Financial

Buying foreclosures to turn them into rental properties is tricky business. Mack Companies, a Chicago real-estate firm, invests in about one out of every 40 homes it inspects. MarketWatch’s Amy Hoak looks at why some make the cut and others don’t.

Feb. 3, 2012

Today’s Employment chart madness from Ron Griess of the Chart Store.
>

Click to enlarge:

˜˜˜

˜˜˜
˜˜˜

˜˜˜

~~~

~~~

More charts after the jump

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

˜˜˜

This week’s New York magazine — a non Business publication — has a rather bearish cover discussing “The Emasculation of Wall Street.

Last week, I mentioned the Barron’s cover was somewhat bullish, with the caveat that Barron’s is a business weekly. New York magazine is more general interest — its not Time or Newsweek, because it covers Wall Street in its back yard.

Meanwhile, Bloomberg is out with this headline today: Investors Fearful as Stock Rally Best Since 1987.

Still, I suspect the NY Mag cover is a bullish sentiment indicator.

>

Source:
The End of Wall Street As They Knew It
Gabriel Sherman
NY, Feb 5, 2012
http://nymag.com/print/?/news/features/wall-street-2012-2/

Who Is President Matters Much Less Than We Think: Freakonomics’ Stephen Dubner

If profanity is the weapon of the witless then how does one best describe something profane? Global policy makers are meddling in markets so that the economies they feel responsible for can achieve what seems to be a consensus objective of muddling through. A policy of meddling to muddle, if you will. Today’s meddling policy, broadly defined as manufacturing and distributing new base money, is a necessary follow-up to yesterday’s meddling policy, broadly defined as aggressively promoting when-issued base money (i.e. credit). In other words, policy makers must now rob Peter and Paul to pay Jamie, which is only slightly more acceptable than the previous policy of robbing Peter’s and Paul’s children to pay Lloyd. We have children, including young girls (sugar and spice and all that), but quite honestly the only apt response for this vulgar state of affairs is: “WTF?”

The entire display of hubris among global economic policy makers is almost too repulsive to bear – even more so than the leap year sporting event commonly known as “letting Americans believe their plutocracy is a democracy” “The Great American Media Buy” the “U.S. Presidential Election”. To quote a headliner in this year’s quadrennial circus, it “is as close to despicable as anything (we) can imagine”.

We are humble investors and it is not our occupation to sling judgmental Shinola. But it is undeniable that we exist, as do you, and therefore have a stake in the actions of fired-up world improvers oddly wired to believe unequivocally that motion is progress while demonstrating great finesse in assuring a minimum gets done. As you opened this piece not for a cynical (and increasingly trite) rant about the absurdities of contemporary authority but, we imagine, for a somewhat reasoned assessment of macroeconomic circumstances and how they may relate to makin’ money, we will try to calm our Tourette’s for a couple of thousand words. No guarantees, of course.

It is the Currency, Stupid.

Whether or not Greece will meet its debt obligations in March and beyond has little to do with Greek wherewithal and output. Everyone knows Greece is insolvent and cannot meet its March 20 payment. Nevertheless, bets are being made quite aggressively in the capital markets handicapping sovereign bailouts. As it stands today the debate surrounds how much to haircut Greek debt and through which entities the bailout would pass.

Were Greece the only insolvent sovereign then most would think it would have already been bailed out. But the dubious balance sheets of other sovereigns like Portugal and Ireland (and Italy and Spain) demand that both sides, creditors holding Greek debt and solvent sovereigns like Germany ostensibly on the hook to pay them, try to find acceptable terms. The parties involved are not only negotiating about Greek debt. They are no doubt posturing for future negotiations as well. Many if not most Greek creditors, (and certainly the most active investors in negotiations), bought their bonds and CDS in the secondary market in anticipation of this workout. Both sides are concerned with establishing precedent. Whatever discount-to-par creditors take on the March 20 sovereign Greek debt payment would establish benchmark terms for other struggling Euro sovereigns as well.

Thus, it is possible that the valuation of sovereign debt across all Euro nations will be established in relatively short order. This would conceivably indicate how much new currency the ECB would have to manufacture, which in turn would allow a more knowable valuation of the Euro vis-à-vis other major currencies. Perhaps this is why all those EURUSD shorts we keep hearing about have not succeeded in taking the Euro down? (And it still amazes us that media still do not understand that for every seller there is a buyer. Maybe they should learn to report which side, buyers or sellers, is most vociferous or has the shortest time horizon?) Nevertheless, we think ongoing currency exchange rates have been more or less accurately discounting the outcome and timing of the Greek debt workout, which in turn would establish a benchmark for sovereign debt haircuts across the Eurozone.

