News and Views

June 18, 2010

All Bets Are On!

“To a surprising and unrecognized degree, the future of finance lies in the history of hedge funds,” argues Sebastian Mallaby, who lays out that colorful history in a Wall Street Journal essay adapted from the longer introduction to his new book, “More Money Than God:  Hedge Funds and the Making of a New Elite.”  The Atlantic also published a chapter from the book that details the events leading up to George Soros’s decision to ‘Go for the Jugular‘ in his 1992 assault on the British Pound. Both Bloomberg and the Wall Street Journal review the book, Mallaby discusses some of its outsized characters in an interview with NPR, and he tells CNBC that pending legislation designed to rein in hedge funds is misguided, pointing out that they tend to be much less leveraged than investment banks. Gold & Silver Links: Coin News:  Gold prices close at record high, silver risesContinue Reading
June 17, 2010

Rolling With Rickards

In an interview with King World News, Jim Rickards continues his roll, discussing an IMF document that analyzes candidates for a new reserve currency, which he says was released in advance of next week’s G-20 meeting in Toronto, “to get the dialogue going about the possibility of replacing the dollar.” “If the dollar is the engine of world growth, what happens when the guy printing the dollars starts to go broke?,” asks Rickards.  “There are limits as to what the U.S. can do and at that point one of two things has to happen:  either you turn off the printing press and the world goes into something like a deflationary contraction and a great depression, which I think is very likely in my view. But the alternative is to find another engine, find another liquidity pump if you will.  And that’s clearly what the G-20 leadership would like to do,Continue Reading
After Glenn Beck recommended Austrian-school economist F. A. Hayek’s “The Road to Serfdom” on his Fox News show last week, the book, originally published in 1944, shot to number one on Amazon and became the most searched term on Google.  The University of Chicago Press is printing an additional 100,000 copies of its 2007 paperback. Bruce Caldwell, the editor of that “definitive edition,” says in an interview with the Washington Independent:  “It’s important to note that ‘The Road to Serfdom’ is a full-fledged attack on socialism and totalitarianism. I don’t see it as a libertarian handbook. People from both the left and the right have always found things to like and dislike in Hayek.” Get complete coverage of the book’s newfound popularity at The Hayek Center’s Taking Hayek Seriously Web site, read a talk delivered by Hayek at a Gold and Monetary Conference, and don’t miss “Fear the Boom AndContinue Reading
During what one trader describes as a “summer lull,” Patrick Heller, writing at Coin Update News, enters the admittedly “treacherous” waters of short-term prognostication to argue that “gold and silver are due for major price spikes by the end of next month.” In addition to gold’s recent gains, he cites a negative report on the economy from the Economic Cycle Research Institute, the Obama administration’s “$50 Billion Bomb” to save state and local jobs, and Sunday’s New York Times article on gold, which “represents a major breakthrough for covering the positive aspects of precious metals and the heightened risks of owning paper assets like currencies, stocks, and bonds.” Heller also refers to “17 reasons to own gold,” by Sprott’s John Embry, and Reuters has published a compilation of recent forecasts for precious metals from major investment banks.Continue Reading
June 14, 2010

Can’t We All Get Long?

The power of gold to unite is displayed in a New York Times article pointing out that “The most visible new gold enthusiasts range from the Fox News commentator Glenn Beck on the right to the financier George Soros on the left, with even some sober-minded Wall Street types developing a case of gold fever. While their language may differ, they share a fundamental view that the age-old refuge of gold is relevant again, especially as other assets like stocks and national currencies show signs of weakness.” Related Links: The Big Picture:  Wall Street still (always) too bullish Wall Street Journal:  Rapid declines rattle even optimists Bloomberg:  Gold’s 30% surge puzzles Bernanke, not this guy David Morgan:  Gold’s record high was a blip Barron’s:  Gold rally isn’t done Financial Times:  Banks set new store on building gold vaults USA Today:  When gold hedge won’t do, consider investing in silver TheContinue Reading
In his weekly interview with King World News, Ted Butler says that the “extraordinary inputs” in money recently into the GLD, coupled with what he sees as a lack of selling interest, “Is creating the symptoms of a gold shortage, even though it’s not the industrial-type consumption that I would talk about…. If we have this in gold, we’re going to have it in spades in silver.  It’s just a matter of time at that point, because there’s so much less silver available and it takes so little money to buy it compared to gold.” Butler, who was reminded that his advice last week to “make physical purchases of silver, in somewhat of a timing mechanism … worked out well,” as the metal rose throughout the day on Monday, also finds the latest COT report “kind of surprising,” because his “expected big liquidation” in the commercial net short position inContinue Reading
June 11, 2010


