Wednesday, December 24, 2008
Tuesday, December 16, 2008
Death of Deflation and US Dollar. Fed has cut to Zero. GDX, SSRI, SLW, AUY, MGN, SST.v OK.v, BVG.v, MAI.to, TNR.v CZX.v, SBB.v
Dec. 16 (Bloomberg) -- The Federal Reserve cut the main U.S. interest rate to “a target range” of between zero and 0.25 percent and said it will do whatever is needed to end the longest recession in a quarter-century and revive credit.
The Fed “will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Federal Open Market Committee said today in a statement in Washington. “Weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”
Monday, December 15, 2008
“The dollar will go to new lows as the U.S. attacks its currency,” said John Taylor, chairman of New York-based FX Concepts Inc., which manages about $14.5 billion of currencies. ..
Speculation that the dollar has peaked gained steam last week as the currency plunged 4.9 percent against the euro to $1.3369, its biggest drop since Europe’s common currency was created in 1999. It weakened 1.75 percent versus the yen.
“We’re at a turning point in terms of dollar dynamics,” said Jens Nordvig, a New York-based strategist at Goldman Sachs, the biggest U.S. securities firm to convert to a bank. “The dollar shortage has been addressed and we’ll see people start to focus on other things and those are all dollar negative.” ...
Spending to shore up the financial system caused the U.S. government’s budget deficit for the first two months of fiscal 2009 that started in October to balloon to $401.6 billion, the Treasury Department said Dec. 10.
“It’s absolutely going to get worse before it gets better,” said Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado. “We’re looking at a $1 trillion deficit, and that’s before the next stimulus package. If Treasury spends all of TARP, it could be $1.2 trillion to $1.3 trillion.” ...
Sunday, December 14, 2008
Gold Cup and Handle Bullish formation indicates potential short squeeze. GDL, AUY, ABX, GDX, BVG.v, RMK.v
US Dollar collapse is back into waterfall mode with 8.5 trillion liquidity commitments. GDX, HUI, XAU, SLW, SSRI, AUY, ABX, SST.v, OK.v, TNR.v, BVG.v
Submitted by cpowell on Sat, 2008-12-13 04:11. Section: Daily Dispatches
From "Midas" Commentaryby Bill MurphyLeMetropoleCafe.comFriday, December 12, 2008
I received a call this morning from a commodities broker who told me that the Comex is alerting various futures firms about the potential of a squeeze on the December contract and is advising the $840 December shorts to exit their positions. That is the remaining open position.
There have been 12,636 notices of delivery. The shorts have until December 31 to make delivery. Normally they deliver early to take in cash and earn the interest. They must be delaying. As I understand the situation, that represents about 40 percent of the gold available at the Comex, and of course someone could enter the scene late, buy February gold, and then spread into December, which would stun the shorts.
My broker friend said his back office said this sort of alert is highly unusual and that the concern is real, not only for gold, but for other commodities too, like copper and palladium, as there is a good deal of talk of taking deliveries there too. But gold is the one for which the advice to cover went out.
This is an extremely productive development and could spur the price of gold up quickly as word spreads. As we all know, buying Comex gold and silver (the cheapest way to buy precious metals) makes all the sense in the world in this financial environment."
US Dollar - Jim Rogers using rally to exit dollar assets GDX, HUI, XAU, GDL, SVL, SSRI, AUY, SLW, MGN
NEW YORK (Reuters) - Investor Jim Rogers said on Thursday he has been using the sharp rally in the U.S. dollar as an opportunity to exit assets denominated in the U.S. currency.
Rogers told the Reuters Investment Outlook Summit 2009 in New York that the rally -- which has pushed the greenback up about 20 percent since July -- is a reversal of a "gigantic short position" accumulated over several years and not a result of a fundamental bet. He added the U.S. currency is likely to weaken sharply again.
"I plan to get out of all of my U.S. dollars at some time throughout this rally," he said. "The dollar is a terribly flawed currency, and perhaps a doomed currency."
