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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?


To: 2MAR$ who wrote (80336)9/26/2011 6:27:53 AM
From: TobagoJack  Read Replies (1) | Respond to of 217774
 
traderdannorcini.blogspot.com

Gold coming under selling pressure in very early European trading

Gold opened in Asian trade on a relatively firm note as buyers came in to take advantage of the break in prices. That buying eventually gave way to sellers looking for a bounce to exit from longs. As price dropped down to Friday's closing level (commensurate with the 100 day moving average), longs who had been bottom picking stepped aside removing any support from the market. That allowed the shorts to press it into stops below Friday's low which dropped the metal rapidly into the band of chart support near the $1600 level.

Upon its initial test of this level, it did bounce somewhat but renewed selling then took it back lower and violated this key psychological level.



Should it fail to recapture $1600, the next stop is near the $1580 level. Should that give way, it looks most likely to drop back into the band of congestion on the charts that held the price from late April of this year through the breakout that came in July. Should this occur, the entirety of the leg higher from July will have been erased. The top of that band was centered near $1550 while the bottom of the band was near the $1480 level.

That is rather fascinating to observe considering the fact that the monetary authorities' solution to the woes confronting the European economy and the US economy is further currency debauchment. Some of this is no doubt due to the fact that traders on the losing side (currently the longs) are going to be dealing with increased margins to hold these losing positions come the close of trading Monday (tomorrow) afternoon.

What we are experiencing is very similar to the events of the summer of 2008 when traders began fearing a deflationary outbreak which led to widespread commodity selling as carry trades were unwound. What is different right now is that the US equity markets are not imploding lower ( I suspect we are seeing official sector intervention occuring in there with the Exchange Stabilization Fund very active - whether they can hold it is unclear).

While monetary officials are no doubt quite pleased to see the commodity sector getting pummelled by hedge fund selling, it is going to be very difficult for that sector to continue its freefall without a spillover effect on the equity sector. What's good for the goose is good for the gander. If the global economy is slowing to this extreme to justify the severity of the sell off taking place in commodities, then stocks are overvalued and ripe for a breach of important chart support levels as well. Either the commodity sector will find value based buying very soon or the US stock markets are going to experience a free fall in price.

One further note for those who like to do historical comparisons. The plunge in 2008 took gold down from its peak by approximately 30% before it bottomed out and began its next leg higher. If that same plunge were to occur this time around, the price could drop as low as $1345 or so by comparison. Gold ended last year at $1422 on the front month Comex gold contract so such a plunge would take the metal negative for the year. Those who are buying the physical metal are being given one helluva gift. Scale in buying can take advantage of this setback in price but this is for buyers of physical only. LEveraged futures guys have got to be careful not to let these hedge funds trample you to death in their mindless rush to the exit. Wait for some signs of a bottom before moving in on the long side unless you have extremely deep pockets.



To: 2MAR$ who wrote (80336)9/26/2011 6:45:58 AM
From: TobagoJack  Read Replies (1) | Respond to of 217774
 
just in in-tray

Subject: I really Haven't Got a F....ing Clue: JAPAN 23ix2011

#FABER AND ROCHE:
I really haven't got a f...ing clue what's going on let alone what to do. it seems to me that fiat currency debasement is as inevitable as shuffling off this mortal coil - but it's not happening - well not at the moment -the value of all fiat currencies have risen by 20% in two months (well that's if you price them in private sector assets). And why is capital seeking sanctuary in what I thought was the very epicentre of global financial calamity ie The Spent World's sovereign debt markets? - aren't they just an accident waiting to happen?


What's mildly reassuring (or fantastically un-reassuring) is that I don't think David Roche or Marc Faber have much idea what to do either! I cannot remember less conclusive comments from either of them - below swift summaries of their instructive but less prescriptive presentations at CLSA's HK Forum.

No-one was expecting Roche to be bullish but his presentation was a wake-up call in more ways than one. Firstly, there has been no deleveraging over the last three years. In fact global debt to GDP has continued to rise and now stands at a staggering 300%. Whilst governments have been mainly responsible, corporate debt levels have not fallen either surprisingly. He observes pertinently that with government debt at 100% of GDP by itself it means that even small changes in growth can have a big impact on indebtedness.

