Anthropomorphic inspirational thought of the day

Reserved humor

At today's Brookings Institution colloquium, Prof.Bernanke was drole. Everyone is mentioning this one: "When we were trying to convince Congress to pass TARP, one congressman told me that his constituents were split on the matter: 'Half are saying no and the other half are saying hell no.'"


That's fairly funny, but he later said something funnier: "The problem is that many things that work in practice don't actually work in theory."

Destructive effects of US QE on Australia and Canada

If QE stabilized weak economies like the US, then it also inflated to dangerous levels healthy ones like Canada and Australia.

Lincoln

From the Bank Credit Analyst:

Outlook For Canada And Australia
january 7, 2014 by bca research


It is widely known that both Canada and Australia avoided the banking/housing meltdown and their fiscal position is much better than in most other developed economies. However, there are no grounds for complacency in either case.



In both countries, house prices have continued to climb in recent years with the result that household debt-to-income ratios now exceed the levels reached in the U.S. before the housing market fell apart. Debt burdens are especially worrying in Canada. Both economies also have high exposure to commodities and the gloss has long disappeared from that sector. We are not predicting a collapse in either Canada or Australia in 2014, but any growth improvement over the coming year is likely to be relatively modest.

In terms of equity market performance, both markets are commodity dependent. There is a case for a cyclical bounce in commodities as global growth improves. Thus, Canadian and Australian stocks may enjoy a reversal of some of their recent severe relative underperformance. However, these markets also are vulnerable to investors downgrading their long-run commodity price expectations, even if there is a cyclical bounce. We recommend staying underweight.

$500 billion in gold futures in a single trade

This morning gold dropped about $30/oz briefly when 4,200 futures contracts were sold in a single trade. At 100 oz/contract, that about $500 billion in nominal value. That's a lot for a single trade. A 1% move in gold around this price is plus or minus $5 billion. Who would make such a trade? Article below:



January 6, 2014, 12:26 PM ET
Gold market ‘flash crash’ explanations vary from ‘fat finger’ to ‘price manipulation’




Gold futures suffered a sudden, brief drop in prices early Monday on the Comex division of the New York Mercantile Exchange, with market watchers blaming the move on everything from a “fat finger” to trader liquidation to price manipulation.

According to Nanex (that’s its chart above), a trade of about 4,200 contracts sent February gold GCG4 tumbling by $30 an ounce on heavy volume at around 10:14 a.m. Eastern and triggered a 10-second trading halt. Prices fell from about $1,245 to around $1,215 an ounce in just moments. The crash came about 14 minutes after the release of U.S. factory orders and ISM services index data.

Phil Flynn, a senior analyst at Price Futures Group, at first said the drop looked like it was due to a “fat finger,” then added there was speculation over a broker liquidating positions.

Mark O’Byrne, executive director at GoldCore, said the “flash crash today had the hallmarks of price manipulation.” Still, “as ever, it is nearly impossible to tell and could have been a fat finger trade or a large fund or bank liquidating a gold position.”

Meanwhile, Ross Norman, chief executive officer at Sharps Pixley, said that the move “looks to be shorts defending their substantial positions.” But “some of us have doubts, which makes gold a steal at these prices,” he said. “In fact, [it’s] the cheapest insurance in town against economic difficulties.”

February gold was last up $1.80, or 0.2%, at $1,240.40 an ounce on Comex.

Now the real question is whether the U.S. Commodity Futures Trading Commission and exchange “will investigate and try to actually enforce its regulations,” said Brien Lundin, editor of Gold Newsletter.

“Apparently there was no investigation into the mid-April episode where gold contracts were dumped simultaneously to push the price through sell

From today's Boston Globe: Murphy and the 2014 outlook