Archive - May 26, 2014 - Story

First it was Germany, now another AAA-rated European country is starting to get concerned about its hard assets. Overnight Bloomberg reported that following in Bundesbank's footsteps, Austria will audit its gold reserves located in the UK, which represent 80% of its total gold holdings. This gold reserve reviews held at Bank of England in London will be first conducted by external auditors, Christian Gutleder, a spokesman for the Austrian central bank, says via telephone. Gutleder explained that the Central bank has checked its reserves regularly in the past, adding that gold reserves haven’t changed since 2007. Which begs the question: why check them now then? 

With the Fed tapering and both China “I don't think the markets are discounting what’s really happening in China,” and Japan’s currencies likely to weaken, the net impact on the U.S. will be deflationary, Kyle Bass warned in a recent presentation. That trend will be accelerated by the improvement in the balance of trade for the U.S., which had its current account deficit shrink due to increased hydrocarbon production. Bass warns, the crucial moment will come when the U.S. reports a sub-6% unemployment rate, meeting the target it has set for normalizing its monetary policy by ending QE and raising rates. He predicted that will come in July. That will be the Fed’s “worst nightmare,” he said. Raising rates would stifle growth and recreate unemployment problems, which would be disastrous politically, according to Bass.

Another day, another fumble by the Obama administration (intentional or not). 11 years after former CIA operative Valerie Plame was deliberately exposed by the Bush administration as the US officials tried to apply pressure on her husband, an American diplomat criticizing the US invasion to Iraq; the Obama Administration's press service unwittingly put the real name of the CIA's top spy in Afghanistan on the 'pool report' distributed to over 6,000 journalists. The Washington Post were the first to discover the FUBAR and while the CIA and White House had 'no comment', they warned that the officer and his family could be at risk if the name were published.

As if global investors needed another excuse to buy stocks, China has escalated geopolitical tensions to 11 on the Spinal Tap amplifier of seriousness. With over 70 vessels in and around the Paracel Islands - where China has provocatively placed an oil rig in disputed Vietnamese territorial waters - it was only a matter of time before the blue touch paper was lit. As Yahoo Japan reports, a Vietnamese fishing vessel has sunk after being rammed by a Chinese vessel and the 10 fishermen have been rescued. While Vietnam has not responded yet, the Coast Guard warned "the situation at the site it very tense."

For a decade, Barclays (among others) rigged the precious metals markets with bursts of sell orders to maintain the illusion that the ultimate indicator of status quo failure was not flashing red. It now appears that Bitcoin suffered the same (but buying burst) manipulation in the last year as The Willy Report notes that last year, a number of traders began noticing suspicious behavior on Mt. Gox. So if you were wondering how Bitcoin suddenly appreciated in value by a factor of 10 within the span of one month, well, this is why. Not Chinese investors, not the Silkroad bust – these events may have contributed, but they certainly were not the main reason. But who did it? and why? It needs to be recognized that, whether intentional or not (though plausible ignorance only goes so far), Mt. Gox has effectively been abusing Bitcoin to operate a Ponzi scheme for at least a year.

We don't know what is more disturbing: that the largest 50 hedge funds (in a universe of about 777) account for some $716 billion in long equity assets or more than half the total (this number does not include non-equity long positions and, don't laugh, shorts of any kind), or that as we reported over the weekend, the investment thesis creativity across the hedge fund world has completely gone down the drain (considering the most popular stocks over the past three years have been Apple, GM and Google). What we do know is that when it comes to the epic pissing contest that are hedge funds, size matters. So for all your pressing questions whose is biggest... long equity book that is... here is the answer.

Forget well-roundedness... if you really want to get on in this world... study math betterer is the clear message from CareerCast.com's rankings of the best and worst jobs in America. As WSJ reports, it’s no secret that quantitative skills are in high demand on the job market; and as one analytics recruiter noted: workers who can’t crunch numbers may ultimately face a "permanent pink slip." Mathematician is the 'best occupation' in 2014 according to their report and Lumberjack the worst (with Newspaper reporter second worst).

The inevitable shuttering of at least 3 billion square feet of retail space is a certainty. The aging demographics of the U.S. population, dire economic situation of both young and old, and sheer lunacy of the retail expansion since 2000, guarantee a future of ghost malls, decaying weed infested empty parking lots, retailer bankruptcies, real estate developer bankruptcies, massive loan losses for the banking industry, and the loss of millions of retail jobs. Since we always look for a silver lining in a black cloud, we predict a bright future for the SPACE AVAILABLE and GOING OUT OF BUSINESS sign making companies.

All parties with a collective interest in seeing the North Dakota oil experiment succeed need to work together because, right now, the boss at the largest stakeholder in the Bakken shale says opponents are drawing a bead on the region. And it's not just exploration and production that's a concern.

If bigger is better then the following infographic is indeed the best that man has got...

There’s a long and comprehensive To-Do list that has been waiting for us since at least 2008, when the nation received one forceful blow upside its thick head. We refuse to pay attention.

When 2014 started, expectations were sky high and as Saxo Bank's Chief Economist Steen Jakobsen notes, policymakers and their support organisations like the OECD, the International Monetary Fund and the World Bank were all quick to call the crisis over and project a true recovery. Now just five month into the year we have seen nothing but disappointing data both relatively speaking but certainly also in absolute terms. As the following presentation outlines, Jakobsen believes we will see new low yields in this cycle this year and that 2014 will also be the year of the low in terms of: inflation expectations, wage/salary, velocity of money, loan demand, lack of reform, and innovation reforms.

As Americans celebrate the Memorial Day holiday, we should remember that though the VA’s alleged abuse and neglect of US veterans is scandalous, the worse abuse comes from a president and a compliant Congress that send the US military to cause harm and be harmed overseas in undeclared, unnecessary, and illegal interventions. The best way to honor the US military is to honor the Constitution, and to keep in mind the wise advice of our Founding Fathers to avoid all foreign interventionism.

We have discussed the 'downside' of America's "black gold" rush and the town of Williston, North Dakota is the poster child for the costs and benefits of this exuberance. But, as The BBC reports, there is some silver lining for those willing to deal..."Strippers can earn $2,500 per shift here," says a bouncer, "but the men here are 100% worse. It's horrible. They're animals."

UPDATE: Gold swung from $1,292 at futures close to $1,312 and is now trading at $1,275 - un-rigged!

Gold futures stopped trading at 1300ET for the Memorial Day holiday... seconds after that Spot Gold prices exploded higher from $1291 to $1312... of course liquidity is extremely light but it seems someone was anxious to get their hands on the real thing... Gold has breached its 200DMA, 100DMA, 50DMA, as well as the crucial $1300 (that Morgan Stanley said would never be seen again).