Secondly these over indebted governments face the "Stall Speed" problem. Roche believes that if GDP growth falls below 3% the action of attempting to cut deficits has the opposite of the desired effect as it craters growth and actually increases the deficit. The only solution to this Catch 22 is to cut liabilities (Russell Napier has a few ideas as to how that might be done!) As a result of the above, by the latter part of the decade, the US looks like Greece from a gross government debt perspective. So why, you may ask, are government bond yields so low? We know the answer to that one... the prices are rigged! The net result of which is that risk aversion is getting expressed in equities instead, reminding me of how "open" hedge funds suffered disproportionately post



Lehmans Shock vs their "gated" cousins.

Amongst other things, Roche has a genius for memorable charts. The one from this year that will stick in the memory is his "Three Ifs and Fat Tails" probability curve which shows the world shifting from a normal
distribution to a flat line. It's a great way of getting the point about market volatility across. In effect the market view is oscillating between vastly different outcomes which seem to have as much chance of happening as each other.

The other big message is that Emerging Markets will not prove to be good hiding places. The export led model is breaking down, as is the high savings, low cost, capital inflow model. China is not spared in this
process and in an echo of Chris Wood's concerns Roche's work suggest that as much as 60% of new loans in China this year have been generated in the shadow banking system Needless to say Europe was not spared the whip either. The most telling observation to this voyeur concerned the German constitution which almost certainly needs to be changed before Europe can address its issues but which was designed, for obvious historical reasons, to be very difficult to alter.

So how is he positioned? The bets in his asset allocation that caught my eye were Irish debt, the NZ$ and his short view of soft commodities. As an active fund manager Roche, unlike many macro speakers, brings the discipline of putting his thoughts into daily action and whilst he is obviously talking his book, he is also very open about that and refreshingly, about his mistakes. Now for Marc Faber....

#MARC FABER:
For a man famed for his Gloom, Boom and Doom report I was pleasantly surprised to hear that apart from the rise in volatility, the potential collapse in commodity prices, the rise of geopolitical tension, the possible attack on Iran by Israel, the push for Chinese global dominance and the out of control US deficits, things are actually ok..read on.

He started by giving a history lesson showing how negative real interest rates almost always lead to increased volatility and speculation but also to a fall in social cohesion as the rich who own real assets and so get richer while the middle classes see their savings erode. The poor see their food and energy bills become a larger percentage of what little income they have. His view was that CPI was in reality over 5%.
His anecdote that only one person in any recent presentations had seen a fall in his living costs, but only because his girlfriend had left him...Marc of course pointed out his living costs would rise over the long term due to escalating replacement costs.

The ongoing printing of money by the US Fed he sees as a necessary evil since they had no other option.


He gave the example of Mexico who attacked their own problems in 1979 to 1988 by the same approach, but saw their currency fall by 98% the equity market however gave several very good buying opportunities and was basically flat in US dollar terms over the period. For the long term he suggested the following asset allocation: 25% Equities, 25% Asian Real Estate, 25% Gold and 25% US dollar cash for those who can't count that means Zero weighting in bonds.

He was long term positive on commodities but shorter term is concerned about the deceleration in growth of demand given that China had grown from 10% of global demand in many basic materials to 40% - 60% this is probably unsustainable. The Achilles heel of China is oil. They have tripled their demand in 15 years and are building military facilities as well as political relationships to defend their interests.

The Middle East is a mess as the population is unhappy. No hope, no jobs and no sex. Not a formula for stability.

He advises to selectively buy oil related assets and maintains that Gold is not in a bubble and is very underowned. IF it had moved in line with Asian Income it would be $10,000. On the current equity markets, he hopes for a rapid correction but reminds us that the US mutual fund industry saw redemptions in every single month except three during the 1970's...

#9436 OKINAWA CELLULAR:
Yesterday the Nikkei reported that KDDI is to have a bite of the Apple and will start selling the iPhone5 in Japan from November. That will make life a little harder for Softbank, which is why its share price softened rather dramatically. But if KDDI is going to sell the iPhone5 - maybe the most peaceful stock in Japan might get to sell a few of them too. Okinawa Cellular is peaceful in every sense. It inhabits a peaceful island where it has a stable 40% market share, it has one of the most peaceful share price charts I've ever seen, (have a look if you don't believe me) and it's balance sheet is so strong, its dividend payment so generous and sustainable - that it's share holders are almost guaranteed nights of peace and tranquilly.

