User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Friday February 26, 2010 - 14:06:05 GMT
Black Swan Capital - www.blackswantrading.com

Share This Story:
| | Email

A “Long” Car Ride with a Gold Bug

Key News
China’s CSI 500 Index of companies with a median market value of $841 million trades at valuations 71 percent above the CSI 300 Index. (Bloomberg)
There is more downside risk to oil demand than upside risk, the International Energy Agency's head said on Friday, as the strength of the global economic recovery remains in question and government spending programmes wind down. (Reuters)
Business Unity of South Africa will present the ruling African National Congress with arguments against proposals to nationalize the country’s mines, Chief Executive Officer Jerry Vilakazi said. (Bloomberg)

Quotable
 
Gold? Yellow, glittering, precious gold?...
This yellow slave
Will knit and break religions, bless th’ accursed,
Make the hoar leprosy adored, place thieves,
And give them title, knee and approbation
With senators on the bench.
     William Shakespeare
 
FX Trading – A “Long” Car Ride with a Gold Bug
 
About two weeks ago, I unfortunately had to attend a funeral for my wife’s uncle. He was really a great person—fun, intelligent, and a man with real integrity and deep religious conviction. I admired him greatly. My father-in-law gold bug (MFL)—another of my real life heroes – drove with me on the trip to the funeral and back. So I quizzed him along the way about his deep convictions about gold.
 
The primary reason MFL still likes holding gold is based on a concern we all have— incredible amounts of US debt. He asked me: At what point do people stop buying US bonds with such mounting debt? Of course I had no good answer. MFL believes the probability of a buyers strike for US debt is rising and wants to have gold for insurance if it happens. Can’t argue that one—agreed! The only comment I could muster gets back to the relativity thing: The US ain’t looking so hot, but it does look better when we consider the much greater potential of sovereign default across Europe. (For the record, it does get stale saying things are a bit “less worse” here as an argument.)
 
His second concern is one many also have—inflation. Being an active investor in the ‘70s, MFL knows all too well the driving force inflation can have on real assets and negative impact on stocks during an inflationary event. MFL’s inflation view is linked tightly to his view on debt. Given the huge debt burden, governments likely only have one way out—inflate it away. Inflation in the end is really the decline in the purchasing power of the currency. The flip-side to that is an appreciation in the price of gold. But one of the problems with the “inflate” their way out argument is the fact that an increasing share of US debt is inflation-linked bonds -- higher inflation doesn’t help there. 
 
I read yesterday a very interesting piece on this topic, written by Gerard Minack of Morgan Stanley, titled, “Default or Inflate or...”. Mr. Minack doesn’t believe it will be as easy to inflate away the problem as it has been in the past. Instead, he believes the government may force banks and institutions to hold more sovereign debt as a way to relieve some of this huge burden; excerpt below:
 
As we've noted before, inflation doesn't solve a debt problem, unanticipated inflation does: Think of it this way: If a borrower's debt is tied to inflation (along the lines of TIPS), then it's not possible to inflate away the debt. From a macro view, a sovereign can inflate away the debt if the average interest rate on the debt falls below the growth in nominal GDP. (It doesn't matter whether it's volume growth or inflation driving GDP.) This is how the public sector deleveraging after World War II was accomplished. The average interest rate on public debt in the US was below the nominal GDP growth rate.
 
The key question now is: Can governments get the nominal growth rate above the average interest rate? We're not persuaded that targeting higher inflation will do the trick. In part that's for obvious reasons: it would require a wholesale abrogation of many of the institutional arrangements put in place over the past few decades - such as independent central banks and inflation targets - and the hard-won gains achieved through the disinflation period starting from the early 1980s.
 
In part we're skeptical because markets are seemingly awake to the risk: Most countries with high debt are already paying interest rates above expected nominal GDP growth. And markets demand a higher premium as debt increases.
 
In the US there is a clear link between nominal GDP growth and the bond yield (and, with a lag, the average actual rate paid on the stock of public debt). As an additional complication, Dick Berner notes that in the US nearly half of budget outlays are now effectively indexed to inflation.
 
