Archive - 2009 - Blog entry

Gold is only about half of its real high.

Overnight, we have learned that multiple Asian central banks intervened to prevent rapid appreciation of their own currencies against the US Dollar. Could we be witnessing the beginning of a currency crisis, or is this simply more water under the bridge?

Yet another advantage for Brazil and India.

Yet another problem for America.

Let me repeat what I stated last August. AIMCo is lucky to have Leo de Bever as their new CEO. The politicians in Alberta should give him a chance to prove himself. I am confident he will succeed in building a great team and add long-term value to the funds he's been entrusted to manage.

Veteran gold traders can attest that piling onto breakouts, especially in highly leveraged futures, can quickly become a losing proposition on a reversal. While yesterday’s surge in gold was confirmed with gold priced in other currencies, there is a slight seasonal negative at work here until the end of October. Traders should recall that the second week of October 2008 began a painful slide after a strong September...

Forget fundamentals. Hedge fund flows, investment banking flows, sovereign wealth fund flows, pension flows, and retail speculation will drive equities and other risk assets much higher. How long can it last? Remember the famous quote from John Maynard Keynes: "The market can stay irrational longer than you can stay solvent."

Dear Congressional Aides:

Here are the questions which should be asked of Gary Gensler and Henry Hu in tomorrow's hearing before the House Committee on Financial Services

The move in gold to new 18 month highs has not been confirmed by backwardation in the gold basis. Caution is warranted for leveraged traders.

In the 1980s, in Soviet Russia, a few times a year, my class walked to a movie theater, where we were shown a documentary. Attendance was mandatory. The documentaries were different but the themes were the same: to the accompaniment of patriotic music, we learned about the righteousness of socialism, the greatness of Mother Russia, and the intelligence and foresight of our great leaders.

True to form for 2009, anyone trading with a close eye on the fundamentals is getting a major hurt put on, while buying any dip to minor support, such as the 50 day MA, remains as viable a strategy as the most sophisticated SPARC assembly language-optimized HFT algorithm. The order has come down from above, once again today (as it did yesterday), that sellers ain't welcome.

The short answer is...

Yes, probably.

The dollar will go way up the next time the stock market crashes or during the next leg of the financial crisis . . . but will tank long-term.

Unlike those employees at Simmons who lost their jobs, private equity pension fund managers and the GPs they invest and co-invest with are sleeping easy, counting the millions they collect in bonuses and fees as they profit by loading up the debt of companies they acquire.

The SSTF shortfall for September came to $4.13 billion. A $10 billion swing from 2007. This is the third month in a row of this red ink.The day of reckoning is coming sooner than is forecast. Japan is in trouble over the same problem. We are following them down the same path.

What we do know is this: compressed prices can lead to explosive moves in either direction.