bhc investment

Hardcore Profits

2009-11-08T20:20:00.002Z

Episode 2

In the second part of Hardcore Profits, Tim Samuels explores the way in which porn is becoming more pervasive and extreme, and how even pensioners and religious organisations aren't immune to indirectly profiting from porn.

On set in America, Tim meets actors who say they feel pressure to undertake increasingly hardcore sex acts, and talks about this to the 'godfather of porn' Larry Flynt, who tells him that even he thinks porn is going too far.

After meeting with an ethical investment adviser to see if it is possible to avoid porn when creating investment portfolios, Tim examines pension and religious investment funds that seem to be profiting from the porn industry.

Credits

Presenter: Tim Samuels
Executive Producer: Will Daws
Executive Producer: Stuart Cabb

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Hardcore Profits

Hardcore Profits

2009-11-08T18:04:00.005Z

Episode 1

Tim Samuels explores how in the 21st century, pornography has never been more profitable or more pervasive. Tim sees how pornography is now piped into people's lives via new technologies and how this is creating powerful new revenue streams for supposedly 'family friendly' mobile phone and credit card companies.

Tim discovers how the Internet has spawned 'Porn 2.0'. He travels to the US headquarters of a porn website with millions of users, and has the opportunity to get 'hands on' with their latest porn technology.

Tim finds out that the spread of porn is having far-reaching consequences. On porn sets in LA, Tim sees that condoms are rarely used, and in Africa, he finds that these American condom-free movies can undermine safe sex education, increasing the risk of HIV infections.

Credits

Presenter: Tim Samuels
Executive Producer: Will Daws
Executive Producer: Stuart Cabb

Japanese Yen: "Pop!"

2009-11-06T18:23:00.002Z

Japanese Yen

2009-11-06T06:10:00.002Z

Long position entered at Thursday's closing 1.1025. While Rogers thinks the rebound in the Dollar could last for a while, which is a turn we had been anticipating as well, it is not a trade we would consider at all due to the huge systemic risk involved. I believe the Yen Carry Trade will continue to unwind.

Prechter: Bear Market Rally Is Over, Stocks Headed For New Lows

2009-11-05T20:36:00.002Z

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Reference:

Bob Prechter: Bear Market Rally Is Over, Stocks Headed For New Lows

British Pound

2009-11-05T08:05:00.003Z

Took profit at 1.6512. BOE rate decision at 12:00 GMT while ECB at 13:30 GMT. Looking to long the Yen.

British Pound

2009-11-04T06:56:00.002Z

Long position entered at yesterday's closing 1.6435.

S&P 500

2009-11-03T23:25:00.004Z

Today we took profit off 50% of our short position, entered at 1087, at 1035. Average cost for remaining short = 1139. There could be a bounce to around 1080 in the coming days.

Aristotle's Good Money

2009-11-03T19:54:00.005Z

Aristotle defined the characteristics of a good form of money – which must be:

Durable: Money must stand the test of time and the elements. It must not fade, corrode, or change through time;
Portable: Good money needs to hold a high amount of 'worth' relative to its weight and size;
Divisible: Money should be relatively easy to separate and re-combine without affecting its fundamental characteristics. An extension of this idea is that the item should be "fungible", defined as "being freely exchangeable or replaceable, in whole or in part, for another of like nature or kind."
Intrinsically Valuable: This value of money should be independent of any other object and contained in the money itself, starting with rarity.

Throughout history, of course, we have seen people adapt various forms of money using different objects. Here are some examples with relative merits denoted.

Fiat paper currencies remain popular, since they are convenient and can be created at will to please the public. However, fiat money fails the all important "intrinsic value" test, as its value is solely derived from legal tender laws. Compliance with such law rests on the credibility and strength of the issuing authority. And as we know, government and political factions can rise and fall faster than pop stars. So it's no surprise that no fiat money has ever survived over time, and they can never be viable money regardless of technological breakthroughs or other human advances.

