DOCSLIB.ORG

That Was the Weak That Worked: Part 3

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
That Was the Weak That Worked: Part 3 THINGS THAT MAKE YOU GO Hmmm...A walk around the fringes of finance By Grant Williams To learn more about Grant's new investment newsletter, Bull's Eye Investor, Click here » 20 January 2014 That Was The Weak That Worked: Part 3 "It was probably a mistake to allow gold to rise so high." – Paul Volcker © Copyright Mauldin Economics. Unauthorized disclosure prohibited. Use of content subject to terms of use stated on last page. Hmmm...THINGS THAT MAKE YOU GO Contents THINGS THAT MAKE YOU GO HMMM... ....................................................3 Wealthy Foreigners Buy Up Swaths of UK Farmland and Country Estates ....................24 Manipulation of Gold by Central Banks Cannot Continue in 2014 ..............................26 EU Elections May Be "Tense" as Extremism Grows, Barroso Warns .............................28 British Exit from EU May Scare Off Foreign Investors, Admits Vince Cable ...................29 A Worrying Wobble ....................................................................................30 Greek Prosecutors Focus on Corruption at the Top ...............................................32 Rich Chinese Continue to Flee China ...............................................................33 Crisis Management: Europe Eyes Anglo-Saxon Model with Envy ................................34 Can Sino Iron Dig Out of Its Investment Hole? ....................................................35 CHARTS THAT MAKE YOU GO HMMM... ..................................................38 WORDS THAT MAKE YOU GO HMMM... ...................................................41 AND FINALLY... .............................................................................42 20 January 2014 2 Hmmm...THINGS THAT MAKE YOU GO Things That Make You Go Hmmm... "What a year this has been for gold. "The price of the yellow metal fell almost 30% from its peak at the end of August a year earlier, to bombed-out lows amidst a wall of selling which included several very sharp and somewhat counterintuitive selloffs, including violent plunges in both the April-May time frame and again into year-end. "Throughout the year, the spectre of manipulation was never far from the minds of all those involved in the gold market, whether they were crying 'foul' or asserting that, of course, there was no manipulation whatsoever and that those who suggested there might be were nothing more than conspiracy theorists, kooks, and whackos. "The main suspects at the heart of the conspiracy theories were, naturally, the bullion banks and the central banks. "The bullion banks, of course, have the eternal motive: profit; but what possible reason could central banks have for suppressing the price? None whatsoever, of course. The gold market is too small and too inconsequential for them to take an interest. "And yet, rumours abounded that the bullion banks were in dire trouble and that a rising gold price could send one or more of them over the edge and into insolvency as a scramble for physical metal exposed massive short positions that had grown out of a fractional-reserve-based lending system backed (if not explicitly, then certainly complicitly) by central banks..." Now THAT, you may well have thought, was the heart-racking, pulse-pounding introduction to my year-end look at the gold market. No preamble, no carefully constructed narrative to entice you into my latest little web, just BOOM! Straight into it. And every word of the above makes sense based upon what we've seen happen in the past twelve months in the topsy-turvy world of element 79, which holds down the spot in the periodic table just after platinum and just before mercury. 20 January 2014 3 Hmmm...THINGS THAT MAKE YOU GO But of course, nothing is what it seems when we are discussing gold. That quotation at the top is the intro to the year-end review of gold that I would have written in 1999 ... had I been doing such things back then. 2013 was, in many ways, a case of been there, done that; and to understand what is happening To receive Grant Williams' today, it is extremely instructive to go back to Things That Make You Go Hmmm... 1999 and reexamine some very strange goings- delivered to your inbox: on at the UK Treasury, AIG, Rothschild, Goldman Sachs, and Number 11 Downing Street. SUBSCRIBE NOW! (Cue dreamy harp music.) The chart of the gold price between February 1996 and August 1999 will look eerily familiar to anybody who follows the gold market closely; and for those who don't, just stick around and I'll show you what you've been missing. Gold Price (COMEX) In US$ 420 1996 - 1999 370 320 270 220 1996 1997 1998 1999 Source: Bloomberg After a run-up to a spike-high of $415.50 on February 2, 1996, gold began to fall. It fell fairly quickly at first, losing 3% in six trading sessions; and then the decline steadied for a while but remained consistent — until, around the end of the calendar year, gold suddenly and inexplicably spiked straight down. By the end of 1996, it had lost 11% of its value. As 1996 turned into 1997 the price continued to fall; and the new year saw several inexplicable downdrafts of considerable size and alarming speed which, by the time the dust had settled at midnight on December 31st, 1997, had cut the value of an ounce of gold by almost a quarter. 