Is Gold – Or Fiat Currency – In a Bubble?
by Zero Hedge - December 31st, 2010 1:17 am
Courtesy of George Washington
It is easy to argue that gold is in a bubble.
But as I pointed out last month:
Deutsche Bank’s head commodities researcher [Michael Lewis] wrote in September:
Gold prices would need to surpass USD 1,455/oz to be considered extreme in real terms and hit USD 2,000/oz to represent a bubble.
Lewis lists as factors driving gold higher:
* A collapse in the US dollar
* Low or negative real interest rates
* Skitish global equity markets
* Coordinated [as opposed to disorderly] central bank gold sales
* Producer dehedging
* New gold investment vehicles
* Falling mine production and rising costs
* Terrorism & rising geopolitical riskBloomberg notes:
Myles Zyblock, chief institutional strategist at RBC Capital Markets, said last month gold may soar to $3,800 within three years as it follows the pattern of previous “investment manias.”
Barron’s points out:
Louise Yamada, the eminent technical analyst who for many years worked at the various firms that have coalesced into Citigroup and now presides over LY Advisors, last week remarked in a client note that gold—based on its current trajectory—most likely wouldn’t represent a true bubble unless and until it gets to $5,200 an ounce (from its $1,317.80 December-contract close on Friday) within a couple of years.
University of Michigan economics professor Mark J. Perry noted in July that inflation-adjusted gold prices are lower now than in 1980:
Adjusted for inflation, the price of gold today is 41.5% below the January 1980 peak of more than $2,000 per ounce (in 2010 dollars).
Frank Holmes, the CEO of US Global Investors said recently:
“If you take a look at previous cycles, super cycles, we’re far from it,” he said.
“If gold were to go to 1980 prices like most commodities have gone to, gold would be over $2 300/oz,” Holmes commented.
WJB Capital Group’s John Roque
…
Facebook
Twitter
LinkedIn 
del.icio.us
DiggRelatively Positive Macro Data Tries to Give 2010 a Happy Ending
by Zero Hedge - December 31st, 2010 1:17 am
Courtesy of MoneyMcbags
2010 is going out with a bang as every piece of data beat guesses today including new claims for unemployment, pending home sales, and days until Christine O’Donnell was once again found out to be a fraud (and note to FBI agents, if you’re looking for where she may have hidden misappropriated funds, you might want to check her bush). And yet despite the flurry of good news, the market reacted with more of a yawn than if it had just read Paul Krugman’s senior thesis (titled Essays on Flexible Exchange Rates: A Love Story) or sat through the first seven hours of the play Gatz. It was a bizarre day in that macro news is hitting its apex while investors remain content to lock in their bonuses and play in the snow until the new year.
As mentioned, initial claims for unemployment fell below 400k for the first time in two years as only 388k people (to be revised up next week in the continued “hold the shock and hope for no awe” government strategy) were fired, laid off, outsourced, or attacked with a dildo last week. So break out the champagne, boil water for the lobster tails, and invite Kayla Collins over for a game of “hide the CDO,” because the economy is coming back (just don’t tell that to the 388k people who are now out of work, the ~18% of the people who are unemployed, the 8.7MM people still getting unemployment benefits, or something called the Federal Reserve Bank who thinks the economy is so fuck awful that they continue to stimulate it by buying bonds, keeping interest rates cockposterously low, and pleading for Super girl to bail them out). With only 388k workers losing their jobs a week and with ~40k new jobs being added to the economy every month, we should be back to full employment in only around negative 250 months, or by Money McBags’ calculations, 1980, so just in time for the 1981 Reagan recession. Sweet.
As always, the most interesting part about the initial claims number was that once again economist guesses proved to be less valuable than a tush turner for Tara Reid (and not because she has no ass, but because it is a stupid fucking product) as they guessed the…
Is Gold – Or Fiat Currency – In a Bubble?
by Zero Hedge - December 30th, 2010 7:32 pm
Courtesy of George Washington
It is easy to argue that gold is in a bubble.
But as I pointed out last month:
Deutsche Bank’s head commodities researcher [Michael Lewis] wrote in September:
Gold prices would need to surpass USD 1,455/oz to be considered extreme in real terms and hit USD 2,000/oz to represent a bubble.
Lewis lists as factors driving gold higher:
* A collapse in the US dollar
* Low or negative real interest rates
* Skitish global equity markets
* Coordinated [as opposed to disorderly] central bank gold sales
* Producer dehedging
* New gold investment vehicles
* Falling mine production and rising costs
* Terrorism & rising geopolitical riskBloomberg notes:
Myles Zyblock, chief institutional strategist at RBC Capital Markets, said last month gold may soar to $3,800 within three years as it follows the pattern of previous “investment manias.”
