Here's my summary of the key news overnight in 90 seconds at 9 am, including news the IMF boss says Europe needs to recapitalise, restructure or shut down its banks as part of a vital clean-up of the industry.
She also warned that the threat from world’s biggest lenders was "more dangerous than ever".
At the same time the EU singled out Spain and Slovenia for "balances that can be considered excessive" and had unusually harsh words for France and Italy for lack of action on improving competitiveness and debt levels.
Across the Atlantic, President Obama has proposed a US$3.8 tln budget deal "more than meeting Republicans halfway" with welfare system cuts in return for higher taxes on the wealthy. But markets are sceptical after many failures and seem to be betting no budget deal gets done with truculent Republicans.
Meanwhile, the Fed 'accidentally' released minutes of its March meeting early which were relatively hawkish, apparently leaning towards scaling back QE this year.
Markets are dependent on excess central bank liquidity, and risk aversion often follows hawkish FOMC minutes. But on this occasion it added momentum to a stockmarket rally.
The Dow raced to another record high and at mid-day had gone through the 14,800 level. Gold on the other hand dropped almost US$20/oz to US$1,560/oz.
A sliding yen has also boosted the Japanese stock market, and in China their currency closed at a 19 year high against the US dollar.
All these moves have propelled the Kiwi dollar ever higher.
The Kiwi dollar starts today at 85.7 USc, a 20 month high, 81.4 AUc, 85.5 Japanese yen which is up almost another 1 yen on the day, and our TWI is at yet another record post-float high of 78.86.
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86 Comments
Cyprus has sold most of its gold, depressing the gold market.
Goildman Sachs has gone bearish on the yellow metal, a big reversal in opinion.
Caveat to Goldman Sachs gold trade recommendation
while higher inflation may be the catalyst for the next gold cycle, this is likely several years away.
So the cost of financing position, other than bonds, would seem to have a potential real cost.
Thereafter for different stated reasons Goldman suggests selling US T10 Treasury notes.
David, what a strange world I see. I guess its the difference between gambling and safety. Gold has gone or going from a speculative gamble for [big] profit to holding it is now a probable loss. Yet its still retains its biggest value/draw, a way to retain wealth in the face of bursting bubbles everywhere, investors losing and Govns defaulting, yet ppl exit, probably into even more risky areas. I wonder if we'll see a gold rout as it goes illiquid? or will asia etc buy it in large gobs. $600 a pop anyone? Hugh Hendry had an interesting line about ending up a giant amongst dwarfs....maybe losses are inevitable its just those who will do the "best" are the ones losing the least.
regards
The Asian collecting of gold is much more to them than just monetary or investment protection Steven, culturally gold plays a significant role in the fortunes or luck in life if you like, to them, so it would be no surprise to see a buy up by them as it goes south.
The long position aside, as in,a time when demand for the precious returns in real value terms......I suggest they would be quite happy to hold that loss position untill demand forced speculative values to return at frenzied levels.....even then , I think , if they were economically comfortable, they might be a little indifferent to offloading thereby generating even more Speculative value....and more economic muscle.
maybe losses are inevitable its just those who will do the "best" are the ones losing the least.
I guess you could apply the theory to most any position depending on length of term.....truckloads of money in variying positions have been captured to limbo over the last few years Steven....it becomes a matter of whether you think you can tolerate hell to quit the position.......
Yea, I would argue gold is a bubble also so will not provide protection, as it will be sold indescriminately along with everything else. The only place to be IMHO is USD cash if the bubbles pop, because that is what everybody will be trying to transfer into, from whatever position they are trying to escape. As to Goldman's recommendation to short US-10yr from about 132.20 which Mr Hulme mentions above, just for interest, I will give it a crack. It is a very deep and liquid market, and is the origin of just about everything, during this funny money period. Will keep you up-to-date.
As to Goldman's recommendation to short US-10yr from about 132.20 which Mr Hulme mentions above, just for interest, I will give it a crack. It is a very deep and liquid market, and is the origin of just about everything, during this funny money period. Will keep you up-to-date.
Brilliant, we need to read about real money trading exploits to offset the plethora of dogma ridden comments.
Yes, go on then, argue gold is in a bubble idlebumski - let's hear it (just for fun)... ??