How to push interest rates below nominal growth? Interest rates were below nominal growth rates in the years after World War II, which was also when the public sector accomplished most of its deleveraging. This was largely due to financial regulation. The Federal Reserve, which was not at that stage independent, acted to cap long-end rates at 2.5%. This arrangement ended with the Treasury accord of 1951.

Regulation may be the answer: Here's our key point: If the way to covertly default is to pay an interest rate below the nominal growth rate, we think it's possible that policymakers will aim to lower the interest rate rather than lift the inflation rate. In a sense, central banks buying government debt are already a small step down that path. A medium-term approach, however, could be to compel private financial institutions to purchase government debt. Such holdings were often mandated (as prudential measures) prior to the deregulation of financial systems in the 1980s.
 
In the US, for example, commercial bank holdings of Treasury paper have fallen significantly, both as a percentage of bank assets and as a percentage of the stock of Treasuries on issue. Commercial banks now have a balance sheet of around US$8 trillion. Requiring them to hold 20% of their assets in Treasuries would imply demand for over US$1.5 trillion of Treasury paper. All else equal, this would obviously squeeze the provision of credit elsewhere in the system, unless regulators allowed banks to increase their leverage (which would be justified on the basis that so much of their asset base is in ‘safe assets'). We are not recommending this. But it seems to us that high sovereign debt may be resolved not by a deliberate shift to higher inflation, but by re-regulation that compels buyers to accept uneconomic yields.
 
My concern is the massive supply we have in the market, in terms of the ability to produce cheap final goods, while there is tepid final demand. Couple that with the continued write-off of private sector debt, and it seems a recipe for deflation -- not inflation. (Whether gold can perform well in deflation is an argument we won’t get into today.)
 
Another of MFL’s concerns is the stock market. He sees gold as a hedge in case we have a real break in stocks. The problem with that argument, I think, is the fact that gold has correlated tightly with stocks during the last cycle, suggesting it has been part of the liquidity-driven asset continuum that has included all types of risk asset classes. That said, gold did act very well during the worst days of the credit crunch and even appreciated along with the dollar for a while. So, the argument has legs. And it has legs now I think especially because of what is going on in Europe. If you have capital invested in Europe and you don’t like the dollar, gold seems one of the only other real alternatives.
 
Interestingly, as we were driving, about 18-hours roundtrip, we were listening to the various talk-radio programs. Both of us being conservative—he on the neo-con Kool- aide side (sorry, couldn’t resist), I on the old school paleo-conservative, Russell Kirk side—we enjoyed the various shows; I don’t listen to them at all during the week as the trading screens are more critical. Not to get into the politics of it, what was most interesting is how many darn advertisements there were for gold. It seemed every 10 minutes another “buy gold” commercial aired. Radio talk show hosts better hope gold never falls out of favor or they will lose a big source of ad revenue, was my first thought.

My second thought, which I threw out at MFL: Aren’t you concerned when you hear so much advertising to the average investor suggesting now they should buy gold?  I’m not sure if he ever answered me on that—other than to laugh.
 
So far, his arguments were very good and solid reasons to own gold. But my last question was this: Is there any economic environment that you can point to that would suggest it’s time to sell gold? MFL gave me the look (the “how did I ever agree to you marrying my daughter” look; I don’t have an answer to that either, but glad he did agree) and a “not really” comment. But then again if MFL had to sell gold, imagine how much work that would be for him, tearing down all the drywall to find it. LOL (For new readers, MFL has used his walls as a hiding place for buckets of precious metals in the past…true story. He wants me also to tell everyone he doesn’t do that anymore, but is beefing up security in case you don’t believe him.)
 