Strange too that public attention seems focused on the players rather than the process, as though it is a multi-front knife fight, a scatological war between politicians, taxpayers, hedge fund speculators, the ECB, IMF, and acronym-laden conduit vehicles. It is much simpler than that, in our view. The whole affair reduces to bond holders on one side and central banks on the other. After all, central banks are the only entities that can ultimately print the necessary money to service the debt and repay the creditors.

The ECB, Fed, PBoC, BOJ, BOE, SNB, Bundesbank & Banque de France have the biggest stakes in exerting austerity on profligate societies because they manufacture the world’s benchmark currencies through which all wealth and power is commonly judged. As central banks enjoy unilateral monopoly power over manufacturing the world’s money with which to repay sovereign (and corporate and household) debt, they have omnipotent control over establishing terms over indebted societies. (For those arguing Plutocracy! here is the basis of your claim.)

To be sure, central banks with insolvent sovereigns are the ones with the highest balance sheet growth rates. We thank James Bianco for the graph below showing the ECB’s balance sheet grew 44% over the last six months:

Click to enlarge:

Source: James Bianco; “Living in a QE World”; January 27, 2012; posted at The Big Picture

As everyone knows, the EU lacks fiscal unity which means the ECB is the focal point of intense public scrutiny when it comes to money printing for member nations. (As our friend Marshal Auerback informs, actual money printing is still done at the national central bank level, but the “orders” are placed by the ECB.) The problem for The Bank of Greece is that it must appeal to the ECB for help and the ECB is controlled by Germany, an economy in surplus. According to the BOG’s website, it “is responsible for implementing the Eurosystem’s monetary policy in Greece and safeguarding the stability of the Greek financial system”. We note the BOG has no mandate to reverse an already destabilized EU or Greek financial system.

The critical debt problems today are not just European, as most seem to believe. As we have written at length, the global monetary system is debt based and the amount of debt denominated in all currencies still dwarfs the actual amount of base money in the world. This leverage means that if global policy makers remain unwilling to de-lever the global monetary system by allowing debt to deteriorate, then they must de-lever it through continued base money creation (which shifts the debt to public accounts through the process of sovereign debt monetization).

And so it shall be. All major central banks are manufacturing base money. (We must draw your attention to our friend Michael Panzner’s latest book, Modern Central Banking: Simplified, which is available on Amazon. You’ll laugh, you’ll cry…but mostly you’ll laugh.) The public debate has become how fast or slow central banks should print, not whether they should. (We argue they should just go ahead and get it over with! De-lever the system already!) The graph below shows global base money growth is a firmly established trend.

Source: James Bianco; “Living in a QE World”; January 27, 2012; posted at The Big Picture

The Fed has our Back(side)

In today’s global monetary system exchange rates are contingent upon popular confidence that equilibrium price levels can be agreed upon across currencies for goods, services and assets. Printing an excess of one particular currency would threaten the perception of that currency’s purchasing power value vis-à-vis other global currencies. It is okay, so believe overseers of the global banking system, for FX cross rates to fluctuate, but it is unacceptable for a major currency to fail. This would expose the dirty little secret that contemporary debt currencies cannot mathematically store purchasing power over time.

Whether or not it is officially proclaimed “a failure”, the global monetary system is already failing in real terms. Anyone can see this in the costs of global goods, services and labor across all currencies, which are rising much faster than global demand, and in the long established trend of debt deflation.

The problem for most investors today is that they no longer know how to invest with a real return objective. For forty years they have been taking the banking system at its word that the paper it produces stores value. Consider last month’s press conference held by Fed Chairman Ben Bernanke, in which he formally announced the Fed would target 2% inflation in the US. The Fed chose as its inflation benchmark the Personal Consumption Expenditures (PCE) index, calculated by the Bureau of Economic Analysis within the Commerce Department. Unlike the CPI, which is currently running at a 3% annual rate (even core CPI, which strips out food and energy prices, is running at 2.2%), the PCE was reported on January 30 to be running at 2.4% (1.8% core). Quick inspection of the PCE index (Bloomberg ticker “PCE DEFY” we kid you not!) shows it was “rebased to 2005” and that “to see this index with a base year as (of) 2000” we should “refer to the ticker PCE DEYO”.1 Alas, Bloomberg did not have the data for base year 2000 when we tried.