20 January 2014 4 Hmmm...THINGS THAT MAKE YOU GO Gold market watchers were baffled at the continued weakness in their beloved metal.They bemoaned their bad fortune and pleaded with the gods above, but neither activity made any difference — the price continued to fall. (Sound familiar?) 1998 was a fairly stable year, with the price moving little from January to December (though again, during the year there were several large falls in price that were hard to account for); and as the world entered the last year of the millennium, there was an air of stability around gold that gave hope to those battered by the consistent weakness in the gold price. (To reiterate, I am talking about the late 1990s here, NOT the last couple of years — just in case there was any confusion.) On the last day of 1998, gold closed at $288.25, down from $415.50 on February 2, 1996 — a fall of over 30% in three years. You ... yes, you with the glasses at the back... (muffled question) No, there is very little similarity to the 37% decline in the gold price from the August 2011 high to the close on December 31, 2013. (muffled question) What do I MEAN? Well, obviously, any similarity is completely coincidental because there were a number of strange things happening and rumours swirling back in 1998 about bullion banks being short gold in quantities that posed a risk to them and, of course, to "the system" — whatever THAT means — so those were once in a lifetime circumstances. (muffled retort) Well, yes, I suppose, now that you mention THAT, there MAY be some purely coincidental similarities between the two periods, but when you hear what happened next, you'll realize that the time I'm talking about was nothing like today, because the following year (1999) a certain central bank did something quite bizarre that led directly to sharply lower gold prices and a dramatic increase in specula... (muffled retort) ... oh look, stop it now. Keep your Bundesbank tale under your hat and we'll discuss it when I've finished. We need to get back to the main story. If I may? Thank you. 20 January 2014 5 Hmmm...THINGS THAT MAKE YOU GO So, as I was saying before I was rudely interrupted by young Eric there, 1999 dawned with an awful lot of antipathy towards gold after three years of poor performance. The rumour mill was operating overtime as speculation about large shorts in physical metal moved towards a crescendo, and a group of central bankers either dismissed accusations of any involvement in price suppression or refused to discuss it at all. The first five months of 1999 looked fairly familiar to anybody who happened to keep a watchful eye on the gold market. Gold Price (COMEX) In US$ January - May 1999 295 290 285 280 275 270 January February March April Source: Bloomberg After three poor years, gold was scratching around trying to find a bottom, and it looked like it was succeeding. The path of least resistance was clearly upward, and it looked for all the world as though a bounce was in the cards, since sellers had become exhausted. The gold price saw several quick spikes — all of which were followed immediately by sharp selloffs; but the net result was that on May 6, 1999, the gold price stood a fraction above where it had entered the year. It was at this point that things started to get screwy. The next day, May 7, 1999, then-Chancellor of the UK Exchequer, Gordon Brown, announced that he would sell almost 400 tons of Britain's gold reserves in a series of auctions over the subsequent three-year period. Dates of those auctions were to be set well in advance. Tense? 20 January 2014 6 Hmmm...THINGS THAT MAKE YOU GO No, I don't mean "Are you on the edge of your seat?" The "tense" I am questioning is that used by Brown in his announcement — it was, in this case, the future progressive. Ordinarily, when people like Brown make statements, they use a tense exclusively reserved for use by government officials and those heading up the world's major central banks: the future promissory. This tense is constructed by taking an intended possibility and removing the words we hope and pray from the beginning of the sentence and inserting the word will in the middle. Let me give you an example. When using the future promissory tense, the phrase "We hope and pray interest rates remain low until at least 2016" becomes: "Interest rates will remain low until 2016." Likewise, "We hope and pray we can unwind QE without any problems" becomes "We will unwind QE without any problems." Try it yourselves.
