Thursday, May 21, 2015


Gold got slammed this morning, probably for no reason. It doesn't seem to have been the result of a US dollar move. We'll see if it can break down below $1200 again.

Anyway, here's the news:

BI - Myles Udland was dead wrong about the Fed. Yes, Myles, you were dead wrong with your June interest rate rise prediction. Might you have been wrong, Myles, because the people who run the Fed are professional economists with an advanced education in economics, while you have a BA in English from U.Conn? Perhaps, Myles, you should shut the hell up and limit yourself from now on to reporting what the smart people are saying, instead of offering your own worthless opinions?

WSJ RTE - Fed's Evans says natural jobless rate may be below 5%. BTW, is our favourite TA still making fun of "Fed jawboning"? Because he could learn a lot from these people at the Fed if he actually paid attention, instead of sitting there feeling superior in his ignorance.

New Deal Demoncrat - the most important positive data of the year. Housing permits and housing starts both reached post-recession record highs in April, he says. Investment spending (housing, corp capex) has grossly underperformed ever since the crash, so it'd be nice to see a turnaround, but I'm not holding my breath.

WSJ RTE - The Portuguese are the next to tell the IMF to go fuck themselves. It seems everyone is finally realizing that the IMF purposefully and negligently destroyed economies with what they themselves later admitted was utterly faulty austerian policy. I'm happy, cos rebellion against the established plutocratic elite is a necessary condition for world improvement. - Whitey's buying gold again. Quote:
According to the data, long-time top investor in GLD is still US billionaire John Paulson’s hedge fund with a holding worth a shade over $1.2 billion.

But the big news is out of Toronto where Canadian asset manager CI Investments purchased a whopping 6,117,900 shares worth $703.6 million during the first three months of the year. It has become the second largest holder of bullion in the fund with total holdings of $735 million.

Goldreporter says that corresponds to 7.7% of the entire portfolio of CI Investment and made GLD the biggest single holding of the asset manager in Q1 2015, an even bigger position than shares of Apple Inc. ($626.7 million).

Swiss investment bank [which one, Frik?] also picked up a large number of GLD units in Q1 increasing its position 490% to just over 4 million shares worth $474 million.

The two weren't the only firms to make bullish bets – Lazard Asset Management doubled its holding to just over 2 million shares and Morgan Stanley (+18.3%) and Blackrock Group (+167%) were also huge buyers.
So I guess gold doesn't suck anymore?

Reuters - India's gold monetization plan lacks lustre. Or planning, or co-ordination, or forethought. Here's an illustration of the problems still unsolved:
"Banks need to propose at least 3 to 4 percent interest rate to attract gold depositors," said Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation. "Otherwise they will not come forward to go through the cumbersome process of testing, melting their jewellery and opening bank accounts."

Current gold deposit plans offer up to 1 percent interest.

While the proposed scheme does not spell out the rate to be offered to depositors, it is unlikely banks will be able to pay much as they would struggle to deal with costs of refining, assaying, distribution and other potential risks.
So, the banks are going to have to assay, melt, refine and distribute the gold. And they want the Indian government to subsidize these costs. Which I can see happening, sure: the Indians are great at throwing money away. Still:
An issue for depositors is that they might be asked to show proof of ownership of the gold, which will be difficult for many Indians because the precious metal is often passed on from generation to generation.
And thus an important difference between gold and paper: gold doesn't care who owns it or where they got it from. As proven by the thousands of corrupt Chinese officials, third-world dictators, drug lords and libertarians (oh snap!) who use gold as a store of wealth. Again, this illustrates how pie-in-the-sky the gold deposit plan is, and how little we have to worry about it for now.

Stumbling and Mumbling - another reason economics isn't a science. Just because you can say evidence is "consistent with" your theory doesn't mean your theory is correct: another theory could also be consistent with the evidence. Again, you economists would do yourselves a favour by generating temporal domain versions of your models and testing them against real-time changes in the economy. Good luck learning the math.

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