“With central banks around the world, particularly the Fed and now the BoE, literally printing gigantic amount of money in order to bail out the banks, which made irresponsible bets on risky and now worthless assets and securities, it makes the case for Gold as a currency even stronger. Our central banks are now cranking up their printing presses at full tilt, you got to be kidding me if you want me to continue holding the paper money they printed!

Personally, I believe Gold is still pretty 'cheap'.”

-- bhc investment, 24 April 2008

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References:

Rogers: Dollar Up, Stocks and Commodities Down

2009-11-01T16:15:00.003Z

“Everybody is pessimistic on the dollar... whenever you have everybody on the same side of the boat, you know what you have to do. We may have a rally in the dollar, a decline in commodity prices or stock prices for a while.”
-- Jim Rogers, 28 October 2009 [1]

“Not a trade that we would take, but it seems the pessimism in the U.S. Dollar is reaching a temporary turn. On the other hand, U.S. stocks are hitting a psychological barrier. We are looking to take a short position in the S&P 500.”
bhc investment, 20 October 2009 [2]

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References:

Saluzzi: This is a Bull Trap!

2009-11-01T11:17:00.004Z

I like This Guy -- He's Good

This is just the beginning of the downtrend.
If the Fed's money printing stops, this economy has nothing to stand on.
The Dollar could make a turn.
Unemployment is not a lagging indicator.
The consumers are not spending -- they are broke!
This is a bull trap! The herds will not know this until AFTER the markets have made a turn.
Be cautious. Don't fight the Fed + government.
Brazil -- a speculative stock market.
The stock market is a casino.
The real economy is not the same as the stock market.
Money printing ain't going to work. Let companies fail!
When there's no jobs, people don't spend money. This is not the bottom, we have lower to go.
You've been fooled by the government!

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The Worlds Greatest Money Maker

2009-10-30T20:43:00.000Z

Evan Davis meets Warren Buffett

Warren Buffett is the greatest investor of all time. His decisions about buying shares and companies have beaten the stock market year after year and made him the richest person in the world - thought to be worth 37 billion dollars.

Yet Buffett lives modestly in his native Omaha, in America's mid-West, and runs his 150 billion dollar business with a staff of just twenty. Evan Davis meets him to find out about his unique investment strategy and his eccentric lifestyle. He talks to Buffett's family, friends and colleagues about the man they call the Sage of Omaha, and Buffett's friend Bill Gates praises his philosophy of life.

As the greed of the super-wealthy is widely criticised in the current financial crisis, Davis asks whether Warren Buffett is the acceptable face of the filthy rich.

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Natural Gas

2009-10-30T12:18:00.001Z

We added to our position in NG at yesterday's closing price 5.062.

Gheit: Oil Prices are not Moving with Fundamentals

2009-10-29T17:12:00.004Z

Fadel Gheit is a Managing Director and senior analyst covering the oil and gas sector. He spent six years with Mobil Oil and five years with Stone & Webster. He has been an energy analyst since 1986 with Mabon Nugent and JP Morgan and has been with Oppenheimer & Co. Inc. since 1994. He has been named to The Wall Street Journal All-Star Annual Analyst Survey four times and was the top-ranked energy analyst on the Bloomberg Annual Analyst survey for four years. He is one of the most quoted analysts on energy issues and has testified before the U.S. Senate and the U.S. House of Representatives about oil price speculation, and is a frequent guest on TV and radio business programs. Fadel holds a B.S. in chemical engineering from Cairo University and M.B.A. in Finance from New York University.

