoid Competitive Devaluations (BBG)
• IMF warns on risks of excessive easing (FT)
• The battle for the Swiss soul (Reuters)

Following yesterday's most recent Europe-led rout, the market is attempting a modest rebound, driven by the usual carry funding currency pair (EURUSD and USDJPY) levitation, although so far succeeding only modestly with not nearly enough overnight ramp to offset the bulk of yesterday's losses. In a centrally-planned, currency war-waging world, it is sad that only two key FX pairs matter in setting risk levels. But it is beyond hypocritical and highly ironic that according to a draft, the G-20 will affirm a commitment to "avoid weakening their currencies to gain an advantage for their exports." So the G-20 issues a statement saying nobody is doing it, when everyone is, thus making it ok to cheapen your exports into "competitiveness"? In other words, if everyone lies, nobody lies. Of course, also when everyone eases, nobody eases, and the world is back to square one. But that will only become clear eventually.

Gold and silver crashed. Here is a sometimes-humorous and often-irreverent and hard-hitting discussion. This is a different perspective and we hope to expand your thinking about gold and silver.