Guest post by John Redwood.
2012 is a year crying out for leadership.
2011 saw dreadful drift in the West. The EU politicians proved incapable of deciding whether to press on to create a single country called Euroland or not. Would they take the necessary powers to tax, spend, send money to troubled regions and print money on the scale needed to shepherd through their chaotic union? Would the voters let them? Could they do so by stealth, without referenda?
As a result they fell between the two schools of thought. Some wanted to avoid spending and borrowing collectively, thinking they could have a currency union without the usual systems for using budgets to ease the problems in the less successful parts of the zone. Others wanted more transfers and common borrowing, but were unable to convince Germany fully, as she feared she would be paying a lot of the bills.
The US politicians ended up in stalemate. US politics is polarised between those who want to spend and tax less, and those who want to tax more. It is split between proponents of Obama’s health care reforms, and those who want them reversed as soon as possible. Major deficit reduction has been delayed. The US wants to pull out of its Middle Eastern wars, but has sounded an uncertain note over how and when.
Guest post for all the gold bugs, by World Complex. Gold is still the most important non fuel mineral in the world, irrespective if trading at 1, 2 or 3k…..
Perhaps you haven’t noticed, but at The World Complex, we like gold. A lot. Not too long ago we ran an article about historical gold production, with some estimates of future production for gold. Today we will take a closer look.
It turns out that my main professional activity is exploring for gold, and yet that isn’t why I spend so much time thinking about it.
I began this blog to investigate application of mathematical methodology to geologic problems. Over the last year in particular, I have put increasing effort into using the same tools to look at economic problems. Yet ask geologists why they spend so much time looking for gold, and you will get many answers, none of them true.
In terms of exploration effort, gold is the most important mineral on the planet. Approximately 50% of all money spent on non-fuel mineral exploration during the last fifteen years was spent on gold exploration.
Summing up the year for geared ETF holders might be quite the opposite of what they thought, despite being right. This is what they tell you;
Each Short or Ultra ProShares ETF seeks a return that is either 3x, 2x, -1x, -2x or -3x of the return of an index or other benchmark (target) for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, ProShares’ returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks. Investors should monitor their ProShares holdings consistent with their strategies, as frequently as daily.
And this is what they don’t tell you, click here.
Key Call 1: Buy Gilts with Sterling exposure
Key Call 2: Buy US investment grade corporate bonds
Key Call 3: Buy 10Y US Treasuries, expect the curve to flatten
Key Call 4: Buy Emerging Asia curve steepeners (but caution on EM FX)
Key Call 5: Long US Dollar / Short Euro
Key Call 6: Long Gold / Short Oil
Key Call 7: Long European Telecoms / Short European Utilities (equity)
Market is not worth trading, as volumes are run by juniors on the desks. For all those who have forgotten what they learnt at Econ 101, here is a great year end piece by the Economist.
Warren Mosler, an innovative carmaker, a successful bond-investor and an idiosyncratic economist, moved to St Croix in 2003 to take advantage of a hospitable tax code and clement weather. From his perch on America’s periphery, Mr Mosler champions a doctrine on the edge of economics: neo-chartalism, sometimes called “Modern Monetary Theory”. The neo-chartalists believe that because paper currency is a creature of the state, governments enjoy more financial freedom than they recognise. The fiscal authorities are free to spend whatever is required to revive their economies and restore employment. They can spend without first collecting taxes; they can borrow without fear of default. Budget-makers need not cower before the bond-market vigilantes. In fact, they need not bother with bond markets at all.
The neo-chartalists are not the only people telling governments mired in the aftermath of the global financial crisis that they could make things better if they would shed old inhibitions. “Market monetarists” favour more audacity in the monetary realm. Tight money caused America’s Great Recession, they argue, and easy money can end it. They do not think the federal government can or should rescue the economy, because they believe the Federal Reserve can.
While all pundits try making the correct 2012 outlook during the last trading days, the HFT machines, churning some 70% of all traded volumes, still trade in a highly unregulated fashion.
Below interview with NYSE COO. Presented without comments. Wonder just how much HFT firms pay the Exchange?
Must read guest post by Saxo Bank’s Sten Jakobsen. Don’t forget reviewing the Stress Chart Indicator.
‘If the debtor is in a difficulty, grant him time till it is easy for him to repay. But if ye remit it by way of charity, that is best for you if ye only knew’. – Qur’an: 2.280’
There is not much to cheer about for 2011 and looking into 2012.
It is remarkable that the US was able to sustain a positive – barely – year again – now two years of near zero performance. Impressive? Hardly – The FED and US government has been throwing everything at this market – low interest, Operation Twist, QE 1 through 5, easier regulation for banks (In house models vs. harsh gross regulation).
A different story is Europe minus 20 pc is not a good year, and as we close the year economic activity is collapsing in Asia, moving towards major deflation in Europe, and slowing/maintaining low growth in the US. This creates environment/outlook for:
1. Major risk of ECB moving towards QE in Q1 of 2012. Europe will “fall of the cliff” in economic growth terms in Q1 – forcing German yield towards zero – but….. the initiation of QE could medium-term mean higher rates. I remain of the idea that early 2012 will be long-term low in interest rates in Europe, but also globally. The low interest rate environment have created negative impacts on spending, investment and savings which only can be solved through more market less government intervention.
2. We coined Q4-2011 the “Maximum Intervention” in our Outlook Report and it clear became an almost idiotic list of initiatives which all of them really only created more of the “extend-and-pretend” concept. This is overview of “measures” involving ECB in Q4. Joke! Q1-2012 could be the critical test of this fractional economy