With Gold taking out new levels in Euro terms, here are a few thoughts by Jessie.
Gold and silver had sharp rallies today as the selling going in to the end of quarter and the gold option expiry dissipated and a sharp short squeeze ensued.
Gold hit a new high in euros today on the back of fresh uncertainties in Europe, particularly in Spain.
As you know money market funds are savings vehicles with a fixed unit price that pay dividends, like a savings account. They arose as alternatives to bank deposit accounts because they were able to present higher returns than the regulated banks.
The Banks, and their regulatory friends who have been mostly among the Republicans want the money markets to have a floating price like a stock, opening the possibility for negative returns on savings. Turbo Timmy G. came out today calling for reforms in the money market funds, and a ‘floating price’ for the money market fund.
Et tu Timmy? All day long. The young man is getting ready to leave Washington after the election and take a lucrative trip through the crony capitalist revolving door, and probably into the banking sector.
The increased uncertainty, the chance of negative returns on your savings if the funds are allowed to fluctuate below one dollar per unit, is sure to drive quite a bit of risk adverse money out of the money market funds. And it opens the door to price manipulation and fraud, doing nothing to help promote transparency and confidence.
The Trader has written extensively on the Algo/HFT trading over the past year. Regulators do not understand, and the Algos are running the markets. We are not against technology, as we use it ourselves, but we are concerned on the long term implications of the markets if a respectable player like Knight can practically go under over one rogue algo going crazy. More by Felix Salmon of Reuters.
By the end of 2007, UNX was at the top of the list. The Plexus Group rankings of the leading trading firms hadn’t even mentioned UNX a year earlier. Now UNX was at the top, in nearly every relevant category…
Harrison understood that geography was causing delay: even at the speed of light, it was taking UNX’s orders a relatively long time to move across the country.
He studied UNX’s transaction speeds and noticed that it took about sixty-five milliseconds from when trades entered UNX’s computers until they were completed in New York. About half of that time was coast-to-coast travel. Closer meant faster. And faster meant better. So Harrison packed up UNX’s computers, shipped them to New York, and then turned them back on.
This is where the story gets, as Harrison put it, weird. He explains: “When we got everything set up in New York, the trades were faster, just as we expected. We saved thirty-five milliseconds by moving everything east. All of that went exactly as we planned.”
On today’s “Street Fighter,” Newport Value Partners Managing Director Charles Ortel talks about the European debt crisis and his investment strategy. Greylock Capital Management President Hans Humes also speaks on Bloomberg Television’s “Street Smart.”
Guest post by Azizonomics.
Last December I took the time to explain capitalism for Angela Merkel:
Capitalism means both successes and failures. It is a fundamentally experimental system, with a continuous feedback mechanism — the market, and ultimately profit and loss. Ideas that work are rewarded with financial success, and ideas that don’t are punished with failure. With capitalism, systems, ideas and firms that fail to produce what the market wants fail. They go bankrupt. Their assets, and their debt is liquidated.
When that mechanism is suspended by a government or central bank that thinks it knows best — and that a system that is too interconnected to fail is worth saving at any cost — the result is almost always stagnation. This is for a number of reasons — most obviously that bailouts sustain crippling debt levels, and are paid for through contractionary austerity. But it is larger than just that.
In nature, ideas and schemes that work are rewarded — and ideas and schemes that don’t work are punished. Our ancestors who correctly judged the climate, soil and rainfall and planted crops that flourished were rewarded with a bumper harvest. Those who planted the wrong crops did not get a bailout — they got a lean harvest, and were forced to either learn from their mistakes, or perish.
These bailouts and interventions have tried to turn nature on its head — bailed out bankers and institutions have not been forced by failure to learn from their mistakes, because governments and regulators protected them from failure.
Obviously she did not read my advice.
While JPM’s Blythe is taking over the commodities space and ruling the markets together with a few dominant players, it is time to ask yourself if a bubble is occurring in the commodities market. Bubbles come and go, and just like the end of the 90′s tech bubble, the commodities space is showing similar signs. From the Atlantic.