"Oil prices are inflated, they are not supported by market fundamentals, but geopolitics keeps oil prices artificially high, and unfortunately that’s not likely to change anytime soon... $45 to $55 is a 'fair price' for oil, and $60 isn’t justifiable."
28 September 2009 [1]
"Fundamentally oil prices should be at $50."
16 September 2009 [2]
"There is no question in my mind that oil prices are inflated, the question is by how much, $10, $15, $20? ...the current price does not reflect the market fundamentals right now."
27 July 2009 [3]
"You can't have the speculators controlling the market... they should be some government regulation."
27 July 2009 [4]

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References:

Eeden: Gold Fair Value $815

2009-10-21T13:19:00.002+01:00

Paul van Eeden, 14 October 2009 [1]:

The Federal Open Market Committee recently announced that the US central bank will "... continue to employ a wide range of tools to promote economic recovery and to preserve price stability."
This means that the Fed will continue to buy agency and Treasury debt in the market to suppress interest rates and that it will do so with newly created money to keep prices from falling in aggregate. The Fed said that it would purchase a total of $1.25 trillion worth of agency mortgage-backed assets and $200 billion worth of agency debt by the end of the first quarter of 2010. It would also have bought $300 billion worth of Treasury debt by the end of October 2009. Since December 2007 the Fed's balance sheet has already expanded by $1.2 trillion.
That $1.2 trillion, for the most part, represents new money that the Fed created. When the Fed creates new money it inflates the money supply, which, in turn, devalues the dollar. That is how the Fed hopes to prevent prices from falling and keep prices rising: by devaluing the dollar.
All this inflation the Fed is creating by monetizing agency and Treasury debt has fired a healthy fear of inflation in the hearts and minds of many. Fear of inflation has created demand for investments that act as inflation hedges and that is at least one of the drivers behind the current rally in the gold price.
The other usual driver behind increases in the gold price is weakness in the US dollar exchange rate. As the US dollar exchange rate falls the gold price in US dollars rises; not because of increased demand for gold, but merely to bring the US dollar gold price back in line with the gold price in other currencies.
Since there is palpable fear of further future inflation and widespread concern that the US dollar will continue to weaken against other currencies as it loses its status as the global reserve currency, it is no surprise that some of those concerns and fears are being manifested in a higher gold price. Gold is currently trading for more than its fair value yet since markets are forward looking a case can be made that the premium in the gold price is merely a reflection of what is to come.
The question before us is therefore whether the rally in the gold price is founded in reality, or in fear induced fantasy.
As a reminder, the fair value of gold in terms of US dollars increases in proportion to the dollar's inflation rate. Thus the $1.2 trillion expansion of the Fed's balance sheet should cause the value of gold to increase versus the dollar. For a more detailed look at how the value of gold can be calculated please refer to the articles on my website: link.
For us to know whether the rally in the gold price is rational, or not, we need to do some accounting.
In December 2007 the US money supply as measured by the Actual Money Supply (link) was approximately $7.5 trillion. The current money supply is approximately $8.4 trillion, an increase of roughly $900 billion over the twenty months since January 2008.
We also know that the Fed's balance sheet has expanded by $1.2 trillion over the same period of time. We cannot merely assume, however, that the entire $1.2 trillion expansion of the Fed's balance sheet represents an increase in the money supply. Items that added to reserves (increased the money supply) on the Fed's balance sheet increased by approximately $1.2 trillion, and items that reduced reserves (removed money from the money supply) increased by approximately $300 billion. That means that the expansion of the Fed's balance sheet since January 2008 added approximately $900 billion to the US money supply.
The money supply also increases as new bank loans are created and decreases as bank loans are paid back, when banks issue equity, or when banks borrow money by selling bonds. Bank profits also decrease the money supply.
So we know that the US money supply since January 2008 increased by about $900 billion and that happens to be about the same as the total amount of money that the Fed created during the same period by monetizing US agency and Treasury debt, and from the bailouts of AIG and Bear Sterns.
Since the increase in the US money supply equals the increase in the money created by the Fed we also know that new bank loan creation was almost exactly offset by the recapitalization of the banks through equity issuances, bond issuances and from operating profits. This implies that if the Fed had not added to the money supply the US money supply would have not grown at all since January 2008 - a highly unusual condition for a fractional banking system based on fiat money.
However, it is anticipated that the banks have more assets that they'll have to write down, which means they will have to raise more capital. The Fed continues to monetize agency and Treasury debt to combat the deflationary impact on the money supply when banks raise capital.
Since the credit crisis came to light, the Fed has been creating new money and increasing the US money supply, while the banks have been sucking money out of the money supply to recapitalize themselves.
