LILA RAJIVA: The Mind-Body Politic
Individuals Not Ideologies
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Soros: Gold In Bubble; But Keep Stimulus Going…..
Always nice to see people talk out of both sides of their mouth.
Here is currency speculator George Soros (ex of legendary hedge-fund Quantum) at the World Economic Forum at Davos:
“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.”
So far so good. Mis-price money (cheap interest rates) and people don’t want to keep their savings in it. They want it in something that isn’t subject to mis-pricing (so they hope) - hence gold.
But then Soros shows how disingenuous he’s being by adding this:
“I think that since the adjustment process to the recession is incomplete, there is a need for additional stimulus. Some countries, like the US and European countries, have plenty of room to increase their deficits. The political resistance to doing so increases the chances of a double dip in the economy in 2011 and after that.”
That is, he’s suggesting running more deficits and keeping the money spigot going, just the thing that’s caused the gold price to rise.
So how do we understand this?
Gold is due for a technical correction, but it’s also probably responding to deflation in the general economy. It’s not going down that fast, because a lot of people are also buying it speculatively.
That’s the tug of war.
Meanwhile, who know what Soros’ holdings are and who knows what his motivations are in making such contradictory statements.
But anyone who takes these sorts of pronouncements as any kind of lead for their own investments/speculations, should be prepared to part fairly soon from their money.
Lanka Needs Soros Like A Hole In The Head
“In 1992, Soros earned the epithet “the man who broke the Bank of England” by demanding the Bank to raise its interest rates or to float the currency (so that he could make more money). The Bank did neither. He retaliated by selling “short” more than $10 billion worth of pound sterling, forcing the Bank of England to depreciate the pound: Soros amassed an estimated US$ 1.1 billion in the process.
Goldman Joins Dollar Bashing
From Business Insider:
“The dollar will weaken to $1.55 versus the euro in three and six months, the bank said, revising previous forecasts of $1.45 for both periods. The U.S. currency, which has fallen versus all of the 16 most-traded currencies this year, will recover to $1.35 in 12 months, Goldman Sachs said”
Tips to Survive Hyperinflation..
Greg at Holy Cause has actually lived through the infamous Zimbabwean Zaire’s hyperinflationary crisis in the 1990s, so his words carry their weight in…er..gold (dollar-holders, I know that stings).
“Most Americans have not lived in hyper-inflationary environments. I have, and assure you that your primary protection is to not hold cash. Treat it like a hot potato, let it rot in somebody else’s hands. This is repeated as Rule #1 below, but it bears saying several times. Never forget it, when you get cash, flee to something else as quickly as possible…..
Just don’t hold an inflating currency - pass it on to the next guy like a hot potato, let it rot in his hands rather than yours.
Rule #2 – Have some type of business, even a “black market” one. Businesses which survived the inflationary hurricane in Zaire included those which were involved in the supply chain of basic consumer goods….money changing was also a profitable business…..
Rule #3 – Own a house and enough land to farm to feed your family. Houses (a primary residence), well bought and paid in full, served as a good hard asset, and provided a roof over one’s head as well. Having a little land to garden or for raising small animals helped keep a family from starving….
Read the rest of this great post at Holy Cause.
The Muddled Market
The market is talking out of all sides of its many mouths:
- USD/JPY is rallying and most currencies strengthened against the dollar, except the pound, suggesting a return to the risk trade.
- But……the pound sank..suggesting risk aversion
- But…the stock markets are up, suggesting an increase in risk appetite
- But……. the bond market is teetering as long bond yields are soaring, an indication that bond traders are skeptical about the future outlook
- But…..gold and silver prices are hitting resistance and falling back, suggesting either technical exhaustion or some return of risk appetite
- But….gold and silver prices are still high, especially for the season, which suggests widespread uncertainty about the economy
- But….jobless claims are down, which is good news for the economy
What does your earnest blogging-trader do on a day like this? She sits on the sidelines and spends the day printing charts of the indices. She also reviews her most recent trading sins and repents. Here’s her mea culpa.