Saturday, December 13, 2008
US Dollar and Gold: Goldman raises gold and silver forecasts on anticipated dollar weakening GS, TLT, GDX, AUY, SSRI, SLW
Goldman raises gold and silver forecasts on anticipated dollar weakening
Goldman Sachs is raising its gold and silver price forecasts in line with its economists' expectations on weaker dollar outlook and as havens from risk.Posted: Friday , 12 Dec 2008
LONDON (Reuters) -
Goldman Sachs (GS.N) said it is raising its near-term gold and silver forecasts on expectations for a weaker dollar, and as interest in the precious metal as a haven from risk continues to underpin prices.
The bank said it has raised its three-month gold forecast to $700 an ounce from $690, its six-month price view to $785 from $730 and its 12-month forecast to $795 from $710.
It sees silver at $10.04 an ounce in three months, up from a previous forecast of $9.90, at $11.08 an ounce in six months, against $10.30, and at $10.30 in 12 months, against $9.20.
"We are raising our gold price forecasts in line with Goldman Sachs economists' currency revisions toward a weaker U.S. dollar outlook," the bank said in a research note.
"We have long held that gold trades inversely with the U.S. dollar, which historically has explained over 90 percent of gold price movements," it said.
Gold, which is often bought as a currency hedge, often benefits from weakness in the dollar.
The current turmoil in the financial markets and worries over the outlook for the global economy are also likely to boost the precious metals' appeal as a haven from risk, Goldmans added.
"We believe that the pervasive negative sentiment surrounding most financial assets may continue to support gold prices at the margin," it said.
Wednesday, December 10, 2008
Treasury Bubble Monitor - Pimco’s Bill Gross Says Treasury Market Is Overvalued TLT, TYX, TNX, FVX, GDX,
Dec. 10 (Bloomberg) -- Bill Gross, manager of the world’s biggest bond fund, says he regrets not buying Treasuries in what is shaping up to be the best year for U.S. government debt since 2000.
“If we had our druthers, if we went back 12 months and we had known then what we know now, it would have been all invested in Treasuries,” Pacific Investment Management Co.’s Gross said in a Bloomberg Television interview from Newport Beach, California. “The question going forward is ‘Is it the winner over the next 12 to 24 months?’ We don’t think so.”
Gross’ $129.5 billion Total Return Fund lost 2.1 percent in the three months through Sept. 30, compared with a 0.49 percent slump by the benchmark it uses to measure performance, according to Pimco’s Web site. Mortgage securities and investment-grade corporate debt accounted for 93 percent of its holdings. The Total Return Fund has not held Treasuries since last December.
Treasuries of all maturities have returned 11.9 percent this year, according to Merrill Lynch & Co.’s U.S. Treasury Master Index, the best performance since the securities gained 13 percent in 2000.
Gross said he continues to invest in corporate debt that is backed by the U.S. government, including the debt of American Express Co. and Sallie Mae Inc. The 64-year-old money manager also said Treasury Inflation Protected Securities represent “one of the best values” for investors seeking high-quality debt “once this delevering process winds down.”
“Treasuries have some bubble characteristics, certainly the Treasury bill does,” Gross said. “A Treasury bill at zero percent is overvalued. Who could argue with that in terms of the return relative to the risk? There is no return.”
The Treasury sold $30 billion of four-week bills yesterday through an auction at zero percent, while three-month bill rates turned negative for the first time since the U.S. began selling the debt in 1929.
Gross expects the Federal Reserve to cut its target rate to 0.5 percent when policy makers meet next week and will likely signal that interest rates will remain low for a “considerable” period of time.
“There’s some risk” for the dollar to weaken, said Gross. “Certainly the government and the Fed cannot continue to talk about trillions of dollars of expansion of the Fed’s balance sheet without the risk of the dollar going south. It is fair to say other economies are doing much the same thing. The dollar doesn’t have to go south if all the economies reflate at the same time.”