What we need to take home from this is that while the Fed has been increasing the money supply by monetizing debt, the extent to which it has inflated the money supply is $900 billion. Not $12 trillion, or $24 trillion, or any other absurd number that gets bantered about the Internet.
And while the increase in the US money supply as a result of the Fed's priming is material, and has maintained US monetary inflation at historically high levels, it is nowhere near hyper-inflationary rates, nor is there any reason to believe that hyperinflation is remotely likely in the US.
We can calculate the percentage change in the US money supply on a year-over-year basis for each month, and then calculate a rolling 12-month average of the monthly, year-over-year changes (link). The average increase in the US money supply over the past twelve months, on that basis, has been 8.44%. That is a very high rate of monetary inflation for the United States. For example, the average inflation rate during the 1970s was 8.33% based on the increase in the Actual Money Supply.
To correctly analyze gold's value vis-à-vis the dollar we also have to consider the inflation rate of the gold supply. The value of gold declines in proportion to the net amount of gold that is added to the above ground supply of gold just like dollar inflation devalues the dollar. While I don't yet have all the gold production and consumption data for 2009 to complete the calculation, I estimate that the gold inflation rate could be around 1.5% for the year.
For a quick and dirty answer we can subtract the expected gold inflation rate from the dollar's inflation rate (~8.5% less ~1.5%) to arrive at a rough guide to what gold's average value for 2009 could be in terms of US dollars. The average value of gold was $762 an ounce in 2008. If we now add ~7% to that we arrive at an estimate of $815 an ounce as the average value of gold in terms of US dollars for 2009.
Take note that that is an average value for the year, and not a year-end or current date value. Nor is it a price prediction. This method of valuing gold is an attempt to quantify the value of gold, not predict its price.
The reason for doing it, though, is that we can see what effect the monetary inflation rate of the US dollar has on the value of gold in terms of US dollars. As you can see, the Fed's activities have indeed had a positive impact on the value of gold, but not nearly as much as the market is factoring into the gold price.
The average gold price for September was $997 an ounce and gold is currently trading well over $1,000 an ounce. The current gold price is more than 25% higher than its estimated average value for 2009, and even though we would expect the current value to exceed the average value for 2009, it would not be nearly by that much.
The market appears to be too fearful of inflation and has factored too much potential future inflation into the gold price. The Fed clearly announced that it would end the monetization of Treasury debt by the end of October this year and the monetization of agency debt in the fist quarter of next year. That means that in six months' time the Fed will stop creating inflation. I realize that the FOMC could decide to extend the monetization of debt, but at this time we have no reason to believe that it will. Therefore it seems to me that the current bout of Fed manufactured inflation is coming to an end.
The US government, however, will continue to run a massive deficit that has to be financed with the issuance of Treasury debt. Assuming the Fed stops supporting the bond market and the Treasury keeps issuing record quantities of new debt, we can expect to see US interest rates start moving up.
The current level of interest rates in the US is historically, and unnaturally low. Interest rates will rise. It's a question of "when", not "if". Given that the Fed has announced it will stop supporting interest rates in six months, and that the market is forward looking, it could be sooner rather than later.
Rising interest rates could be positive for the dollar in spite of the massive issuances of US Treasury debt, and that could put downward pressure on the gold price since the gold price moves inversely to the dollar's exchange rate.
So in spite of the fact that the Fed has been inflating the US money supply by monetizing debt, and in spite of the fact that dollar-bearishness is in abundant supply, and that the US dollar is very likely losing its status as the sole reserve currency, there is a good chance that US interest rates will have to rise and that could cause a rally in the US dollar and a decline in the gold price.
Gold bugs have been conditioned to believe that the gold price has to rise in times of financial or political turmoil. But that is not necessarily the case. Lately, when greed dominates the market large institutions buy emerging market and Asian assets, and sell US dollars. That puts downward pressure on the dollar exchange rate and causes the gold price to rally. In other words, the gold price rallies when things are going well and greed is the dominant emotion.
When fear grips the market institutions sell emerging market and Asian assets and buy US dollars, sending the dollar exchange rate higher and putting downward pressure on the gold price. So when things go bad, the gold price falls.
During 2008, in spite of the fact that the United States was the epicenter of the financial crisis, the US dollar rallied, money poured in US bonds, and the gold price fell. Just a few weeks ago, when the US housing data disappointed the market, the dollar rallied and the gold price fell.
The belief that the gold price will respond positively to bad news and fear could well be misplaced, and is certainly not supported by recent market movements. It also ignores the fundamental and underlying factors that determine the value of gold and moves its price.