I understand the arguments for gold. And most of them make great sense. In a world where it seems every government can’t create enough debt or rush to debase its currency fast enough to beggar-thy’s-neighbor on trade, gold is the answer. But, though not perfectly analogous, I remember that in the midst of the Nasdaq-cum E-company boom, it didn’t look as though it would ever end. Analyst after analyst justified the environment as far as the eye could see. If you didn’t own tech stocks you were a moron. This environment was so darn persuasive it led Julian Roberts and George Soros, arguably two of the best hedge fund managers ever, to capitulate right near the top of the Nasdaq boom. They took some major hits. 
 
I guess the lesson to me, and why I am concerned by gold here is this: When you cannot define any environment that would make gold go down, it probably represents some type of sentiment extreme. And we know what Mr. Market likes to do when he sees that—slam! 
 
Have a great weekend. And thanks Dad for a making it a fun and interesting trip despite the event. You’re the best even if you do like gold!
 
Jack Crooks
www.blackswantrading.com
 
--------
 
From David Newman….Yesterday we launched the first issue of Black Swan Capital’s newest newsletter advisory service – Global Macro Trader.
 
The Global Macro Trader is designed to be a source of independent research and trading ideas across the entire spectrum of major global asset classes; US & International Stock Indices, Benchmark Government Bonds, Gold, Oil, and other key commodities. It’s an extension of the research we do every day to help us build fundamental themes and track money flow for our currency analysis.
 
We are offering an introductory price of $69 per month to all Currency Currents readers for the next two weeks; after that the regular monthly subscription price goes to $99 per month.
 
To view the first issue of Global Macro Trader, please click here….
 
If you would like to subscribe to our new service, you can do so using your credit card or PayPal…
 
And as always, if you have any questions please don’t hesitate to contact me.
 
Thank you.
 
David Newman
Director of Sales and Marketing
denewman@blackswantrading.com
Ph: 866-846-2672 

 

Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."



Elevate Your Trading With The Amazing Trader!

The Amazing Trader includes:
  • Actionable trading levels delivered to YOUR charts in real-time.
  • Live trading strategy sessions.
  • Market Updates with Trading Tools.

Register To Test Your Amazing Trader


Trading Ideas for 11 December 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Tue 12 Dec
09:30 GB- CPI
10:00 GB- ZEW Survey
13:30 US- PPI
Wed 13 Dec
00:30 AU- Employment
09:30 GB- Unemployment
13:30 US- CPI
15:30 US- EIA Crude
19:00 US- Fed Decision
Thu 14 Dec
07:30 CH- SNB Decision
All Day- Global- flash PMIs
12:00 GB- Bank of England Decision
12:45 EZ- ECB Decision
13:30 US- Retail Sales
13:30 US- Weekly Jobless
14:45 US- Industrial Production

Forex Trading Outlook


Potential Trading Opportunities

  • POTENTIAL PRICE RISK: Mediun Tue--10:00 GMT-- DE- ZEW. Second Tier Sentiment Survey
  • POTENTIAL PRICE RISK: HIGH-Medium Tue--13:30 GMT-- US- PPI

  • POTENTIAL PRICE RISK: HIGH-Medium Wed--09:30 GMT-- GB- Employment
  • POTENTIAL PRICE RISK: HIGH Wed--13:30 GMT-- US- CPI
  • POTENTIAL PRICE RISK: Medium Wed--15:30 GMT-- US- EIA Crude
  • POTENTIAL PRICE RISK: High Wed--19:00 GMT-- US- Fed Decision


  • POTENTIAL PRICE RISK: HIGH- Thu --00:30 GMT-- AU- Employment
  • POTENTIAL PRICE RISK: Medium- Thu --All day-- global- flash PMIs
  • POTENTIAL PRICE RISK: HIGH-Medium- Thu --07:30-- CH- Swiss National Bank Decision
  • POTENTIAL PRICE RISK: HIGH-Medium- Thu --09:30-- GB- Retail Sales
John M. Bland, MBA
co-founding Partner, Global-View.com EXCLUSIVE: Global-View Daily Trading Chart Points Updated

EXCLUSIVE: Global-View Free Forex Database updated




TRADER ADVOCACY ARTICLES

Trader's Advocate Articles..

pic

Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

 
Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map


Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog

Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.

 

WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105