Exchange Traded Fund
As destructive as the Japanese tsunami has been, it may have left some investment pearls in its wake. It has suddenly made available some of the country’s best of breed, world beating companies available at throw away prices. But this is going to be an investment for longer term money, not a trade, as some patients may be required for a payday.
More pension politics up here in Canada and more disinformation on Canada's pension myths...
For now, the big fish are bailing out the little fish. Unfortunately, the US is the biggest fish of all and it's extremely unclear to see who exactly will be bailing us out when our rates start rising.
Asian demand is especially strong in the increasingly important China. The Chinese strong cultural affinity and love affair with gold (primarily due to a distrust of Chinese paper money) shows no signs of abating. Indeed, it may be accelerating as was seen in the recent figures from the Shanghai Gold Exchange and customs in China and now reports (including from CNTV – the national TV station of the People's Republic of China) of shortages of raw gold or unrefined gold. China, now the largest producer of gold in the world is seeing its gold mines struggle to cater for surging Chinese demand. The raw gold trade has been growing by up to 30% per annum and demand has leapt in recent months leading to a developing raw gold shortage in China. The industry in China expects only 27,000 tonnes of raw gold can be delivered this year. That is way below the estimated demand of 50,000 tonnes. A potential supply shortage of 23,000 tonnes of gold is a large amount of gold in the small gold bullion market which is tiny versus equity, bond and derivative markets. It is infinitesimal when compared to the $4,000 billion a day traded in currency markets.
The “Hunt Brother High” is within reach. The total demand for silver today is the same as it was in 1980, when their corning drove it to $50/ounce.
Investment demand is overwhelming industrial demand by a large margin. Should I let target creep take hold and raise my long term forecast to $100? That might be really insane! (SLV), (AGQ), (CDE), (SLW).
I've got a funny feeling that all the ramp-and-camp, extend-and-pretend POMO games propping up stocks are about to stop working. That would of course trigger a long, deep slide in equities, because as we all know, it's the Federal Reserve's games which have goosed the market to its current lofty heights. The market's confidence in the Bernanke Put--that is, the belief that the Fed will never let stocks decline-- remains supremely undimmed...I've got a funny feeling that it's lose-lose time for the Fed's games. here's the basic game plan: inject tens of billions of free money into the "risk trade," i.e. equities and commodities, ramp the futures markets when volume and liquidity are low, and crush the U.S. dollar. It's practically a perfect inverse correlation: when the dollar tanks, stocks move higher, and when stocks hit bottom then the dollar peaks. Think see-saw: when one tops out, the other hits bottom, and vice versa.
Several days ago there were a few rather amusing anecdotes in the blogosphere that just because Sprott filed a selling shareholder shelf in PSLV, the ETF was about to crash and burn. What was not disclosed is that in 2011 there have been about 200 comparable shelves filed for public companies, yet nobody called for the imminent anihilation of 40% of the S&P. Stunningly, just because someone requests the right to sell an asset they own when said asset is trading at all time highs, apparently does not mean they intent to exercise said right. To wit: the premium to NAV for the Eric Sprott physical silver ETF just hit an all time record of 23%. We are confident that this is due to JPMorgan being massively long the metal, and also because anywhere one walks these days, physical silver lying on the ground is more prevalent than dog excrement. Also, those who decided to play the premium-NAV compression trade, are advised to promptly close it unless, of course, they are a TBTF bank.
So much for that $25 million EGPT ETF as being a leading indicator. AP dscribes what can only be summarized as the funniest plunge-protection free market reopening in history: "Shares on Egypt’s stock exchange plunged Wednesday as the market
reopened after being shut for nearly two months because of the mass
protests that toppled former President Hosni Mubarak. Egypt’s finance minister was on hand as men dumped confetti on the trading floor to mark the resumption of trading. But within seconds of the opening, trading was once again halted as an intense sell-off drove shares below pre-set limits put in place to slow any sharp declines. The market reopened half an hour later. The benchmark EGX 30 index was trading down 9 percent at 5,137 points by early afternoon, recovering slightly from a drop of nearly 10 percent earlier. Finance Minister Samir Radwan called on investors not to panic." Of course, where some see panic, others may see responsible selling of liquid assets as the clusterflock of black swans is now flying high in the troposphere and following the Gulfstream.