I repent that I entered a trade with panic rather than reason.
I repent that I entered it on a Friday morning before a long weekend (last week) when the markets were thin and volatility greater than normal. I also didn’t calculate the spread and bought higher than I should have.
I repent that I forgot about position size and just dumped whatever I could into it
I repent that when the trade moved in my favor, I didn’t sell the whole position but left half in
I repent that I didn’t do the fundamental analysis but did a multicultural trade - picking 12 currencies that sounded good to me.
I came out alright, but it was pure fluke.
Your blogging-trader did not lose money. She made a bit. Enough to pay some pressing bills. She should be thankful, but being a trader, she knows that making money on a bad trade, is not the way to go.
Update: Non-farm payrolls came in at negative 345k after an expected negative 525k - signaling that the recession could have bottomed. This should feed the risk trade, which means my multi-currency trade (Koruna, Nordic currencies, and Singapore dollar) should end up alright (I’m a bit in the red now). The time frame is one more week or two)
Currency Conundrum: Where Do You Hide?
The big currency story of last week was the dollar meltdown, taking the dear old greenback (or the wicked insignia of imperialism, take your pick) down from over 83 to under 80 on the USDX (dollar index - an index measuring the dollar’s strength against a basket of currencies). Everything strengthened against the dollar - pound, yen, loonie, aussie, kiwi, rupee, gold, silver..
And only a few weeks ago we were within striking distance of 90. When will I ever learn not to try and pick tops? My perfectionism gets in the way of money-making. I seem to want to be a soothsayer rather than rich.
But weeping aside, we saw this same sort of slide last year, only in spades. The dollar sank almost to 70 in March 2008, a move unequaled since the USDX began. After that, it resurrected itself, near miraculously, and continued treading water for the rest of the year. I’d hoped dollar-holders would see 90 plus. But 89 was as high as we got and then went back into the upper 70s, a 12.17% drop (11/21/08). Right now, we’re roughly at -8.9% (approx 10 points down from 89.6%), with the momentum to the downside still strong.
Last week’s swan-dive has the sweaty, knuckle-whitening smell of 2008 all over it. Chuck Butler of Everbank cautions against chasing the move, but who wouldn’t be tempted to have a go? The momentum is there, the fundamentals are there, the news supports both - so says the ever insightful Kathy Lien at GFT Forex.
The next crisis will be in currencies, points out Jim Rogers, rather redundantly.
But even he confesses to being baffled over where to hide.
The big driver behind all this is a statement by Bill Gross, Pimco’s manager, that the US could see a downgrade in its credit rating.
This struck me as rather odd. Especially, seeing as how dear old Pimpco was the charity child of the Fannie and Freddie group-hug from the government.
I wonder…I cogitate…I roll my eyes….
After all, the credit rating agencies (S&P, Moody’s Fitch’s) were talking about the UK heading for a ratings downgrade, not the US. They didn’t say anything about the US. And the UK’s debt -to-GDP is worse than ours (it’s near 100% GDP). Correction June2, 2009): I should clarify that I’m referring to public debt as a ratio to Gross Domestic Product, and checking the figures, I think I got this wrong. Will repost the figures.
Who the heck is listening to these ratings racketeers anyway? Weren’t they the same folks who put gold stars on some of the stinkiest pieces of manure being sold on the market?
Hmmm. What have we here? Could it be a little PR stunt? A little one-downmanship among friends to make a bit of pocket-change all around? A little game of push-the-buck- over-the 200-day- MA-cliff?
On the other hand, forgetting my cynicism for the moment, there are lots of real reasons for this weakness, besides trial balloon-floating from Mr. Gross, the main ones being the bounce in the stock market and the relatively smaller size of the quantitative easing in the Eurozone.
Add to that a thin trading day, which exaggerates any move, and the anticipation of the long weekend…
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