Friday 28 January 2011

Global Trade is Brisk? (Update)

Just over a month ago, I was musing that the Baltic Dry Index (BDI) was showing a very different path than the commodities lately. My thinking was that the BDI (a measure of shipping rates for dry bulk goods) was indicating global economic seizure, while the CRB commodities index was indicating there was a robust global economic recovery -- and one of these had to be telling us the wrong thing. I felt that the commodities were only strong based on speculation, not on physical demand (witnessed by the low demand for global shipping as indicated by the falling BDI.) So, my theoretical trade (not that anyone should ever trade anything on my recommendation! Check out the Disclaimer at the bottom of the page...) was to go long BDI and short CRB. The mismatch between these two surely had to be reconciled before long. Bet on a fall in speculative fever, with a hedge on a recovery of shipping for physical goods if there is indeed a real recovery in play. I was expecting to see the CRB fall, but if it didn't then in time the BDI had to rise.

Well, imagine my surprise to see today when I look into the data again and find that, yes, the CRB is down a smidgen -- but the BDI is down even more! So the picture is now at least starting to show reality (there is a global depression on, not a recovery). But going long the BDI certainly wouldn't have made you any money, nor in fact going short the CRB if you had done so less recently than the last few days, unfortunately. I didn't set a time limit on how long it might take to play out, and if you give it some more time I'm sure we'll see the CRB can fall further than the BDI. But a big rise in the BDI seems like it's a distant dream for now. It just goes to show that Greenspan was totally correct — the market can remain irrational longer than we can stay solvent!

Wednesday 26 January 2011

Just a little more anecdotal evidence of tightness in the gold market

I received this in an email reply from this morning:

Good Morning

Thank you for contacting us at GoldSovereignsDirect - part of PMR Co.

Unfortunately, our stocks of gold sovereigns and half sovereigns are very low at present - we are unable to quote.

We purchase our coins directly from members of the public - stock levels change daily.

I will keep your enquiry on file and contact you when we have stock to offer.

Thank you for your interest


Stephen Pessall


0845 472 5640

PMR Co are members of the British Jewellers Association – membership no: 52106 VAT Reg no:996 8389 26 - PMR Co, PO Box 186, Telford, TF2 2BX

Monday 24 January 2011

Is James Turk the new Chief bell-ringer and bottle-washer?

King World News: James Turk - Silver in Backwardation, Set to Explode

"What this backwardation shows is that there is a disconnect between the physical and the paper markets in silver. As I said previously, the silver shorts simply cannot hold the paper price down here any longer without seriously discrediting the paper silver market as a price discovery mechanism.

Gold is not in backwardation, nevertheless the demand for physical gold is extremely intense. With the sentiment indicators at very low levels, it suggests we are about to see a stunning short covering rally in gold.”

(Bold emphasis above is mine, highlighting phrases of particular special interest to those Freegolder among the audience.)

It will be interesting to see if Turk is now the sell signal for metals, in particular silver. Or if he is once again right in this call. I do, however, note (prior to reading this KWN article) that the silver price is breaking down today and gold is following. It'll be interesting to see how this progresses, methinks...

For my part, I am simply looking forward to yet another good opportunity to buy in at better prices in the short term. In the longer term, Turk is almost certainly going to be correct here IMO.

Another face steps out of the shadows to endorse retail/investment banking split

Anyone around here for a while will probably recall I have called for the reinstatement of a "Glass-Steagall Act" (instated as a result of the Great Depression and taken down in 1999 at banker request) to prevent Too Big To Fail retail deposit-taking banks from being rescued in future by governments (taxpayers).

So far we've had a few names step out to suggest this is what's necessary: Vince Cable, Mervyn King, Barak Obama, Paul Volker, to name just a few.
(Oh, and me of course... :-> )

Today we can add Nick Clegg, the Deputy Prime Minister of the UK coalition government. BBC News: Bank reform needed, says Deputy Prime Minister Clegg

So... when will it happen? (IMO it will happen, it's just a case of when...)