The Leaf-Chronicle, which covers an area that includes Ft. Campbell KY, recently reported that U.S. soldiers in Iraq and Afghanistan are being sold counterfeit “rare” coins, thinking that they can make money selling them when they return to the U.S. Preeminent among the fakes is the 1804 silver dollar.  With only about 15 thought to exist, some are valued at more than $4 million.  “We see hundreds of them,” says one area coin dealer, while another with 10 of the fakes, all brought back by soldiers returning from Afghanistan, assumes “the money is going back to the enemy. What fears me worst is these (soldiers) could be buying their own bullets to be shot at them.” Despite calling that a “stretch,” U.S. military officials concede that “It is no secret that many of the Afghan contractors who work building our (forward operating bases) have to pay for protection or payContinue Reading
June 10, 2010

Supplying Demand

Business Insider features the charts from a report by Swiss bank UBS, that “surpasses anything we’ve seen before. The report is extensive, pointing out the precious metal’s power to beat inflation and market risk.”  The report says that gold has become the “ultimate currency.” A number of the charts deal with supply, and in an interview headlined “Gold Running in Short Supply,” Eric Sprott tells The Street that he believes “a physical shortage will manifest itself somewhere soon. There’s only 162,000 tons of it out there — and I don’t know anyone selling it. Someone’s going to try to buy a bar of gold sometime and it won’t be there.” Related Links: Bloomberg:  Gold-coin haven demand saps supply, raises premiums Gold Scents:  Dow:gold ratio poised for another leg down Mineweb:  Europeans believing in gold Pragmatic Capitalism: Bull (Arthur Kroeber) versus bear (Marc Faber) on China The Daily Reckoning:  Insufficient silverContinue Reading
In an interview with Barron’s, John Hathaway, who manages the $1.4 billion Tocqueville Gold Fund, is asked about gold being “the bubble du jour, at least in the media.”  He responds by saying,  “I love it when the media, which never told you to get into gold in the first place, is now telling you to get out. It is just classic.”  He goes on to explain how the media misconstrued George Soros’ gold bubble statement and offers up a football analogy for gold: “If this were a football game, we would be at the beginning of the third quarter. The first two quarters lasted about 10 years. The first quarter you had this stealthy accumulation. Second quarter, gold became more fashionable to talk about, and you began to see some very high-profile, smart investors coming in. The third phase will be more people jumping on the bandwagon, and theContinue Reading
Assessing “the last great secular bull market,” and “the next secular bull, one that’s still in the baby stage,” Gold Scent‘s Toby Connor points out that “Gold has just recently broken out above the old 1980 high of $850. It hasn’t even doubled yet much less rallied 300%. Now if you think gold rallying to $3500 is ridiculous you are absolutely correct. There is no way gold is going to stop at a mere 300%. Unlike oil, gold is readily available to the public and ultimately that is what drives the final stages of a secular bull market/bubble. When the public comes into the market their panic buying drives the final parabolic move to unbelievable heights. We saw perfect examples with both the tech and housing bubbles. The public was deeply involved in both. And now, for the topping on the cake. The precious metals markets are infinitely smaller thanContinue Reading
A Daily Bell article contends that “The trouble with economic reporting in the West is that it simply does not tell the truth. This AP story is a good example. Its main point is that the American ‘recovery’ is not going to be strong enough to provide enough jobs for the 15.3 million unemployed. Now this supposition has two problems. First of all there is no ‘recovery’ as it is commonly understood, and second we assume that the 15 million out-of-work figure is based on a 10 percent unemployment rate. In fact, that figure is very much in dispute … Many savvy observers believe that the unemployment rate is twice as high, at 20 percent, and we believe it to be even higher than that. Anyway, as far as the U.S. recovery itself goes, this is a most misleading conversation within the mainstream press. Even during less severe downturns, WesternContinue Reading
In his weekly interview with King World News, Ted Butler says of the two-day “price smash” in silver:  “there was nothing coincidental or accidental about it at all, it was very intentional on the part of the commercials.  I think the smaller commercials, maybe more than JP Morgan, but they’re all in cahoots on the thing.” But he says that “We may have a rocket ride pretty soon to the upside,” since “any punch-down through the 200-day moving average, which we hit at the lows [Friday] would have to be considered the final clean-up…. whether we’re going to get that or not depends upon how treacherous and vicious these commercials are.  But it’s mostly done.” And with “a lot of risk taken out of the market” his “bullishness” on silver is “approaching 100 percent,” compared to 50/50 for gold. He also speaks of a “noticable reduction” of some 4,000 silverContinue Reading