Barron’s points out:
Louise Yamada, the eminent technical analyst who for many years worked at the various firms that have coalesced into Citigroup and now presides over LY Advisors, last week remarked in a client note that gold—based on its current trajectory—most likely wouldn’t represent a true bubble unless and until it gets to $5,200 an ounce (from its $1,317.80 December-contract close on Friday) within a couple of years.
University of Michigan economics professor Mark J. Perry noted in July that inflation-adjusted gold prices are lower now than in 1980:
Adjusted for inflation, the price of gold today is 41.5% below the January 1980 peak of more than $2,000 per ounce (in 2010 dollars).
Frank Holmes, the CEO of US Global Investors said recently:
“If you take a look at previous cycles, super cycles, we’re far from it,” he said.
“If gold were to go to 1980 prices like most commodities have gone to, gold would be over $2 300/oz,” Holmes commented.
WJB Capital Group’s John Roque
…
Options Traders Utilize Materials ETF Puts to Construct Bearish Positions
by Option Review - December 30th, 2010 6:37 pm
Today’s tickers: XLB, XLF, VRGY & STJ
XLB - Materials Select Sector SPDR ETF – Options traders are initiating bearish strategies on the XLB, an exchange-traded fund designed to track the performance of the Materials Select Sector of the S&P 500 Index, with shares of the fund currently trading just 0.05% lower on the day at $38.43 as of 12:25pm. Investors bracing for a pullback in shares of the fund focused their attention on put options expiring in January and February of 2011 right out of the gate this morning. Plain-vanilla put buying took place at the February 2011 $38 strike where more than 7,600 puts changed hands, versus paltry previously existing open interest of 125 contracts. It looks like the majority of the puts, at least 5,100 of the contracts, were purchased at an average premium of $1.09 apiece this morning. Put buyers are poised to profit should the price of the underlying fund fall 3.95% from the current price of $38.43 to breach the average breakeven point to the downside at $36.91 by expiration in February. A nearer-term pessimistic player appears to have purchased a 1,000-lot January 2011 $37/$38 strike put spread for a net premium of $0.27 per contract. The investor makes money if XLB shares decline 1.8% to trade below the effective breakeven price of $37.73 by January expiration day. Maximum potential profits of $0.73 per contract are available to the put player should shares of the fund drop 3.7% to trade below $37.00 before the contracts expire next year. The overall reading of options implied volatility on the ETF is higher by 6.4% this afternoon to arrive at 20.86% as of 12:45pm.
XLF - Financial Select Sector SPDR ETF – The XLF jumped to the top of our ‘most active by options volume’ market scanner within…
Howard Davidowitz Destroys The Recovery Illusion, Debunks The Consumer Renaissance
by ilene - December 30th, 2010 6:14 pm
Courtesy of Tyler Durden
Today’s must see TV comes from the following interview of Pimm Fox on the consumer and the economy with retail expert Howard Davidowitz, who in 10 minutes provides more quality content and logical thought than we have seen from CNBC guests in probably all of 2010 (except of course for that one time when Erin Burnett kicked out Mike Pento, but that’s a different story). Where does one start? Probably at the end: "I am not surprised by the strength of retail sales, because i knew that 30% of consumers are responsible for retail sales, and these 30% did much better because of the performance of capital markets. I don’t think it is indicative of anything going forward. I don’t think the economy is going to get any better. If you look at our fiscal and monetary policy, we went two trillion in the hole last year. Two trillion… to produce this… and unemployment went up to 9.8%! We’ve spent two trillion we’re printing money we’re going bananas. Our balance sheet, we’ve got $2.6 trillion on there, and what;s on there government securities, and MBS." And here is the kicker for the world’s biggest hedge fund, which at least one person besides Zero Hedge appears to get: "If interest rates go up a point Bernanke’s bankrupt. Everything he’s bought is underwater. All the MBS are underwater, the whole country is underwater." Does anyone see the issue now with why rising interest rates, aside from predicting a "recovery", may also, courtesy of its now $2 billion DV01, "predict" the insolvency of the Federal Reserve?
Some other observations on the retail "renaissance":
- Walmart is 10% of US retail sales, has 150 million customers, and its stock it is down 6 consecutive quarters;
- Sears is the largest department store in America: "their stock is terrible"
- Best Buy had a huge earnings miss
- Toys’R’Us loss increased last quarter
- A&P filed bankruptcy
- Loehmann’s filed bankruptcy
- Charming Shoppes is going to close 100 stores
- TJMaxx just liquidated AJ Right
And in addition to dissecting the collapse of Sears, Davidowitz observes what should be a loud glaring alarm signal for the likes of Ackman and all those who are betting on the resurgence of the US mall storefront and the likes of General Growth: the bulk of store traffic is moving online (where incidentally the only jobs…
Daily ETF News Update:2010 Quietly Slips Away (DIA, IWM, QQQ, SPY)
by ilene - December 30th, 2010 5:56 pm
Courtesy of John Nyaradi
As expected, this holiday week has been quiet as 2010 quietly slips away.