Load more

Recommended publications
  • Family, Friends, Bid Bouras Adieu Head of a Children's Hospital In
    S O C V ΓΡΑΦΕΙ ΤΗΝ ΙΣΤΟΡΙΑ Bringing the news W ΤΟΥ ΕΛΛΗΝΙΣΜΟΥ to generations of E ΑΠΟ ΤΟ 1915 The National Herald Greek- Americans N c v A wEEkly GrEEk-AmEriCAN PuBliCATiON www.thenationalherald.com VOL. 17, ISSUE 847 January 4-10, 2014 $1.50 Head of a Children’s Greece an Hospital in Greece Ideal Place Faces Bribery Charge For Advent By Andy Dabilis ernment of Prime Minister An - Of Medical TNH Staff Writer tonis Samaras, the New Democ - racy Conservative party leader, ATHENS – The former Board has been cracking down. Tourism Chairman of a the largest state Tombouloglou, who has al - children’s hospital in Greece, tered his version of why he took who was charged with demand - the money – which he admitted ing a bribe in return for approv - – said he needed time to pre - Fertilization Expert ing a contract to help children pare his defense. He said, “The Tells TNH That with obesity, was released on truth will shine,” although he bail after a long deposition. didn’t elaborate. IVF is Catalytic in Haris Tombouloglou must “I believe in God and justice,” post a 150,000-euro bail and is he said. “This is a setup. The Attracting Patients forbidden to leave the country. money I took was a gift for the He faces charges of soliciting a hospital. The company was By Constantine S. Sirigos 25,000-euro bribe from an ad - afraid that it would be excluded TNH Staff Writer vertising firm that had secured from the tender,” Tombouloglou a $190,000-euro contract to co - said on his arrest.
    [Show full text]
  • Page 01 Dec 31.Indd
    ISO 9001:2008 CERTIFIED NEWSPAPER Tuesday 31 December 2013 27 Safar 1435 - Volume 18 Number 5930 Price: QR2 European stock Rustiness, a markets slip, challenge for Tokyo rises Sri Lanka Business | 17 Sport | 25 www.thepeninsulaqatar.com [email protected] | [email protected] Editorial: 4455 7741 | Advertising: 4455 7837 / 4455 7780 Karlovic beats Berdych Restrictions on Huge demand sale, transfer of MPHC shares for PSG-Real DOHA: Citizens, who are allot- ted the shares of Mesaieed Petrochemical Holding Company (MPHC) via a low- priced IPO that is all set for match tickets launch today, will need permis- sion from the local bourse to sell more than 50 percent of the scrip after listing. Tickets cost QR700 on black market Qatar Exchange (QE) yes- terday reached a deal with the DOHA: Prices of tickets for Doha on December 29. Soon after MPHC to restrict successful IPO this week’s football friendly to touchdown, PSG hit the training subscribers from offloading or be played between European pitch at Aspire Academy. transferring more than half the giants France’s Paris Saint- Former World Cup winning allotted shares after the securities Germain (PSG) and Spain’s defender with France Laurent are listed on the bourse. Real Madrid in Doha have Blanc is the manager of PSG The above limit is being soared to an astronomical sum which also has the services imposed in line with the nature of QR700 on the black market, of influential striker Zlatan of the IPO that aims at helping news reports have said. Ibrahimovic. Other key play- successful Qatari subscribers The tickets are being sold at ers include Thiago Silva, Claude build wealth (capital gains and Croatia’s Ivo Karlovic returns the ball to Czech Republic’s Tomas Berdych during their match in Qatar’s QR700 on the black market and Makelele.