Aside from money, inflation and exchange rates, we hear a lot about China and its impact on markets. Chinese residents are now allowed to buy gold. China buys vast quantities of all sorts of raw materials such as copper, iron and oil and hope has been pinned on China's revival since the economic crisis began. The Chinese economy barreled ahead as if nothing happened while North America, Europe and Japan's economies collapsed.
Exports represented 35% of China's GDP last year, according the World Bank website. China's exports fell approximately 30% since last year, which means we would have expected China's GDP to decline by more than 10% this year. Instead, the Chinese economy grew by 8%! How is that possible?
The Chinese government announced a massive stimulus program, much larger than the US stimulus package as a percentage of GDP. Yet it is almost certain that only a portion of the stimulus plan has been executed. A more likely source for China's growth is the expansion of its bank credit this year. Bank credit in China has increased by 28% of GDP since January. To put that in perspective, that is equivalent to a $4 trillion increase in the US money supply, more than ten times the amount by which the US money supply actually did increase since January this year. Anyone concerned about inflation should be concerned about the inflation of the Chinese renminbi.
But I got side tracked; we were talking about the Chinese economy's miracle growth. The theory goes that the credit expansion in China is fueling a consumer binge to such an extent that China's internal consumption has replaced the lost export markets and then some. Before we just take this on blind faith, we should note that China's economic numbers are not calculated in the same way as equivalent figures in North America. Specifically, in North America GDP is measured by expenditures while China's GDP is based on production; and that is a very material difference.
For instance, the manufacturing of products is a component of Chinese GDP and not the sale of those products. Consider that if China wanted to increase its GDP all it had to do was produce more goods without regard for whether there was a market for those goods. Of course, manufacturers cannot continue to produce more and more without selling their products - they will rapidly run of money. But they could if the banks are willing to lend them money to build inventories of manufactured goods. I have a sneaky suspicion that the explosion of Chinese bank credit was used to finance a massive increase in production so that GDP growth would meet the Party's expectations.
This would explain quite a lot, and it has severe repercussions. It would explain why China continued to buy large quantities of raw materials that could not be reconciled with the collapse in the market for its goods (exports). An economy cannot sustain itself if debt is used to manufacture products for which there is no market. Either the banks, or the manufacturers, or the retailers have to eat the losses. Regardless of where those losses come home to roost such an economy as a whole is rotten to the core.
The inconsistency in the Chinese data and the anecdotal evidence that China is building vast inventories can only be reconciled if one assumes that there was a surge in the production of goods that now decay in stock yards and warehouses. That means that China's economy has the potential to implode with a reverberating bang unlike any other that has ever emanated from the East.
The Chinese Communist Party apparently learned from America that debt financed consumption was not a sustainable economic model. Their solution, it seems, is even more absurd: debt financed production in the absence of demand.
While such an economic model is flawed, China has vast resources, such as approximately $2 trillion in reserve assets, with which it can finance its folly. That implies that the Chinese conundrum could last much longer than we may expect. Even so, just like the debt financed US consumer spending spree had to come to an end, so too must China's debt financed demandless production spree.
Earlier we reached the conclusion that US interest rates could potentially start increasing and cause the US dollar exchange rate to strengthen, which, in turn, would cause the gold price to fall. We can now add that the massive inflation of China's money supply can cause the renminbi to collapse and send another currency crises rippling through financial markets. A collapse of the Chinese renminbi could also result in a stronger dollar and lower gold price.
But consider what could happen when the Chinese miracle economy is unveiled to be no better than the US miracle economy had been.
Last year when the US was the epicenter of the financial crises the US dollar rallied and the gold price fell. What would happen if China were the epicenter of an economic collapse? What happens when the gold and commodity bulls realize China cannot continue to consume at an even greater pace than it had been when the world was buying its goods, but, instead, now has to work down the excess inventory it built up? It would be a good bet that the US dollar would rally and the gold price would fall.
Given that the gold price is trading at a 25% premium to its fair value and that we can imagine several scenarios whereby the US dollar could rally and the gold price could fall, it seems to me that betting on a higher gold price right now is merely a bet on the Greater Fool Theory. That is not to say that the gold price could not continue to rally - markets can remain irrational far longer than rational people ever imagine they would. Personally, though, I have no interest in buying an over-priced asset in the hope that it will become even more over priced - not even gold.