We are comforted that Chairman Bernanke and the Commerce Department are sanguine about something they are calling “inflation” not eating into the purchasing power of US dollars or into real returns on dollar-denominated assets. We would be happy to go along with the Fed except that we are investing to increase our future purchasing power and, frankly, we do not trust the Fed to watch out for our purchasing power. It seems obvious the Fed is not only changing policy by officially “targeting inflation”, (and framing the change as greater transparency which is in the public good), it is also shifting benchmarks to be able to better control the perception of low inflation so that it may manufacture more base money.

Merriam-Webster defines profane as follows: “to treat (something sacred) with abuse, irreverence or contempt, or to debase by a wrong, unworthy or vulgar use”. We do not think measuring inflation should be considered sacred but we do think policy makers are deliberately, without ego or malice, managing monetary affairs as it suits the banking system. If by massaging the perception of inflation they are breaching the public trust and displaying contempt for laborers and unlevered savers, (not to mention investors), well then it is just business. WTF.

Absolute Power

Such economic manipulation is to be expected. Mr. Bernanke represents a power structure with deep roots that supports the general theory that those that control a nation’s money control the nation.

“Let me issue and control a Nation’s money and I care not who makes its laws. The few who can understand the system will be either so interested in its profits, or so dependent on its favours, that there will be no opposition from that class, while, on the other hand, that great body of people, mentally incapable of comprehending the tremendous advantage that Capital derives from the system, will bear its burden without complaint and, perhaps, without even suspecting that the system is inimical to their interests.” 2

- Mayer Amschel Rothschild, 1838

It is becoming increasingly obvious today within developed economies that ultimate power remains with the monopoly issuer of our fiat currencies, much as it has for centuries. Sometimes power must exert itself, as this 1819 discussion in the British Parliament shows:



Commons Secret Committee: dddddd“In what line of business are you?”

Nathan Rothschild:dddddddddddhdd “Mostly in the foreign banking line.”

Commons Secret Committee:ggggggg “Have the goodness to state to the Committee in detail, what you conceive would be consequence of an obligation imposed upon the Bank (of England, which Rothschild owned) to resume cash payments at the expiration of a year from the present time?”

Nathan Rothschild: dddddddddddddd“I do not think it can be done without very great distress to this country; it would do a great deal of mischief; we may not actually know ourselves what mischief it might cause.”

Commons Secret Committee: ddddddd“Have the goodness to explain the nature of the mischief, and in what way it would be produced?”

Nathan Rothschild:ddddddddddddddd “Money will be so very scarce, every article in this country will fall to such an enormous extent, that many persons will be ruined.”

Are we mad to compare old history with today’s monetary system? Well, let’s just say that nothing has changed in the structure of central banking and we have never been high on “this time is different” thinking. (We think even Rogoff & Reinhart who wrote the wonderful book of the same title would instruct that private central banks maintain the same control over the monetary system today). So, we should expect central banks to manufacture mass quantities of currency to ensure bank system solvency. Knowing this in advance is an even bigger gift for unlevered real asset investors than Ben Bernanke’s gift to levered carry-trade investors by promising to keep US interest rates zero bound through 2014.

We have not reached the end of history. Mankind evolves, as does capitalism and its many brands. But not that much. An objective look at our modern economic ecosystem shows clearly one unified global banking system that is actually made stronger by predictable, publicly aired tensions among competing political and economic theorists and practitioners. As long as lawmakers and we, the people that must obey them, continue quarrelling among ourselves, those that control money are free to do as they like. When the people revolt against the symbols of political power (storm the Bastille, storm the winter palace), then the people succeed in forcing those that control money to alter the political structure. Only when lawmakers take steps to limit bank system access to the nation’s resources by indenturing the factors of production (dumping tea overboard, storming the Eccles Building), can the nation’s capital shift back to the people.

Today we have an oligopoly of central banks issuing the world’s baseless currencies and, by having successfully promoted substantial household and sovereign debt assumption, can now dictate resource allocation and fiscal policy terms. Against this power there is fragmentation — (mostly) democratically elected officials overseeing republics of generally obedient populations. Lenin knew; “by continuing the process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens”. John Maynard Keynes himself agreed: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose”.

