Creeping up on the outer edges of Wall Street and The City soothsayers’ economic crystal ball, until now dominated by American and Euro crises, is growing concern about China.
Trading Physical Gold As Easily As You Trade Stocks: Is Gold Becoming A Tradable Currency After All?Submitted by Reggie Middleton on 12/03/2011 11:41 -0400
Not many know that you can trade physical gold & precious metals OTC through your brokerage account, and take physical delivery on demand. This is the first of several interviews that explores this model.
A 787 point gain on the Dow this week, second only ever in absolute points gained to w/e 10/31/08, ended on a disappointing note as equities gave back significant early gains around the NFP print to end the day practically unch (128pts off the highs). Equities underperformed credit on the day with another strangely impressive (given NAV and HY spread differentials) outperformance by HYG. On a medium-term basis, equities began to revert back to where broad risk assets are more supportive but on a short-term intraday basis, risk assets (most notably EURJPY, AUDJPY, and TSY levels and curves) were in a more aggressive derisking mode. ES definitely maintained strength for longer than many expected today before giving it all back into the close, but financials (especially the majors) were surprisingly positive today even after such a good week - quite a squeeze.
Unlike the broad consensus of prognosticators who feel the road for the US is a decade or more, Bass sees a three-to-five year window for a credible solution to the debt saturation or else kicking the can will cease to have any impact. The reason for the proximity is the acceleration of what happens in Europe and Japan with that respective chronology his central view - which he sees as critical in understanding for every money manager. In this extended interview at AmeriCatalyst, he points to the optimistic self-deception biases that leave people unable to comprehend the scenarios as they either lead to a really bad outcome or a nominally bad outcome.
Using the Lehman moment as an example, Bass explains how we have been conditioned to believe there is always a backstop or savior...now those backstops at a corporate and sovereign level (central banks and the IMF for example) are being called into question in their roles (being seen for what they are - as just promises) and it is the chasm between what we want to believe and what does happen that is enormous and leaves the extreme volatility, risk-on/risk-off market the way it is. Reiterating how critical the psychology of today's situation, Bass goes on to debunk the optimism of globalization (at least for the Western world), destroy the myth of a 50% greek writedown solution, Japanese xenophobia and savings losses, structural versus cyclical implications for US equity deterioration, why you should never trust what government says, the US decifit and housing issues, increasing global debt saturation and how this tearing at the social fabric of the world will lead to - war.
The Bank of Korea’s continued diversification of its foreign exchange reserves is a bullish factor which may have led to the price gains today. The central bank of South Korea announced that it had purchased 15 metric tonnes of gold in November to raise its reserve of bullion in an effort to diversify its portfolio of its foreign reserve investment and reduce risks caused by market volatilities. According to the Bank of Korea (BOK), it made a purchase of 15 tons of gold last month to increase the nation’s gold reserves to 54.4 tons worth $2.17 billion as of the end of November. It boosted the size of its gold reserves by US$850mn in November, up a massive 39% from the previous month. Its total gold reserves are now worth US$2.17bn.
Been lots of talk around lately regarding the collapse of the US Dollar and what that would mean for the United States of America and the world. There has also been a lot of talk about the Federal Reserve Bank of the United States of America and how unhappy the people of the US are getting with this largely unknown organization. These two forces are converging together in what could be a very serious and detrimental way as it relates to the average US citizen. This article will rely heavily on flawed analogies to help the lay person understand the inner workings of both the IMF and the Federal Reserve Bank. This is not to be taken as an academic piece and I would ask that it not be judged as such. This is meant to help those people that have recently woken up to the reality that their country has been hi-jacked and those that are desperate to get up to speed as quickly as possible. So let’s jump right into the thick of it shall we? First we need to start with what I hope are simple lessons so that you can take what I am about to teach you and apply it to the real world. There is one thing that bankers and computer people love to do and that is to use big scary acronyms to scare off the simple folk. So here is the first lesson...
This is not a rescue, but merely going from the frying pan into the fire by funding bad trades with impunity.