Okinawa Cellular is 51.5% owned by KDDI, which is why it might get some iPhone's to sell, but it probably doesn't awfully matter if they don't - they've been selling smart phones to their aging islanders like hot cakes - actually "hot cakes" is a little strong, they've been selling 20 smart phones a day since April, but then there are only 1.4ml people on Okinawa. Still, small is beautiful and anyway this ratio of dialy sales to total population is the same as the rest of Japan. What's not small but is still beautiful is the $230ml of net financial value sitting on the balance sheet, equivalent 38% of market cap. And what is smaller and beautiful are the ratios on which it trades compared to its larger indebted parent.

Okinawa Cell KDDI
Price/EPS 9.19 9.49 OC 3% cheaper
Cap-NFV/EPS 5.70 11.45 OC on half the multiple
Dividend Yield 4.45 2.54 OC 78% more generous
Price/Book 0.94 1.05 OC 11% cheaper
EV/EBITDA 3.37 3.66 OC 8% cheaper
OP Mgn 18.36% 13.74% OC 33% more profitable
ROE 11.53% 12.37

If you want a peaceful life with thoroughly worthwhile yield - I'd buy it.

#JGBS:
I've always been sanguine about Japan's state indebtedness; largely because it is simply a reflection of a very low tax take together with an implicit social contract which says "if we don't tax you - you must lend it to us instead". That's why historically 94% of JGBs have been held onshore - and why the $12tn JGB market is the corollary of the $20tn stock of household savings - if the Japanese paid more tax - both would be smaller. That seems sustainable enough particularly given the $20tn of Household Financial Assets. But it could be argued that although very laudable to fund one's Government, it's been at the cost of Japanese domestic growth - ie the JGB market has soaked up too much domestic wealth and crowded out the private sector. But then what happens if foreigners start lending money to the Japanese Government too - and they have. In July gaijin suddenly pulled on their JGB buying boots adding more than $12bn to their $880bn of JGB holdings - this is a record high and gives foreigners 7.4% of the $11.9tn Japanese Government Bond Market. If Foreigners keep buying JGBs doesn't it create a "Reverse crowding out" which could be good for domestic demand? - or is this just me not having a f....ing clue again?



To: 2MAR$ who wrote (80336)9/26/2011 8:10:10 AM
From: elmatador1 Recommendation  Respond to of 217774
 
Germany and France do not accept hair cut, crisis spills over the rest of the world. Rest of the world is telling them: get this hair cut and lets move on!!

We... are committed to a strong and coordinated international response to address the renewed challenges facing the global economy," the G20 finance chiefs said. "We are taking strong actions to maintain financial stability, restore confidence and support growth."

Pressure in on EU.

"pressure built from markets and other regions to take action to prevent it from snowballing."

google.com



To: 2MAR$ who wrote (80336)9/26/2011 9:41:41 AM
From: TobagoJack  Read Replies (1) | Respond to of 217774
 
Just in, message from physical gold trader based in singapore

Sent from my iPad

On 26 Sep, 2011, at 9:27 PM, M wrote:

J & I are buying next week when J returns from Koh Samui.
Garnering cash from ATM daily.

Let's hope China Great Wall has pandas in stock next week!
Thanks for the info!

M

On Mon, Sep 26, 2011 at 8:44 PM, C wrote:
Hi J and M
confirmed via multiple calls :
NO coin/bar available at all in Dubai & Mumbai !

Sent from my iPhone



To: 2MAR$ who wrote (80336)9/26/2011 9:44:58 AM
From: TobagoJack1 Recommendation  Read Replies (2) | Respond to of 217774
 
Asian central banks apparently moving cash from euro banks



To: 2MAR$ who wrote (80336)9/26/2011 6:18:12 PM
From: TobagoJack3 Recommendations  Read Replies (3) | Respond to of 217774
 
I am mindful that either we suffer another 16 days of 100-dollars draw-down of the political metal / faith mineral, or we shall resume the regular programming we grew perhaps too comfortable with, as sure the current chop-n-slash have exterminated enough weak hands to please the gods of speculation in all lands.

Graham, even as nuclear wannabe iran is on hold, failed-to-be n.korea is put on backburner for another day, certainly-is-already pakistan has been tee-up.

