New York's S&P index is back where it stood in July 2007
right before the global credit crunch first bit, eating more than half the
stock market's value inside 2 years...
Japan's Nikkei index has jumped by one third since mid-Nov., thanks to export companies getting a 20% drop in the Yen
currency's fastest drop since right before the Asian Crisis of 1997...
And here in the UK where the FTSE-100 stock index
just enjoyed its strongest January since 1989, when house prices then
suffered their biggest post-war drop average house prices are rising
year-on-year, even as the economy shrinks...
The common factor? Zero interest rates and money creation on a scale
never tried outside Weimar Germany or Mugabe's Zimbabwe. Only the Eurozone
has stood aside so far, and even then only a little.
And yet gold and silver the most sensitive assets to
money inflation are worse than becalmed.
Daily swings in the silver price haven't been this small since spring 2007.
Volatility in the gold price has only been lower than Thursday this week on
15 days since the doldrums of mid-2005. Back then the Dollar also steadied
and rose after multi-year falls. Industrial commodities outperfomed
'safe haven' gold too a pattern echoed here in early
2013 by the surge in the price of useful platinum over industrially 'useless'
Perhaps the flat-lining points to better times ahead. Gold after all is where
retained capital hides when things are bad a store of
value to weather the storm. Or it may signal itchy feet in the 'hot money'
crowd, now moving back into stocks and shares instead. But we can't shake the
feeling that something awful is afoot. Gold and silver aren't making
headlines today. Just like they didn't before the financial crisis began.
"Japan is on an unsustainable path of a strong Yen and deflation,"
wrote Andy Xie once of Morgan
Stanley, now director of Rosetta Stone Advisors back in March 2012.
"The unprofitability of Japan's major exporters and emerging trade
deficits suggest that the end of this path is in sight. The transition from a
strong to weak Yen will likely be abrupt, involving a sudden and big
devaluation of 30 to 40 percent."
Already since the Abe-nomic revolution announced in
November the Yen has dropped more than 20% versus the Dollar. But "there
is plenty of liquidity still parked in the Yen," Xie
noted this week. Quite apart from the shock to America's
trade deficit which surging shale-oil supplies deliver, "The
Dollar bull is due less to the United States' strengths than the weaknesses
in other major economies," he adds. And reviewing the last two major
counter-trend rallies in the Dollar's otherwise permanent decline, "The
first dollar bull market in the 1980s triggered the Latin American debt
crisis, the second the Asian Financial Crisis. Neither was a
Neither of those crises coincided with a bull market in gold or silver.
Savers worldwide chose Dollars instead as the hottest emerging-market
investments collapsed. But then neither of those slumps saw emerging-market
central banks so stuffed with money, nor gold and silver so freely available
to their citizens.
China's gold imports almost doubled last year, with net demand overtaking
India for the world's #1 spot at last. This week the People's Bank of China
pumped a record CNY860bn into the money markets
($140bn), crashing Shanghai's interbank interest
rates by almost the whole one-percent point they had
earlier spiked ahead of the coming New Year's long holidays.
The disparity, meantime, between the doldrums in precious metals and the bull
market in Dollar-Yen trading can be seen by glancing at the US derivatives
market. Yesterday the CME Group cut margin
requirements on gold and silver futures. It raised the
payments needed to play the Yen's lightening
drop. One of those moves is likely bullish, short-term. But you'd to borrow
money to choose.
Western pension funds are meanwhile pulling out of commodities, and just as
liquidity floods back into the market. Both the Wall Street Journal and
the Financial Times
report how big institutions have quite hard assets "after finding they
did little to protect their portfolios against inflation risk and the
unpredictable returns of stocks." One of the biggest commodity hedge
funds, Clive Capital has shrunk from $5 billion under management two years
ago to less than $2bn today. And yet European banks the
major source of credit to commodities traders are
now reviving their commodities lending.
"The sector came close to panic 18 months ago," says the FT.
But now "The banks want to be again my best friend," says a Swiss
executive. "Funding concerns have now substantially dissipated,"
says SocGen's head of natural resources and energy
finance, Federico Turegano.
There's plenty of money around to borrow, in short. Whether in Chinese
banking, currency betting or commodities trading, where there was very little
at all, suddenly it's all turned up at once. Which is just
how trouble arrives. All that central-bank liquidity and quantitative
easing has so far left consumer-price inflation unmoved, too.
Please Note: This article is to inform your thinking, not lead
it. Only you can decide the best place for your money, and any decision you
make will put your money at risk. Information or data included here may have
already been overtaken by events and must be verified elsewhere
should you choose to act on it.