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Monday, October 25, 2010
Sunday, October 17, 2010
Sunday, October 10, 2010
The Fed is dead, maybe by 2012
ARROYO GRANDE, Calif. (MarketWatch) — OK, so Nassim Nicholas Taleb, the “Black Swan” author, actually said: “The Fed won’t exist in 25 years.” Warning: It’ll happen much sooner, fallout of the coming Second American Revolution.
It’s inevitable: Wall Street banks control the Federal Reserve system , it’s their personal piggy bank. They’ve already done so much damage, yet have more control than ever.
Tea-party activists in their own wordsTea-party activists talk to Russ Britt on what their movement represents.
Warning: That’s a set-up. They will eventually destroy capitalism, democracy, and the dollar’s global reserve-currency status. They will self-destruct before 2035 … maybe as early as 2012 … most likely by 2020.
Last week we cheered the Tea Party for starting the countdown to the Second American Revolution. Our timeline is crucial to understanding the historic implications of Taleb’s prediction that the Fed is dying, that it’s only a matter of time before a revolution triggers class warfare forcing America to dump capitalism, eliminate our corrupt system of lobbying, come up with a new workable form of government, and create a new economy without a banking system ruled by Wall Street.
Read 'America on the brink of a Second Revolution.'
Let’s reexamine the timeline closely:
Stage 1: The Democrats just put the nail in their coffin confirming they’re wimps when they refused to force the GOP to filibuster Bush tax cuts for billionaires.
Stage 2: In the elections the GOP takes over the House, expanding its strategic war to destroy Obama with its policy of “complete gridlock” and “shutting down government.”
Stage 3: Post-election Obama goes lame-duck, buried in subpoenas and vetoes.
Stage 4: In 2012, the GOP wins back the White House and Senate. Health care returns to insurers. Free-market financial deregulation returns. Lobbyists intensify their anarchy.
Stage 5: Before the end of the second term of the new GOP president, Washington is totally corrupted by unlimited, anonymous donations from billionaires and lobbyists. Wall Street’s Happy Conspiracy triggers the third catastrophic meltdown of the 21st century that Robert Shiller of “Irrational Exuberance” fame predicts, resulting in defaults of dollar-denominated debt and the dollar’s demise as the world’s reserve currency.
Stage 6: The Second American Revolution explodes into a brutal full-scale class war with the middle class leading a widespread rebellion against the out-of-touch, out-of-control Happy Conspiracy sabotaging America from within.
Stage 7: The domestic class warfare is exaggerated as the Pentagon’s global warnings play out: That by 2020 “an ancient pattern of desperate, all-out wars over food, water, and energy supplies would emerge” worldwide and “warfare is defining human life.”
In this rapidly unfolding scenario, the Fed cannot survive. Why? Not because the Fed is at the center of America’s economic problems, beyond repair, a dying institution. But because the Fed is a pawn of Wall Street’s Happy Conspiracy, which is incapable of seeing the train wreck that it set up.
This out-of-control, conspiracy of greedy Wall Street bankers, corporate CEOs, corrupt politicians and Forbes 400 billionaires will, in the near future, trigger the third catastrophic meltdown of the 21st century, a collapse that paradoxically can transform America into a new, stronger post-capitalist economy … but only after a revolution and brutal class warfare. But few will talk about what’s coming.
Warning: Never trust the American Treasury Secretary
So who can you trust to tell us the truth? Taleb says it’s very simple. His “simple metric” was made clear at a recent “Washington Ideas Forum” in a piece by Atlantic editor Nicole Allan: Unfortunately most fail Taleb’s test. Most get it wrong. Many lie, exaggerate, speak half-truths or, worse, say nothing.
Here’s Taleb’s “simple metric for judging whose economic opinions are worth his time: ‘Did someone predict the crisis before it happened” in the past? “If the answer is no, I don’t want to hear what the person says. If the person saw the crisis coming then I want to hear what they have to say” about future crises.
Taleb target No. 1: Treasury Secretary Tim Geithner, who spoke just before Taleb at the forum. Of course, experience tells us you really can’t trust anyone in government. All politicians fudge the numbers, cherry-pick data to suit their personal goals, biases and political rhetoric.
Remember Hank Paulson, Wall Street’s Trojan Horse inside Washington? Earlier he had made over half a billion as Goldman’s CEO. Back in July 2007 before the meltdown he bragged to Fortune that this is “the strongest global economy I’ve seen in my business lifetime.” Never trust anything “leaders” like him say. Never.
It’s inevitable: Wall Street banks control the Federal Reserve system , it’s their personal piggy bank. They’ve already done so much damage, yet have more control than ever.
Tea-party activists in their own wordsTea-party activists talk to Russ Britt on what their movement represents.
Warning: That’s a set-up. They will eventually destroy capitalism, democracy, and the dollar’s global reserve-currency status. They will self-destruct before 2035 … maybe as early as 2012 … most likely by 2020.
Last week we cheered the Tea Party for starting the countdown to the Second American Revolution. Our timeline is crucial to understanding the historic implications of Taleb’s prediction that the Fed is dying, that it’s only a matter of time before a revolution triggers class warfare forcing America to dump capitalism, eliminate our corrupt system of lobbying, come up with a new workable form of government, and create a new economy without a banking system ruled by Wall Street.