    [Show full text]
  • 19 September 2009
    THE GREEK AUSTRALIAN The oldest circulating Greek newspaper outside VEMA Greece SEPTEMBER 2009 Tel. (02) 9559 7022 Fax: (02) 9559 7033 E-mail: [email protected] OUR PRIMATE’S VIEW MR G. BABINIOTIS AND THE ‘DIALOGUE’ ON GREEK EDUCATION PAGE 5/23 CRUCIALGREEKS GO TO THE POLLS ON OCTOBER 4 ELECTIONS Fantasy islands Owning your own island is a dream Greece’s main parties started pre- that has long attracted the surplus paring for a brief but intense election campaign in the count- millions of the rich. down to snap polls next month. PAGE 15/33 Prime Minister Costas Karamanlis and the head of the main opposition PASOK party, George Papandreou, in- creased their public appearances and intensified their rhetoric in a bid to se- cure the votes of disenchanted sup- porters of their respective parties. They, as well as the three leaders of the other parties with representatives in Parliament, agreed to participate in George two televised debates in the count- Papandreou down to the October 4 polls. Karamanlis continued with the straight talk that earned him praise af- Costas ter his speech at the launch of the Karamanlis Thessaloniki International Fair (TIF) ear- Canberra’s lier this month, appealing to New Democracy supporters at an Athens PASOK leader George Papandreou Meanwhile, the electoral committees Byzantine Secret rally to vote for the ruling party “in the gave as good as he got. Addressing a of New Democracy and PASOK started national interest,” even if the party has large crowd in Neo Faliro, he de- unveiling their respective lists of candi- One of the finest surviving Byzantine disappointed them in the past.
    [Show full text]
  • World's 1St Computer Is Coming to Manhattan
    O c v ΓΡΑΦΕΙ ΤΗΝ ΙΣΤΟΡΙΑ Bringing the news ΤΟΥ ΕΛΛΗΝΙΣΜΟΥ to generations of ΑΠΟ ΤΟ 1915 The National Herald Greek Americans A WEEKLY GREEK AMERICAN PUBLICATION c v www.thenationalherald.com VOL. 10, ISSUE 499 May 5, 2007 $1.00 GREECE: 1.75 EURO Former U.S. Ambassador George Tenet Answers his Critics with his New Book To Greece Phillips Talbot Former CIA Director Won’t Pinpoint Who Reflects on Junta Years Tried to Push Him Out By Antonis H. Diamataris (retired), now in his 92nd year and in Special to The National Herald remarkably good health for his ad- By Mark Frangos vanced age, granted the interview And Evan C. Lambrou NEW YORK – The American Ambas- from his simple apartment in New Special to the National Herald sador to Greece Phillips Talbot knew York City. Our mission was to explore nothing prior to the April 21, 1967 in detail the U.S.’s possible involve- NEW YORK – In a controversial in- coup which brought the colonels to ment in the coup, with respect to the terview with CBS’ “60 Minutes” last power, he said in an exclusive inter- widespread belief among so many Sunday evening, April 29, former view with the National Herald, his Greeks. CIA Director George Tenet said first ever, shedding new light on Asked whether her believed there that, even though his Greek her- those tragic events. was any American involvement in itage inclines him to be “conspira- “In the winter and early spring of the coup, Mr. Talbot said he did not torial by nature,” he did not want to 1966-1967, we picked up rumors “because it was so damaging to the speculate about who in the Bush that there were groups within the American posture in Europe.
    [Show full text]
  • AHEPA Holds 86Th Annual Supreme Convention in Athens More Than 2,000 Ahepans Flock to Athens for First Time in 38 Years for Weeklong Convention
    O C V ΓΡΑΦΕΙ ΤΗΝ ΙΣΤΟΡΙΑ Bringing the news ΤΟΥ ΕΛΛΗΝΙΣΜΟΥ to generations of ΑΠΟ ΤΟ 1915 The National Herald Greek Americans A WEEKLY GREEK AMERICAN PUBLICATION c v www.thenationalherald.com VOL. 11, ISSUE 560 July 5, 2008 $1.00 GREECE: 1.75 EURO AHEPA Holds 86th Annual Supreme Convention in Athens More Than 2,000 Ahepans Flock to Athens for First Time in 38 Years for Weeklong Convention By Yannis Sofianos and address AHEPA’s delegates dur- Special to The National Herald ing their return to their country of origin. Greek Prime Minister Costas ATHENS – For one week, between Karamanlis, Foreign Minister Dora July 1 to July 7, AHEPA will retrace Bakoyannis, Greek Parliament Pres- its roots and travel to its founders’ ident Demetris Sioufas and Arch- homeland for a unique homecom- bishop Ieronymos of Athens and all ing, as this historic Greek American Greece will all be attending AHEPA organization holds its 86th Annual events throughout the week, includ- Supreme Convention in Athens, ing the grand banquet formal, Greece. According to AHEPA which will take place this Saturday, Supreme President Ike Gulas, this July 5 at the Athens Intercontinen- event “is like a large pilgrimage to tal Hotel. the birthplace of democracy and Greek Deputy Foreign Minister Western civilization.” Theodoros Kassimis, who oversees In a statement to The National Greek Diaspora issues, is sitting in Herald, Mr. Gulas called the con- on most of the conferences taking vention “a very important and his- place throughout the week-long toric moment for AHEPA.” He added convention, as is Archbishop that “I am very excited to be serving Demetrios of America.