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Reference:

Gold is over $1000 an ounce - Now what?

Gross: Now Betting on Deflation

S&P 500

2009-10-21T10:21:00.001+01:00

Short position entered at 1087.00.

Gross: Now Betting on Deflation

2009-10-20T19:00:00.008+01:00

Bill Gross is a bond fund manager we have huge respect for. Recently, the man who runs the world’s biggest bond fund at Pacific Investment Management Co. said he’s been buying longer maturity Treasuries as protection against Deflation [1]. We believe the timing of Gross buying was more or less around the time when we at bhc investment suggested the Smart Money trades [2]. “There has been significant flattening on the long end of the curve,” Gross said in an interview from Newport Beach, California, with Bloomberg Radio. “This reflects the re-emergence of deflationary fears. The U.S. is at the center of de-levering as opposed to accelerating growth.”

As far as we are concerned, we stand by our prediction of Inflation, not Deflation. Will write more in the coming weeks.

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References:

Quick Comments

2009-10-20T17:07:00.003+01:00

Not a trade that we would take, but it seems the pessimism in the U.S. Dollar is reaching a temporary turn. On the other hand, U.S. stocks are hitting a psychological barrier. We are looking to take a short position in the S&P 500.

Nicholas Taleb: Bernanke should be Removed from Office

2009-10-20T12:42:00.004+01:00

Nassim Nicholas Taleb (born 1960) (Arabic: نسيم نيقولا نجيب طالب‎) (alternative spellings of first name: Nessim or Nissim) [1] is a literary essayist, epistemologist, researcher, and former practitioner of mathematical finance. Though a specialist in financial derivatives, he is critical of the finance industry. He held a "day job" in a lengthy senior trading and financial mathematics career in a number of New York City's Wall Street firms, before starting a second career as a scholar in the epistemology of chance events to focus on his project of mapping how to live and act in a world we do not understand, and how to come to grips with randomness and the unknown -- which includes his black swan theory [2] of unexpected rare events. Taleb has also, in the wake of the economic crisis that started in 2008, become an activist for a "Black Swan robust society".

Warning of the global banking crisis

In 2007, in The Black Swan [3]:

Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial Institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks -- when one fails, they all fall. The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur ....I shiver at the thought.
The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deem these events "unlikely".

Success during the 2007-2008 financial crisis

Taleb appeared to be vindicated against statisticians in 2008, as he reportedly made a multi-million dollar fortune during the financial crisis of 2007–2008, a crisis which he attributed to the failure of statistical methods in finance. Universa, where Taleb is adviser, made returns of 65% to 115% in October 2008 in its approximately $2 billion “Black Swan Protection Protocol.”