Read 'America on the brink of a Second Revolution.'
Let’s reexamine the timeline closely:
Stage 1: The Democrats just put the nail in their coffin confirming they’re wimps when they refused to force the GOP to filibuster Bush tax cuts for billionaires.
Stage 2: In the elections the GOP takes over the House, expanding its strategic war to destroy Obama with its policy of “complete gridlock” and “shutting down government.”
Stage 3: Post-election Obama goes lame-duck, buried in subpoenas and vetoes.
Stage 4: In 2012, the GOP wins back the White House and Senate. Health care returns to insurers. Free-market financial deregulation returns. Lobbyists intensify their anarchy.
Stage 5: Before the end of the second term of the new GOP president, Washington is totally corrupted by unlimited, anonymous donations from billionaires and lobbyists. Wall Street’s Happy Conspiracy triggers the third catastrophic meltdown of the 21st century that Robert Shiller of “Irrational Exuberance” fame predicts, resulting in defaults of dollar-denominated debt and the dollar’s demise as the world’s reserve currency.
Stage 6: The Second American Revolution explodes into a brutal full-scale class war with the middle class leading a widespread rebellion against the out-of-touch, out-of-control Happy Conspiracy sabotaging America from within.
Stage 7: The domestic class warfare is exaggerated as the Pentagon’s global warnings play out: That by 2020 “an ancient pattern of desperate, all-out wars over food, water, and energy supplies would emerge” worldwide and “warfare is defining human life.”
In this rapidly unfolding scenario, the Fed cannot survive. Why? Not because the Fed is at the center of America’s economic problems, beyond repair, a dying institution. But because the Fed is a pawn of Wall Street’s Happy Conspiracy, which is incapable of seeing the train wreck that it set up.
This out-of-control, conspiracy of greedy Wall Street bankers, corporate CEOs, corrupt politicians and Forbes 400 billionaires will, in the near future, trigger the third catastrophic meltdown of the 21st century, a collapse that paradoxically can transform America into a new, stronger post-capitalist economy … but only after a revolution and brutal class warfare. But few will talk about what’s coming.
Warning: Never trust the American Treasury Secretary
So who can you trust to tell us the truth? Taleb says it’s very simple. His “simple metric” was made clear at a recent “Washington Ideas Forum” in a piece by Atlantic editor Nicole Allan: Unfortunately most fail Taleb’s test. Most get it wrong. Many lie, exaggerate, speak half-truths or, worse, say nothing.
Here’s Taleb’s “simple metric for judging whose economic opinions are worth his time: ‘Did someone predict the crisis before it happened” in the past? “If the answer is no, I don’t want to hear what the person says. If the person saw the crisis coming then I want to hear what they have to say” about future crises.
Taleb target No. 1: Treasury Secretary Tim Geithner, who spoke just before Taleb at the forum. Of course, experience tells us you really can’t trust anyone in government. All politicians fudge the numbers, cherry-pick data to suit their personal goals, biases and political rhetoric.
Remember Hank Paulson, Wall Street’s Trojan Horse inside Washington? Earlier he had made over half a billion as Goldman’s CEO. Back in July 2007 before the meltdown he bragged to Fortune that this is “the strongest global economy I’ve seen in my business lifetime.” Never trust anything “leaders” like him say. Never.
Saturday, October 9, 2010
Fed Needs to Pump Trillions More Into Economy
The Federal Reserve needs to pump at least $6 trillion to $7 trillion more into the U.S. economy to have any meaningful impact on sluggish growth, former Bush economic adviser Marc Sumerlin told CNBC.
Sumerlin, co-founder of The Lindsey Group, a Washington DC-based economic advisory group, also said that the U.S. would fall back into a recession if the Bush tax cuts aren't extended beyond this year.
The Fed has hinted for weeks that it is ready to buy up more debt in the credit markets to help spur the economy, which is still recovering from the financial crisis of 2008. The U.S. central bank has already spent over $1 trillion since early 2009 to keep credit markets liquid in what has become known as quantitative easing, or QE. (For a fuller explanation, click here.)
Although the Fed hasn't indicated how much more money it might pump into the economy—which has been labeled QE-2—Sumerlin's recommendation goes well beyond what most other economists expect or even recommend.
"U.S. households have $70 trillion in assets," Sumerlin explained during a live interview. "And the Fed essentially needs to buy enough Treasurys and mortgages that you can get a bid on all those other assets. And when you have leakage in the international system it takes a pretty big amount to be successful. To me, it starts to get interesting at six to seven trillion dollars."
Sumerlin's comments, which came around midday, helped push stocks lower.
“To get someone who was part of the former economic council saying the Fed will need to step up big and do $6 trillion in (asset purchases), was a bit of a shock and created a bit of nervousness,” Marc Pado, market strategist at Cantor Fitzgerald, told CNBC.com.
Few economists expect the Fed to commit that much new money to helping the economy, and many think any further quantitative easing wouldn't have that much impact anyway.
Pimco co-CEO Mohamed El-Erian, for instance, told CNBC earlier Thursday that further monetary easing by the Fed and other central banks probably won't work.
"The risk is that this may be ineffective again," he said. "In fact, the big story of the last year and a half is every time we have had a policy action, outcomes have fallen short of expectations."
Raoul Pal, global macro analyst for the Global Macro Investor, who appeared with Sumerlin on CNBC, also questioned the wisdom of further easing.
"There is no evidence that it's ever worked in the past, so there is no real evidence that it will work now," Pal said. "So I think it's a high risk thing for them to try and do. I also don't believe you can get the money in the system. Even if it's $6 trillion, I don't think it's going to get in the system because there is no velocity of money. So all you end up doing is buying the Treasurys off the banks who will keep the money at the Fed."
As for extending the Bush tax cuts—which Congress has put off voting on until after the November elections—Sumerlin said "we will have a recession" if they are allowed to expire.
"Because we're growing too slowly," he said. "If you look at the quarters when the tax cuts went in, there was very substantial growth. People forget that the third quarter of 2003, we grew at 7 percent when the tax cuts—the full marginal rates—took effect. Running that in reverse causes the opposite to happen."
Sumerlin, co-founder of The Lindsey Group, a Washington DC-based economic advisory group, also said that the U.S. would fall back into a recession if the Bush tax cuts aren't extended beyond this year.
The Fed has hinted for weeks that it is ready to buy up more debt in the credit markets to help spur the economy, which is still recovering from the financial crisis of 2008. The U.S. central bank has already spent over $1 trillion since early 2009 to keep credit markets liquid in what has become known as quantitative easing, or QE. (For a fuller explanation, click here.)
Although the Fed hasn't indicated how much more money it might pump into the economy—which has been labeled QE-2—Sumerlin's recommendation goes well beyond what most other economists expect or even recommend.
"U.S. households have $70 trillion in assets," Sumerlin explained during a live interview. "And the Fed essentially needs to buy enough Treasurys and mortgages that you can get a bid on all those other assets. And when you have leakage in the international system it takes a pretty big amount to be successful. To me, it starts to get interesting at six to seven trillion dollars."
Sumerlin's comments, which came around midday, helped push stocks lower.
“To get someone who was part of the former economic council saying the Fed will need to step up big and do $6 trillion in (asset purchases), was a bit of a shock and created a bit of nervousness,” Marc Pado, market strategist at Cantor Fitzgerald, told CNBC.com.
Few economists expect the Fed to commit that much new money to helping the economy, and many think any further quantitative easing wouldn't have that much impact anyway.
Pimco co-CEO Mohamed El-Erian, for instance, told CNBC earlier Thursday that further monetary easing by the Fed and other central banks probably won't work.
"The risk is that this may be ineffective again," he said. "In fact, the big story of the last year and a half is every time we have had a policy action, outcomes have fallen short of expectations."
Raoul Pal, global macro analyst for the Global Macro Investor, who appeared with Sumerlin on CNBC, also questioned the wisdom of further easing.
"There is no evidence that it's ever worked in the past, so there is no real evidence that it will work now," Pal said. "So I think it's a high risk thing for them to try and do. I also don't believe you can get the money in the system. Even if it's $6 trillion, I don't think it's going to get in the system because there is no velocity of money. So all you end up doing is buying the Treasurys off the banks who will keep the money at the Fed."
As for extending the Bush tax cuts—which Congress has put off voting on until after the November elections—Sumerlin said "we will have a recession" if they are allowed to expire.
"Because we're growing too slowly," he said. "If you look at the quarters when the tax cuts went in, there was very substantial growth. People forget that the third quarter of 2003, we grew at 7 percent when the tax cuts—the full marginal rates—took effect. Running that in reverse causes the opposite to happen."
Dollar crunched again
The U.S. dollar dropped to its lowest level since January, even as a prominent Federal Reserve official cast doubt on the assumption that the Fed will move toward another round of asset purchases at next month's regularly scheduled meeting.
Trade trauma ahead?
The U.S. currency fell to 81.8 yen, its lowest since April 1995, and was trading at $1.39 against the euro. The dollar index tumbled to 77.2, matching a low last seen in January.
The latest declines came after Friday's weak jobs report seemingly boosted the case for a return to so-called quantitative easing, in which the Fed buys Treasury bonds to push down interest rates. Private nonfarm payrolls rose by 64,000 last month, showing a tepid recovery continues but falling short of expected 75,000-job gain.
The figures "are well clear of a 'double-dip' signal for the economy but they are consistent with continued disinflation which supports the case for an expansion of Fed QE at the November FOMC meeting," Tullett Prebon economist Lena Komileva wrote in a note to clients.
But James Bullard, the president of the Federal Reserve Bank of St. Louis, said in an interview on CNBC Friday that the push toward more easing isn't a "slam dunk" and stressed that members of the Federal Open Market Committee will decide only after reviewing more data on the economy.
Bullard also noted the potential drawbacks to another round of QE, reflecting comments made in recent weeks by other regional Fed presidents.
"This is unchartered waters... (inflation) may get away from us if we are not careful," Bullard said.
Among the chief risks of still looser Fed policy has become apparent in recent weeks with the outbreak of hostilities in currency markets. A weaker dollar pushes up the value of rival currencies, making it harder for growth-strapped countries to export their way out of their problems.
The great fear should the Fed commit to another round of QE, Komileva said, is that it will end up "exporting deflation to the rest of the world through weak domestic demand and global currency majors' strength against the dollar
Trade trauma ahead?
The U.S. currency fell to 81.8 yen, its lowest since April 1995, and was trading at $1.39 against the euro. The dollar index tumbled to 77.2, matching a low last seen in January.
The latest declines came after Friday's weak jobs report seemingly boosted the case for a return to so-called quantitative easing, in which the Fed buys Treasury bonds to push down interest rates. Private nonfarm payrolls rose by 64,000 last month, showing a tepid recovery continues but falling short of expected 75,000-job gain.
The figures "are well clear of a 'double-dip' signal for the economy but they are consistent with continued disinflation which supports the case for an expansion of Fed QE at the November FOMC meeting," Tullett Prebon economist Lena Komileva wrote in a note to clients.
But James Bullard, the president of the Federal Reserve Bank of St. Louis, said in an interview on CNBC Friday that the push toward more easing isn't a "slam dunk" and stressed that members of the Federal Open Market Committee will decide only after reviewing more data on the economy.
Bullard also noted the potential drawbacks to another round of QE, reflecting comments made in recent weeks by other regional Fed presidents.
"This is unchartered waters... (inflation) may get away from us if we are not careful," Bullard said.
Among the chief risks of still looser Fed policy has become apparent in recent weeks with the outbreak of hostilities in currency markets. A weaker dollar pushes up the value of rival currencies, making it harder for growth-strapped countries to export their way out of their problems.
The great fear should the Fed commit to another round of QE, Komileva said, is that it will end up "exporting deflation to the rest of the world through weak domestic demand and global currency majors' strength against the dollar
Monday, October 4, 2010
French rogue trader Kerviel faces verdict
PARIS (AFP) - – A French court will pass verdict Tuesday on rogue trader Jerome Kerviel who faces up to four years in prison for covert stock trades that Societe Generale bank says cost it almost five billion euros.
Kerviel's lawyer has called for the 33-year-old to be acquitted, blaming the bank for the 2008 rogue trading scandal that almost destroyed it, while prosecutors have demanded four years' jail plus one year suspended.
The verdict hearing at Paris's main courthouse starts at 10:00 am (0800 GMT) and is set to last about an hour.
Kerviel has admitted regularly exceeding trading limits and logging false transactions to cover his gambles, but said this was common practice among traders and that his bosses turned a blind eye as long as earnings were high.
At the last trial hearing in June, his lawyer Olivier Metzner asked how a "normal boy" like Kerviel could "end up here", facing years in jail on charges of breach of trust, forgery and entering false data into computers.
"How do you create (people like Kerviel) if not for financial gain?" he said, referring to the bank.
Kerviel's former employers and the state prosecutors bringing criminal charges have branded him a liar who knowingly misled his bosses and put Societe Generale and its employees in peril.
His defence has always been that his bosses knew of and approved his risky deals, which he says were visible to his colleagues and bosses on the trading desk.
On discovering the risky deals in January 2008, Societe Generale was forced to unwind positions worth 50 billion euros (69 billion dollars) -- equal to nearly all its shareholder capital at the time.
The bank has admitted failings in its controls, for which it was fined four million euros in July 2008, but insisted at the trial that managers could not have tracked all Kerviel's trades when he logged false data to cover them.
Societe Generale's lawyers said it wants 4.9 billion euros in compensation from Kerviel. He could also face a fine of 375,000 euros.
The trial heard from more than 30 witnesses but shed little light on what motivated Kerviel, who said simply that he "tried to do his job in the interests of the bank."
"Why did he do these things? Hoping for a bonus? To become a star?" state prosecutor Philippe Bourion asked in June.
"That's the only mystery the prosecution will not be able to solve."
Kerviel's lawyer has called for the 33-year-old to be acquitted, blaming the bank for the 2008 rogue trading scandal that almost destroyed it, while prosecutors have demanded four years' jail plus one year suspended.
The verdict hearing at Paris's main courthouse starts at 10:00 am (0800 GMT) and is set to last about an hour.
Kerviel has admitted regularly exceeding trading limits and logging false transactions to cover his gambles, but said this was common practice among traders and that his bosses turned a blind eye as long as earnings were high.
At the last trial hearing in June, his lawyer Olivier Metzner asked how a "normal boy" like Kerviel could "end up here", facing years in jail on charges of breach of trust, forgery and entering false data into computers.
"How do you create (people like Kerviel) if not for financial gain?" he said, referring to the bank.
Kerviel's former employers and the state prosecutors bringing criminal charges have branded him a liar who knowingly misled his bosses and put Societe Generale and its employees in peril.
His defence has always been that his bosses knew of and approved his risky deals, which he says were visible to his colleagues and bosses on the trading desk.
On discovering the risky deals in January 2008, Societe Generale was forced to unwind positions worth 50 billion euros (69 billion dollars) -- equal to nearly all its shareholder capital at the time.
The bank has admitted failings in its controls, for which it was fined four million euros in July 2008, but insisted at the trial that managers could not have tracked all Kerviel's trades when he logged false data to cover them.
Societe Generale's lawyers said it wants 4.9 billion euros in compensation from Kerviel. He could also face a fine of 375,000 euros.
The trial heard from more than 30 witnesses but shed little light on what motivated Kerviel, who said simply that he "tried to do his job in the interests of the bank."
"Why did he do these things? Hoping for a bonus? To become a star?" state prosecutor Philippe Bourion asked in June.
"That's the only mystery the prosecution will not be able to solve."
PAS to pick 'non-smoking candidate'
KUALA LUMPUR (AFP) – Malaysia's conservative Islamic party will field only a candidate who does not smoke in an upcoming by-election, reports said Sunday, as the party seeks to boost its Islamic image.
The Pan-Malaysia Islamic Party (PAS), which is a part of the opposition alliance, said the candidate it will pick for the poll in northern Kelantan state must display good Islamic character and the person must be a non-smoker.
"I will reject smokers from the start. They are not only ruining their health but also wasting money," PAS spiritual leader Nik Abdul Aziz Nik Mat was quoted as saying by the New Sunday Times paper.
He also told the Malay newspaper Berita Minggu that the candidate must also pray regularly and be a non-gambler. No date has been fixed for the by-election, but PAS has said it will field a candidate to contest the poll.
There are no clear religious edicts banning smoking, but Nik Abdul Aziz has said previously that some Muslim scholars consider smoking as forbidden.
In 2007, PAS said it was planning to field in national polls only non-smoking candidates or those who were willing to kick the habit.
The Islamic party has also asked its candidates to take on oath promising to divorce their wives if they to defect to other parties.
The Pan-Malaysia Islamic Party (PAS), which is a part of the opposition alliance, said the candidate it will pick for the poll in northern Kelantan state must display good Islamic character and the person must be a non-smoker.
"I will reject smokers from the start. They are not only ruining their health but also wasting money," PAS spiritual leader Nik Abdul Aziz Nik Mat was quoted as saying by the New Sunday Times paper.
He also told the Malay newspaper Berita Minggu that the candidate must also pray regularly and be a non-gambler. No date has been fixed for the by-election, but PAS has said it will field a candidate to contest the poll.
There are no clear religious edicts banning smoking, but Nik Abdul Aziz has said previously that some Muslim scholars consider smoking as forbidden.
In 2007, PAS said it was planning to field in national polls only non-smoking candidates or those who were willing to kick the habit.
The Islamic party has also asked its candidates to take on oath promising to divorce their wives if they to defect to other parties.
How to invest in gold and key price drivers
Reuters - Gold surges to a record above $1,313 an ounce on Wednesday after a spate of lacklustre U.S. data fuelled expectations the Fed may move towards further quantitative easing to help the economy, undermining the dollar.
Following are key facts about the market and different ways to invest in the precious metal.
HOW DO I INVEST?
SPOT MARKET
Large buyers and institutional investors generally buy the metal from big banks.
London is the hub of the global spot gold market, with more than $20 billion in trades passing through London's clearing system each day. To avoid cost and security risks, bullion is not usually physically moved and deals are cleared through paper transfers.
Other significant markets for physical gold are India, China, the Middle East, Singapore, Turkey, Italy and the United States.
FUTURES MARKETS
Investors can also enter the market via futures exchanges, where people trade in contracts to buy or sell a particular commodity at a fixed price on a certain future date.
The COMEX division of the New York Mercantile Exchange is the world's largest gold futures market in terms of trading volume. The Tokyo Commodity exchange, popularly known as TOCOM, is the most important futures market in Asia.
China launched its first gold futures contract on Jan. 9, 2008. Several other countries, including India, Dubai and Turkey, have also launched futures exchanges.
EXCHANGE-TRADED FUNDS
The wider media coverage of high gold prices has also attracted investments into exchange-traded funds (ETFs), which issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself.
Gold held in New York's SPDR Gold Trust , the world's largest gold-backed ETF, rose to a record high of 1,320.436 tonnes in June. The ETF's holdings are equivalent to more than half global annual mine supply, and are worth some $54.9 billion at today's prices.
Other gold ETFs include iShares COMEX Gold Trust , ETF Securities' Gold Bullion Securities and ETFS Physical Gold, and Zurich Cantonal Bank's Physical Gold.
BARS AND COINS
Retail investors can buy gold from metals traders selling bars and coins in specialist shops or on the Internet. They pay a small premium for investment products, of between 5-20 percent above spot price depending on the size of the product and the weight of demand.
KEY PRICE DRIVERS:
INVESTORS
Rising interest in commodities, including gold, from investment funds in recent years has been a major factor behind bullion's rally to historic highs. Gold's strong performance in recent years has attracted more players and increased inflows of money into the overall market.
U.S. DOLLAR
Despite the recent drop in the usual strong correlation between gold and the euro-dollar exchange rate, the currency market still plays a major long-term role in setting the direction of gold.
Gold is a usually popular hedge against currency weakness. A weak U.S. currency also makes dollar-priced gold cheaper for holders of other currencies and vice versa.
This link sometimes breaks down in times of widespread financial market stress, however, as both gold and the dollar benefit from risk aversion. Their ratio turned positive in late 2008 and early 2009 after the Lehman Brothers crisis.
OIL PRICES
Gold has historically had a correlation with crude oil prices, as the metal can be used as a hedge against oil-led inflation. Strength in crude prices can also boost interest in commodities as an asset class. More recently this correlation has weakened, with gold prices continuing to rise in the last two years as oil prices retreated from record peaks.
FISCAL AND POLITICAL TENSIONS
The precious metal is widely considered a "safe haven", bought in a flight to quality during uncertain times.
Financial market shocks, as seen in the aftermath of the collapse of Lehman Brothers and more recently in the case of burgeoning euro zone debt problems, tend to boost inflows to gold.
Major geopolitical events including bomb blasts, terror attacks and assassinations can also induce price rises.
CENTRAL BANK GOLD RESERVES
Central banks hold gold as part of their reserves. Buying or selling of the metal by the banks can influence prices.
On Aug. 7, 2009, a group of 19 European central banks agreed to renew a pact to limit gold sales, originally signed in 1999 and renewed for a further five years in 2004.
Annual sales under the pact are limited to 400 tonnes, down from 500 tonnes in the second agreement, which expired in late September . Sales under the new pact have been low, however.
HEDGING
At the beginning of the 21st century, when gold prices were languishing around $300 an ounce, gold producers sold a part of their expected output with a promise to deliver the metal at a future date.
But when prices started rising, they suffered losses and there was a move to buy back their hedging positions to fully gain from higher market prices, a practice known as de-hedging.
Significant producer de-hedging can boost market sentiment and support gold prices. However, the rate of de-hedging has slowed markedly in recent years as the outstanding global hedge book shrank.
The world's biggest gold miner, Barrick Gold, cut its gold hedges by about 3 million ounces to eliminate its entire hedgebook in the fourth quarter of last year.
SUPPLY/DEMAND
Supply and demand fundamentals generally do not play as big a role in determining gold prices as those of other commodities because of huge above-ground stocks, now estimated at around 160,000 tonnes -- more than 60 times annual mine production.
Gold is not "consumed" like copper or oil.
Peak buying seasons in major consuming countries such as India and China exert some influence on the market, but others factors such as the dollar and financial risk carry more weight
Following are key facts about the market and different ways to invest in the precious metal.
HOW DO I INVEST?
SPOT MARKET
Large buyers and institutional investors generally buy the metal from big banks.
London is the hub of the global spot gold market, with more than $20 billion in trades passing through London's clearing system each day. To avoid cost and security risks, bullion is not usually physically moved and deals are cleared through paper transfers.
Other significant markets for physical gold are India, China, the Middle East, Singapore, Turkey, Italy and the United States.
FUTURES MARKETS
Investors can also enter the market via futures exchanges, where people trade in contracts to buy or sell a particular commodity at a fixed price on a certain future date.
The COMEX division of the New York Mercantile Exchange is the world's largest gold futures market in terms of trading volume. The Tokyo Commodity exchange, popularly known as TOCOM, is the most important futures market in Asia.
China launched its first gold futures contract on Jan. 9, 2008. Several other countries, including India, Dubai and Turkey, have also launched futures exchanges.
EXCHANGE-TRADED FUNDS
The wider media coverage of high gold prices has also attracted investments into exchange-traded funds (ETFs), which issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself.
Gold held in New York's SPDR Gold Trust , the world's largest gold-backed ETF, rose to a record high of 1,320.436 tonnes in June. The ETF's holdings are equivalent to more than half global annual mine supply, and are worth some $54.9 billion at today's prices.
Other gold ETFs include iShares COMEX Gold Trust , ETF Securities' Gold Bullion Securities and ETFS Physical Gold, and Zurich Cantonal Bank's Physical Gold.
BARS AND COINS
Retail investors can buy gold from metals traders selling bars and coins in specialist shops or on the Internet. They pay a small premium for investment products, of between 5-20 percent above spot price depending on the size of the product and the weight of demand.
KEY PRICE DRIVERS:
INVESTORS
Rising interest in commodities, including gold, from investment funds in recent years has been a major factor behind bullion's rally to historic highs. Gold's strong performance in recent years has attracted more players and increased inflows of money into the overall market.
U.S. DOLLAR
Despite the recent drop in the usual strong correlation between gold and the euro-dollar exchange rate, the currency market still plays a major long-term role in setting the direction of gold.
Gold is a usually popular hedge against currency weakness. A weak U.S. currency also makes dollar-priced gold cheaper for holders of other currencies and vice versa.
This link sometimes breaks down in times of widespread financial market stress, however, as both gold and the dollar benefit from risk aversion. Their ratio turned positive in late 2008 and early 2009 after the Lehman Brothers crisis.
OIL PRICES
Gold has historically had a correlation with crude oil prices, as the metal can be used as a hedge against oil-led inflation. Strength in crude prices can also boost interest in commodities as an asset class. More recently this correlation has weakened, with gold prices continuing to rise in the last two years as oil prices retreated from record peaks.
FISCAL AND POLITICAL TENSIONS
The precious metal is widely considered a "safe haven", bought in a flight to quality during uncertain times.
Financial market shocks, as seen in the aftermath of the collapse of Lehman Brothers and more recently in the case of burgeoning euro zone debt problems, tend to boost inflows to gold.
Major geopolitical events including bomb blasts, terror attacks and assassinations can also induce price rises.
CENTRAL BANK GOLD RESERVES
Central banks hold gold as part of their reserves. Buying or selling of the metal by the banks can influence prices.
On Aug. 7, 2009, a group of 19 European central banks agreed to renew a pact to limit gold sales, originally signed in 1999 and renewed for a further five years in 2004.
Annual sales under the pact are limited to 400 tonnes, down from 500 tonnes in the second agreement, which expired in late September . Sales under the new pact have been low, however.
HEDGING
At the beginning of the 21st century, when gold prices were languishing around $300 an ounce, gold producers sold a part of their expected output with a promise to deliver the metal at a future date.
But when prices started rising, they suffered losses and there was a move to buy back their hedging positions to fully gain from higher market prices, a practice known as de-hedging.
Significant producer de-hedging can boost market sentiment and support gold prices. However, the rate of de-hedging has slowed markedly in recent years as the outstanding global hedge book shrank.
The world's biggest gold miner, Barrick Gold, cut its gold hedges by about 3 million ounces to eliminate its entire hedgebook in the fourth quarter of last year.
SUPPLY/DEMAND
Supply and demand fundamentals generally do not play as big a role in determining gold prices as those of other commodities because of huge above-ground stocks, now estimated at around 160,000 tonnes -- more than 60 times annual mine production.
Gold is not "consumed" like copper or oil.
Peak buying seasons in major consuming countries such as India and China exert some influence on the market, but others factors such as the dollar and financial risk carry more weight
Sunday, October 3, 2010
I'll work till I die
NEW YORK (CNNMoney.com) -- Gone are the days of golf and gardening into the golden years. Many older workers are working well into retirement and it's not just because they have to, it's because they want to.
Bob Alper, who has supported himself as a full-time comedian since 1986, says even at 65, retirement never crossed his mind. "I live for the moment when I can get up on the stage and make people laugh," says Vermont-based rabbi-cum-comedian who performs 60-70 shows a year at colleges and synagogues across the country.
In 1998, 11.9% of workers 65+ remained in the labor force. In 2008, it was 16.8%. This year, 18% say they will continue working. And by 2018, the Bureau of Labor Statistics projects 22% of older workers will continue to punch a clock.
Even the wealthy are reluctant to retire from the workforce, according to a report released on Sunday by Barclays Wealth. Half of the high net worth respondents over 65 surveyed said they will always be involved in commercial or professional work of some kind.
Dubbed "nevertirees," many wealthy individuals will never stop working, the report said, even if they have little financial need to do so. Like Alper, they want to keep doing what they are doing for as long as possible.
7 secrets to a richer retirement
"There was a general upward trend of labor force activity among older workers before the financial collapse," explained Alicia Munnell, director of the Center for Retirement Research at Boston College. "People were getting healthier and living longer."
Mark Miller, author of The Hard Times Guide to Retirement Security, said boomers began viewing the retirement years differently well before the recession took hold. "Many were committed to staying engaged. ... The whole idea of working longer, even for a handful of years, can be tremendously beneficial to your mental well being."
25 Best Places to Retire
But the current dour economic climate has also forced many older workers to push back their retirement plans out of financial necessity.
In the recession's wake, home valuations, stock portfolios and retirement accounts have been depleted. Meanwhile, the cost of health insurance has increased dramatically, leaving many workers with no other alternative but to hold on to the jobs they have.
"The economy has now made working longer a real imperative," Miller said.
That's the case for Chuck McCabe, 65, who opened several tax preparation firms in Virginia nine years ago.
"I expected I would retire at a normal age but the business took a lot longer to get to a point where it would be marketable. Now I really can't retire until the business is valuable enough for me to sell it." McCabe, who has cashed in his 401(k) to make payroll, estimates that it will be least five years until he can consider retiring.
McCabe's wife, Marilyn, also 65, even passed up her own retirement after a career in human resources to work alongside her husband and help build his tax practice. "She'll be working with me until we sell the business," he said. "I think she would like to be retired now."
Like the McCabe's nearly half of those ages 65 and older report being behind in terms of retirement preparedness, according to a recent survey by TD Ameritrade.
"We are entering a stage, given the heightened longevity and our changing economic circumstances, that people will continue working," according to Marcia Wagner, managing partner of The Wagner Law Group, a Boston-based law firm specializing in the Employee Retirement Income Security Act.
Wagner admits she has no plans to ever retire either -- but, like Alper, by choice. "I will work till I die because I like what I do."
Bob Alper, who has supported himself as a full-time comedian since 1986, says even at 65, retirement never crossed his mind. "I live for the moment when I can get up on the stage and make people laugh," says Vermont-based rabbi-cum-comedian who performs 60-70 shows a year at colleges and synagogues across the country.
In 1998, 11.9% of workers 65+ remained in the labor force. In 2008, it was 16.8%. This year, 18% say they will continue working. And by 2018, the Bureau of Labor Statistics projects 22% of older workers will continue to punch a clock.
Even the wealthy are reluctant to retire from the workforce, according to a report released on Sunday by Barclays Wealth. Half of the high net worth respondents over 65 surveyed said they will always be involved in commercial or professional work of some kind.
Dubbed "nevertirees," many wealthy individuals will never stop working, the report said, even if they have little financial need to do so. Like Alper, they want to keep doing what they are doing for as long as possible.
7 secrets to a richer retirement
"There was a general upward trend of labor force activity among older workers before the financial collapse," explained Alicia Munnell, director of the Center for Retirement Research at Boston College. "People were getting healthier and living longer."
Mark Miller, author of The Hard Times Guide to Retirement Security, said boomers began viewing the retirement years differently well before the recession took hold. "Many were committed to staying engaged. ... The whole idea of working longer, even for a handful of years, can be tremendously beneficial to your mental well being."
25 Best Places to Retire
But the current dour economic climate has also forced many older workers to push back their retirement plans out of financial necessity.
In the recession's wake, home valuations, stock portfolios and retirement accounts have been depleted. Meanwhile, the cost of health insurance has increased dramatically, leaving many workers with no other alternative but to hold on to the jobs they have.
"The economy has now made working longer a real imperative," Miller said.
That's the case for Chuck McCabe, 65, who opened several tax preparation firms in Virginia nine years ago.
"I expected I would retire at a normal age but the business took a lot longer to get to a point where it would be marketable. Now I really can't retire until the business is valuable enough for me to sell it." McCabe, who has cashed in his 401(k) to make payroll, estimates that it will be least five years until he can consider retiring.
McCabe's wife, Marilyn, also 65, even passed up her own retirement after a career in human resources to work alongside her husband and help build his tax practice. "She'll be working with me until we sell the business," he said. "I think she would like to be retired now."
Like the McCabe's nearly half of those ages 65 and older report being behind in terms of retirement preparedness, according to a recent survey by TD Ameritrade.
"We are entering a stage, given the heightened longevity and our changing economic circumstances, that people will continue working," according to Marcia Wagner, managing partner of The Wagner Law Group, a Boston-based law firm specializing in the Employee Retirement Income Security Act.
Wagner admits she has no plans to ever retire either -- but, like Alper, by choice. "I will work till I die because I like what I do."
Saturday, October 2, 2010
Bail Out by Ah Long
KUALA LUMPUR: Illegal money-lenders have expanded their activities to the courts by offering bail to people charged with criminal offences.
Court officials claimed that they have received information on their activities. The moneylenders either acted as professional bailors or
loaned money to people who needed it to post bail.
Notices have been put up at court premises to advise the public not to be deceived by these moneylenders.
“All court directors in Peninsular Malaysia have received a directive dated Aug 25 from the registrar to put up the notices,” Kuala Lumpur Court director Azizah Mahamud said.
The notices reminded the public that unlicensed money-lending was illegal.
“The public is also reminded to be wary as the court has never appointed any agents or individuals to settle any cases on the court’s behalf.
“If there are any offers of such services from Ah Long or touts, a report can be lodged with either the court or the police,” she said. Sources highlighted a recent case where two “professional bailors” stood surety for a foreigner in a
criminal case in the Sessions Court at Jalan Duta, here. The court was later informed by the “bailors” that the accused had absconded and that they wanted their money back.
“The judge forfeited the bail money and also disallowed the two bailors from standing bail in a different case,” the source said. Acting Federal Commercial Crimes Investigation Department director Datuk Nooryah Md Anvar said she
had not received any reports on the matter.
“To my knowledge, no such reports have been lodged with the police on the loan sharks’ activities in the court premises,” she told the New Straits Times.
MCA Public Services and Complaints Bureau head Datuk Michael Chong also said he had not received any such reports from the public.
“However, when people are desperate, they will do anything including borrowing money from loan sharks,” he said.
Court officials claimed that they have received information on their activities. The moneylenders either acted as professional bailors or
loaned money to people who needed it to post bail.
Notices have been put up at court premises to advise the public not to be deceived by these moneylenders.
“All court directors in Peninsular Malaysia have received a directive dated Aug 25 from the registrar to put up the notices,” Kuala Lumpur Court director Azizah Mahamud said.
The notices reminded the public that unlicensed money-lending was illegal.
“The public is also reminded to be wary as the court has never appointed any agents or individuals to settle any cases on the court’s behalf.
“If there are any offers of such services from Ah Long or touts, a report can be lodged with either the court or the police,” she said. Sources highlighted a recent case where two “professional bailors” stood surety for a foreigner in a
criminal case in the Sessions Court at Jalan Duta, here. The court was later informed by the “bailors” that the accused had absconded and that they wanted their money back.
“The judge forfeited the bail money and also disallowed the two bailors from standing bail in a different case,” the source said. Acting Federal Commercial Crimes Investigation Department director Datuk Nooryah Md Anvar said she
had not received any reports on the matter.
“To my knowledge, no such reports have been lodged with the police on the loan sharks’ activities in the court premises,” she told the New Straits Times.
MCA Public Services and Complaints Bureau head Datuk Michael Chong also said he had not received any such reports from the public.
“However, when people are desperate, they will do anything including borrowing money from loan sharks,” he said.
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