November 2011 Market

[68Camaro]

First post for November

(Oct 2011 thread is here) viewtopic.php?f=17&t=8831

The irrational exuberance over the Euro-zone "debt settlement" (nothing much has been settled) has already waned, and the big run-up of last week has completely backed-up, at least on the Euro exchanges - they are back to where they were a week ago, and still dropping. The Euro continued to weakened more overnight relative to the dollar, and the prices of PM as measured in USD have continued to reflect that overnight, continuing to drop as the dollar has risen. Simply put, it takes fewer USD to buy gold or silver from those that hold gold or silver in Euros. So change of this type is not a literal weakening of the PM market, but a recomputation as the value of the USD changes. The PMs will also be sensitve to the general market direction, at least for short-terms, as PMs are liquidity, PMs are true cash, and when markets drop and margins have to be covered, those that also hold PMs will trade it off if they have to, in order to cover margins. This is all to be expected. Silver will also be sensitive to perceived direction of the economy, as a portion of its demand is industrial, and a weakened economy translates into lowered demand (at least theoretically, though I personally think the elevated demand as a PM is more than making up for that). Much of the above is restatement of the obvious, but it is sometimes good to see it in one place, in print (again).

There have been many people suggesting that PMs have yet another dip to face. And actually they do have AT LEAST one more major dip to face, and that is the big dip that happens when the balance of the market collapses. (And as that collapse could happen, in part, in a couple of stages over days/weeks, there could be a couple of steps to this big dip - in hindsight we could even see that we are in the middle of that right now.) During any significant market collapse many things will happen, sometimes in chaotic order that will only be obvious in hindsight. But these will include people buying madly out of fear, selling madly out of fear, revaluations due to constantly changing currency ratios, and possible imbalances between exchanges where PMs could be valued differently in different parts of the world. At some point real physical will take on a different price than the promise of physical, and what will matter eventually is the number of ounces of PMs that you have in your possession, rather than how they are valued in USD.

[shinnosuke]

Let's talk Lehman Bros...I mean MF Global. Is it Lehman, Part II? How will this ultimately affect the market this month and going forward?

http://sherriequestioningall.blogspot.com/2011/11/mf-global-stole-hundreds-of-millions.html

[rsk1963]

Greek vote.

Do we want to be saved? Or do we want to crush the EU now? There are things going on right now that make blood run from my nose (is this an aneurysm, a nightmare or some other farse?) at this point I'm not even sure where the horizon line is. Although, these feelings that we are having (I'm sure I'm not alone here) are not far off of wallstreet I guess either, 300 point swings up and down on a daily level.



Stay thirsty.

[68Camaro]

The Greek vote and the MF Global failure are just two steps in this. Eventually something is going to kick-over and start the dominoing.

The Greek government, as I noted in another thread - doesn't want to be responsible for the decisions that they NEED to make, so they want to put the blame on the people, so that the people themselves can't complain when they lose all further financing. (Greece may experience revolution or civil war as a result.) In the meantime the expected outcome of the referendum will create a full default, banks will fail but for those that are decided to be rescued. Because these are not European banks, but banks with national homes, in some cases banks will be rescued, in other cases the host countries will not have the resources or will to bail them out, and they will fail. This unless the US and/or IMF step in to help print more money and rescue them with inflated US dollars!

[AGCoinHunter]

This is going to get nasty really quickly. First few dominos fall and you are going to see something we have never seen before. Stock up now before its too late.

[Market Harmony]

Rich, you make an excellent point... Pomp knows that his socialist country is going down the tubes. He can either step up and take the blame for making either decision (to take bailout, or not) or put it up for public vote. Either of which will not change the ultimate outcome, but by putting it in the hands of the people, he will not have to shoulder the blame personally. Besides... votes get rigged all the time, so even if the popular vote is against what the politicians have to say, then they can at least fudge the results and still blame the people.

[68Camaro]

What an "interesting" day... Makes one think, even if no logical conclusion comes from the thinking. Definitely a multiple post day.

Latest suggestion is the (Greek) party in power is going to call for a vote of confidence in Papandreou, so they might actually throw him out tonight (their time, american afternoon) and attempt to fill in the gap. But... hmmm, are they sufficiently organized and unified to find someone else with integrity, who is a true leader, who can stand in the gap? Who might that be? They'd best be very careful. Sometimes the devil you know is less bad than the devil you don't. It's times like these that the snakes in the woodpile come out and take over countries.

[AGCoinHunter]

http://www.zerohedge.com/news/greek-mil ... event-coup

Interesting....Greece is going to spiral out of control quickly.