Today’s news was largely positive with initial unemployment claims dropping below 400,000, the lowest level since mid-summer, 2008.
Pending home sales in the United States rose 3.5% in November, however remain 5% below year ago levels. Home prices, as we discussed earlier in the week, fell in October and so a double dip in housing remains a real possibility, especially with the recent rise in interest rates.
China reported their December PMI which grew but at a slower rate as the Chinese government battles inflation in that country. A slowing Chinese economy will be one of the major factors and potential pitfalls to the global recovery going into 2011.
Daily Moves for Major ETFs:
Dow Jones Industrials: (NYSEArca: DIA) -0.17%
Russell 2000: (NYSEArca: IWM) -0.19%
NASDAQ 100: (Nasdaq GM: QQQQ) -0.15%
S&P 500 Index: (NYSEArca: SPY) -0.15%
MSCI Emerging Markets:(NYSEArca: EEM) +0.51%
MSCI China (NYSEArca: FXI) -0.26%
Gold (NYSEArca: GLD) -0.49%
7-10 Year Treasuries: (NYSEArca: IEF) -0.20%
20+ Year Treasuries: (NYSEArca: TLT) -0.08%
With almost every analyst everywhere expecting a bullish 2011, the likelihood of a January surprise grows ever greater. Technically we remain in overbought waters and long overdue for a correction. Watch for Sunday’s update for a full look ahead at 2011.
Wall Street Sector Selector remains in “Yellow Flag” status, expecting choppy to lower prices ahead.
Wishing you a wonderful New Year,
John Nyaradi
Publisher
Wall Street Sector Selector
Click here to learn more about John’s book and for a free membership to Wall Street Sector Selector
Marc Faber: Treasurys Are A “Suicidal Investment”
by Zero Hedge - December 30th, 2010 4:21 pm
Courtesy of Tyler Durden
Marc Faber, who just like Nassim Taleb has never hidden his disdain for investments in US-backed paper, is back to bashing Treasurys, although with logic diametrically opposite to that espoused by those such as Morgan Stanley who see rising rates as a sign of economic growth. “This is a suicidal investment,” Faber told Bloomberg in a telephone interview from St. Moritz, Switzerland. “Over time, interest rates on U.S. Treasuries will go up. Investors will gradually understand that the Federal Reserve wants to have negative real interest rates. The worst investment is in U.S. long-term bonds.” As for equities, Faber increasingly sees a Zimbabwe outcome: “If you print money, the currency goes down and the S&P 500 goes up. By the end of 2011, people will look at 2012 and think 2012 could be a very bad year because the policies applied are not sustainable and create a lot of instability. Investors may look at 2012 and 2013 with horror.” Not Wall Street thought. By the end of 2011, bankers will most likely be looking at the second consecutive record bonuses year, and by then will have enough gold safely stashed away in non-extradition countries to where the host organism may finally be allowed to die in peace.
Treasury 10-year note yields will rise to 5 percent from yesterday’s level of 3.349 percent, Faber said, without specifying a time frame. As bonds fall over the next decade, he said investors should buy precious metals, real estate or equities. U.S. debt has returned 5.7 percent in 2010, more than erasing last year’s 3.7 percent loss, according to a Bank of America Merrill Lynch index.
Treasuries fell today as reports showed initial jobless claims dropped more than forecast, U.S. businesses expanded at the fastest pace in two decades and pending home resales beat expectations. The yield on the benchmark 10-year note advanced 0.04 percentage point to 3.39 percent at 1:54 p.m. in New York, according to BGCantor Market Data.
Faber correctly predicted in May 2005 that stocks would make little headway that year. The S&P 500 gained 3 percent. He was less prescient in March 2007, when he said the S&P 500 was more likely to fall than rise because the threats of faster inflation and slower growth persisted. The S&P 500 then climbed 10 percent to its record
…
Interview with Manual of Ideas
by ilene - December 30th, 2010 4:11 pm
Courtesy of Vitaliy Katsenelson
Manual of Ideas Interviews Vitaliy Katsenelson
Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of upcoming The Little Book of Sideways Markets (Wiley, December 2010). To receive Vitaliy’s future articles by email, click here.
Manual of Ideas Interviews Vitaliy Katsenelson
by Zero Hedge - December 30th, 2010 4:07 pm
Courtesy of Vitaliy Katsenelson
Manual of Ideas Interviews Vitaliy Katsenelson
Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of upcoming The Little Book of Sideways Markets (Wiley, December 2010). To receive Vitaliy’s future articles by email, click here.
Estonia Welcomes The Euro
by Zero Hedge - December 30th, 2010 3:18 pm
Courtesy of Tyler Durden
Presented without commentary.
h/t Daniel
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(
