A few nations may indeed be forced to sell some of their official gold reserves as a result of plunging oil prices. It seems however not likely at this juncture that Russia will be one of them, there is a good chance that Venezuela will eventually be forced to sell some of its official gold holdings. However, the impact - short term psychological impact - on the gold market should be quite limited.
"As was true at the 2000 and 2007 extremes, Wall Street is quite measurably out of its mind. There’s clear evidence that valuations have little short-term impact provided that risk-aversion is in retreat (which can be read out of market internals and credit spreads, which are now going the wrong way). There’s no evidence, however, that the historical relationship between valuations and longer-term returns has weakened at all. Yet somehow the awful completion of this cycle will be just as surprising as it was the last two times around – not to mention every other time in history that reliable valuation measures were similarly extreme. Honestly, you’ve all gone mad."
As we prepare for the annual food fest, and post-Thanksgiving tryptophan-induced food coma; we thought this weekend's reading list should be a bit of a smorgasbord of interesting topics to stimulate your brain cells between naps and football.
While the media continue to just about exclusively paint a picture of recovery and an improving economy, certainly in the US – Europe and Japan it’s harder to get away with that rosy image -, in ordinary people’s reality a completely different picture is being painted in sweat, blood, agony and despair. Whatever part of the recovery mirage may have a grain of reality in it, it is paid for by something being taken away from people leading real lives.
It really isn’t hard to connect the dots and see the real economy in the real world, outside Wall Street, is a disaster and getting worse by the hour. Below are a bunch of dots that have been issued in the last 24 hours. Here are the facts.
In order to "suggest" that the US economy had grown by a far greater than expected run-rate, the BEA was forced to revise away personal income, and "assume" these had instead been invested in the US economy, in the form of a surge of durable goods purchases. Sure enough, while both incomes and savings tumbled, spending magically surged: So if that "statistical" amount of money you thought you had saved in the BEA's savings.xls spreadsheet just dropped by 10%, fear not dear Americans: it was all used for a good cause: to fabricate a much stronger than expected Q3 GDP number.
If yesterday the BEA provided the sugar high for Q3, with a GDP number that will be soon revised lower, then today's economic barage has so far been a disaster, with both Initial Claims, Personal Income and Spending, and now core Durable goods and capital goods shipments and orders missing across the board.
- National Guard, police curb Ferguson unrest as protests swell across U.S. (Reuters)
- Ferguson Reaction Across U.S. Shows Complex Racial Split (BBG)
- Democratic senator Schumer: Democrats Screwed Up By Passing Obamacare In 2010 (TPM)
- Veto threat derails Reid tax deal (Hill)
- Justice Department Investigating Possible HSBC Leak to Hedge Fund (WSJ)
- Merkel hits diplomatic dead-end with Putin (Reuters), and yet...
- Merkel Said to Reject Ukraine NATO Bid as Rousing Tension (BBG)
- HSBC, Goldman Rigged Metals’ Prices for Years, Suit Says (BBG)
While there has been no global economic outlook cut today, or no further pre-revision hints of "decoupling" by the appartchiks at the US Bureau of Economic Analysis, both European and US equities are pointing at a higher open, because - you guessed it - there were more "suggestions" of "imminent" QE by a central bank, in this case it was again ECB's Constancio dropping further hints over a potential ECB QE programme, something the ECB has become the undisputed world champion in. The constant ECB jawboning, and relentless central bank interventions over the past 6 years, led to this:
- GERMANY SELLS 10-YEAR BUNDS AT RECORD-LOW YIELD OF 0.74%
The punchline: this was another technically "failed" auction as it was uncovered, the 10th of the year, as there was not enough investor demand at this low yield, and so the Buba had to retain a whopping 18.8% - the most since May - with just €3.250Bn of the €4Bn target sold, after receiving €3.67Bn in bids.
Another day, another case of central banks, not one but two this time, dictating "price" action.
The look at the drivers of next week, without using the word manipulation or conspiracy, or referring to how stupid or evil some people may or may not be.
For America’s 44 million senior citizens, plus tens of millions of others who are on the threshold of retirement, last month marked a watershed moment that is worth celebrating. At the end of October, the Federal Reserve announced the first step in returning to a more normal monetary policy. After nearly six years of near-zero interest rates and quantitative easing, the Fed is ending its bond-buying program and has signaled a plan to eventually begin raising the federal-funds rate, raising interest rates to more normal levels by 2017. U.S. households lost billions in interest income during the Fed’s near-zero interest rate experiment.
Lack Of Daily Central Bank Intervention Fails To Push Futures Solidly Higher, Yen Implosion ContinuesSubmitted by Tyler Durden on 11/03/2014 07:47 -0400
While it is unclear whether it is due to the rare event that no central bank stepped in overnight with a massive liquidity injection or because the USDJPY tracking algo hasn't been activated (moments ago Abe's deathwish for the Japanese economy made some more progress with the USDJPY hitting new mult-year highs just shy of 113.6, on its way to 120 and a completely devastated Japanese economy), but European equities have traded in the red from the get-go, with investor sentiment cautious as a result of a disappointing the Chinese manufacturing report. More specifically, Chinese Manufacturing PMI printed a 5-month low (50.8 vs. Exp. 51.2 (Prev. 51.1)), with new orders down to 51.6 from 52.2, new export orders at 49.9 from 50.2 in September. Furthermore, this morning’s batch of Eurozone PMIs have failed to impress with both the Eurozone and German readings falling short of expectations (51.4 vs Exp. 51.8, Last 51.8), with France still residing in contractionary territory (48.5, vs Exp and Last 47.3).
"We start our Q4 GDP tracking estimate at +2.2%, eight-tenths below our prior standing forecast. The lower tracking estimate mainly reflects the larger-than-expected +0.7 percentage point contribution from defense spending to Q3 growth (which introduces risks for payback in Q4), the weaker-than-expected trajectory for consumer spending heading into the quarter apparent in today’s personal income and outlays report for September, and a slightly weaker assumption on net exports in light of the large net trade contribution in Q3, our global teams’ recent downgrades to rest-of-world growth forecasts and the recent appreciation of the US dollar." - Goldman Sachs
Two days ago, when QE ended and knowing that the market is vastly overstimating the likelihood of a full-blown ECB public debt QE, we tweeted the following: "It's all up to the BOJ now." Little did we know how right we would be just 48 hours later. Because as previously reported, the reason why this morning futures are about to surpass record highs is because while the rest of the world was sleeping, the BOJ shocked the world with a decision to boost QE, announcing it would monetize JPY80 trillion in JGBs, up from the JPY60-70 trillion currently and expand the universe of eligible for monetization securities. A decision which will forever be known in FX folklore as the great Halloween Yen-long massacre.