Good Monday morning. Here is what I’m reading to start the week:

• 2014: Here Comes the Dumb Money! (Investing Caffeine) but see Stories From 1999 (Joe Fahmy)

• Companies turning again to stock buybacks to reward shareholders (Washington Post)

• Gold Funds See Unprecedented 31% Slump With World Losing Faith (Bloomberg) see also Precious Metals Charlatans — Freaks of the Industry (Kid Dynamite’s World)

 

Continues here

 

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “10 Monday AM Reads”

  1. ch says:

    Barry-

    In the gold article, it notes that the value of a GLD share is $119 & change. The GLD fund website notes that as of Friday, it has 827 tons of gold.

    –Last time the GLD traded at $119, on 6/28/13, the ETF had 969 tons, 142 tons more than it has today.

    –The only other time GLD traded at $119 was on 8/20/10, when the fund had 1,299 tons of gold, 472 tons more than it has today.

    You can verify that here if you’d like: http://www.spdrgoldshares.com/assets/dynamic/GLD/GLD_US_archive_EN.csv

    A few questions for you:

    1. Where did the 472 tons of gold go the last 3 years from 8/20/10 to now? The price didn’t change, so why did the GLD’s inventory change?

    2. More recently, where did the 142 tons of gold go from 6/28/13 until today? The GLD’s price didn’t change in the past 6 months, why did the ETF lose that much physical gold?

    3. 142 tons is ~$5B in physical bullion at current prices; 472 tons is ~$18B at current bullion prices. If no one wants gold, why has nearly ~$20B in gold bullion been removed from the GLD ETF alone in just over 3 years? Who’s holding that gold now? Why?

    If the public understood this, they would understand why the price of gold is likely to continue to decline from here, & perhaps why GS bought $500m of GLD even as they were screaming “Sell gold” earlier this year.

    On Wall Street, there has historically been a simple name given to the situation when leveraged institutions see their collateral drained leading to a reduction & therefore a decline in the price of their outstanding assets: A bank run.

    The question is “Why is there a bank run going on in gold?” I have found most people to be too emotional about gold to think objectively about that question, but I think it may end up being one of the most important investing topics to get right in the next 5-10 years…

    I’d love to get your thoughts.

    • My thoughts are that the Goldbug narrative has failed, the metal has fallen 31%, and none of them seem to be willing to acknowledge the error.

      So they take to writing all manner of crazy shit to rationalize what any trader will tell you is a rookie mistake: Doubling down on a losing position.

      • ch says:

        You are right, the Goldbug narrative has failed, in much the same way the Housing Bear narrative failed from 2004-2007…both then & now, each narrative seems to have temporarily failed because the banking system is piling even more leverage onto an already overleveraged, under-collateralized trade in hopes of getting out whole…but just like the temporary invention & proliferation of NINJA & negative-am loans didn’t make housing bears wrong in the long run, neither is the removal of good collateral from the gold market likely to make gold bulls wrong in the long run.

        The quote below is from the article you linked – funniest bear market I’ve seen in 20+ yrs in this biz…what’s going on in gold markets is akin to home prices falling 31% but the marketable supply of houses falling by 40%+ & the premium to acquire an actual home (v. buying a portfolio of RMBS’) running 7-24% above the underlying value of the equivalent value RMBS portfolio…

        “In Asia, where many buy jewelry as a form of investment, the cost to consumers is higher. At a store of SK Jewellery Pte Ltd. in central Singapore, a gram of 99.9 percent purity, cost S$62.50 ($50) on Dec. 11. That’s equivalent to about $1,555 an ounce, 24 percent more than the London spot price that day. A 1-ounce coin at United Overseas Bank Ltd. (UOB), Southeast Asia’s third-largest lender, was on sale for S$1,640 an ounce ($1,310) the same day, according to its website.”

      • Ypu have everything PRECISELY backwards.

        HOUSING: As to housing, I was one of the most vociferous housing bears — in print TV and radio. That market peaked in 2005 in volume and 2006 in price;

        GOLD: The Goldbug narrative worked from $400 to aboit $1100, as inflation and a decreasing dollar (Down 41% from 2001-08) did their damage.

        Beyond that $1100 figure, IMO, Gold seems like a bubble. Despite the narrative of QE and printing and hyper infaltion and currency collapse (ANd OMG Econopalypse Now!), the story never played out as advertised.

        The secular gold bull market is over, its down nearly 40% — a full on collapse. I doubt you will see $1900 again for the next 10 years;maybe even 20 years.

        ~~~

        What you refuse to recognize is that GOld had its run; you should have declared victory and gone home long ago. This is a classic case of overstaying your welcome in a trade

    • catclub says:

      I think the difference in total amounts of metal at the same price have to do with the acquisition cost. On the way up, the average price of metal held by the fund is lower than the market price. On the way down, the reverse.

      It would be complicated by the volume differing all along the price path. So no simple relationship.

  2. VennData says:

    Fatal carjacking makes Christmas shopping at US mall a nightmare

    “… Police on Monday were seeking an armed pair of suspected carjackers who a day earlier shot to death a man Christmas shopping with his wife at a high-end New Jersey mall and then fled in the couple’s luxury SUV, prosecutors said…”

    http://news.yahoo.com/fatal-carjacking-makes-christmas-shopping-us-mall-nightmare-160753793.html

    Now if only dad had a high caliber weapon. They’d a thought twice, and if not, wow, what a shootout.

    Merry Christmas from the NRA.

  3. hue says:

    Green with Instagram (NYTimes)

    Snoozer Are, In Fact, Loser (New Yorker) In the early nineteenth century, the United States had a hundred and forty-four separate time zones.

    Twitter: Blocking is Too Crude (Scripting News)

  4. VennData says:

    Factory activity gaining steam as production broadens

    http://news.yahoo.com/factory-activity-gaining-steam-production-broadens-153042487–business.html

    Obama’s limousine friends lying to save their skins after ruining America. He’s lying I’m telling you. Lies!

    – Jack Welch.

  5. willid3 says:

    401k abuses?
    http://www.nakedcapitalism.com/2013/12/401-k-plan-abuses-finally-coming-light.html

    same problems that show up in pensions also show up in 401ks. plus it seems that if you want to transfer from one asset to another it could take up to 6 weeks for that to even happen. and there are some double dealing problems as your 401k plan and the administrator share revenue. and of course there is the problem that administrators dont work for you, they work for your employer, so they can (and do) restrict transfers, and charge for make work, and more

  6. VennData says:

    Who is the Smart Money?

    The Smart Money should be the people that made money. People who are smart are not the Smart Money unless they made money. People who run big institutions and funds, the same. The people who think they are Smart Money might be, but only if they made money.

    You cannot predict who the Smart Money will be and most important: the people who are the Smart Money can’t either Nor will they necessarily remain the Smart Money, but they might.