Normally things are in a bubble when everyone has bought it. When more has been sold than actually really exists - that's not a 'bubble', but really the opposite - a price supression scheme...
on the other hand I would argue its probably paper that's the mother of all bubbles, or to put it another way - government bonds...(same thing)
http://www.youtube.com/watch?feature=player_embedded&v=wzzoBVK3fyE#!
I think Bumski's comment was retrospective economist, at least I took it that way, Past tense bubble...perhaps was would have been better than is, but then was will be is again and so forth.
Bubble whatever , when it's speculative value diminishes against other positions, you could rightly deduce the air is going out of the tyre resulting in an impaired driving position or flat.......or deflating /ed bubble.
Everybody is entitled to do what they want, so I don't want to get into a pissing match with a gold bug but;
- We are now in a cash/currency, versus assets/things showdown, courtesy of central banks. Ultimately gold is just another 'thing'.
- In Cyprus were they interested in Gold? No, they want cash. If that's what they want, then owning gives you leverage (assuming it's secure).
- Globally, the average man is hurting and gold's soft price is his proxy, while efforts by central banks in blowing up asset bubbles is only making it worse for him.
- Full employment, or true consumer led inflation will not come back until the next new technological breakthrough dawns on mankind.
- As has been said before, low rates are like daylight savings, a true zero sum gain. Nothing new is created, rather just a reshuffle out of the hands of those who do, into hands of those who own.
Perhaps I'm too bearish, but I don't think it will get us anywhere. Sooner or later suffering of the masses will burst all bubbles and trying to obtain cash then will be like trying to get a good deal at a B&T auction in AKL right now.
PS: Got about 8 mins into the youtube thing and its first point is how the low interest rates have screwed legions, people who were once a market force.
- Ultimately cash is just another thing. A debt obligation note to be exact.
- In Cyprus, any Russian will tell you they would have gladly swapped their bank account for the equivalent in gold, its just that no one had the gold to swap. The reason they wanted cash (as opposed to cheques etc) was that the banks were collasping (not the EUR currency itself), and they wanted something that was not collapsing. Ultimately the EUR will have its turn. Its a failed currency experiment, but everyone's entitled to their opinion. If Cyprus was running its own currency we would have seen a run and collapse and a rush out to another currency to escape devaluation.
- No - just how much gold do you think the average man has? The gold price has nothing to do with the average man's proxy (that's his wife's job). Gold trades in the many trillions every year, way beyond the average man's ability to effect the price. It trades as a currency.
- I won't bother to distinguish between consumer led inflation, cost push inflation, etc... at the end of the day inflation is inflation - the devaluaing of money. You dont need full employment for inflation, you just need actual demand ($$$) to outstrip the capacity to supply (real goods and services).
- High interest rates do the same thing btw. They just reshuffle from one group to another.
Those that pay interest are also a market force. The point of the youtube clip was it led on to explain gold leasing - basically the practice of leasing (then selling) gold that doesnt exist into the market, meaning the price of real gold isnt in a bubble nor would it be at double or triple the current price. That was really my point.
Edit: I don't know, economist. I am unbiased regarding gold. I did get all way through the vid and it seems the leasing thing is very complicated. At a time like this, when everything is so screwy, sitting in cash allows me to be responsive, as it is purest form of liquidity. I have been called passive aggressive in that I will often refuse to do what I told. Sometimes it leaves me looking like a fool, if I have ignored somebody with my interests at heart. Other times I have come off looking like a genuis for steering my own boat. All I know is that I will never get to take Bernanke to task if I follow his advice and go all-in now, perhaps leaving me high and dry. If they are unaccountable, it means they are not friendly and you are on your own. I think you like gold for the same reason I like cash/USD.
Ultimately this is a tug-of-war, where things that are being inflated are supposed to pull up things that are falling. Or, the deflationary urge perhaps because it includes most people on the planet, will envelope everything.
It seems to me, we are nearing a point where if everything is allowed to collapse, the long term benefits will outweigh the benefits of continuing to fight it. Legalisation of pot in America is a good example.
Everything is going to be screwy from here on down IMHO. At some point the collapse will come, then a reset. Life will not end. Birds will not drop from the sky. I guess the question is what will that reset look like? Will the USD system survive? I think not. A currency derives its value from the bond markets. As Nixon put it - government debt and fiat currency are in essense the same thing.