Pimco, a unit of Munich-based Allianz SE, has about $790 billion in assets under management. The Total Return fund has gained 4.63 percent over the last five years, ranking it among the top one percent of all comparable funds, according to Bloomberg data.
To contact the reporters on this story: Kathleen Hays in New York at email@example.com; Michael J. Moore in New York at firstname.lastname@example.org. Last Updated: December 10, 2008 15:50 EST"
Sunday, December 07, 2008
"By Daniel Dombey in Washington
Published: December 7 2008 15:54 Last updated: December 7 2008 18:47
Barack Obama on Sunday spelled out his plans for the biggest infrastructure investment in the US for half a century. The president-elect argued that with the economy reeling, his incoming administration could not afford to worry about a spiralling budget deficit.
Mr Obama’s proposals for government works on roads, bridges, internet broadband and school buildings, together with energy efficiency measures and health spending, are far more detailed than the normal announcements during a time of transition."
Have you noticed recently that all news are awful, but market is turning around on the worst news and closing Up? Shorts are afraid to keep positions over the weekend. Before they waited for a bad news, now another QE programme could blow them up in a new found Bull in worthless currency in the end. Rally is in the making for a short term in markets.
Wednesday, December 03, 2008
Previously Wen had told Reuters that China could buy up stocks of aluminium to help struggling smelters. But the central government may cast the net much wider.
"All base metals are being considered," he told reporters on the sidelines of a conference in Sanya on China's Hainan Island.
China's metals sector has been hit hard by a slump in demand, which has caused stocks to build up and prices to plummet, forcing many to suspend part of their production.
The government, keen to offset the impact of a residential housing crisis and the global financial turmoil, has announced a $586-billion stimulus package to revive the economy.
Officials have said they plan to buy up stocks of resources and materials to shore up prices and the government has already begun buying up grains and soybean to support farmers, but it has yet to reveal its ambitions to build state metals reserves.
Earlier this week, Yunnan province, a major base metals production region in southwestern China, broke ranks by saying it planned to buy up 1 million tonnes of metals, ores and semi-finished products to support local industry.
Neighbouring Guangxi may follow suit.
But one China economist sounded a sceptical note about the idea of the government hoovering up metals stocks.
"It's hard to believe why the government would want to buy up all that stock. The question I have to ask is for what purposes? To help enterprises?" said Wensheng Peng, economist at Barclays Capital in Hong Kong.
"There are better ways to do that, by giving those firms money for example. Given the current low prices, it makes sense to build strategic stocks. There is a lot of confusion about the potential stockpile builds. More clarity and details are needed."
'IF I WAS A BANKER...'
Zhang Liqun, director of Financial Research Institute of the Development Research Center at the State Council, the cabinet, said buying metals reserves would ease pressure on smelters that were struggling with weak domestic demand and low prices.
"Considering its impact on jobs, buying reserves can be considered," Zhang told the conference in Sanya.
Weak demand has driven up aluminium stocks in China. About 1,1-million tons of aluminium are estimated to be sitting at warehouses and smelters' yards versus about 1-million tons in late November, industry sources at the conference said.
The key Shanghai aluminium futures contract hit a new 15-year low on Wednesday, after state-owned research group Antaike predicted domestic demand growth for aluminium would slow to 3% next year from 8,5% this year.
Wen said Chinese banks should buy aluminium as an investment due to the low price, adding that he believed production costs would be higher than current metal prices within three to five years.
"If I was a banker and I had money, I would buy aluminium now," Wen said."
The Standard & Poor’s 500 Index, which tumbled 42 percent to 848.81 this year, may rally 53 percent to 1,300 by the end of 2009, David Bianco wrote in a note dated yesterday. The New York-based strategist, who a year ago predicted a 2008 advance of 16 percent for the S&P 500, is now forecasting a gain that would exceed the index’s best annual performance on record.