In the wake of chopping its Central Bank swap rates, the Fed has been called a bunch of names: a hero for slugging the big bailout bat in the ninth inning, and a villain for printing money to help Europe at the expense of the US. Neither depiction is right. The Fed is merely continuing its unfettered brand of bailout-economics, promoted with heightened intensity recently by President Obama and Treasury Secretary, Tim Geithner in the wake of Germany not playing bailout-ball. Recall, a couple years ago, it was a uniquely American brand of BIG bailouts that the Fed adopted in creating $7.7 trillion of bank subsidies that ran the gamut from back-door AIG bailouts (some of which went to US / some to European banks that deal with those same US banks), to the purchasing of mortgage-backed–securities, to near zero-rate loans (for banks). Similarly, today’s move was also about protecting US banks from losses – self inflicted by dangerous derivatives-chain trades, again with each other, and with European banks. Before getting into the timing of the Fed’s god-father actions, let’s discuss its two kinds of swaps (jargon alert - a swap is a trade between two parties for some time period – you swap me a sweater for a hat because I’m cold, when I’m warmer, we’ll swap back). The Fed had both of these kinds of swaps set up and ready-to-go in the form of : dollar liquidity swap lines and foreign currency liquidity swap lines. Both are administered through Wall Street's staunchest ally, and Tim Geithner's old stomping ground, the New York Fed.
Given the better-than-expected ISM print earlier, one could be forgiven for believing that the US is just fine thank you very much. Our earlier discussion of the dispersion in the ISM sub-indices, and yesterday's discussion of the PMI 'catch-up' nature of the very recent pre-holiday seasonal orders given the unusual slump in October may weaken the decoupling view but strategists will extrapolate trends as normal. Whether you believe in tooth-fairies or decoupling, Goldman's Global Leading Indicator continues to accelerate downward and moved into negative territory for the first time since August 2009. Amid a broad deterioration in components their outlook for global growth remains soft, even as the US export miracle remains alive and well.
Gold ended November with a 1.9% gain in US dollar terms, the seventh month of the dollar falling against gold so far this year. The euro fell 5% against gold in November. The British pound fell nearly 4% against gold. The Aussie dollar fell nearly 6.5% and the South African rand by 5%. Thus, gold again protected investors and savers internationally from the global financial crisis. Gold is now more than 20% higher in dollars and 18% higher in euros and pounds in 2011. It is only 9% below the record nominal high of $1,920/oz reached in September and given the degree of systemic and monetary risk in the world this price level will likely again be reached by early 2012. Global ETF holdings of gold topped 70 million oz for a second day in a row, marking not only a new record high, but meaning that ETF holdings of gold are double those held by the Chinese central bank and are just a few metric tonnes behind those of France, the world's 5th largest official holder of bullion (2,435T).
- Fed Dollar-funding Cut Shows Limits of Action (Bloomberg)
- Global euphoria runs out of steam (AP)
- Chinese Manufacturing Activity Slows (FT)
- Draghi calls for eurozone ‘compact’ (Dow Jones)
- Close Ties Facilitated Coordinated Moves (Hilsenrath)
- Congress Push to Relax US Securities Laws (FT)
- ECB hints at action if euro zone adopts fiscal pact (Reuters)
- Japan to Compile Fourth Extra Budget (Bloomberg)
In his latest letter to LPs, Kyle Bass of Hayman Capital Management, offers his tell-tale clarity on what may lie ahead for Europe and Japan. With his over-arching thesis of debt saturation becoming more plain to see around every corner, Bass bundles the simple (and somewhat unarguable) facts of quantitative analysis with a qualitative perspective on the cruel self-deception that we all see and read every day about Europe.
Whether it is Kahneman's "availability heuristic" (wherein participants assess the probability of an event based on whether relevant examples are cognitively "available"), the Pavlovian pro-cyclicality of thought, or the extraordinary delusions of groupthink, investors in today’s sovereign debt markets can't seem to envision the consequences of a default.
His Japanese scenario is no less convicted, as we have discussed a number of times, with the accelerant of this debt-bomb being the very-same European debacle and his time-frame for this is set to begin in the next few months.
Hey, at least a handful of Ben's buddies will make a bundle ...