If you believe the US will not face a debt crisis and it will return to a sustainable path, and life will go on as normal, then yes, I agree, I would hold USD. That would be logical as the financial world revolves around the USD (other currencies have just derived their value from USD). Oil backs the USD and gold backs that oil after all.
However, if like me, some people believe the USD is basically finished and its just a matter of time (months or years I have no idea?), then gold is the better option.
There have been cracks appearing in the USD's armour for a while now. The BRICs are looking for alternatives to settle trade in (in the end their own currencies will not work either). Probably the last step will be when the Arabs no longer take USD paper for oil, then it's all over for the USD. Once the USD is no longer the settler for trade and if their bond market collapses (ie the FED no longer holds it up) your USD paper would be worthless...
If the collapse happens quickly you may end up waking up one morning in NZ and all the banks are shut, so keeping cash (any currency) in the bank to protect against systematic risk isn't what I would do.
Edit: Ahead of you; all but a few crumbs were drained from NZ accounts over last 2 weeks or so. Now in the ground. Wherever overseas there is dep guarantee my account(s) will be left as is, for time being. Interesting times indeed, and amazing that I seem to be the only one doing this, according to the tellers.
As long as the USD-oil peg holds, supported for better or worse by US military, that is where we all run to when things get scary, so remains my basis. Being dual-res means I am 'invested' there anyway...
PS: Maybe I am naive, but in the event of collapse, with debt destruction, the USD will strengthen.
If the USD survives, so will the system that's based on it. That's why the FED is the ultimate buyer of last resort of debt (last crisis it financed everything from McDees to Harleys with 16 trillion or so of interest free loans).
I don't think any fiat will survive what's coming down the track in the end, that's why I'd rather be in gold and real assets as a reserve (certainly not paper debt obligations). Most debts are demoninated in USD so I'm not sure why you would say what you say? As long as central banks keep printing and plugging the system limps on... I think the writing is on the wall for the end of the USD, I think China and Russia and co all know that. I think if the system collapses it will be because the USD has collapsed. I dont think that will happen until oil is no longer settled in USD. It will be settled in whatever currency is has gold backing though, thats for sure, or gold itself. I think the BRIC nations (and others) know this too.
Technically - its the movement of gold that keeps oil in USD, not military might, not political pressure, not a strong USD, but gold. That's just how the international finance system works. Arabs dont have residences in London because the weather is so great there. "Gold and oil can never flow in the same direction" as they say.
Count - In the currency or commodity markets a swing of 20% is common .. at the end of the day the trend is still up for gold... and all the reasons behind its rise are still in place... its just trading noise... that and the inside ptb had to knock gold down given Japan's annoucement. It happens all the time.... These things are co-ordinated via BIS.
Most traders in gold - esp the little guys, as you are aware would have got stopped out long before 20% fall (assuming they brought at the peak).
If I was a big bullion bank I can go into the market sell naked short x tonnes of gold, drop the price down, then close my short at a profit. This scam happens time and time again and has been well documented. The CFTC and SEC look the other way as its in the governments interests to retain the gold price, ditto the bullion bank who is sitting on billions of $$ of gold leases which it also sold into the physical market, China and the East don't mind this scam as it means they can pick up even cheaper gold on the dips.
If you hold USD, bought when the NZD/USD was 60 cents you've lost a lot more than 20% on todays exchange rates Stephen. I'm not a trader, let alone a margin trader. Wouldn't even recommend trading the precious metals to anyone for the above reason. Its a manipulated and rigged market. In the end the physical gold price will pull away and the paper gold price could go to nil. Too bad for anyone attempting to trade it.
I do have gold and silver bullion and shares and 3 rental properties and kiwisaver, if you wanted to know. All for different reasons. The only way to own gold is to buy it outright and hold it yourself (outside the banking system), buy into a fully audited ETF like Sprott runs or buy the mining shares (extra risk, but they are cheap as chips) who have it in the ground to pull out. I wouldn't hold bullion to profit from trading it, but as insurance against systemantic risk and as a long term store of wealth. And I believe one day gold will once again back paper with gold at much much higher levels, because its the only real solution for the GFC.