Friday 21 January 2011

On using debt to get rich today

To those with whom I have recently discussed the wisdom of taking on significant debt in order to buy income-producing rental properties (partly for tax reasons, although I would imagine that in truth it is also because they don't have the resources to do it otherwise), in spite of the fact they too believe the world is heading into very choppy economic waters (a large part of why they are looking for income-producing assets in the first place), here is just one small piece of evidence to support my case that you had better pick and choose your properties and tenants very carefully, and make sure you have a good relationship with your banker. Perhaps being just a little bit lucky will help too...

BBC:Rent arrears rise again say letting agents

This is before the... choppiness... starts. The world has changed, and it's going to change a lot more IMO. We can no longer get rich the way our fathers did, unfortunately. Tread carefully my friends, I wish you good luck!

Wednesday 12 January 2011

Haven't looked in on the Pound's progress for a while

I realised I haven't updated progress on the Pound since March. That's a long time, but I'm sure you weren't waiting so no biggie eh? :-)

On 3rd March my conclusion was the Pound was probably going down for the remainder of 2010. Looking back, we can see that clearly this was an incorrect call.

However, let's see if it just needs a little more time.

Friday 7 January 2011

Interesting comment about Marketing

I was just reading an article on ZeroHedge (I was looking into their recent interest in the Baltic Dry -- clearly I now have lots of time to make up elsewhere as a result, what with the number of, mostly inane, comments over there... :-\ ) and I stumbled across one interesting comment, that I thought was worthy of note. I'll simply paste it below:

by Sudden Debt
on Mon, 01/03/2011 - 14:45

That shart looks like Titanic just sunk.

Another bleak forecast:

Since a few years, I've been watching the jobmarket pretty close and I've seen to have noticed a small trend indicator of the economy.

The jobmarket to watch is actually Marketing & Communication. Whenever bad new was being reported, a few months before that, Marketing jobs went away. At arround newyear last year, there where suddenly about 3 times more job offerings in marketing in just a matter of months. And those grew untill the summer.

Now suddenly, the number of Marketing jobs has bottomed to near zero. Actually I've never seen it that bad.

The reason why I mention this is because Marketing uses a 1 year forecast model linked on investments and growth forecasts.

And now I tend to believe that this years investment plans are going to hit rock bottom and sales might be facing for impact.

Normally Marketing expenditures are between 2 & 5% of the turnover. 2 starting from BtoB and 5% for retail.

So if a company starts hiring agressivly on all channels, they might be upon something big.

If you hear rumors about sacking them, it's bad.

These job numbers are now even lower then 2008!

(From this ZH article)

Wednesday 5 January 2011

Latin American countries want to weaken their currencies?

Today I read that Brazil are once again rattling the cage about the strength of their currency (or more to the point, the weakness of the US Dollar). Chile also are concerned about the strength of their currency, and are intervening in the market process by purchasing US Dollars (which strengthens the Dollar, while also weakening their currency at the same time).

This idea to try to out-run the US in debasing your currency is a fool's errand.

If they really want to compete on world markets through having a cheap currency, they should take a leaf out of the European Central Bank's book, and change what it is they're going to debase themselves against. The ECB realised that you can't out-run the US in debasing your currency. Instead, they choose to measure their currency, the Euro, against something other than the Dollar. Something more reliable and stable. Real money. Gold.

All the Brazilians and Chileans need to do, is change the layout of their financial statements. Include in there the marked-to-market value of their gold reserves in the assets column, and on the liabilities column list the issued currency promises. In this way, you gain as the US debases their Dollar (because the value of your gold will go up as a result of that process). But because you have tight control over how much gold you have in your reserves, you can issue and extinguish the amount of your own currency in existence to suit your own purposes. If you want to weaken your currency, no problem just print up some more Reals. If your currency is getting a bit too weak, perhaps the rest of the world is losing confidence in your responsibility levels or perhaps the cost of imported commodities is starting to choke your economy -- no problemo! Just stop issuing your currency any further and allow some of the existing debt to mature and not be rolled over. You are in control of your own destiny, rather than continuing to be tied at the hip to US profligacy.

One day, all currencies are going to be arranged in this way -- so why wait and keep playing the Dollar Game any longer?


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