We argue that indebted governments have ceded that power to banking systems without conscience or public accountability. If the global banking system has ultimate power over how global wealth is perceived, (as it does), and it is the only institution powerful enough to keep indebted governments in control of their societies, (which it is), then the only reasonable strategy for an independent investor is to think like a Rothschild. Don’t fight the Fed – bet on it.

We will put more meat on the bones in a follow-up report, An Adult Approach II (Relative Real Value), and provide a truer sense of current and future US inflation and our sense of relative value within such an environment.

Kind regards,

Lee Quaintance & Paul Brodsky
pbrodsky@qbamco.com

1 Bloomberg; PCE DEFY Index

2 Mayer Amschel Rothschild (1774-1812); written in a letter from London to Rothschild agents in New York; 1838.





My post Giants-win the Superbowl morning reads:

• The End of Wall Street As They Knew It (NY Mag) see also U.S. Brokerage Firms Closing Shop After Trading Drop-Off, Capital Squeeze (Bloomberg)
• Facebook Twofer:
…..-Why Facebook is likely to do a face-plant (Market Watch)
…..-The value of friendship (The Economist)
• Most Tech Takeovers Since 2007 Spurred by Data Torrent (Bloomberg)
• Feds Disclose New 401(k) Rules (WSJ)
• Sunken platinum treasure pegged at $3 billion (Petoskey News)
• JPMorgan, BofA Sued by New York Over Use of Mortgage Database (Bloomberg) see also HUD Secretary Expects “Substantial” Payment of Foreclosure Fraud Settlement with MBS Investor Money (FDL)
• China Risks 4-Point Growth-Rate Cut in Case of Europe Worsening: Economy (Bloomberg)
• Listen to Your Community, But Don’t Let Them Tell You What to Do (Coding Horror)
• Second markets Losing a Goose That Laid the Golden Egg (DealBook)
• Forget super PACs. A modest proposal for legalizing bribery (Washington Post)

What are your reading?

>

Itchy Investors Ramp Up the Risk

Source: WSJ

We are starting something new this week — a broad based strategy session for clients of our quant tool, FusionIQ. This weekly Market Strategy Call is part of our newly updated and improved FusionIQ Investor site. Kevin Lane, the head of our quantitative & technical research and I will be discussing what we see for the market, where the inflection points are, and what to look for as danger signs.

Its free to subscribers of FusionIQInvestor or FusionIQ Trader.

Greece’s hourglass is running out of sand as officials scramble to turn it over again. As pressure continues to be brought upon Greek politicians to agree to more budget cuts before they get more bailout money and a PSI agreement remains elusive however close the parties continue to say they are to a deal, the Greek 1 yr yield is rising above 500%. The 14.5b euro bond that matures on March 20th, which is the focus of everyone, is down almost 2 pts to .38 on the euro. The euro is lower in response and while Portuguese yields are moving higher in sympathy, Italian and Spanish yields are mostly lower. The amount of money deposited at the ECB overnight rose to a 2 1/2 week at 511b euros and it’s the 2nd largest amount on record. European banks thus seem more interested in prefunding their 2012 debt maturities as they also shrink their balance sheets, rather than fund business lending growth. Germany factory orders were better than expected in Dec.

Last week, I went into the details of the NFP report (See Tearing Apart January 2012 NFP data). There were 10 positive bullet points versus 5 negatives — and even those negatives were the same old sore spots (high teen and minority unemployment, persistent long term joblessness, etc.) that have been plaguing the labor market for some time now.

For the past decade, I have been very diligently tearing apart the monthly jobs data with a statistician’s eye: I have discussed the importance of the overall trend versus any one point in time; I have emphasized how far off the Birth Death adjustment becomes at the end of each economic cycle (not the beginning); we reconciled the differences between Household and Establishment surveys; urged the media to report both Unemployment (U3) and Underemployment (U6), and lastly, noted that flat wages are even worse than reported thanks to the Fed/BLS tendency towards focusing on Inflation ex inflation.

I mention these bonafides because I am no sycophant when it comes to BLS data. I have long urged a healthy skepticism, and have tried to look beneath the headlines (perhaps if there is interest, I may post a guide to various ways to read BLS employment data).

However, after Friday’s solid NFP release, some unusual — and to be blunt, quite silly — commentary was about the intertubes. Quite frankly, it embarrassed its authors, whom I would categorize into three distinct cliques: The PermaBears, the Political Knaves, and the Consistently Wrong (some people belong in more than one category).

