First Tunisia, Then Egypt, Now Yemen: Will This Reach The Powder Keg That Is The EU & What Will Happen If It Does?Submitted by Reggie Middleton on 02/02/2011 12:38 -0500
So here's what it will look like of the Tunisian/Egyptian/Yemen parade skips across to the EU. Can you spell U-G-L-Y?
The two oil shocks of the 1970s saw gold prices rise by more than 24 fold (2,300%) in just 9 years - from $35/oz to $850/oz see chart above). To put that in perspective, today gold's rise has been far more gradual and it has risen some 5 fold (430%) in 11 years - from $250/oz to $1,330/oz. In this regard it resembles gold’s rise from $35/oz in 1971 to nearly $200/oz in late 1974 – a six fold increase. Given the significant macroeconomic, systemic, monetary and geopolitical risks of today gold is likely to perform again as it did in the 1970s. A 20 fold increase from trough in 1999 to peak sometime in the coming years would see gold rising to over $5000/oz. This may seem outlandish to those unaware of gold's fundamentals but the very small supply of gold internationally, increasing demand (particularly from investors and central banks), the sovereign debt crisis in the EU (soon to spread to the U.S.) and the debasement of the dollar, the euro and other currencies internationally makes this increasingly possible.
"The Lonliest Man in Davos" wrote a 28-page report foretelling a global recession by 2015 via a commodity debt crisis brought on by China.
One would think that judging by all the frequency of lies about Europe's latest CDO knight in shining armor, also known as the EFSF, that bond spreads would be rushing headlong to zero as yet another form of perpetual taxpayer backstop is implemented. One would be wrong. Spreads on the Portuguese and Spanish 10 Years are now back to their widest levels in history. It is fairly complicated to reconcile this stickiness with the daily barrage of mendacity from all ECB apparatchiks. Basically, the market, unlike Goldman (see below), is fairly unconvinced that any of the currently planned rescue plans have any chance of being successful.
The markets are already pricing in the near certainty of a quarter-point rise from the Bank of England by May with another increase expected before October. But perhaps not wanting to be left out, the zealous guardians of Europe’s monetary system, who measure inflation rates across the 17-country bloc to the second decimal point, have recently raised their rhetoric to such an extent that investors are openly speculating that in spite of the continent’s tight fiscal policy European rates are now likely to rise before the end of summer. As they say in the land of macro investing, the cycle isn’t over until the Europeans lift rates. Just don’t bet on money staying tight for long. - Hugh Hendry
Since by now it is all too clear that none of the rating agencies will dare to downgrade the US until well after its creditors realize they have all been taken for the proverbial ride, and even longer after the Fed owns a vast majority of US treasury bonds, which according to CNBC is great, but according to Weimar Germany is sucky to quite sucky, one is forced to pay attention to the fine print and carefully worded nuances in all public statements to see just how they really feel. Today provided just such an opportunity. According to Market News, "Fitch Ratings Wednesday said it believes “the U.S. fiscal metrics will be the worst of any ‘AAA’-rated sovereign,” due to the higher-than-expected deficits and debt levels expected following the extension of the Bush era tax cuts." That's about as diplomatic as it gets without getting (nearly) fired for telling the truth (see NJ governor Christie). The punchline: "Absent a credible plan, the rating on the U.S. federal government will come under pressure." Too bad the US has not had a credible plan for about 30 years now aside from "...print?"
During a presentation in Chicago yesterday, Jim Rogers may have well laid the foundation for the next bubble predicted by Zero Hedge in October, namely rice. His comments may have also spooked some of the weaker hands in gold, which has tumbled by $20 today, primarily on concerns what Chinese tightening may do to demand for the precious metal. Of course, how tightening is bad for commodities and good for stocks is one of those questions that can only be explained by the Fed's third mandate. From Bloomberg: "While gold “may go down for awhile,” the metal is “going to go over $2,000 in this decade,” Rogers, who owns gold, silver and rice, said today during a presentation to business executives in Chicago. Gold touched a record $1,432.50 an ounce in New York on Dec. 7. The price closed today at $1,387. “I’d rather own rice,” Rogers said. “I’d rather own something that’s more depressed than gold.”"
Gold and silver have fallen in most currencies today but are higher in the “commodity currencies” of Canadian, Australian and New Zealand dollars, and flat in Swiss francs. Gold and silver are both slightly higher for the week in US dollar terms but weaker in terms of other currencies.
The day's key events in equities, vol, FX, rates, corporates and commodities, as well as a recap of tomorrow's upcoming events.
All you wanted to know about why the world is bankrupt in many pretty charts.
When it comes to providing analytical perspectives and empirical insights into the realm of sovereign deterioration, few come close to the work of Reinhart and Rogoff. Citi’s Willem Buiter is one such man. In his latest summary piece describing in excruciating detail just how bad things are at the sovereign level (and judging by tonight's opening print in the EURUSD more are starting to realize this), Buiter provides a terrific country by country guide of what is now an insolvent world, starting with the merely extremely risky, going through the backstop-baiters, and finishing with the time bombs that have already gone off and everybody pretends not to care. For those who do care, this is a definitive guide to what each individual European (and not only) country can look forward to in an age of global moral hazard. The only open question: with China's interest now to preserve the Euro's viability, how will Beijing act in the next few months as the eurozone finally starts unraveling.
... That's what some model (quite possibly from Ford or Wilhelmina) in Barclay's FX department predicts tomorrow's NFP number will be. And just in case the first number is wrong, basedon what can only be attributed to Barcap borrowing Birinyi's ruler, the firm says there is a 95% confidence interval that the actual number will come at 450,000. And there's your whisper number. .
This Mornings News Flow Is Essentially A "Didn't Reggie Tell Us This In Full Detail Up To Two Years Ago" Parade As Indebted Europe Continues To Rip At The Seams!Submitted by Reggie Middleton on 01/05/2011 09:08 -0500
Don't say I didn't tell 'ya so!
"Off With Our Heads!": Bil Gross On How "Future Generations Pay The Price For Their Parents’ Mindless Thrusting"Submitted by Tyler Durden on 01/05/2011 08:28 -0500
- American politicians and citizens alike have no clear vision of the
costs of a seemingly perpetual trillion-dollar annual deficit.
- Policy stimulus is focused on maintaining current consumption as
opposed to making the United States more competitive in the global
- Dollar depreciation will sap the purchasing power of U.S. consumers,
as well as the global valuation of dollar denominated assets.
By Bill Gross
Charting 2010, Part 2: Currency - Printing Money, FX Manipulation And Pricing Unleaded In Bits Of BaconSubmitted by Tyler Durden on 12/26/2010 11:38 -0500
No summary of 2010, visual or otherwise, would be complete without an extensive overview of what pundits call Monetary Stimulus, quantitative easing or Large Scale Asset Purchases, and the peasantry calls, just as correctly (with a few footnotes), the printing of money. If there are two words that define what we had an absence and an abundance of in the past year, those would be jobs, and money. As some of the key jobs-related charts were presented yesterday, below, once again courtesy of BusinessWeek, are the main charts that among other things demonstrate the various currency manipulation playbooks, the price of gas in bacon and other products, the annotated strength of the dollar through time, and what is actually printed when the Fed does print money.