Hi Maurice, a few matters ...
(a) Paul Kasriel explains why foreigners are calling in their U.S. bets
apogeeresearch.com
"Global investors pumped up their ownership of U.S. financial assets by 14 percentage points in the go-go '90s, to the point where their holdings were equal to almost 25% of total U.S. capital stock. That's a hefty sum. Trouble is, the foreigners anted up but the payoff pot shrank. Now, with federal spending going through the roof, tariffs being slapped on some imports and capital investment diminishing, is it any wonder that these investors are placing their chips elsewhere?"
1980 5% of US financial assets owned by international electorates
1990 11%
2000 25%
(b) The battle has been joined, as reported by boring but fair Reuters, only reporting and rarely commenting
reuters.com
"NEW YORK, June 28 (Reuters) - Central bank intervention to prop up the dollar pulled the rug out from under COMEX gold on Friday, upending early gains and sending futures to a six-week low as bulls turned tail en masse.
Much of the capitulation came suddenly before the close, which left August gold GCQ2 at $313.90 an ounce, down $5.70, or 1.8 percent. It managed an equally head-jerking bounce off $310.50, its lowest since May 16, in the final moments.
Spot gold XAU= fell to $314.00/5.00 from Thursday's $319.00/50 close. Friday's late fix by London bullion dealers was $318.50.
Gold was also a victim of investor outflows back into the stock market. The Dow Jones industrial average was up 53 points in the afternoon, despite news that Xerox Corp. would restate five years of results to reclassify more than $6 billion in revenues in the second accounting debacle absorbed by Wall Street this week.
The dollar was firm against the yen after the Bank of Japan led the intervention to prevent a rising yen from choking off Japan's export-led recovery. The greenback failed to stay up against the euro, but still ended above the 28-month low hit at $0.9990 per euro in the morning.
"We rallied because of the strength of the euro based on the Xerox situation -- and there are a few other things that make people feel there's no loss of confidence in U.S. equities due to all this thievery going on," said a floor broker. "Then intervention drove the dollar higher and that in turn drove gold lower."
Gold, equal parts currency and commodity over the years, has correlated tightly with the euro this year, reaching 2-1/2 year highs early this month above $330 an ounce.
Stock market jitters compounded the interest in gold as a store of value, amid worries about the fragile economic recovery, terrorism and corporate book cooking in the wake of the collapse of Enron Corp.
Estimated final volume was a busy 45,000 contracts, almost half of which came in the last few minutes of trade.
"It took out $316 with stops below that level and just hammered the market on those stops," said David Meger, analyst at Alaron Trading in Chicago. $310 was the obvious point of the movement but when we said that we weren't expecting to get that in the next three minutes."
The long position on the COMEX has been a growing impediment as gold ran out of new buyers. The CFTC Commitments of Traders report released after the close Friday showed the net speculative long on the COMEX contracted to 37,967 contracts as of Tuesday from last week's 41,241 lots."
You believe in Greenspan, and I have faith in free markets, you in magic, and I in physics.
Chugs, Jay |
