The Prevailing Trend, the Dollar, and the Return of Volatility

Friday, February 12th, 2010

What does the fiscal crisis in Greece have to do with the price of commodities? Why would the Chinese step up their rhetoric of ditching reserve holdings in U.S. agencies, like Fannie and Freddie, and mortgage backed securities debt – Whom does it serve?

Why have emerging markets, commodities and commodities stocks, and equity markets in general, gotten a lashing?

Believe it or not, it’s all about achieving global equilibrium, and at the heart of this is the dollar.

Behind all of the market volatility in equities, commodities, and emerging markets in January, and the myriad of causes the financial media chalk up, are the prevailing trend, and the countervailing forces, that revolve around trading in the U.S. dollar.

Read the complete article here.

Source: Pierre Daillie (AdvisorAnalyst.com), GlobeAdvisor.com, February 11, 2010

Tags: Chalk, Commodities, Dollar, Emerging Markets, Fiscal Crisis, Global Equilibrium, Globeadvisor, Greece, Heart, Lashing, Market Volatility, Mortgage Backed Securities, Myriad, Prevailing Trend, Rhetoric, Stocks
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Roundup: Gold Market

Sunday, January 17th, 2010

Gold Market
For the week, spot gold closed at $1,130.93 per ounce down $7.32 or 0.64 percent. Gold equities, as measured by the XAU Gold & Silver Index, fell 4.93 percent rise for the week. The U.S. Trade-Weighted Dollar Index slid 0.34 percent.
Strengths

• Gold Fields Mineral Services has said in its latest gold survey that official central bank sales declined 90 percent in 2009 as they shifted onto the buy-side of the market during the second quarter and have remained there since.
• Central bank gold sales for the year were only 157 tonnes, significantly lower than the Central Bank Gold Agreement’s quota of 500 tonnes.
• World investment tonnage more than doubled last year, rising by 482 percent to 1,375 tonnes, as investors piled into bullion-backed exchange traded funds and other investment vehicles that track the price of gold.

Weaknesses

• China’s decision to raise reserve requirements by 50 basis points for banks hurt commodities and caused gold to erase earlier gains in the week as risk-averse trades strengthened the dollar and Greece’s fiscal crisis dented investor confidence. Analysts see the tightening in China as a weakness because it is believed it will curb demand for raw materials.
• Peng Junming, an investment strategist at China’s sovereign wealth fund has said the U.S. dollar has most likely bottomed as there will be very limited space for the dollar to drop further, and has said that there is no urgent need for China to increase gold buying for now because of high prices.
• Reports from the U.S. Treasury calculated $15 billion profits from the Capital Purchase Program for banks and another $4.4 billion in profits from other bank investments and lending programs. However, the figures are miniscule when compared to the estimated net losses on its $700 billion bailout program which totaled $68.5 billion for the fiscal year ended in September 2009 primarily due to the continued weakness from AIG, automaker bailouts, and mortgage payment losses.

Opportunities

• The World Economic Forum (WEF) has expressed that sovereign credit risks are rising and has said that unsustainable debt levels ranked among the top three risks for the year ahead. WEF has said debt levels have risen from 78 percent in 2007 to 118 percent of GDP in the G-20. Continued weaknesses in Dubai, Greece, and Ukraine may entice investors to seek refuge in gold.
• The World Gold Council has said that gold sales across the countries in the Middle East will considerably pick up in 2010 thanks to better market conditions and rising demand for gold as an alternative asset.
• Notable gold investor, Rob McEwen believes gold prices may increase to $5,000 an ounce between 2012 and 2014 and maintains his forecast that gold will rise to $2,000 an ounce by the end of the year.

Threats

• Governor Schwarzenegger is refusing to consider tax hikes and is relying mostly on $8.5 billion in expenditure cuts from medical insurance programs, among others. He is also counting on the U.S. government contributing nearly $7 billion to plug the budget deficit gap. As a result, Standard & Poor’s cut California’s debt yet again citing “severe fiscal imbalance and the impending recurrence of a cash deficiency if the state’s revenue and spending trajectories continue.”
• The chairman of the Commodity Futures Trading Commission said that the agency’s planned meeting in early March to discuss possible position limits on metal futures and options contracts will focus on gold and silver contracts.
• Inflation fears in Venezuela have risen after President Hugo Chavez decided to devalue the bolivar by 50 percent to benefit the largest state-owned oil producer after margins fell due to the fall in crude prices last year. It will raise cash for social projects and will increase wages ahead of parliamentary elections in September. Chavez has warned businesses that raise prices ahead of the devaluation will be seized by the government.

Tags: Bailout, Bank Gold, Bank Investments, Central Bank Gold Sales, China, Commodities, Dollar Index, Emerging Markets, Exchange Traded Funds, Fiscal Crisis, Gold, Gold Equities, Gold Fields, Gold Market, Gold Survey, Investment Strategist, Investment Vehicles, Investor Confidence, Mineral Services, Mortgage Payment, oil, Silver Index, Spot Gold, U S Treasury, World Investment
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Jim Chanos in the Spotlight

Thursday, October 1st, 2009

James Chanos is a legendary American hedge-fund manager and president and founder of Kynikos Associates, a New York City investment company focused on short selling. He rose to fame in the 1980s as a short seller who had a knack of spotting stocks he considered to be overvalued. After working as an analyst at several firms, he founded Kynikos (Greek for “cynic”) as a firm specializing in short selling.

This post features Chanos being interviewed by Rob Johnson of New Deal 2.0 - a one-stop shop for current news, fresh insight, and sharp analysis of the country’s fiscal crisis.

This is good stuff - click here for a Verbalink transcript.

Source: New Deal 2.0, August 2009.

Tags: 1980s, Current News, Fame, Fiscal Crisis, Good Stuff, Hedge Fund Manager, Insight, Investment Company, James Chanos, Jim Chanos, Knack, Kynikos Associates, New Deal, New York City, Rose, Sharp, Spotlight, Stocks
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Shiller: US remains in “bad recession”

Tuesday, July 21st, 2009

Robert Shiller was among the very few to warn of a housing bust before it happened. Now he says that although the housing market could be approaching a bottom, prices might remain in the “doldrums” for years to come as the US remains in a “liquidity trap” comparable to the one it faced during the Great Depression.

Though stock market prices are valued fairly, Shiller said, equities remained a “risky” investment because the US had not turned the corner on its fiscal crisis. He warned that stock prices “could fall dramatically”.

Click here for the article.

Tags: Bottom Prices, Bust, Doldrums, Fiscal Crisis, Great Depression, Housing Market, Liquidity Trap, Recession, Risky Investment, Robert Shiller, Stock Market Prices, Stock Prices
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