ZeroHedge has been a terrific site when it comes to CDOs, HFT and other challenging aspects of financial complexities. That’s what makes it so difficult to understand why they completely shit the bed with the BLS census adjustment  (Record 1.2 Million People Fall Out Of Labor Force In One Month, Labor Force Participation Rate Tumbles To Fresh 30 Year Low).

Good analyst, bad analysis.

Understand what this Census adjustment actually is: BLS takes the decennial census, and adjusts its estimates for total population, work force, and employed, and does so for a variety of demographic factors. No, it is not that the non-institutional population suddenly rose by 1.7 million month-over-month, and therefore the labor force suddenly lost a million people. Rather, this reflects a “frame of reference” revision incorporating the latest census data.

Don’t take my work for it, here is what the conservative American Spectator said:

“I don’t want to overstate the significance of [Zero Hedge's] oversight, which conservative voices around the media and the web are also making, namely the idea that the participation rate dropped 0.3 percent and the labor force dropped more than 1.2 million in the past month. Those things are simply not true no matter how loudly people scream “conspiracy” and “propaganda.” (Having been trading financial markets for about 25 years, I’ve heard these same accusations about economic data being manipulated to help the incumbent president — whether Democrat or Republican — so many times, they just bore me now.)”

This error was immediately picked and amplified by CNBC’s Rick Santelli, who was one of the Tea Party’s founding fathers. Santelli has been dead wrong about NFP the past 6 months (or longer). From the floor of the Chicago Exchange, he has underestimated Employment data month after month without correction or remorse. I haven’t teased apart everyone of his calls, but it seems that he has been consistently on the wrong side of the data since the late Spring. Perhaps The Daily Show might like to take a look at his prognostication skills.

File Santelli under the category Political Knave, along with James Pethokoukis. Jimmy P was once a good economics reporter, but he has allowed his political bias to consume him. It is a shame, because he has a good mind and a head for numbers — but since his joining the Kudlow brigade of hard right touts, his work like Why the official 8.3 percent unemployment rate is a phony number—and what it means for Obama’s reelection is not worth the effort to separate the valuable analysis from the politcial hackery.

Lastly, there are those who have been simply wrong. I have to throw Charles Biderman under the bus here. He has been so consistently wrong over the past 4 years it has been rather astonishing. He utterly missed the signs of the crisis in 2007-08, denied the recession deep into it, and then missed the turn in 2009-10. (If there is interest, I might post his major  calls).

Biderman actually complained that — WTF!?! — all of the gains were due to seasonal adjustments in January. This has to be one of the single most clueless economic statements I have ever read. Of course there are massive seasonal adjustments in January! There is a huge hiring surge in November and December — primarily retail sales and shipping — which is unwound in the New Year. This occurs annually, mostly due to a little-known holiday you might have heard of called Christmas.

Ignore the economic foolishness of the biased political hacks and perma-bears. If you want an excuse to be cautious on the markets, then look at the mixed earnings near a cyclical peak, the overbought condition of indices, and the headaches in Europe. There are always plenty of reasons to be concerned and worried — but the January NonFarm payrolls isn’t one of them.

>

Previously:
Tearing Apart January 2012 NFP data (February 3rd, 2012)

No Rick Santelli and Zero Hedge, One Million People Did Not Drop Out of the Labor Force Last Month (February 3rd, 2012)

click for full graphic

>

Hat tip Flowing Data

Just in time for the next FOMC announcement, via William Banzai:

>
click for larger graphic

Australian retail sales unexpectedly declined by -0.1% MoM (a gain of +0.2% was expected) in December. Real retail sales for the 3 months to 31st December increased by +0.4%, lower than the +0.6% forecast.

Some 29k job losses were recorded in December, though Bloomberg reports that a private sector survey suggests jobs gains in the new year.

The RBA, I believe, will cut interest rates by 25bps (to 4.0%) tomorrow, following the 25 bps cut in November and December last year. The A$ is currently around US$1.0720, down a bit, but off its lows. Still believe that at over US$1.07, the A$ its overvalued against the US$, particularly as China is expected to slow down (materially?) this year.
The Australian PM, Ms Gillard seems to be coming under pressure – Mr Rudd, the person she ousted and now the Australian Foreign Minister, seems keen to return to his previous position;

Chinese New Year retail sales growth grew by 16% – yes a whopping number to you and m, but the slowest pace since 2009. It was 19% last year. Luxury goods seem to have been impacted. Time to short the sector? Certainly worth a look. Hong Kong retail sales are expected to rise by 15% this year, well below last years 25% rise.
Bloomberg reports that Casino operators in Macau may be hit – in my opinion WILL be hit – another short?
Been reading some reports that inflation in China may well rise towards the end of the 2nd Q 2012. January’s number is to be released this Wednesday. Will follow carefully. May be a reason why China has not eased as expected. However, Chinese data….. Personally, I will follow India – should provide the signal.