Taleb's financial success coupled with his earlier predictions have seen him catapulted to prominence. He has appeared on numerous magazine covers and television shows to discuss his views. Taleb started being treated as a "rock star" in Davos 2009 in which he had harsh words for bankers.

In an article in The Times, Bryan Appleyard described Taleb as "now the hottest thinker in the world". The Nobel Laureate Daniel Kahneman proposed the inclusion of Taleb's name among the world's top intellectuals, citing "Taleb has changed the way many people think about uncertainty, particularly in the financial markets. His book, The Black Swan, is an original and audacious analysis of the ways in which humans try to make sense of unexpected events."

Approach to models linked to Austrian School

In his criticism of models, Taleb has taken a point of view in line with the Austrian School of economic thought. He opposes top-down knowledge as an academic illusion and believes that price formation obeys an organic process. His paper with Espen Gaarder Haug asserts that option pricing is determined in a "heuristic way" by operators, not by a model, and that models are "lecturing birds on how to fly", except that in the case of options, the birds might listen. In the book "Lecturing Birds on Flying: Can Mathematical Theories Destroy the Financial Markets?" Wiley Publishing (2009), Pablo Triana explores this topic with references to Haug and Taleb and critiques of the Black-Scholes-Merton model.

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References:

Predicted Fed's Cluelessness

2009-10-19T23:52:00.003+01:00

The Fed is in the business of market psychology manipulation -- what it's doing is very different to what it wants you to know and believe. While cranking up its printing press at full tilt in an outright attempt to pop up Inflation, it will tell you there's no Inflation risk in sight. While pursuing an unofficial “Weak Dollar” policy, it will tell you it favours a “Strong Dollar”. Stop listening to the Fed!

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Taibbi: Wall Street's Naked Swindle

2009-10-18T09:38:00.006+01:00

On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst.
But what's even crazier is that the bet paid [1].

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Reference:

Wall Street's Naked Swindle

Federal Reserve Admits Hiding Gold Swap Arrangements

2009-10-13T09:50:00.003+01:00

Source: Gold Anti-Trust Action Committee Inc. On 9:30 am EDT, Wednesday September 23, 2009 [1]:

MANCHESTER, Conn.--(BUSINESS WIRE)--The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.
The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.
The Fed's disclosure came this week in a letter to GATA's Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA's administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund's treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.).)
The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see http://www.federalreserve.gov/aboutthefed/bios/board/warsh.htm), formerly a member of the President's Working Group on Financial Markets, detailed the Fed's position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.
Warsh wrote in part: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."
When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve's Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (See http://www.gata.org/node/1181.)
The Fed's September 17 letter to GATA confirming that the Fed has gold swap arrangements can be found here:
http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf
While the letter, GATA says, is far from the first official admission of central bank scheming to suppress the price of gold (for documentation of some of these admissions, see http://www.gata.org/node/6242 and http://www.gata.org/node/7096), it comes at a sensitive time in the currency and gold markets. The U.S. dollar is showing unprecedented weakness, the gold price is showing unprecedented strength, Western European central banks appear to be withdrawing from gold sales and leasing, and the International Monetary Fund is being pressed to take the lead in the gold price suppression scheme by selling gold from its own supposed reserves in the guise of providing financial support for poor nations.
GATA will seek to bring a lawsuit in federal court to appeal the Fed's denial of our freedom-of-information request. While this will require many thousands of dollars, the Fed's admission that it aims to conceal documentation of its gold swap arrangements establishes that such a lawsuit would have a distinct target and not be just a fishing expedition.
In pursuit of such a lawsuit and its general objective of liberating the precious metals markets and making them fair and transparent, GATA again asks for financial support from the public and from all gold and silver mining companies that are not at the mercy of market-manipulating governments and banks. GATA is recognized by the U.S. Internal Revenue Service as a non-profit educational and civil rights organization and contributions to it are federally tax-exempt in the United States. For information on donating to GATA, please visit here:
http://www.gata.org/node/16
People also can help GATA by bringing this information to the attention of financial news organizations and urging them to investigate the Fed's involvement in gold swaps particularly and the gold (and silver) price suppression generally.