Where did you attend this meeting Kimy...?...mining what...? what was your status of entry to a mining investment meeting for Chinese Investors.
total control...? bugger off.
P.S. finding a manhole is a step in the right direction for knowledge in mining........so ah you know.....bit o work to be done there.
Meanwhile, the Fed 'accidentally' released minutes of its March meeting early which were relatively hawkish, apparently leaning towards scaling back QE this year.
Meanwhile back at the ranch Ben Bernanke disguised as a door with it's knob shot off, Christine la Garde disguised as the bed that got laid on..."laden"
As I posted yesterday....the QE effect with evey breath sucking money in, every exhale allowing hot air to escape.
A bit like having the corpse on the table while watching the artificials do the work
pump it in , let it out. pump, exhale, pump deflate
The intrigued speculative markets get to look upon this...as
life as we know it .....Jim.
I wonder if the further move upwards in the NZD has been triggered by Aussie institutions buying $700 million to buy Mighty River Power shares. And traders have then bought into and exacerbated that trend.
Given a fiscal multiplier of zero in our very open economy, it would actually have been better for the government to have rung their Aussie mates and given them the shares for free, as the damaging effect on the exchange rate and current account would not then have happened.
Of course giving them away for free would be ridiculous, so far better to not have sold them in the first place, and certainly not offshore.
Reposted from a different thread which then fell off the radar.
There have been many coments with respect to the Kiwi dollars reaching parity with the US dollar. On the other hand, there is a lot of talk about the kiwi being overvalued.
Can anybody state a basis for this believe?(no pun intended!)
In my view the Australian dollar reaching parity was a stretch, but the Kiwi...? Not to say I think it can't, but it is highly unlikely in my view. If the Euro collapses, the flight to safety will push up the Dollar. If the EU Finance Ministers resolve the crisis by managing fiscal unity in Europe, the status quo remains.
What will make the Kiwi dollar so valuable to sit next to the world reserve currency? Faith...?
HGW
What will make the Kiwi dollar so valuable to sit next to the world reserve currency? Faith...?
Being in the wrong place at the wrong time HWG, maybe not in parity but certainly in a very very uncomfortable place unless your selling Toyotas....
The RBA is under real pressure with the currency diminishing the value of assets, down to their last 3% of swing....see Iconoclast's post on Joe Hockey. it's a goodie.
So valuable ..? no that is not the word ....accidentally intergral....coat-tail parachuting...I dunno but actually valuable no.... so sustained high?, krrrrrrrrrrist I hope not.
My apologies Kimy and to your partner, I can't imagine how distressing it must have been for you losing your...well your..Mhole...gosh I don't even know if Viagra is helpful for that sort of thing.....so glad you found it though ...a bit like mojo I expect...all's well when that end's well.
Thanks for the heads up GBH, I thought we had been talking a bout a real Manhole, a bit slow on the uptake I was .
Christine Lagarde, Managing Director of the IMF prognosticates again, and again, and again
She grabs the microphone at least once a week
Telling everyone what to do - what needs to be done
And yet nothing happens. Nothing gets done.
What is the point of the IMF? Doesn't seem to achieve much
Anyone listening?
Just more jawboning
......the watchdog I.M.F. is required to bark noisely every so often to justify it's existance and the cost of feeding the mutt.
Spot on Christov.
Much like most other govt. institutions (UN, WTO, Central Banks) and govts. themselves.
I still don't understand why the majority of citizens still put so much faith in these institutions and expect that they'll act in the citizens best interests.
Yes mist it counts as something.....But like all insurance policies, your either going to be in the loop or out .....the dog don't bark ...your somehow defenceless against what was plainly obvious to the dog you employed to guard.
I harken back to Argentina dispensing with the hungry pooches services...not altogether a bad outcome for them.
"A new discovery that shows that Rangitoto erupted "semi-continuously" for about 1000 years is prompting scientists to re-think what the volcano could do in the future."herald
And if you look at your insurance small print...exclusions may include damage caused by volcanic activity....
Watch now a premiums and small print exclusions increase for the Auckland region....
Love your honesty. If you're earning NZD's, hopefully some consolation. Don't think I'd want to be in Cyprus or earning Yen, or even trying to operate inbound tourism biz here, etc. Can't help feeling though, as each of these powerhouse economies devalue, pushing ours higher and higher, where it will end up. Sooner or later we'll have to look at something orderly ourselves, or Mr Market will do it for us.
