The price of gold took a swan dive as November ended, just as Swiss voters formally nixed an initiative that would have required the central bank to buy a lot of the stuff. Faille argues that this is not a matter of cause and effect. It is, on the other hand, a fascinating case study in the discounting machinery that is a market.
The release of Lord Grabiner's report provides evidence going well beyond the conclusions that Grabiner himself is willing to draw, and shows a central bank acting as a wink-and-nod clearing house.
A bitcoin-mining fire, a survey of small and medium businesses and their levels of preparedness for bitcoin customers, and a new criminal accusation against an alleged ponzi scheme: all conribute to the sense that bitcoin is a microcosm of the whole financial world, good and bad.
Draghi and Yellen seem to be headed in opposite directions. One is revving up the money-creation engine, the other is 'tapering.' So why is Yellen so publicly supportive of Draghi? And what happened to the rebellion within the ECB?
The Swiss National Bank and the government oppose a pending referendum that would drastically change the country's policy on gold. But of course the anti-establishment nature of the petition is the whole point.
In the matter of a merchant selling computers that are supposed to mine bitcoin, the FTC alleges that the merchant is a sham, simply using the language of the bitcoin world to find suckers. But the agency might have gotten a bit ahead of itself here.
The significance of the size of bank reserves and deposits as channels for the influence of QE upon macro-economic factors varies bank by bank. Monetary levers don't work on the really big rocks. A word on implications for the equity positions in those banks.
There are several channels for spill-over effects, whereby the actions of the Federal Reserve and the ECB can have grave consequences around the world. Psychological consequence, in particular herding, is among them.
The Federal Reserve practice of the direct purchase of bonds from the U.S. treasury has a fascinating history. Though there have been no direct purchases since 1981, the idea surely is not forgotten. Is indirect purchasing simply a better way for the sovereign and central bankers to assist their cronies?
Markets work. We are warranted in believing this because it has proven itself in human history and we have studied history. Centralized social planning fails. Now, having said all that, let's talk about the Fed.
Paul Volcker is obviously entitled to express his concerns when he senses that the well-educated young people of today are taking economics courses full of the wrong lessons: specifically, that they are unaware of just how nasty a dragon inflation was in the U.S. in the 1970s.
The Chair of the Federal Reserve cannot with any plausibility look upon market bubbles as something exogenous, something that just happens to the earth, like a meteor shower, something from which she and others in her august circles can seek to protect us.
Why it is possible that the recent uptick in animal spirits in Japan comes largely from a sense that Abenomics as originally conceived has run its course, and that Abe and the rest of the gang there will have to move on shortly.
If the old line from Cabaret--"money makes the world go around"--is true, what happens when crypto-currencies go around the world? Vikas Shah explores the world of e-monies.
Vikas Shah looks at the future of money--paper vs. electronic.
Recently we discussed Dr. Stiglitz' view of the Eurozone, a view offered to an Italian audience, with Italy (and Greece) foremost in mind. Today we complement that with Deputy Governor Hakkarainen's view of the Eurozone. He looks down at the same map from the north, with Finland and Sweden foregrounded.
Stiglitz seems to think the euro can be saved, but that the “structure” of Europe as a political entity has to change. His ideas for a reformed structure sound a lot like a consolidation of Europe into a single nation state.
The latest news from Eurekahedge shows a spotty performance for the global hedge fund industry in April, and generally in the year to date. The report also makes a casual remark about low inflation numbers that gives our Christopher Faille an opportunity to grouse about its Keynesian premises.
On Barhydt's view, we have to see Bitcoin and other currencies like it as part of an evolution of the whole world of commerce, payments, and exchange, a vast movement of disintermediation that threatens to disrupt the banking and finance industries.
One informed observer suggests that bitcoin could become a permanent, mainstream, and regulated fixture in the world precisely by maturing past the dreams of its founders and enthusiasts.
Yes, an article in a recent issue of The New Republic, by Dean Starkman, is right to dismiss certain simplistic views of the crisis of 2007-08 as offensive. But what is Starkman's alternative? In providing that, he gets simplistic himself, even complacent.
Arjuna Sittampalam, editor of Investment Management Review and a Research Associate with EDHEC-Risk Institute, cautions the asset management industry in Europe that even if the idea of a continent-wide FTT is defeated, it may encounter a "worse development."
The dust-up over Newsweek's recent article on bitcoin's real or alleged founder is great fun, and will do bitcoin itself no harm.
My own quite speculative view is that Europe as a project is coming apart, and that some of the constituent nations may split into underlying parts in the process, but that this is happening slowly and messily so the world is as yet far from seeing any new equilibrium.
The need for risk management in general and, more specifically, the inability of HNW Chinese otherwise to hedge against RMB exchange risk, is driving them to invest overseas.
In January 2013 the Council of the European Union agreed to allow 11 member states to institute a sweeping financial transaction tax as a matter of "enhanced cooperation." Now, a year later, the EU's tax commissioner, a one-time enthusiast of the idea, is signaling compromise.