[tractorman]

http://www.zerohedge.com/news/greek-military-overhaul-attempt-prevent-coup

Interesting....Greece is going to spiral out of control quickly.

Now that's scary.

[68Camaro]

My thoughts were running in the same direction. In a part of the world used to military coups, be prepared for the generals to take over if the civilians can't get their act together. Unanswerable questions - what would they do with the power, and would they give it back up later?

[shinnosuke]

My thoughts were running in the same direction. In a part of the world used to military coups, be prepared for the generals to take over if the civilians can't get their act together. Unanswerable questions - what would they do with the power, and would they give it back up later?

And don't forget that there is a set of freshly appointed generals next door in Turkey. I would hate to see the Ottomans get an idea about claiming new territory to their east, but stranger things could happen.

I've been trying to follow the market all day today. As unqualified as I am to make predictions, I hope all will forgive me for saying that it's time to speed up the preps. Arab Spring, European Autumn, North American Winter?

[68Camaro]

Somewhat mixed markets today. No stellar new news, but nothing has changed the bad news. Greece insists on the referendum, balance of Europe will withhold further loans until the referendum, set for early December. Italian bonds now at record levels - will they be next? US private jobs growth still low, though positive spin on latest numbers was all over the place. Bernanke says there is more the Fed can do, without actually noting anything specific, which really means there isn't much more they can do (unless they do a QE3) - but this (irrationally) gets people excited. Good grief...

Dollar stays "high(er)", but PMs start a recovery anyway (which means they are advancing versus the lower dollar of a few days ago).

US equities up about half of yesterday's losses. Europe up but less so, maybe a third. Japan down, but could be argued that was actually the day before.

Tomorrow may be more exciting...

[68Camaro]

So, where are we for this last half of the year...?

Gold recovered again this week to about mid-way between its recent low and recent (and all-time) high. It is now about where it was in mid-August when it began the last big push up that led to the all-time high circa 23 Aug. October built a strong base in the lower 1600s (a number that itself would have been a bit hard for many to believe only a few months prior), and it has now consistently built on that, recovered from some tests, and pushed back up above 1750 and closed there.

Silver is still recovering from the August abuse, and actually is also about halfway between the mid-August local highs circa 43 and the lows during the drop of 28ish (yes, there were discrete momentary points even lower than that). Silver also survived some re-tests, and despite a couple of relatively brief dips into the upper 20s during the past 3 months, managed to close the week near its recent highs, above 34, and over this time rebuilt a solid base in the 30-32 range above which to grow.

The Greek chaos is almost too much to absorb - it changes moment by moment, so hard to report on that in the moment. Tonight (as I write this) we get to find out if their leader survives a confidence vote, and what starts to happen after that, regardless.

An email being circulated today, alledgedly by a portfolio manager heavily invested in both bullion and PM mining stocks, titled "Major PM Smash Imminent?" makes note of MF Global's 150,000 frozen commodity accounts:

According to the trustee handling the liquidation of MF Global Inc., no other broker dealers have agreed to accept the transfer of the 150,000 MF Global accounts that were frozen on Oct 31, of which 50,000 were regulated commodities accounts. The trustee states that if no one agrees to transfer the accounts to their brokerage, all commodities accounts WILL BE LIQUIDATED BY END OF TRADING ON FRIDAY 11/4!

I'm skeptical of the above being true, and even if true, the affects on the PM market will be transitory. We will see what falls out. However, the broader market affects of MF Global have not yet shaken out. There is more to come on that - we may see some dominoing of other failures coming from this.

[rsk1963]

Camaro

That's certainly is hard to believe.
http://www.businessweek.com/news/2011-11-04/mf-global-customers-say-frozen-money-shows-failure-of-safeguards.html

I believe they are just frozen, and they have to unwind a knot of strings.

Pap stays. What do you think happens in the market place on Sunday evening? Also groupon had their comming out party IPO (with current revenues of -308 million on the quarter) do you think this thing will be a stud or dud?

[68Camaro]

Thanks for the BW link; the discussion there makes more sense, but doesn't leave MF Global's customers feeling any better. I feel for the poor customers, though to some extent they reap what they sow, because they had advance warning of the type of thing they were getting into (a Goldman heritage management team led by Corzine).