US Takes Gloves Off With Pakistan
By Jeff M. SmithThe DiplomatSeptember 12, 2011

You could be forgiven for dismissing the latest diplomatic spat between the United States and Pakistan as just another hiccup in a long-estranged marriage. Trading accusations and navigating diplomatic crises has become a weekly affair for this deeply troubled alliance. But the broadside launched against Pakistan by the US Chairman of the Joint Chiefs of Staff in congressional testimony on September 22 represents a rupture so dramatic that its significance is difficult to overstate.

On Thursday, Adm. Mike Mullen told the Senate Armed Services Committee that Pakistan was using ‘violent extremism as an instrument of policy’ and said the Haqqani network, Af-Pak’s deadliest militant outfit, ‘acts as a veritable arm of Pakistan’s Internal Services Intelligence Agency.’ Mullen further explained that Pakistan was using militant proxies to ‘hedge their bets’ in Afghanistan, adding, ‘in reality, they have already lost that bet.’ To be sure, independent analysts and former government officials have been airing such complaints for years. But never in the long, dark history of the Afghan war have serving officials so unequivocally called Pakistan to account for its double game. Pakistan’s reaction was swift but uninspiring. The country’s new foreign minister warned that the United States ‘cannot afford to alienate Pakistan,’ while Mahmood Shah, a former army brigadier, explained that the US is simply ‘mak(ing) Pakistan the scapegoat for (its) failures in Afghanistan.’ Prime Minister Yousef Raza Gilani added: ‘They can’t live with us. They can’t live without us.’

That sort of response simply isn’t going to cut it anymore. The Obama administration – indeed, the country at large – has lost faith in Pakistan. The turning point for the White House appears to have been the September 13 attack on the US embassy in Afghanistan; a brazen assault by Haqqani network insurgents that resulted in a 20-hour gun battle in a fortified corner of the Afghan capital. Just a few days earlier, the Haqqani network orchestrated a truck bombing outside a US base in Wardak that wounded 77 US soldiers and killed five Afghans. Indeed, a barrage of crises has been propelling the United States and Pakistan toward a reckoning for months. The year opened with the Raymond Davis saga, when Pakistan refused to grant diplomatic immunity to a US contractor who killed two armed Pakistanis in a mysterious confrontation in January. That was followed by the expulsion of US military trainers and intelligence agents and a diplomatic row over visas to US officials. A series of US drone strikes on al-Qaeda and Taliban targets in Pakistan’s tribal lands strained ties even further, as did the continuing refusal of the Pakistani military to launch an assault on the militant stronghold of North Waziristan. The discovery and killing of Osama bin Laden in May in a wealthy suburb miles from Pakistan’s premier military academy served as the grand finale.The bin Laden raid raised red flags across Washington, not least on Capitol Hill. Lawmakers were told by then-CIA director Leon Panetta the Pakistanis ‘were (either) involved or incompetent.’ Many congressmen and senators, long in the dark or uninterested in South Asian affairs, were shocked to find the degree to which Pakistan was misusing American aid and harbouring US enemies. Key congressional leaders began demanding a fundamental reassessment of the United States’ Pakistan policy, and in July the US announced it was withholding $800 million in Pakistani aid.

Pakistan has fared little better inside the administration. Under former Defense Secretary Robert Gates, the Pentagon had been a staunch opponent of taking a tougher line with Islamabad. The defence department helped torpedo stiff restrictions on US aid to Pakistan in the $7.5 billion Kerry-Lugar bill. But now Gates is out, and tough talking Leon Panetta is in. As the United States’ top spy from 2009 to 2011, Panetta is intimately familiar with the ISI’s transgressions. He expressed his frustrations recently, explaining, ‘Time and again, we’ve urged the Pakistanis to exercise their influence over (the Haqqanis) and we’ve made very little progress. The message they need to know is: we’re going to do everything we can to defend our forces.’