As playwright Arthur Miller once observed, “An era can be said to end when its basic illusions are exhausted.” Most of the illusions that defined the last decade — the notion that global growth had moved to a permanently higher plane, the hope that the Fed (or any central bank) could iron out the highs and lows of the business cycle — are indeed spent. Yet one idea still has the power to capture the imagination of the markets: that the inexorable rise of China and other big developing economies will continue to drive a “commodity supercycle,” a prolonged upward rise in the prices of commodities ranging from oil to copper and silver, to textiles, to corn and soybeans. This conviction is the main reason for the optimism about the prospects of the many countries that live off commodity exports, from Brazil to Argentina, and Australia to Canada.
Must read and listen interview on the markets. “We are not investors anymore, we are all speculators….”. Via Chris Martenson.
“Even Wile E. Coyote had to come back down to earth sooner or later”, says Charles Biderman, founder of TrimTabs Investment Research. In his opinion, the prices of stocks and bonds – enabled by excessive financialization of our economy and central bank money printing – have been defying gravity for a dangerously long time.
If we continue to do all we can to preserve the status quo — to maintain “phony” asset price levels as Charles calls them — at best we will restrict overall growth and handicap the economy.
The problem isn’t so much the unfairness and malinvestment evident in a rigged market. As Charles shrewdly asks: what happens when the market becomes un-rigged?
We’ve never experienced the unwinding of an entirely manipulated financial system, so we can’t predict for sure. But at this point, a painful collapse of our markets and loss of the US dollar as the world’s reserve currency seem entirely plausible. Full article here and video below.
With Bernanke still running the show, at least in the ES futures, the invisible hand is there picking up those futures, until it suddenly stops one day. Some more on the subject of the importance of a rising stock market and the Fed. From Ilene.
After reading Lee Adler of the Wall Street Examiner’s article, I asked him, “Why is it the Fed’s job to be propping up the stock market? Doesn’t it make the whole market a Fed-controlled game, rather than what it started as – a mechanism for companies to raise money and people to invest in public companies?”
Lee answered: “Bernanke has made no bones about it. He sees the stock market as a legitimate instrument of policy manipulation. It’s his biggest tool, much bigger than the ones between his ears and his legs. The Fed works for the banks, and the capital markets exist as a means for ‘capitalists’ to extract wealth from the public. Stock markets weren’t started for the purpose of enriching the public, that’s for sure… The Fed has two clients, the US Treasury, and the banking system. It operates to make sure that they stay in business.”
Market thinking so permeates our lives that we barely notice it anymore. A leading philosopher sums up the hidden costs of a price-tag society.By Michael Sandel via the Atlantic.
THERE ARE SOME THINGS money can’t buy—but these days, not many. Almost everything is up for sale. For example:
• A prison-cell upgrade: $90 a night. In Santa Ana, California, and some other cities, nonviolent offenders can pay for a clean, quiet jail cell, without any non-paying prisoners to disturb them.
• Access to the carpool lane while driving solo: $8. Minneapolis, San Diego, Houston, Seattle, and other cities have sought to ease traffic congestion by letting solo drivers pay to drive in carpool lanes, at rates that vary according to traffic.
• The services of an Indian surrogate mother: $8,000. Western couples seeking surrogates increasingly outsource the job to India, and the price is less than one-third the going rate in the United States.
• The right to shoot an endangered black rhino: $250,000. South Africa has begun letting some ranchers sell hunters the right to kill a limited number of rhinos, to give the ranchers an incentive to raise and protect the endangered species.
One of the first to suggest the market is rigged back in 2009, Biderman, is back with further insight. From Trim Tabs.
The stock markets are being rigged by the Federal Reserve and European Central Bank and what is more, just about everybody knows that. My CNBC buddy Bob Pisani said today that kicking the can down the road, a euphemism for the rigged economies both here and in Europe, is an effective policy tool because it has worked, so far.
Compare today’s conventional wisdom that the market is rigged with the response to my year end 2009 appearances on CNBC and Bloomberg TV. Back then I said that the stock market had to be rigged by someone, probably the Fed. I got booed, in essence, and was called a conspiracy theorist nut, wacko by some of your favorite bloggers.
Today the stock market does not go down for longer than a day or so. Video below.