The IMF has warned that problems in Europe could cut GDP growth in China by up to a half, though they are still forecasting 8.0% GDP growth this year and next. The IMF/Ms Lagarde’s comments may well be more than a little bit influenced by Lagarde wanting China to cough up for her bail out fund, though Europe is China’s main trading partner. By the way, unlike most, I believe China will contribute to increase the IMF bail out fund – it’s in their interests boys and girls.

Interestingly, China will supersede France as Germanys leading trading partner shortly, according to the FT.

Please IMF, send that note to Mr Jim O’Neill, who believes that EM’s are decoupled. By the way, I raised this whole decoupling idea with a number of very, very, very serious players in India – needless to say, they were not convinced and that’s putting it mildly. India does not rely on exports – domestic consumption is far more important, by the way. However China does rely, inter alia, on exports;

Yet more public demonstrations against Mr Putin. However, whilst Mr Putin remains assured of returning as President he will not be able to be as cavalier as before. Hopefully, that means we don’t have to see those awful photos of him flexing his muscles and trying to be the equivalent of a “dinky toy” Arnie. Capital flight out of Russia continues – indeed some suggest its increasing;

OK, sorry, but Greece yet again. Apparently there were some tough negotiations over the weekend. The problem does not seem to be with the private sector lenders re PSI, but with the Troika. The Troika are refusing to budge, demanding (I must say) pretty savage cuts. Greek politicians have totally lost credibility – are you surprised? Demands from the Troika will increase – The German’s are refusing to increase the size of the E130bn 2nd bail out package. Even if a “deal” is agreed (which logic would suggest should be the better option for Greek politicians – but Greek politicians and logic !!!!) this time around, Greece WILL DEFAULT.

Bloomberg reports that an agreement is near, whilst the FT suggests that it is not. Bloomberg reports that the Greeks have “agreed” (whats the worth of a agreement by the Greeks) to further spending cuts of 1.5% of GDP – competitiveness measures are proving more difficult. Its all totally Greek, as usual. Apparently the Greeks have been set a deadline of 9.00am London time to respond.

Interestingly, I would have expected that the vast majority of you would disagree with my view that Greece should be let go. Indeed, quite the reverse, by a massive majority – interesting. Just reconfirms my view that after an initial sell off, investors may well welcome the move – assuming that the Euro Zone creates a cordon around the rest of the PIIGS – Portugal, in particular.

On a separate point, Mr Ackermann is pushing the Euro Zone/IMF to agree a deal – he has also been advising Germany – does that sound like a conflict of interest to you. Mr Ackermann is CEO of Deutche Bank (who will have to take further hits if there is a Greek default) and Chairman (need to check) of the IIF (who are negotiating with the Greeks/Troika on PSI). You will recall that he initially pushed for just a 20% odd haircut;

Euro is trading below US$1.31 (currently US$1.3075). I will continue with my strategy of shorting around US$1.32, but am getting very close to my limit;

The FT reports that the EBA (European Banking Authority) is to challenge a “significant proportion of capital restructuring plans” submitted by European banks, who must reach a 9.0% Core Tier 1 capital ratio by end June. Are you surprised – thought not. Basically banks are fiddling the risk weighted assets, proposing unrealistic plans for asset sales and are over optimistic re profitability. Basically, stay away from banks that need to raise capital. However, it appears that the EBA is caving into pressure – what else would you expect from an EU institution;

Analysts are likely to increase their GDP forecasts for both the US and the UK, given much better recent economic data. Still early days and I remain of the view that both the FED and the BoE (the BoE this week) will introduce QE3. Essentially, they will both want any upturn to become embedded and self sustaining;

The FT reports that investors in US mortgage securities may have to take a US$40bn loss in respect of mortgage foreclosure abuses. The US Housing Secretary suggests that this amount is just a “down payment” !!!!! and that banks will have to pay up/agree to reductions in principal etc, etc in due course !!!!;

Whilst Asian markets are up, European markets are likely to be tricky at the opening due to Greece. Please Turkey, cant you take them over.