Panetta will find an ally in his replacement at the CIA. David Petraeus carries his own intimate knowledge of Pakistan’s double game, having served as the top US commander in Afghanistan for the past year. His heroic efforts there were consistently stifled by the safe haven and support Afghan militants receive from Pakistan, and his relationship with Pakistan’s generals is famously estranged. The Agency has its own bone to pick with Pakistan: the CIA blames the Haqqani network for a December 30, 2009 bombing at an agency outpost in Khost, Afghanistan that killed seven CIA officers – the single deadliest attack on US intelligence personnel in the Agency’s history. Moreover, the last two CIA station chiefs were forced to leave Pakistan after they were publicly ‘outed’ in December 2010 and May of this year. Nor will Pakistan find help inside the State Department, which is still reeling from the embassy attack. The new US ambassador to Pakistan, Cameron Munter, told Radio Pakistan on September 17 that the Haqqani network was responsible for the assault and ‘there is evidence linking the Haqqani network to the Pakistan government...This is something that must stop.’

And then there is Mullen, perhaps the most ardent proponent of closer cooperation with Pakistan inside the administration. Mullen, who is retiring at the end of the month, has made over 20 visits to Pakistan as the top US commander, and worked tirelessly to forge a close personal bond with Pakistan’s Chief of Army Staff Gen. Ashfaq Kiyani. It’s both ironic and fitting that he was the one to deliver the unprecedented rebuke to Islamabad.

The question now on everyone’s mind is: what comes next? South Asia analysts have been mulling this prospect for years. It should come as little surprise that there are few good options. Pakistan holds substantial points of leverage over the United States, not least through its control of key supply routes into Afghanistan. The administration has wisely invested in alternative supply lines through Russia and Central Asia, reducing Pakistan’s monopoly from nearly 90 percent a few years ago to just under 50 percent today. Whether or not the United States could sustain the Afghan war effort without Pakistan – by dramatically increasing the workload of the Northern Distribution Network and airlifting more supplies in – is a matter of speculation. Ashton Carter, the Under Secretary of Defense for Acquisition, Technology and Logistics, believes it is possible. He told Reuters in May, ‘We’re confident that we’re not dependent on any particular single thread, and we can continue to supply the Afghanistan effort.’ Additionally, the problem will gradually solve itself, with the phased reduction of US troops through 2014.Pakistan can also withhold intelligence cooperation, evict US military, intelligence, and diplomatic personnel and end whatever support remains for the incredibly successful CIA-operated drone programme. All of this could seriously complicate the United States’ war efforts.But the cost to Pakistan would be far greater. Pakistan is a country with few friends. Islamabad frequently touts its relationship with China, but Beijing’s hesitant embrace rests on shaky foundations. The friendship grants China leverage over India and holds the possibility of opening up new energy routes to China through Central Asia, but Beijing has never accepted the patron role that Pakistan so clearly desires. After floods ravaged Pakistan in 2010, the United States offered $150 million in emergency aid. China’s contribution: less than $5 million. More telling, when Islamabad invited China to build a military base in Gwadar earlier this year, Beijing’s response was ‘thanks, but no thanks.’

Pakistan has survived bouts of profound economic turmoil and mismanagement on the strength of generous financial aid from the United States and IMF, where the US holds veto power. The United States is capable of bringing tremendous – and potentially fatal – financial pressure to bear. Were Pakistan’s relationship with the US to turn openly hostile, diplomatic isolation would follow, as would the suspension of aid and spare parts for Pakistan’s military. ISI officials with known links to militant groups could be targeted for sanctions by the United States and international community, as could the Pakistani government, whose actions far exceed the criteria to be designated a state sponsor of terrorism.

This isn’t the preferred path. Even as Mullen lifted the veil on Pakistan’s double game, the Joint Chiefs chairman argued that the United States must stay engaged with Pakistan; that we need to be there ‘when the light goes on.’ For many, this is wishful thinking. But it is instructive to remember that there’s one diplomatic mechanism with a track record of success in Pakistan. Immediately after the attacks of 9/11, then deputy secretary of state Richard Armitage warned Pakistan’s leadership that it would be ‘bombed back into the Stone Age’ if it did not support America’s invasion of Afghanistan. That was the first – and last – time the United States received Pakistan’s full cooperation in this war. Washington then deemed it sufficient to sustain Pakistan’s cooperation with carrots, doling out $20 billion in aid over the past decade. Yet with every new cheque, Pakistan’s resentment toward the US grew and support for militants grew.

Perhaps, at the 11th hour, the Obama administration has realized the folly of this approach and found its own Armitage moment. Whether or not it has the same effect on Pakistan has yet to be seen. One thing is clear, however: the gloves are off.

Jeff M. Smith is the Kraemer Strategy Fellow at the American Foreign Policy Council