Sounds to me mist you will ...recover...wiser...tougher....what will be interesting for you, in set up and recovery will be the fear factor and it's influence over what you have shown to be previously logical calculated processes........I say this because that is the very component that causes us all to wish we had done what we would normally do under the same rule of judgement.......I'm stll going ..."damn it" from time to time....so have not conquered it yet.
speculating is of course "not gambling" .. it is informed decision making .. but .. no I wasnt being PC .. more an observation that scalping can be different things to different people .. depending on their time frame .. minutes, hours, days .. what I was referring to was the mistake many novices make .. trapped in a scalp that transforms into a position trade .. mist is short NZD from 0.84 and hanging on
Yes, a more than adequate explanation - In respect of the speed and magnitude of pricing discontinuities. You may wish to track down moves in USD/DEM in the mid 80s - 4 to 5 big figure moves were not out of the way, before it retrenched back to near where it started by mid afternoon. Personal trades in that environment cleaned me out once, forcing me to get my first credit card to cover extra liabilities until my bonus got paid.
Constant surveillance of the position without other distractions and a boldness generally created by the use of other people's money to trade.
I once visited a central bank where the cable trader said let's go to lunch leaving an open 100 million STG/USD position with only wide stop insructions issued to a bookie.
Sorry...genuinely that is, mist...to see you getting clobbered, but that is why I pushed for a response last week from you.....to be aware the BOJ was ramping it up and the flood had to go somewhere....well not just here obviously, but the impact was always going to exacerbate the problem.
Expect 88 to be possible before Tuesday next.
And don't worry too much, I saw Stephen H asking someone yesterday if they'd lost 20% on a swing........yep, I'm getting creamed out there....I thought and left it at that.
Mist ....more than a little sorry myself you had to arrive in this position....but like anything , put it down to experience (after a good nights sleep) and move on.
Good luck to you.....P.S. I try not to be too direct with that type of info, as it gets me in a bit o hot water round these parts.
Stay well.
Christov: This is a problem. Realise you compose your comments first in common every-day language and then parse them through your cipher machine. While I may be long-in-the-tooth in some things I am a total novice in currency matters. I read your posts and try to de-cipher them, and appreciate those that I can de-code. Similarly, many of Stephen Hulme's posts are far beyond my ken. Obviously both you and Stephen have seasoned experience in these matters. So, here you have an example of an encrypted message to MIST and he MIST it. And I MIST it too. Can you refer me back to the appropriate link. I would like to follow up on it. Can you expand on your $0.88 by next Tuesday (not looking for an argument). I'm a knowledge sponge on these things. When I see something I dont understand will usually try and follow up and ask questions. This a genuine attempt at asking a question. I try to listen to (what I call) the chatter, and from what I can see the upward pressure on the NZD will continue. No time frame.
Ummmm...eeerrrr, iconoclast , I did not keep the link to mist, and only gave the heads up after following a number of mists posts......out of concern, I know what it's like to be fixed in gaze on one thing, to get smacked by another...and so rang the bell.
Same goes if you follow things I post to Stevo, not much I can do to ring the bell for Snippy as all that glitters is the catchphrase there.
So on to ciphering.....ok, let me clear here....As I told you here a long time back, I won't be direct about things because it might be someones shirt lost or fortune missed, that would then play on my mind / conscience........So if I'm bullish I might suggest things in a positive manner...bearish probably in a cynical manner....
So, here you have an example of an encrypted message to MIST and he MIST it.
Um no,it wasn't...massive boj print imminent was directly referred to, and the associated need for extreme care in that position....I know mist saw it..as he responded to it in the manner he indicated above....nothing there led me to believe he had not evaluated his position.
while I'm clearing things up here, I should point out I'm not trading in the FX sense...that was a long long time ago...long hedge positions ,yes...but it's all relative is it not..?
I enjoy coming here for lots of reasons....well banter mostly...and like you I'll post when something irks me or amuses me or just plain intrigues me....so there's no Knights Templar going on if you know what I mean.....I bloody wish GBH would give me the inside run from time to time...but I guess for the same reasons I outlined above, we stick with the inuendo..and banter.....did you hear Kimy got his manhole back...?I can't imagine anything that would bring more joy back into someone's life.....well I mean if your that disposition and all.