June 2008, bhc investment [2, 3]:

The fact that I am betting against the central banks cartel doesn't worry me. The fact that after all those 'massaged' jobs and GDP reports and nearly 80% and over 60% of concentrated net short positions in Silver and Gold, respectively, they can only manage to bring these precious metals down less than 30% from the recent highs makes me think: "it's gonna be a heck of a ride when the sentiment turns!"

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References:

Robertson: Buy ‘Curve Caps’ to Hedge Against Rate Hikes

2009-10-10T10:11:00.003+01:00

The former hedge-fund manager [Julian Robertson] has been buying “curve caps,” an investment that acts like leveraged put options, on long-term government bonds, he said today in an interview with Bloomberg Television.
“They would insure us in the event of massive rate increases,” Robertson said.
Robertson, 77, has been saying the U.S. may face financial “Armageddon” if Japan and China don’t continue to purchase its bonds to finance the country’s deficit spending. The Treasury Department would be forced to raise interest rates to attract new investors, he said.
-- Bloomberg, 2 October 2009 [1]

The Fed will not have the b**** to raise interest rates until we see inflation making a comeback, or it will risk pushing the entire U.S. economy over the abyss of another Great Depression. By the time the Fed starts to raise interest rates, it will be a matter of playing catch up with inflation. Mainstream economists who think higher interest rates will tank the commodity market will have a hard time understanding this dynamics until inflation is once again making headline news. The Fed wants inflation so bad it will do anything and everything.
-- bhc investment, 15 January 2009 [2]

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References:

Rogers is Singing our Song but Louder!

2009-10-08T08:31:00.005+01:00

Gold. Making new all-time high. Don't like buying it now.
Might buy more when lower or higher.
Gold should be over $2,000 and will get there over the next decade.
Gold is a hedge against Inflation or war.
Stocks -- liquidity driven stupidity.
Gains in stocks are illusive as Dollar is making losses.
Commodities are the place to be.
Expect higher Inflation.
You can't solve a debt and consumption problem with even more debt and consumption!
Crude Oil: the surprise is going to be how high it stays and how high it goes!
The supply and demand picture will drive Crude higher.
Japan, a creditor nation. Yen Carry Trade is unwinding.
Agricultural commodities: one of the places to make money in the next decade. Inventories of food are the lowest in decades!
Unless you are a great stock picker, you are better off buying the commodities directly.
Do your own homework! Focus on what you know!
Don't jump around and invest in things you don't know!

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Gold: Revisited, Part II

2009-10-06T16:58:00.006+01:00

Gold made It to Non-Financial News Headline

As Gold is making it to even non-financial news headline today, allow me to recap for you some of the erroneous and misleading views expressed by some of the legendary investors, economists, and technicians in the past.

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I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot – and it's a lot – it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.
-- Warren Buffett [1]
FACT: Gold has been nothing but a terrific asset outperforming even Warren Buffett's Berkshire Hataway!

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On the way toward $600, gold may pause at $800, which is an apex of a smaller degree triangle. Whether or not prices do indeed pause, the main target ($600) remains firmly in place. Thus, our stance remains bearish.
-- Robert Prechter [2, 8]
FACT: Gold never made it to $600 even during the global deleveraging in 2008. In hindsight, it was a great opportunity to buy it cheap when the herds were panic selling [3]! Prechter has recently flipped his forecast on Gold [4].

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Following last week's massive, $130 collapse [in June/July 2008], Gold has given us EXACTLY the move required to confirm the bull market is OVER!
-- Glenn Neely [5]
FACT: NEoWave's Gleen Neely was making the same mistake as Prechter's. We believe Neely too would have flipped his forecast on Gold [6].

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Those not out of gold should use any bounce back toward $894 to exit the trade and focus their energies elsewhere.
-- Dennis Gartman [7]
FACT: Gartman has been a flip-flop on Gold for so many times that we lost track [3]!

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References: