Gold Will Outlive Dollar Once Slaughter Comes: John Hathaway - Bloomberg

Gold Will Outlive Dollar Once Slaughter Comes: John Hathaway

By John Hathaway - Oct 28, 2010

Bloomberg Opinion

The world’s monetary system is in the process of melting down. We have entered the endgame for the dollar as the dominant reserve currency, but most investors and policy makers are unaware of the implications.

The only questions are how long the denouement of the dollar reserve system will last, and how much more damage will be inflicted by new rounds of quantitative easing or more radical monetary measures to prop up the system.

Whether prolonged or sudden, the transition to a stable monetary system will become possible only when the shortcomings of the status quo become unbearable. Such a transition is, by definition, nonlinear. So central-bank soothsaying based on the extrapolation of historical data and the repetition of conventional wisdom offers no guidance on what lies ahead.

It’s amazing that there is no intelligent discourse among policy leaders on the subject of monetary rot and its implications for the future economic and political landscape. Until there is fundamental monetary reform on an international scale, most economic forecasts aren’t worth the paper on which they are written.

Telltale signs of future trouble aren’t hard to spot. Only a few months ago, Federal Reserve Chairman Ben Bernanke and a chorus of other high-ranking Fed officials were talking about exit strategies from the U.S. central bank’s bloated balance sheet and the financial system’s unprecedented excess liquidity. Now, those same officials are talking about pumping more money into the system to stimulate growth.

Risky Targets

And they’re not alone: Six months ago, the chief economist of the International Monetary Fund, Olivier Blanchard, suggested that raising inflation targets to 4 percent from 2 percent wouldn’t be too risky.

This sort of talk must grate on the nerves of our trading partners, China, India, Russia and others, who have accumulated pyramids of non-yielding Treasury debt. No haven there. Return- free risk may be a better way to put it. And bickering among central bankers over currency manipulation and rising trade tensions doesn’t exactly reinforce one’s confidence in a scenario of sustained economic growth and a return to prosperity.

The prospects for an orderly unwinding of the extreme posture of global monetary policy are zero. Bernanke, Jean- Claude Trichet and Mervyn King, his counterparts in Europe and the U.K. respectively, are huddling en masse upon the most precarious perch in the history of monetary affairs. These alleged guardians of monetary stability, in their attempts to shore up the system, have simply created the incinerator for paper money. We are past the point of no return. Quantitative easing may well become a way of life.

No Freak Occurrence

The consensus investment view seems to be that the credit crisis of 2008 was a freak occurrence, unlikely to repeat. That is wishful thinking. Monetary policy has painted itself into a corner. Based on our present course, there will be more bubbles and more meltdowns.

Financial markets and institutions sense trouble, as reflected in the flight to supposedly safe assets such as Treasuries and corporate-debt instruments with paltry yields, as well as the reluctance to lend by commercial banks. We are stuck in an epic liquidity trap. The irony is, if global central banks succeed in creating inflation, the value of these safe assets will be destroyed. It is a slaughter waiting to happen.

In the pedantic mentality of central bankers, their playbook creates just the right amount of inflation. As inflation accelerates, consumers will spend to get rid of their dollars of diminishing value and spur the economy. Once consumers start spending, it will be time to raise interest rates because a solid foundation for prosperity will have been established, they say.

Slender Thread

But whatever the playbook promises, the capacity of financial markets to overshoot can’t be overestimated. The belief among policy makers and financial markets in the possibility of this sort of fine-tuning is preposterous, but it is the slender thread on which remaining investment and business confidence rests.

The breakdown of the monetary system will be chaotic. When inflation commences, it will be highly disruptive. The damage to fixed-income assets will seem instantaneous. Foreign-exchange markets will become dysfunctional. The economy will become even more fragile and unpredictable.

Gold is an imperfect, but comparatively reliable, market gauge for the extent of current and future monetary destruction. The recent acceleration in the dollar price of the metal to $1,381, a record high in nominal terms, coincided with talk of a new round of quantitative easing and highly visible discord among major nations on trade and currency-valuation issues.

Naysayers’ Bubble

Naysayers point to gold’s price and see a bubble, without understanding that the only acceleration that is taking place is in the rate of decline of paper currency. The Fed is organizing an attack on the dollar’s value, believing that this is the most expedient way to defuse deflationary market forces. The man in the street is unaware, a perfect setup. Inflation can only be successful when the public doesn’t see it coming.

The sudden torrent of commentary on gold isn’t the sign of a bubble. Anti-gold pundits provide a great service to those who grasp this historical moment: They facilitate the advantageous positioning of the one asset most likely to be left standing when the dust settles.

(John Hathaway is a managing director of Tocqueville Asset Management LP in New York. The opinions expressed are his own.)

To contact the writer of this column: John Hathaway at JHathaway@Tocqueville.com

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net

®2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Gold Will Outlive Dollar Once Slaughter Comes: John Hathaway - Bloomberg

Share

________________________

M & A: Worries Grow About BHP Deal for Potash

Worries Grow About BHP Deal for Potash

will the deal go through?  If not, CAD 130/share is the target! -

----------------------------------------

From the NYTimes.com- DealBook

Potash Corporation of Saskatchewan investors seem to fear that the Canadian government may block BHP Billiton's hostile bid for the company, analysts said.

Go to Article from The New York Times:

http://www.nytimes.com/2010/10/29/business/global/29potash.html?emc=dbk

Potash chief Bill Doyle urged patience for investors expecting an alternative to BHP Billiton's $40 billion bid, two months after starting talks with potential suitors, Bloomberg News reported.

Go to Article from Bloomberg News:

http://www.bloomberg.com/news/2010-10-28/potash-having-very-active-conversations-on-alternative-bids.html?dbk

Read More

http://dealbook.blogs.nytimes.com/?p=309373&dlbk&emc=dlbk

still not ready to accept reality…

Investors realise gold is not all that glitters

By Ellen Kelleher

Published: October 29 2010 18:30 | Last updated: October 29 2010 18:30

The focus of investors scouting about for value in the precious metals market has shifted to palladium, platinum and silver, as gold now trades at record levels.

Investment flows into exchange-traded funds (ETFs) backed by platinum and palladium have about matched or exceeded those wending their way into gold-backed ETFs in the last month, data from ETF Securities shows.

The rise in the metals’ prices is just as impressive. The cost of palladium – used as a catalyst in converters that clean car exhausts – soared 93 per cent to $626 a troy ounce in the past year, hitting a nine-year high thanks to a pick-up in interest from hedge funds. Silver – the poor man’s gold – now costs $23.73 per troy ounce, having risen more than 45 per cent in the same period. And platinum – palladium’s sister metal and a requisite component in diesel car engines – trades at more than $1,680 a troy ounce.

“Much like gold and platinum, palladium has experienced a QE2 sugar rush, not looking back since its $459.25 low of August 12 after the Fed decided to hold its balance-sheet constant,” said Edel Tully, a UBS commodities strategist.

The uptick in interest in the metals stems from the uncertainty surrounding the economy as well as fears about another round of quantitative easing in the US, and concerns about currency depreciation.

But volatility remains a concern. Starting next week, precious metal prices are likely to see sharp swings because of expected announcements from the Bank of England and the Federal Reserve, analysts forecast.

“Between now and the Federal Open Market Committee day, precious metals will likely endure patience-testing and see-saw price action,” wrote Tully in a recent note.

But even if prices swing in the near-term, longer-term forecasts for palladium in particular and platinum as well look compelling.

“Of all the precious metals, we’re most bullish on palladium,” claims Walter De Wet, head of commodities research at Standard Bank in London. “Demand is also strong for platinum but not as strong as it is for palladium.”

Demand for palladium is set to continue to exceed supply in the coming years as ownership of petrol-based cars becomes commonplace in China and other emerging market countries.

At the same time, palladium’s supply looks constrained. Some analysts speculate that the Russian government’s stockpiles of palladium may have dried up. Sales from the Russian government have added about 1m ounces of palladium supply annually in recent years.

UBS’s Tully forecasts that a shortage of supply from Russia could push palladium prices above $1,000 per troy ounce. Platinum prices, meanwhile, which have been rising since late 2008, look more toppy by comparison. Analysts argue that they have been pushed higher by speculators and the flow of money into emerging markets, which tends to boost commodities demand. While some expect platinum – the only metal that can be used as a catalytic converter in diesel engines – to rise higher yet in 2011, they think a correction is likely one day given that the metal has fewer industrial uses than palladium and is more costly.

“We believe that platinum positioning is over-extended; particularly as no ‘new’ fundamental driver has emerged,” says a recent UBS commodities research report.

Prospects for silver, meanwhile, are even less clear. While the metal still trades at record levels, commodities experts claim that it tends to move in line with the gold price. They warn that history suggests silver underperforms gold when markets fall and outperforms it when they rise. “The silver market surplus is quite bloated at the moment,” points out Suki Cooper of Barclays Capital. “If investment demand slows down for silver, we’re likely to see a sharp correction.”

But “silver fever” is still all the rage, with sales of silver coins set to hit a record high this year. Standard Bank’s De Wet concludes that gold and silver prices – which continue to benefit from strong interest from Asia – will see support through the Chinese new year which begins in February.

Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.

"FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms
© Copyright The Financial Times Ltd 2010.

http://www.ft.com/cms/s/2/18ef998a-e382-11df-8ad3-00144feabdc0.html

PIMCO | Investment Outlook - Run Turkey, Run

Run Turkey, Run

• The Fed’s announcement of a renewed commitment to Quantitative Easing has been well telegraphed and the market’s reaction is likely to be subdued.
• We are in a “liquidity trap,” where interest rates or trillions in asset purchases may not stimulate borrowing or lending because consumer demand is just not there.
• The Fed’s announcement will likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment.

They say a country gets the politicians it deserves or perhaps it deserves the politicians it gets. Whatever the order, America is next in line, and as we go to the polls in a few short days it’s incumbent upon a sleepy and befuddled electorate to at least ask ourselves, “What’s going on here?” Democrat or Republican, Elephant or Donkey, nothing much ever seems to change. Each party has shown it can add hundreds of billions of dollars to the national debt with little to show for it or move our military from one country to the next chasing phantoms instead of focusing on more serious problems back home. This isn’t a choice between chocolate and vanilla folks, it’s all rocky road: a few marshmallows to get you excited before the election, but with a lot of nuts to ruin the aftermath.

Each party’s campaign tactics remind me of airport terminals pre-9/11 when solicitors only yards apart would compete for the attention and dollars of travelers. “Save the Whales,” one would demand, while the other would pose as its evil twin – “Eat Whale Blubber,” the makeshift sign would read. It didn’t matter which slogan grabbed you, the end of the day’s results always produced a pot of money for them and the whales were neither saved nor eaten. American politics resemble an airline terminal with a huckster’s bowl waiting to be filled every two years.

And the paramount problem is not that we contribute so willingly or even so cluelessly, but that there are only two bowls to choose from. Thomas Friedman, the respected author of The World Is Flat, and a weekly New York Times Op-Ed author, recently suggested “ripping open this two-party duopoly and having it challenged by a serious third party” unencumbered by special interest megabucks. “We basically have two bankrupt parties, bankrupting the country,” was the explicit sentiment of his article, and I couldn’t agree more – whales or no whales. Was it relevant in 2004 that John Kerry was or was not an admirable “swift boat” commander? Will the absence of a mosque within several hundred yards of Ground Zero solve our deficit crisis? Is Christine O’Donnell really a witch? Did Meg Whitman employ an illegal maid? Who cares! We are being conned, folks; Democrats and Republicans alike. What have you really heard from either party that addresses America’s future instead of its prurient overnight fascination with scandal? Shame on them and of course, shame on us. We’re getting what we deserve. Vote NO in November – no to both parties. Vote NO to a two-party system that trades promises for dollars and hope for power, and leaves the American people high and dry.

There’s another important day next week and it rather coincidentally occurs on Wednesday – the day after Election Day – when either the Donkeys or the Elephants will be celebrating a return to power and the continuation of partisan bickering no matter who is in charge. Wednesday is the day when the Fed will announce a renewed commitment to Quantitative Easing – a polite form disguise for “writing checks.” The market will be interested in the amount (perhaps as much as an initial $500 billion) as well as the targeted objective (perhaps a muddied version of “2% inflation or bust!”). The announcement, however, has been well telegraphed and the market’s reaction is likely to be subdued. More important will be the answer to the long-term question of “will it work?” and perhaps its associated twin “will it create a bond market bubble?”

Whatever the conclusion, not only investors, but the American people should recognize that Wednesday, even more than Tuesday, represents a critical inflection point in determining our future prosperity. Of course we’ve tried it before, most recently in the aftermath of the Lehman crisis, during which the Fed wrote $1.5 trillion or so in “checks” to purchase Agency mortgages and a smattering of Treasuries. It might seem a tad dramatic then, to label QEII as “critical,” sort of like those airport hucksters, I suppose, that sold whale blubber for a living. But two years ago, there was the implicit assumption that the U.S. and its associated G-7 economies needed just an espresso or perhaps an Adderall or two to get back to normal. Normal just hasn’t happened yet, and economic historians such as Kenneth Rogoff and Carmen Reinhart have since alerted us that countries in the throes of delevering can take many, not several, years to return to a steady state.

The Fed’s second round of QE, therefore, more closely resembles an attempted hypodermic straight to the economy’s heart than its mood elevator counterpart of 2009. If QEII cannot reflate capital markets, if it can’t produce 2% inflation and an assumed reduction of unemployment rates back towards historical levels, then it will be a long, painful slog back to prosperity. Perhaps, as a vocal contingent suggests, our paper-based foundation of wealth deserves to be buried, making a fresh start from admittedly lower levels. The Fed, on Wednesday, however, will decide that it is better to keep the patient on life support with an adrenaline injection and a following morphine drip than to risk its demise and ultimate rebirth in another form.

We at PIMCO join with Ben Bernanke in this diagnosis, but we will tell you, as perhaps he cannot, that the outcome is by no means certain. We are, as even some Fed Governors now publically admit, in a “liquidity trap,” where interest rates or trillions in QEII asset purchases may not stimulate borrowing or lending because consumer demand is just not there. Escaping from a liquidity trap may be impossible, much like light trapped in a black hole. Just ask Japan. Ben Bernanke, however, will try – it is, to be honest, all he can do. He can’t raise or lower taxes, he can’t direct a fiscal thrust of infrastructure spending, he can’t change our educational system, he can’t force the Chinese to revalue their currency – it is all he can do, and as he proceeds, the dual questions of “will it work” and “will it create a bond market bubble” will be answered. We at PIMCO are not sure.

Still, while next Wednesday’s announcement will carry our qualified endorsement, I must admit it may be similar to a Turkey looking forward to a Thanksgiving Day celebration. Bondholders, while immediate beneficiaries, will likely eventually be delivered on a platter to more fortunate celebrants, be they financial asset classes more adaptable to inflation such as stocks or commodities, or perhaps the average American on Main Street who might benefit from a hoped-for rise in job growth or simply a boost in nominal wages, however deceptive the illusion. Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme. Public debt, actually, has always had a Ponzi-like characteristic. Granted, the U.S. has, at times, paid down its national debt, but there was always the assumption that as long as creditors could be found to roll over existing loans – and buy new ones – the game could keep going forever. Sovereign countries have always implicitly acknowledged that the existing debt would never be paid off because they would “grow” their way out of the apparent predicament, allowing future’s prosperity to continually pay for today’s finance.

Now, however, with growth in doubt, it seems that the Fed has taken Charles Ponzi one step further. Instead of simply paying for maturing debt with receipts from financial sector creditors – banks, insurance companies, surplus reserve nations and investment managers, to name the most significant – the Fed has joined the party itself. Rather than orchestrating the game from on high, it has jumped into the pond with the other swimmers. One and one-half trillion in checks were written in 2009, and trillions more lie ahead. The Fed, in effect, is telling the markets not to worry about our fiscal deficits, it will be the buyer of first and perhaps last resort. There is no need – as with Charles Ponzi – to find an increasing amount of future gullibles, they will just write the check themselves. I ask you: Has there ever been a Ponzi scheme so brazen? There has not. This one is so unique that it requires a new name. I call it a Sammy scheme, in honor of Uncle Sam and the politicians (as well as its citizens) who have brought us to this critical moment in time. It is not a Bernanke scheme, because this is his only alternative and he shares no responsibility for its origin. It is a Sammy scheme – you and I, and the politicians that we elect every two years – deserve all the blame.

Still, as I’ve indicated, a Sammy scheme is temporarily, but not ultimately, a bondholder’s friend. It raises bond prices to create the illusion of high annual returns, but ultimately it reaches a dead-end where those prices can no longer go up. Having arrived at its destination, the market then offers near 0% returns and a picking of the creditor’s pocket via inflation and negative real interest rates. A similar fate, by the way, awaits stockholders, although their ability to adjust somewhat to rising inflation prevents such a startling conclusion. Last month I outlined the case for low asset returns in almost all categories, in part due to the end of the 30-year bull market in interest rates, a trend accentuated by QEII in which 2- and 3-year Treasury yields approach the 0% bound. Anyone for 1.10% 5-year Treasuries? Well, the Fed will buy them, but then what, and how will PIMCO tell the 500 billion investor dollars in the Total Return strategy and our equally valued 750 billion dollars of other assets that the Thanksgiving Day axe has finally arrived?

We will tell them this. Certain Turkeys receive a Thanksgiving pardon or they just run faster than others! We intend PIMCO to be one of the chosen gobblers. We haven’t been around for 35+ years and not figured out a way to avoid the November axe. We are a survivor and our clients are not going to be Turkeys on a platter. You may not be strutting around the barnyard as briskly as you used to – those near 10% annualized yields in stocks and bonds are a thing of the past – but you’re gonna be around next year, and then the next, and the next. Interest rates may be rock bottom, but there are other ways – what we call “safe spread” ways –to beat the axe without taking a lot of risk: developing/emerging market debt with higher yields and non-dollar denominations is one way; high quality global corporate bonds are another. Even U.S. Agency mortgages yielding 200 basis points more than those 1% Treasuries, qualify as “safe spreads.” While our “safe spread” terminology offers no guarantees, it is designed to let you sleep at night with less interest rate volatility. The Fed wants to buy, so come on, Ben Bernanke, show us your best and perhaps last moves on Wednesday next. You are doing what you have to do, and it may or may not work. But either way it will likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment.

If a country gets the politicians it deserves, then the same can be said of an investor – you’re gonna get what you deserve. Vote No to Republican and Democratic turkeys on Tuesday and Yes to PIMCO on Wednesday. We hope to be your global investment authority for a new era of “SAFE spread” with lower interest rate duration and price risk, and still reasonably high potential returns. For us, and hopefully you, Turkey Day may have to be postponed indefinitely.

William H. Gross
Managing Director

“Safe Spread” is defined as sectors that we believe are most likely to withstand the vicissitudes of a wide range of possible economic scenarios. All investments contain risk and may lose value.

Past performance is not a guarantee or a reliable indicator of future results. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Corporate debt securities are subject to the risk of the issuer’s inability to meet principal and interest payments on the obligation and may also be subject to price volatility due to factors such as interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government, government-agency or private guarantor there is no assurance that the guarantor will meet its obligations. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. The credit quality of a particular security or group of securities does not ensure the stability or safety of the overall portfolio.

There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest for a long-term especially during periods of downturn in the market.

This material contains the current opinions of the author but not necessarily those of PIMCO and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Pacific Investment Management Company LLC, 840 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626. ©2010, PIMCO.

PIMCO | Investment Outlook - Run Turkey, Run

Share this|

________________________

Goldman Advises Clients To Front Run The Fed Via POMO

Feed: zero hedge
Posted on: Friday, October 22, 2010 01:20 AM
Author: Tyler Durden
Subject: Goldman Advises Clients To Front Run The Fed Via POMO

 

After a few months of breaking down what the simplest trade in the world is, that would be frontrunning the Fed for the cheap seats, Zero Hedge is happy to advise our readers that finally Goldman Sachs itself has capitulated and is now indirectly telling its clients to frontrun Ben Bernanke via POMO. No complicated value investor nonsense, no pair trades, no cap structure arbitrage, no hedging, no levered beta plays. Buy ahead of POMO. Sell. Rinse. Repeat. From a GS distribution to clients: On the interplay between the FED and STOCKS: Since Sept 1 – when QE was becoming a mainstream focus – if you only owned S&P on days when the Fed conducted Open Market Operations (in US Treasuries), your cumulative return is over 11%.  in addition, 6 of the 7 times when S&P rallied 1% or more, OMO was conducted that day. this compares to a YTD return of 5.8%.  the point: you would have outperformed the market 2x by being long on just the 16 days when – this is the important part – you knew in advance that OMO was to be conducted. The market's performance on the 19 non-OMO days: +70bps. And there you have it - the top in frontrunning the Federal Reserve is now in. The most recent Fed POMO calendar is linked (there is one tomorrow). Frontrun away. Tentative Outright Treasury Operation Schedule Across all operations in the schedule listed below, the Desk plans to purchase approximately $32 billion. This is the amount of principal payments from agency debt and agency MBS expected to be received between mid-October and mid-November. Operation Date1 - Settlement Date - Operation Type2 - Maturity Range   Oct. 22, 2010 – Oct. 25, 2010 - Outright Treasury Coupon Purchase - 4/15/2013 – 9/30/2014   Oh, and Ben, your criminal organization will one day pay for making a complete manipulated travesty out of capital markets.

View article...

List of companies involved in the rescue of the 33 Chilean miners

List of companies involved in the rescue of the 33 Chilean miners

But this happened because the Chilean people, government and President were more interested in doing whatever it took, and accepted whatever would help from sources around their country and around the world.  They did not allow false nationalism nor internal politics nor special interests to stand in the way of their heartfelt national effort to retrieve their trapped brothers.  The Chileans organized the worldwide effort and made it work.

This displays true compassion, maturity and unity of purpose by the Chilean people and is what made the rescue successful.

List of American companies who contributed to the rescue of the Chilean miners. Organizations from other lands were likewise involved. The Chilean President was most gracious in recognizing all those who helped create the Chilean miracle.  · Schramm Inc. Of West Chester, Pennsylvania built the drills and equipment used to reach the trapped miners.  · Center Rock Company, also from Pennsylvania , built the drill bits used to reach the miners.  · UPS, the US shipping company, delivered the 13-ton drilling equipment from Pennsylvania to Chile in less than 48 hours.  · Crews from Layne Christensen Company of Wichita Kansas and its subsidiary Geotec Boyles Bros. Worked the drills and machinery to locate and reach the miners and then enlarge the holes to ultimately rescue them.  · Jeff Hart of Denver Colorado was called off his job drilling water wells for the U.S. Army's forward operating bases in Afghanistan to lead the drilling crew that reached the miners. · Atlas Copco Construction Mining Company of Milwaukee, Wisconsin provided consulting on how to make drilling equipment from different sources work together under differing pressure specifications. · Aries Central California Video of Fresno California designed the special cameras that were lowered nearly a mile into the ground sending back video of the miners. · Zephyr Technologies of Annapolis Maryland, made the remote monitors of vital signs that miners will wear during their ascent. · NASA Engineers designed the " Phoenix " capsule that miners would be brought to the surface in, and provided medical consulting, special diets and spandex suits to maintain miners' blood pressure as they're brought back to the surface. · Drilling Supply Co., Houston also involved. Canadian-based Precision Drilling Corp. And South-African company Murray & Roberts, drilled  backup rescue shafts in case the American rig failed. Which fortunately did not happen.

Insider Selling To Buying: 2,341 To 1 | zero hedge

Published on zero hedge (http://www.zerohedge.com)

---

Insider Selling To Buying: 2,341 To 1

By Tyler Durden

Created 10/05/2010 - 20:46

Sorry kids, we just report the news... as ugly as they may be. After last week saw an insider selling to buying [1]ratio of 1,411 to 1, this week the ratio has nearly doubled, hitting a ridiculous 2,341 to 1. And while Wall Street's liars and CNBC's clowns will have you throw all your money into "leading" techs like Oracle and Google, insiders in these names sold a combined $200 million in stock in the last week alone (following Oracle insider sales of $223 million in the prior week). Insiders can. not. wait. to. get. out. fast. enough. This Fed-induced rally is nothing short of a godsend for each and every corporate executive. But yes, there may be value: there was insider buying in 2 (two) companies last week: General Dynamics and Best Buy, for a whopping total of $177,064. At the same time sales were a total of $414 million: so is anyone wondering why JPMorgan is reopening its gold vault... Anyone left holding the bag on this market when the FRBNY props are taken away, will be left with the same return as all those investors who entrusted their money with Madoff. Guaranteed.
[2]
Source: Bloomberg [3]

• Best Buy
• Google
• Insider Selling

---

Source URL: http://www.zerohedge.com/article/insider-selling-buying-2341-1

Links:
[1] http://www.zerohedge.com/article/insider-selling-buying-surpasses-1400-1
[2] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/shirakawa/Insider Selling 10.4.jpg
[3] http://www.bloomberg.com/news/2010-10-04/weekly-insider-buying-and-selling-by-s-p-500-companies.html

Insider Selling To Buying: 2,341 To 1 | zero hedge

Share

-- The MasterFeeds

Copper Will Trade at $11,000 in a Year, Goldman Says - Bloomberg, October 5, 2010

We’ll see…

      

October 5, 2010

Copper Will Trade at $11,000 in a Year, Goldman Says

Copper will trade at $11,000 a metric ton in a year, Goldman Sachs Group Inc. said as it raised price estimates because of swelling demand.

The forecast implies a 35 percent gain from the metal’s current price. The bank had predicted on Sept. 17 that copper would trade at $8,050 a ton in 12 months. Goldman today advised investors to buy the December 2011 contract as increasing demand leads to shortages of the metal.

Copper for three-month delivery traded on the London Metal Exchange jumped 23 percent in the third quarter, the most in a year, helped by falling stockpiles and a weaker dollar. LME inventories shrank by 17 percent in the period, and the U.S. Dollar Index, a six-currency gauge of the greenback’s strength, slid 8.5 percent, the most since 2002.

“Supply-demand deficits look set to grow on emerging- market strength and improving demand from developed economies, which we expect to significantly outpace supply growth, drawing down inventories and creating market shortages,” analysts including London-based Jeffrey Currie said in the report. “We don’t believe that the market is fully pricing these shortages and the potential for demand rationing that lies ahead in 2011.”

Zinc Prices

Three-month copper traded at $8,156 a ton at 1:38 p.m. on the LME. The December 2011 contract was at $8,025. Goldman Sachs raised its three-month forecast for the metal to $8,500 and increased its six-month estimate to $8,800.

Copper will average $9,300 a ton next year, the bank said, compared with about $7,215 so far in 2010. Electrical equipment and construction are the main sources of demand.

Goldman Sachs also raised its 12-month forecast for zinc to $3,000 a ton. The metal, used to rust-proof steel, will likely stay in surplus for now because of supply growth, though the market will be more balanced in the year ahead and “possibly swinging to times of deficit” next year, the bank said.

Zinc for three-month delivery was last at $2,288 a ton on the LME, reducing this year’s decline to 11 percent. The metal will average $2,575 in 2011, said Goldman Sachs, which on Sept. 17 predicted a 12-month price of $2,225.

CNBC.com Article: Super-Rich Investors Stocking Up Gold by the Ton

CNBC.com Article: Super-Rich Investors Stocking Up Gold by the Ton

The world's wealthiest people have responded to economic worries by buying gold by the bar — and sometimes by the ton — and moving assets out of the financial system.

Full Story:
http://www.cnbc.com/id/39510784

------------------------------------------------
Download CNBC Real-Time from the App Store for Free and get Streaming Real-Time quotes, breaking news and the latest videos from CNBC.
http://www.itunes.com/apps/cnbcreal-time

Sent from my iPad

On Tomorrow's Secret Meeting To Plot The End Of High Frequency Trading | zero hedge

On Tomorrow's Secret Meeting To Plot The End Of High Frequency Trading

By Tyler Durden

Created 10/03/2010 - 17:35

Published on zero hedge (http://www.zerohedge.com)

The SEC's "definitive"(ly worthless) report on what happened on May 6^th was a dud, and was nothing more than a distraction-based smear campaign against Waddell and Reed (an experiment in which we can only hope W&R participated involuntarily): a firm which did something that was completely in its right to do. But is this unexpected? After all had the SEC confirmed that it is indeed HFT who is responsible for a broken market structure, it would have effectively destroyed itself: if and when the SEC does indeed confirm that the entire market topology over the past 5 years has been hijacked by young and pustular math Ph.D.'s with fast computers, the implications to fair markets would be orders of magnitude worse than the fallout associated with the Madoff scandal, and could serve as grounds for the unwind of the SEC itself, which would have to explain why it has been avoiding calls against HFT impropriety for years. So in a sense Mary Schapiro's conclusion is nothing less than a lass desperate act of self preservation. Which however means nothing in the grand scheme of things. Tomorrow, as the WSJ [1]reported a week ago, the Investment Company Institute, better known to Zero Hedge readers as the guys who track the now permanent weekly outflows from capital markets, is holding a secret meeting in which some of the participants "are determined to push for a plan to restrict high-frequency trading" (furthermore, the ICI was rather pissed about this particular leak, implying that things are really serious). While the SEC may have declared a market structure truce, and is peddling its usual worthless solution of circuit breakers (more on this below), actual market participants have had enough of seeing their profits plunge and seeing HFT extract more capital out of the market than the much maligned ten years ago market makers and specialists ever did.
More from the WSJ [1]on the dilemma facing the "whales" -traders who trade in blocks which are orders of magnitude larger than the typical (lately) trade size of 100 to 300 shares:

Using powerful computers and data feeds, high-frequency trading firms typically hold stocks a few minutes and sometimes only a few seconds at a time, churning roughly half of total stock-market volume. Whenever you—and your mutual fund or pension plan—buy or sell a stock, one of these fast-trading firms is likely to be on the other side of the trade.

The problem? While some fund leaders have praised high-frequency trading for making markets more efficient, others contend that the profits earned by fast traders may come partly at the expense of ordinary investors.

Mutual funds and other giant investors are often forced buyers and sellers. When money comes in they must buy stocks; when it goes out they must sell. Their typical buy or sell order is roughly 185,000 shares. Yet the average trade size on U.S. exchanges is only about 100 to 300 shares.

So institutions trade in dribs and drabs. A giant buy order would push up a stock; a huge sell order would knock it down. "Would you leave $100 in cash on the street corner and hope nobody takes it, or would you hide it in your pocket?" asks Andrew Brooks, head of U.S. equity trading at T. Rowe Price. "Information about our order flow is valuable, and we need to protect it."

Yet order flow leakage and anticipation is precisely the key issue behind the great battle currently raging between HFTs and slow money: algorithms constantly seek and find new way to predict if a small block is closed or if there are millions of shares lying in wait behind it, forced to transact at any price. Themis Trading's Joe Saluzzi has discussed this issue extensively before, for example in this article in Advanced Trading [2] magazine, in which he notes that implicit costs associated with constant order frontrunning by HFTs, "have been rising and hurting pension and mutual fund performance. Even the most sophisticated buy-side quantitative funds are also experiencing higher trading costs, as their models are also being spotted and taken advantage of by their highspeed, high-frequency trading cousins."
The WSJ explains this phenomenon as follows:

Any institutional order for a couple hundred shares can have thousands or even millions of shares behind it. A fast trader that can infer which orders were placed by a big institution gains an insight into how stock prices may be about to change. Whoever gets there first stands to make a tiny profit on each of those trades.

Some of the larger exchanges are now fighting back with all they have - starting tomorrow the NYSE is now instituting a small way to throw a wrench in the HFT spokes: selective order ID elimination.

Direct data feeds supplied to fast traders by several major exchanges have customarily included an "order ID"—a kind of tag that, according to several traders, may assist a fast trader in deducing whether a large institution lurks behind a small order. Starting Oct. 4, the NYSE Arca exchange will give customers the option of having these IDs removed from its direct data feeds on orders they don't want displayed to the whole market.

Traders say the absence of the ID may itself alert rapid traders to the presence of a large, hidden order. "Without the order ID, we don't think anyone could map the order to any other information to divine that it is part of something larger," responds Ray Pellecchia, an NYSE Euronext spokesman.

Another exchange, recently known for doing pretty much anything to win order flow, and thus permitting all sorts of alleged shady practices to take effect on it is BATS, which chimes in on another practice known as "partial post only at limit."

Or consider a type of trading order called a "partial post only at limit." Here, if a fast trader's small buy order is rejected instead of executed, the firm can deduce that a large block of shares may lie hidden in reserve, poised to sell at a given price. Thus a trader may be able to get information without executing the trade. Clever use of this order type can increase the trader's odds of being in the right place at the right time—capturing a splinter-thin, lightning-fast profit before the institution can move.

Chris Isaacson, chief operating officer at BATS Exchange, the third-largest U.S. stock market, downplays such concerns. "This order type is rarely used and would be very complex to implement for the purpose of detecting a large order on the other side," he says. Such a trader "would have to be willing to take considerable risk."

Which is why, since the SEC refuses to get involved, starting tomorrow, all readers should immediately notify their brokers to stop allowing their orders to be Flashed (a topic extensively discussed last summer and which is still continuing with the SEC's blessing) if they have not already done so (as this implicitly allows non-qualified orders to be front run), and to stop trading with any exchange with either has no idea what this is, or refuses to comply. More importantly, brokers should also be advised to drop all order IDs tagging each and every individual order. Since the HFTs front run stock blocks based on a statistical distribution of tagged versus untagged orders, the only hope of equalizing the playing field is if every single order is now untagged, thus fooling HFTs into believing that there is large money sitting in the bid behind the order. Granted, this may force prevailing prices higher for the time being, but the end result will be a faster divergence from market equilibrium, which eventually, when the balance inevitably reasserts itself, will force the vast majority of HFTs to be blown up once there is a market correction and the computers are caught with artificially dollar-cost average inflated prevailing prices. In other words: open war on HFTs has been declared, and since regulators refuse to stand on the side of the small and long-term investors, it is time to form a unified block against the HFT scourge.
And while we are once again (as always) discussing the SEC's terminal incompetence, we wish to present one last time, just what happened on Friday in the LQD flash crash, courtesy once again of Nanex. Note the dubious absence of Waddell and Reed:
Chart 1, which demonstrates what exchange(s) the rogue algo originated from: note the PACF repeater and BATS stubbing all the way down:
[3]
Chart 2, which shows the actual LQD trades:
[4]
Chart 3, which confirms that the PACF had the BBO all the way down. Once again, no W&R
[5]
Is it thus any wonder the industry itself is now ganging up against HFT? We believe that now that HFT is scapegoated by real money accounts for all P&L problems and otherwise, its days are effectively numbered. Which is why as the HFT world enters its death rattle days, expect markets to be even more unpredictable and volatile than ever... and of course, to ultimately break as usual.

• Capital Markets
• Circuit Breakers
• High Frequency Trading
• Joe Saluzzi
• New York Stock Exchange
• NYSE Euronext
• Stop Trading

---

Source URL: http://www.zerohedge.com/article/tomorrows-secret-meeting-eliminate-high-frequency-trading

Links:
[1] http://online.wsj.com/article/SB10001424052748703793804575511990102886132.html#articleTabs=article
[2] http://www.themistrading.com/article_files/0000/0587/081010_AdvancedTrading2.pdf
[3] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/shirakawa/LQD 1.png
[4] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/shirakawa/LQD 2.png
[5] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/shirakawa/LQD 3.png

On Tomorrow's Secret Meeting To Plot The End Of High Frequency Trading | zero hedge