Your a pretty smart guy iconoclast...you do your homework...now start trusting what you already know..... self-doubt is just fear in justification.
Is Wheeler lose?
"Loose central bank policies may threaten global financial stability when interest rates rise because lenders could become "addicted" to central bank financing and put off vital reforms, the International Monetary Fund has warned"
http://www.telegraph.co.uk/finance/financialcrisis/9986853/IMF-raises-concerns-over-QE-cold-turkey.html
He would argue not....but even if we do not have the very same QE farce going on here...we do have the banks pumping out fresh credit by the billion..and the market reaction to the IMF forcing up the NZ OCR ( as will be the case) is going to be pretty much the same as being addicted to QE and having rates rise.
The counter will be that credit use in NZ is going into real GDP growth...jobs...wealth...but it is also going to expand the property bubble...and we know where bubbles end up.
Take note: The NZ govt is married to the IMF.....you are this very minute paying to bail out the Euro failures....suck on that Apple!
some of us actually care about having the right policy response for the betterment of all New Zealanders not just to serve your individual interest
hehehe
Great tongue-in-cheek work kimy. Coming from a property investor who:
a) keeps harping about reducing interest rates (which would directly benefit his property portfolio)
b) sends his DPB tennants off to WINZ to get an increase in accomodation supplement (from the taxpayer) that will flow directly through to the landlord
c) talks about going to Beijing to spend his money so he can avoid GST and thereby avoid tax in this country (so gets the benefit of the tax paid funding the accomodation supplement AND spends the said dosh outside the country)
Yah. I can see how that works for the betterment of all New Zealanders. hehehe
Good on you Kimy. Stick to your guns.
If they raise the OCR then unemployment will continue to rise, the increased payout for beef/lamb/dairy/milk powder will be minimal with a higher NZD therefore leading to greater pressure for our farming community to meet their financial obligations. If they go down the gurgler so do the rest of us.... less money spent in rural provincial towns.. local businesses hit the can... the domino effect...
Manufacturing will continue to die in small towns and cities (Invercargill, Westport), just as it did in the UK under Thatcher and company... what do they rely on now?? Of course the Financial industry "the city of London"... look where the UK is today... only a devalued GBP is giving any hint of their economy recovering. They have pockets all over the UK which are destitute... people living off the state living in communities with high rates of crime and poverty with little to no hope unless they move.
Problem is Australia is just that too far!!
Wheeler must drop interest rates...and soon.
Yes, yes, housing bubble etc... but we're only talking equity here... it will plateau once the RBNZ intervenes with stringent LVR's and Auckland Council decides to increase supply of land for building new homes/apartments. Perhaps I am a tad optimistic this will actually happen!!!
Billy Bob and Jonkey will continue to do what they enjoy doing...making money....for themselves and the wealthy.. which if that's you (including some of the punters on here) then fine. Vote for these guys and watch your bank balance grow while "our" society disintegrates around you... unless of course you have the means to move to a "high socio economic area" and send your kids to Private schools or "Free" schools where they won't have to rub shoulders with the riff raff of society. Live in your own "bubble" why don't you.
I have rambled, ranted and digressed but it pains me to see how NZ once ranked highly as a developed nation continues to pursue greater inequality among it's population.
MIST
the marathon
Trading can be likened to running a marathon. As anyone who has run a marathon will know, you cant step straight out and run a marathon. It requires considerable training, preparation and conditioning. You need to be able to run one kilometre before you can run 42 kilometres. If you cant run one kilometre, unlikely you can run 42 kilometres. Serious marathoners will build up to running 250 kilometres per week in training, week in week out for 6 months, culminating in speed work over the last month. Thats running 1 kilometre and repeating it 250 times. Similarly the novice trader needs to understand the very short term first. Pick a time frame. ie the opening session. Focus on that one single time period. Dissect it. Examine it. Master it. Do not trade any other time period until you have mastered it. Once mastered, move to another time period, or extend the chosen session. Like the marathon you will not last the distance if you do not understand or cannot perform over the shorter distance. Repetition is a very large part of any athlete's training.
The biggest mistake most novices make is trying to do the marathon first up
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