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Thursday, October 3, 2013

I try to ignore fruitcakes, but they keep dragging me back in

Izabella Kaminska's gotten more and more rabid in her hatred of gold these past few weeks - I guess not only did the goldbugs steal her tricycle when she was a toddler, they also must have spray-painted rude comments about her on the outside of her highschool when she was a teenager.

Here's one particularly stupid article of hers.

FT Alphaville - pawned out

It starts off as a passable explanatory article, I guess, for someone who actually cares about the market action of publicly traded British pawnshop stocks. Story is that the gold price went down, and shops were thus encumbered by gold stock that's not properly hedged.

Except that's not even it, because it turns out that increased competition from fly-by-nights has also been a factor in Albemarle & Bond's losses.

IK accuses A&B of insufficiently hedging their book. If so, the company is run by morons. Some clown with a back-street shop might run unhedged; but an exchange-listed corporation?

But later she really ventures off the fucking derp end:

A reduction in gold jewellery in circulation for pledging purposes shows that the economy is probably improving — there is less need to borrow against gold. Or, alternatively, that most of the gold which was owned by distressed hands has also, by now, been encumbered.

If the loans can’t be paid back — and the Albemarle share price reaction suggests there is a lot of concern that this is the case — there will instead be ever greater pressure to liquidate collateral so as to meet liabilities in dollar sums. A negative feedback loop which only puts further pressure on gold prices could be the result of that.

"Further pressure on gold prices"? Really?

Not just I, but other sensible people who FT tricks into reading this buffoon, called her on this idiotic assertion.

Approximately how many hundred tons of gold does the British pawn industry have to liquidate, do you think?

Approximately zero, perhaps? I mean, 0.01 hundred tons of gold is approximately zero. 0.03 hundred tons is also approximately zero. Compared with 2013 Chinese gold demand, the amount of British pawnshop inventory in danger of liquidation is approximately zero.

And I sincerely doubt they'd "liquidate" this gold into the commodity market. "Liquidating" pawnshop gold would mean disassembling crafted jewelry that sells for a massive premium to melt, and then sending the 14-carat garbage off to a refinery to get purified. I don't know the pawnshop industry, but I would assume that they'd simply try to auction the jewelry and gold goods. Might even make sense to sell in bulk to a Chinese importer.

The hard times of the British pawnshop industry single-handedly putting "further pressure on gold prices"?

This is not the level of article that should be written by someone with access to an FT blog.

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