Sunday eve - no opinion yet - there is a lot of weekend yet to happen, a lot to think about. But overall people are largely parked on the sidelines waiting for something to happen each day. On days where nothing significantly bad happens, the equities market goes up on optimism. On days where significant bad news happens it crashes again. Mostly on low volume each day, so no conviction. It's a psychotic market with no conviction. Basically the whole world is balanced on the knife edge of the theory that TPTB can re-start the markets and growth and optimism, underpinned by the effective printing of money and implicitly, "controlled" inflation (though at a higher rate than recently). They would love to see steady 8-10% inflation for years, which would inflate them out of their immediate problems and kick the can down the road some more years. I personally think that is an impossible task - never been done before. I think the underlying problems continue to build and are approaching a crisis point in several areas. Something will flash out of their control and it will be game over for them.

No opinion on Groupon stock - their business plan/marketing approach doesn't turn me on, seems to me it relies far too many things outside their control, but that doesn't mean it'll be a dud. I've certainly been plenty wrong about many recent cultural trends, so I've learned to stay away from stock picks that rely on my cultural intuition, because I'm clearly not in tune with modern marketing or consumers.

[68Camaro]

On the same headline page Yahoo finance has these two almost mutually incompatible stories, with no explanation for why they paint differing pictures:

http://finance.yahoo.com/news/Job-marke ... et=&ccode=

Here we see info such as:

The American job market improved modestly in October, and economists looking deeper into the numbers found reasons for optimism ...

Economists pointed out other bright spots in the unemployment report:
-- Average hourly wages rose 5 cents a week, to $23.19. More pay for workers means they have more spending power in the economy. Many businesses are waiting for customer demand to pick up before they hire in big numbers again.
-- August and September turned out to be much better months for job creation than first thought. The nation added 104,000 jobs in August and 158,000 in September, a total of 102,000 more than earlier estimates. The August figure was first reported as zero.
-- The number of people considered long-term unemployed, meaning they have been looking for work for at least six months, fell by 366,000, to 5.9 million. That is the fewest since April.

Ok, so average wages increased at an annual rate of 2.6%. This, with inflation at an official rate of (what is the latest?) something like 3.6%, and shadowstat numbers in the 10% range. Yep, this is a real positive.

Ok, so job creation over the past several months (if we can trust the data) has been less horrible than we thought. It is merely very bad, instead of gawdawful. These creation rates don't keep up with population growth, and nothing in this makes sense to cause the total unemployed to actually reduce from 9.1 to 9.0, except that people are dropping off the rolls and becoming uncounted.

And in contrast we see this article:

http://finance.yahoo.com/news/Most-of-t ... et=&ccode=

Early last year, 75 percent were receiving [unemployment] checks. The figure is now 48 percent -- a shift that points to a growing crisis of long-term unemployment.
...
Nearly 46 million people received food stamps in August, a record total.

[rsk1963]

Sounds about right... trying to paint a flower on s&@% doesnt change the fact that its still s&@%.


Tomorrow will be interesting.

Pap out, italy struggling to figure out where or what, or who will save them.
Asian markets down across the board (as of fright now). PMs up.

Buckle up we are currently experiencing some turbulence.

http://www.businessweek.com/news/2011-11-06/asia-stocks-fall-as-debt-crisis-undermines-greece-italy-leaders.html

Just found this place, has a good amount of Global perspectives on commodity markets.
http://cnbusinessnews.com/category/markets/precious-metals/

[68Camaro]

Milton Friedman interview from 1979, compare to today

No need to either put Milton Friedman on a pedestal, nor vilify him, and before you do either, get the facts on him first. But regardless of your opinion of him or his policies his core conservative/libertarian ideals speak as loud now from the grave than they did then, in this 5-part ~45 minute interview and Q&A on the Donahue show from 1979. Amazing how far down we've come since then, and how our problems now were the same then. If you only have time for one, pick the 3rd one, especially the first 2-3 minutes of that one.

http://www.youtube.com/watch?v=E1lWk4TCe4U
http://www.youtube.com/watch?v=5Lp2kGJASGY
http://www.youtube.com/watch?v=GapXLpLoZBs
http://www.youtube.com/watch?v=I0Ocv8aMBjk
http://www.youtube.com/watch?v=brBvdjoNC6Y

[shinnosuke]

It's 1am in Tokyo now and I just saw your post. As you recommended, I watched the first few moments of the 3rd video. Will definitely watch the rest later. It is the clear thinking of and statements by Milton Friedman that immediately confirms what we all know in our heart of hearts to be true. Oh, that Americans could wake up and prevent the economic and political demise of their country before it grows too late.

Friedman reminds me of Ron Paul. Or perhaps, Paul reminds me of Friedman, is the right way to say it.