Late last week, Zero Hedge pointed out that Goldman Sachs had come out with yet another flip flop piece on gold, having recommended that clients should go long, then short, then long again, pretty much depending on which way the wind blows. We have long been skeptical of Goldman calls on anything, let alone gold, as the firm, just like JPMorgan is very much fundamentally conflicted any time it has a bullish "recommendation" on any precious metal due to the very intimate influence gold and other commodities have on Fed presidents' perception of inflation (and the last thing one would want is for Bernanke's deflation scare tactics to be doubted by more than just Dallas Fed's Fisher, who despite lofty rhetoric has yet to back his words with even one abstaining vote). That said, our skepticism about Goldman's sudden shift in bias has been validated by FMX Connect, which has conducted a forensic analysis of just what Goldman is seeking to achieve with its most recent recommendation. We continue to be far more bullish on any price appreciation prospects for gold, when Goldman (not to mention that other clown on TV), are bearish on gold, than the inverse.
Well, those devious gold bugs and sound money advocates are at it again! They had the audacity to produce economic analysis that consistently outshines and embarrasses mainstream Keynesian pundits. They had the nerve to expose the seedy underpinnings of the private Federal Reserve. They even had the gall to bring the long established short manipulations of metals markets by global banks like JP Morgan and HSBC into the light of day, where anyone whose head was not buried in the dark recesses of their own colon could see and say “My god! There really is an organized cabal against gold and silver!” But if you thought all that was outrageous, these people, who promote the insane notion that our currency should actually be backed by tangible wealth and should be under the control of the voting public instead of some unaccountable parasitic corporate central bank, have now brought state legislators into the mix! The return to sound money has begun…
The real price of crude oil really topped out at $120/barrel last week. Anyone in the oil industry will tell you that, considering only the true supply and demand for oil, the price should be about $70/barrel. All of the $23, or 27% increase in the price of oil in the last four weeks has been about fear. We are going to see $90/barrel before we see $150. Saudi Arabia is not Tunisia, Algeria, Egypt, or Libya. The Saudi’s had a lot more money to spread around to keep everyone loyal. This is why Al Qaida has made absolutely no inroads there for the past 10 years.
Overnight Recap: Japan's Nuclear Crisis Leads To 'Panic' - Nikkei Crashes 17% In 2 Days, Japanese Default Risk Rises to Record, Gold Down 1% in $Submitted by Tyler Durden on 03/15/2011 06:40 -0500
Japan's nuclear crisis has deepened and we deeply regret to say that there is now the real possibility of a nuclear catastrophe. Investor panic has set in with the Nikkei down over 16.5% in two days and the Topic index down by 17% - its worst two-day loss since the 1987 Wall Street stock market crash. The cost to insure Japanese debt has surged to a record with credit-default swaps protecting Japanese government debt for five years soaring 27 basis points to a record of 125 basis points. One UBS trader said that the deteriorating nuclear crisis had led to "near panic across local credit-default swap markets." While most equity indices and commodities have fallen, some sharply, gold has remained resilient and is down 1% in US dollar terms and is higher in Australian dollars which like other so called 'commodity' currencies has come under pressure in recent days. Gold remains marginally higher in all currencies since the tragedy began last Friday.
The burgeoning demand for energy has spilled over to the corn market, where demand for feedstock by ethanol refiners is going from strength to strength. Nearly 40% of the country’s corn crop is being diverted to ethanol production. Expect the volatility of food prices generally to increase. (ADM).
Global pension assets are estimated to be – drum roll, please – $31.1 trillion. No, that is not a misprint. It is more than twice the size of last year’s GDP in the U.S. ($14.7 trillion). We know a few hedge fund managers have invested in gold, like John Paulson, David Einhorn, Jean-Marie Eveillard. There are close to twenty mutual funds devoted to gold and precious metals. Lots of gold and silver bugs have been buying. So, what about pension funds? According to estimates by Shayne McGuire in his new book, Hard Money; Taking Gold to a Higher Investment Level, the typical pension fund holds about 0.15% of its assets in gold. He estimates another 0.15% is devoted to gold mining stocks, giving us a total of 0.30% – that is, less than one third of one percent of assets committed to the gold sector. Now here’s the fun part. Let’s say fund managers as a group realize that bonds, equities, and real estate have become poor or risky investments and so decide to increase their allocation to the gold market. If they doubled their exposure to gold and gold stocks – which would still represent only 0.6% of their total assets – it would amount to $93.3 billion in new purchases. If these funds allocate just 5% of their assets to gold – which would amount to $1.5 trillion – it would overwhelm the system and rocket prices skyward.
Investors will win the ETF price war, while the real victim will be an arthritic mutual fund industry. You can’t miss those glitzy, overproduced, big budget ads on TV for a multitude of mutual fund families. But they are about to be consigned to the dustbin of history.