The U.K.’s FTSE 100 Index may increase 41 percent from yesterday’s close to 5,800 in 2009, while the FTSEurofirst 300 Index may climb 25 percent from current levels, Zurich-based UBS said in separate notes.
“The consensus outlook for 2009 is a full year of gloom,” Bianco, 33, wrote in his 2009 market outlook. “We believe 2009 will bring signs of a dawn in confidence with the first faint light appearing earlier than most investors expect.”
The S&P 500 climbed 13 percent from an 11-year low on Nov. 20 as the government agreed to protect New York-based Citigroup Inc. from further losses and the Federal Reserve stepped up efforts to unfreeze credit markets. This year’s slump gives investors a chance to buy the biggest “growth” stocks in the S&P 500 at “deep discounts to intrinsic value,” according to Bianco, who recommends energy, technology and industrial shares.
The benchmark for U.S. equities is valued at 11.3 times the estimated earnings of its 500 companies, data compiled by Bloomberg show. The S&P 500 on average over the past five years has traded at 19.5 times the reported profit of its companies.
The U.K.’s FTSE 100, which is currently valued at 7.4 times profit, may climb to 5,800 next year, based on a price-earnings multiple of 13, strategist Gareth Evans wrote in a separate note. Price-earnings valuations may climb to lift the FTSEurofirst 300 Index 25 percent from current levels, a team of London-based strategists led by Nick Nelson forecast.
European per-share earnings will still tumble 25 percent as the euro-zone economy contracts 0.9 percent, they said.
“The macroeconomic and corporate profit outlook for 2009 is horrible,” Nelson’s team wrote. “But share prices have moved well ahead of this and are now pricing in a multi-year recession/depression.”
The brokerage also forecast gains for Latin American markets and recommended Brazilian equities.
To contact the reporter on this story: Alexis Xydias in London at email@example.com.
Monday, December 01, 2008
Extreme risk aversion, a tumble in oil and other commodity prices, combined with the spread of the financial crisis caused a "massive" move of financial assets worldwide into U.S. Treasury bills, driving yields closer to zero and pushing the dollar sharply higher, the U.N. said in its World Economic Situation and Prospects 2009 report.
An advance copy of the report was released at a development conference in Doha on Monday.
U.N. economists warned, however, that the current situation is pushing the external indebtedness of the United States to new heights, which could precipitate a renewed slide of the dollar once the deceleration process ends.
"Consequently, the disorderly adjustment of the global imbalances and a hard landing of the dollar remain major downside risks to the global economy, as an accelerated fall of the dollar could cause renewed turmoil in financial markets," the report said.
"Investors might renew their flight to safety, though this time away from dollar-denominated assets, thereby forcing the United States economy into a hard landing and pulling the global economy into a deeper recession," the report added.
Since the deepening of the financial crisis in mid-September, the U.S. dollar rose more than 12 percent against a basket of six major currencies .DXY. At the same time, the euro weakened about 14 percent to trade around $1.26
In the report, U.N. economists also said world economic growth will slow to 1 percent in 2009 from 2.5 percent this year. Global economy may even contract if stimulus packages prove too little too late, the report said. (Reporting by Vivianne Rodrigues; Editing by Leslie Adler)
The National Bureau of Economic Research declares what most Americans already knew: the downturn has been going on for some time.
The NBER is a private group of leading economists charged with dating the start and end of economic downturns. It typically takes a long time after the start of a recession to declare its start because of the need to look at final readings of various economic measures.
The NBER said that the deterioration in the labor market throughout 2008 was one key reason why it decided to state that the recession began last year."
Conundrum of Rising US Dollar, Falling Treasury Yields and rising Prise for protection from US Default. GDX, HUI, XAU
Credit default swaps on 10-year Treasury debt expanded to 29.2 basis points -- its widest ever -- from 26.5 basis points on Tuesday, according to CMA, a specialised data provider.
CMA said CDS on five-year widened to 22.0 basis points from 20.5 basis points. (Reporting by Emelia Sithole-Matarise"