There is something inherently perilous in choosing the recipient of any important post by reliance upon the most impressive resume: by that method you can get an endless supply of insiders, confirming that the inside is always the right side.
The good news is that there is a general consensus that QE-infinity is not sustainable. "The notion that QE has distortionary effects is widely accepted," says the CSAM white paper.
The key to understanding the mechanics of bitcoin is that at ten minute intervals the 'miners' gather up the recent proposed transactions and try to add them to the block chain, the universal ledger of bitcoin transactions.
A big story came with Beijing and London datelines on Tuesday, October 15: a deal that may make the City of London a major trading hub in the Chinese yuan, while making life easier for British investors who want to invest directly in China. What does this mean for the U.S. dollar?
In his WSJ piece on Oct. 4, Ferguson said that the "fiscal arithmetic of excessive federal borrowing is nasty even when relatively optimistic assumptions are made about growth and interest rates." Although he made a noteworthy error in expounding on this point, the point itself is solid and important.
Both the total population of ultra high net worth individuals in the world and the amount of wealth they together represent have increased over the past year. The latter metric increased by a little less than $2 trillion.
Christopher Faille talks to James Rickards about U.S.-Russia relations, as Russia reaches parity with the U.S. in the gold-to-GDP ratio.
The key to an equity hedge strategy in the U.S. at present is that “the basket of those stocks generating healthy profits becomes clearer to differentiate from those that are having trouble doing so” through the earnings season. PrevInvest is moderately bullish on this, but not bullish on an event-driven strategy.
We pause to mark the death of a man who, more than any other, was responsible for the creation of a spot market in crude oil in the hectic period after the Yom Kippur War.
Mosler is perfectly willing to have governments create money for their own spending. He does not see that as necessarily inflationary, apparently because the same governments can always tamp down on inflation through the tax system.
The dispute framed by a June 3d debate at Columbia Law School will define the future (and no very-distant future either) of economic policy in the western world and of the fate of all the currencies involved. The question will be: after Keynes, what? We owe thanks to everybody involved in arranging for the Murphy/Mosler debate.
The ongoing process in Europe of bumbling from one crisis to another, with the increase in the centrality and centralization of the ECB that it has brought, may both fatigue and invigorate many of the participants but the image it brings to my mind is of a line of firecrackers setting each other off, each louder than the one before, without apparent end.
Facile parallels notwithstanding, neither the argument Druckenmiller made at Sohn nor any other good reasons that may now exist for shorting the Aussie have a lot to do with the case against the pound in 1992. That tug-of-war occurred in a unique context, not here replicated.
The great success of the Thatcher-era Big Bang was that it shocked the Square Mile out of insularity. The turnover and value of London-based equity transactions increased from roughly £500 million in 1986 to more than £2 billion nine years later.
The present global monetary situation, plainly, is not at equilibrium. Everybody else’s currencies depend upon the dollar, the dollar depends upon petroleum, and petroleum depends upon … whatever. Changes will continue (through a succession of crises if no other way can be developed) until a new equilibrium can be attained.
The notion of a flight to safety has never before sounded so paradoxical. The impending fiscal cliff illustrates the unsustainable fiscal position of the U.S. Treasury, and the uncertainties this creates may generate a flight to the presumed safety of ... U.S. Treasuries.
Either Portugal or Italy could kick off a move toward the use of gold as collateral for sovereign debts. Each country has significant supplies of the stuff. Portugal, for example, has 383 metric tons, equaling 90 percent of its foreign reserves.
IMF economist Manmohan Singh, in a recent working paper for the IMF, makes a case that pledged collateral is a critical financial lubricant, and that since the collapse of Lehman in September 2008 there has been a significant and troubling decline in its supply. Certain measures intended by regulators to enhance financial stability may in fact undermine it, by worsening the supply/demand mismatch, in effect creating a grey market for this pledged collateral.
Financial crises always turn up new risks – and new opportunities. Famously, George Soros bet against the Bank of England during a fiscally challenged time in the early 1990s and pocketed a billion and change for his troubles. Was that a spectacular guess in a geopolitical game of chicken, or was it true alpha? We don't know, because we don't have the data. Currencies didn't much matter then; they do now.
The Commodity Customer Coalition has now issued a white paper presenting its own view of the “background, impacts, and solutions to MF Global’s Demise.”
Chris Brodie has been trading commodities for over 20 years, and set up Krom River in 2006. Scotsman Brodie relocated to Zug in Switzerland several years ago and has no regrets about the move. The fund’s best year so far was 2008 when it rose by 37% while the GSCI fell by two thirds, and it was also up in August of this year. Krom River are running both discretionary and systematic funds, and also have a dedicated agricultural vehicle. We touched on a range of topics that CAIA candidates and charterholders will be familiar with. Krom River is a signatory of the Hedge Fund Standards Board that has been discussed on AAA.
By Christopher Faille Passive and active investments are often contrasted as if the distinction is self-evident. It isn’t. Even for an unambitious long-only equity indexed fund, trades have to be executed in order to maintain the desired balance, and these trades can be executed either well or poorly, in ways that help or hurt the […]