    [Show full text]
  • From Bad to Worse? Reflections on the Crisis in Greece and in Europe1
    efectons on the risis in reece and in uroe 217 Zoe eofridi From Bad to Worse? Refectons on the Crisis in Greece and in Europe1 Keywords: crisis, reforms, Greece, consequences, democracy, EU What are the consequences of the radical measures taken in Greece since the beginning of the crisis? hile discussing the positve and negatve efects of the Troika therap in Greece, this essa gives an overview of the politcal situaton in Greece and Europe, and discusses the dangers for democrac in the EU. Vom Regen in die Traufe? Refeionen ber die Krise in Griechenland und in Europa Schlüsselwrter Krise, eformen, Griechenland, Konseuenzen, Demokrate, E elche Auswirkungen haen die tef greifenden anahmen, die seit Ausbruch der Krise in Griechenland eingeleitet wurden n dem Essa werden die positven und negatven Konseuenzen analsiert, und sodann wird diskutert, was der Fall von Griechenland über die aktuelle politsche Situaton Griechenlands und Europas aussagt und welche Gefahren für die Demokrate damit verbunden sind. Zoe eofridi ax eber Fellow, European niversit nsttute, Florence Eail Zoe.eofridieui.eu Österreichische Zeitschrif für Politkwissenschaf ÖZP, . g. 21 . 1, 21722 21 oe eoridi 1. Introducton: ‘The Debt’s Ugly Head’ The Eurozone was ill-prepared to deal with the global crisis. Membership gave countries with historically high levels of infation, such as Greece, access to artifcially cheap credit. This al- lowed them to borrow at a favourable interest rate to fund government budgets and current account defcits. Crucially, however, the Stability and Growth Pact (1997), which called for budget def- cits to not exceed 3 of GDP and debt to not exceed 60 of GDP, was not properly enforced.
    [Show full text]
  • The Europeanisation of Greek Foreign Policy: a Literature Review
    The Europeanisation of Greek foreign policy: A literature review Stelios Stavridis1 1. Introduction This work reviews part of the literature on the Europeanisation of Greek foreign policy. It covers mainly studies published in English. It concentrates on the foreign policy of Greece, although it does refer to other areas whenever necessary. It is a pilot-study in that there is yet to be a thorough investigation of that particular aspect of Europeanisation. Moreover, on the theoretical side, a review of the literature shows that ‘Europeanisation’ is a term that is often used in the academic world but that there is no common definition of what it actually means. A very simple example of this confusion can be seen in the existing lack of agreement about its correct spelling. With an ‘s’ or with a ‘z’? It is interesting to note that most UK- based academic used the version with an ‘s’, whereas others, mainly from a US- background prefer a ‘z’. Computer-based spell-checks tend to prefer the American spelling, even when they are set under ‘English/UK’ language. Europeanisation, whichever way it is spelt, includes a number of possible definitions. Some stem from the wider considerations of globalization, Westernization, or even simply Americanization to take a more French-biased approach. This is a rather more traditional and historical approach to the problem of what Europeanisation actually means (see Olsen 2002: 17-19). With due respect to historians, this is not a very useful approach for a study on the Europeanisation of Greek foreign policy which concentrates on the years after Greece joined the European Union (EU, formerly the EEC).
    [Show full text]