Notes From Underground: Last Week’s Two Biggest Losers

Another day, another week, another month and another quarter. It is hard to believe that we have now reached the halfway mark for 2013 and it has been anything but boring. The next quarter should be just as volatile as the German elections take center stage and political uprisings are beginning to change the international landscape. The unemployment data from the U.S. will bring even more volatility than usual as the FED has now raised the importance of JOBS as the mainstay financial focus … again. As Europe debates a unified banking system, one gets the feeling that EU banking problems are simmering just below the surface and the issue of BAIL-INS is making large depositors extremely nervous. The GOLD has been thrown overboard as the instrument of being a store of value, but as the $1200 level succumbed to selling pressure, the SILVER and PLATINUM performed admirably.

If one wants to buy an out of favor asset, SILVER/GOLD may be a place to trade. Do your technicals and see if you can establish a comfortable risk profile for yourself. I am just bringing attention to the fact that while GOLD tumbled silver was dragged down. More importantly, as I noted last night, THE GOLD/YUAN CROSS AT 7150 YUAN TO AN OUNCE OF GOLD MAY PROVIDE A LEVEL FOR THE GOLD TO HOLD. Again, the GOLD/YUAN was at 7150 the day of the IMF gold sale to INDIA on November 2, 2009 and although in U.S. dollar terms the price was $1048, for Chinese buyers the 7150 YUAN level may bear more importance. Just bringing attention to a level that may prove supportive.

***Two biggest losers last week were the FED and the Swiss National Bank. As U.S. long-term rates rose, the FED‘s balance sheet of $3.5 trillion in assets got pummeled on a mark-to-market basis. I wonder if the U.S. Treasury will remit the money the FED sent to it last year. But when you have a printing press you have the ultimate realm of OPM (other people’s money). The Swiss National Bank also took a drubbing as its portfolio of international currency and bonds had to fall dramatically in value. The SNB turns over its profits to the CANTONS but I wonder who absorbs the losses. Hey, Ben Bernanke and Thomas Jordan: Just double down on your bets and make a few more speeches. The FED and Swiss both appear to suffer a trader’s dilemma. That is, when a trade becomes a long-term investment. If the SNB bought Aussie dollars at 1.05, they have to love the currency at 0.9300. If the FED bought 10-year notes at 1.70% yield, at 2.3% they are a gift.

***The key speech tomorrow will be Fed Governor Jeremy Stein at the Council on Foreign Relations. It is on monetary policy and we will pay close attention to any mention of credit being mispriced because of the FED and its ability to impact financial stability.
***Something to ponder: Jon Hilsenrath had a WSJ piece today about the White House, with Senate advisement, beginning the search for a new FED Chairman. My question is this: BECAUSE THE 535 MEMBERS OF CONGRESS AND THEIR AIDES ARE STILL ALLOWED TO TRADE, WILL THIS BE A CAUSE OF INSIDER TRADING AND BENEFIT THE FEW? Just asking the obvious. Patience will be the watchword as we enter the new quarter, which is sure to be volatile … except if you are an elected official.

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4 Responses to “Notes From Underground: Last Week’s Two Biggest Losers”

  1. Nate Says:

    I think I am going to start my own blog… It is going to have links to Yra Harris and Trader Dan… I will be hailed a genius!

  2. Ronald Ferrill Says:

    Could there be a correlation between Gold prices and prices of emerging market equities?

    While I don’t have any faith that the U.S. Fed (FED) will be able to turn their investments into a profitable situation for the country, I do believe that SNB will do so. Patience, time, knowing what to do from where you are are likely tenets in their approach.

    I kinda thought that Ben’s speech and the reaction in markets were purposeful in response to the President’s conversation on TV while out of the country, talking about Bernanke’s likely step down from position. Obama there reminded me of small executives (presidents of divisions) I’ve known in industry, like one who decided to send me an email on Sunday evening from his home in CA, trying to fire me, or another who actually had tears as he gave me my severance letter. In the first case he did so because I balked at an illegal and unethical move he was making, then after receiving his email, I called the CEO and blew the whistle – this “small” executive eventually was fired along with his cronies. In the second case, the tearful (disingenuous) president went on to destroy the company I was forced to leave after turning it around as VP Ops, their revenues dropping to less than 50% of prior within a year as backlog dropped to 1/3, and in 4 years company was sold and revenues to 15%. So did Bernanke get a measure of schadenfreude?

    Regarding the point of insider trading within the political bubble of Washington D.C. – what’s new?! No matter what we the citizens expect or desire, they are there for their own self-aggrandizement and nothing else. Yes, cynical – and correctly so. Skepticism is too light a stance for what we now have as a ruling class.

  3. yra harris Says:

    Ron–excellent addition.The Gold and emerging markets relationship is interesting and why I sense that looking at prices in terms other then dollars is becoming more important—I try to not be so U.S. centric–for that is a disease that traders cannot afford

  4. Chicken Says:

    “they are there for their own self-aggrandizement”

    An understatement, I assure you. To the extent, they themselves cannot recognize this fact due to their entitlement.

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