With the fast-rising prices for silver and gold that have set new all-time highs this past week of April 2011, many investors must be wondering, what does one do to take advantage of this situation?

It does seem to the author that there is a distinct lack of media attention covering the precious metal rise. As always, there seems to be an equal number of bears calling the rise in prices a bubble and signalling danger versus an equal number of bulls calling for a further rise to $50 USD and beyond, based upon currency debasement. For myself, I see further gains based upon supply and demand factors of the emerging markets growth, and I will watch with interest.

As for a prediction for the silver price, based upon a quick look at the charts and the application of some Elliott Wave's principles, I call for silver to rise to

With the fast-rising prices for silver and gold that have set new all-time highs this past week of April 2011, many investors must be wondering, what does one do to take advantage of this situation?

It does seem to the author that there is a distinct lack of media attention covering the precious metal rise. As always, there seems to be an equal number of bears calling the rise in prices a bubble and signalling danger versus an equal number of bulls calling for a further rise to $50 USD and beyond, based upon currency debasement. For myself, I see further gains based upon supply and demand factors of the emerging markets growth, and I will watch with interest.

As for a prediction for the silver price, based upon a quick look at the charts and the application of some Elliott Wave's principles, I call for silver to rise to

First and foremost, and as reported by Reuters last night, “Gaddafi ‘accepts peace roadmap’: South Africa's Zuma,” and I hope this is the real deal. But the writing has been plastered on the wall. Instability has a way to propel oil and precious metals higher, and the current geopolitical landscape is fertile ground for conspiracy theories, apocalyptic dreams, and allodoxaphobia when views are a bit off the beaten track.

As a side note, the various spellings of the name Gaddafi is due to a lack of a "universally accepted authority for transliterating Arabic names," according to the The Christian Science Monitor.

We find ourselves in the midst of uncommon times, and currency games keep most of us off balance, with the European Central Bank and Federal Reserve playing ping-pong with each other, while the rest of the World simply observes and acquires uncomfortable neck pain. Portugal’s expected bailout didn’t affect

Here is an interesting inflation hedge for income investors. Newmont Mining Corporation (NEM) is planning its dividend payments based on the average sales price for gold. The expected payment date based on this formula is June 29, 2011. According to the company:

The annual payout will increase at a rate of $0.20 per share for each $100 per ounce rise in the average realized gold price. At the current gold price of approximately $1,450 per ounce (i.e. between $1,400 - $1,499 per ounce), Newmont's annual dividend would be $1.00 per share. Subject to Board approval, the first quarterly dividend under this policy is expected to be payable on June 29, 2011 to shareholders of record on June 16, 2011.

The company believes that by 2017, it can produce 7 million ounces of attributable annual gold production, and that based on today's prices of precious metals, it can achieve internal rates

By Brad Zigler

Gold made a clean sweep against the world's reserve currencies this week, particularly the yen, which posted a record-setting 4.8 percent loss. Bullion notched a new record against the greenback as well, while it rose 2.1 percent vs. the Swiss franc and 1 percent in euro. Sterling yielded 0.5 percent to gold.

In dollar-denominated assets:

• London gold was fixed at $1,457 Thursday morning, 1.8 percent higher on the week, after averaging $1,443; COMEX spot last settled at $1,459 for a 1.4 percent gain; spot metal averaged $1,446 this week in New York; average daily COMEX volume toppled 47 percent to 140,399 contracts, but open interest surged by 31,919 contracts to 519,059.

• COMEX gold inventories fell 22,176 ounces (0.7 tonnes) to 11.011 million; 21.2 percent of open interest is now covered by warehouse stocks; 2.349 million ounces are deliverable, while immediate demand for COMEX bullion amounts to no

Why the fascination with a gold bubble? I still don't know. Perhaps there are financial incentives for some authors and media talk show hosts. After all, a lot of these people don't actually trade or invest their own money into the markets. They are paid to express an opinion and the public takes their word as good as "gold." Now the contrarian in me causes me to question whether gold has indeed run its course, inflation adjusted or not. The market does not have to bow down and agree with our reasoning. Therefore it is wiser to view what the market is actually doing and structure a process that puts you in the place with the greatest potential while managing your risk well. Right now the market believes that hard assets are the key to securing wealth or generating a return on investment, regardless of whether or not gold is