[68Camaro]

Why has PM market gone up the past few days? No idea. Sometimes it is impossible to ever know what specific factors drives things up or down - or if at all, sometimes that knowledge is only later in hindsight. I don't know if physical is being consumed and bought at a discount while it is "cheap", or if this is a move on speculation. Of course I approve, in the sense that I think the dollar is becoming increasingly worthless, and so should be reflected in the price of the best source of cash that exists, gold.

After solid up moves a week ago Friday, and again yesterday, with minimum retracement, gold is now back near 1800, and silver trying to find a solid close above 35. PMs are just a couple of good trading days away from the 1900s and 40s, and back to record territories. But, better to do this slowly than quickly. Steady as she goes, unless the big crises start hitting us.

Amazing how complacent people get at bad news. The news we hear these days starts to numb us. A year ago any of several things we hear on a daily basis would have caused panic. Now, nothing, or next to nothing. The frog is in the water, in the pot, the heat is on, and it's getting warmer, and warmer. But... we're all comfortable, right now. Right? (Don't answer that.)

[shinnosuke]

Required reading:
The dollar is done. Deal with it.
http://news.silverseek.com/GoldIsMoney/1320691016.php

So PM prices will be all over the place, but that's because many are still in denial. It is due to that wicked tendency of normalcy bias which we all possess, in one degree or another.

[68Camaro]

Good note shinnosuke - I saw that link posted on coinflation, looked at it - thanks for noting it here!

I was a bit perplexed at the market rise late yesterday - but what do I know, and I certainly don't think like the market traders, that is increasingly obvious. But sanity prevailed today - at least briefly - as the equity markets panicked in a delayed reaction to yesterday's Italian vote kicking out their PM, and the rapidly increasing Italian bond yields to a point where they cancelled their bond sale for tomorrow (so they apparently are going to have to figure out how live without the income from that sale for a time - interesting...). So the Euro is dropping large against the dollar today, and gold is "down" today (on paper). But ... the USD is up 1.7% and gold has only dropped .7%. So gold is still swimming strongly upstream, but the downstream current has briefly increased, and brought it temporarily down. That USD rise against the Euro (especially) is the type of thing that might eventually become a riptide, for a short time. (As mentioned in other posts by both myself and other several people, as well as in many articles outside of RC.) But (I believe) it will pass. That gold has only dropped .7% when the dollar is up 1.7% indicates that gold is still increasing in perceived value, and is desired.

Silver, as usual, overreacts a bit, and is down 2% vs the 1.7% rise in the USD.

[shinnosuke]

Good note shinnosuke - I saw that link posted on coinflation, looked at it - thanks for noting it here!

I was a bit perplexed at the market rise late yesterday - but what do I know, and I certainly don't think like the market traders, that is increasingly obvious. But sanity prevailed today - at least briefly - as the equity markets panicked in a delayed reaction to yesterday's Italian vote kicking out their PM, and the rapidly increasing Italian bond yields to a point where they cancelled their bond sale for tomorrow (so they apparently are going to have to figure out how live without the income from that sale for a time - interesting...). So the Euro is dropping large against the dollar today, and gold is "down" today (on paper). But ... the USD is up 1.7% and gold has only dropped .7%. So gold is still swimming strongly upstream, but the downstream current has briefly increased, and brought it temporarily down. That USD rise against the Euro (especially) is the type of thing that might eventually become a riptide, for a short time. (As mentioned in other posts by both myself and other several people, as well as in many articles outside of RC.) But (I believe) it will pass. That gold has only dropped .7% when the dollar is up 1.7% indicates that gold is still increasing in perceived value, and is desired.

Silver, as usual, overreacts a bit, and is down 2% vs the 1.7% rise in the USD.

Rich, I'm sure it was a FReudiaN slip on your part, but calling the funds created by bond sales income is an indication of our times. New debt can hardly be considered bullish for Italy or any developed country, buried as they almost all are, under mountains of poverty-inducing, hope-crushing, debt. The world needs more central bank-free free enterprise that pays a reasonable tax rate to support reasonable governmental activities like defense (not offense) and roads.

Let's see what happens to forex rates and PM prices in Asia. I just arrived in Texas. It's good to be back in the US of A.

[68Camaro]

I understand your point - it probably wasn't the most clear term, revenue would have been a better choice. But - while I'm not invested in the term - I don't think income was a total gaff - from wiki:

"In the field of public economics, it may refer to the accumulation of both monetary and non-monetary consumption ability"

But you can slap me with a noodle over this when we meet...

[shinnosuke]

Ah, the dangers of posting on an Internet forum (especially in a jet-lagged condition). I see now that my comments towards you were too strong. Conditions are just so Orwellian lately.