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WORLD FINANCIAL REPORT ON RADIO DECEMBER 24th 2015
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CHARTS OF THE WEEK-QUOTES-QUICK HITS
-CHART OF THE WEEK: The Big Short Was Only One Reason 2015 Was The Year of the Bears. Money managers are having trouble picking winners. But they sure can pick losers. Take Whitney Tilson, who makes money by betting on stock declines or short selling. Just last week he closed out his bet against Lumber Liquidators Holdings Inc., riding it from about $100 to less than $20. He’d helped trigger the stock collapse when he publicized suspicions in 2013 about the company’s wood flooring. Then there was this autumn’s takedown of Valeant Pharmaceuticals International Inc. by Andrew Left and his Citron Research. Valeant, which had been a punching bag for both politicians and Bronte Capital’s John Hempton, plunged when Left compared it to Enron. That earned him most of the credit for the drug firm’s downward spiral. Read more here-http://bloom.bg/1IlnhWP
-CHART OF THE WEEK: Euro-Dollar Bulls and Bears Set To Hibernate Until March. Euro looks past January to focus on March Fed and ECB meetings. Currency options show euro-dollar focus is looking past the European Central Bank and Federal Reserve meetings in January and giving a lot more attention on the March policy meetings, Bloomberg strategist Vassilis Karamanis writes. Until then, the euro is likely to trade within a familiar territory versus the greenback, especially as year-end flows may cloud the short-term direction after the Fed liftoff. Read more here-http://bloom.bg/1QHcysh
-CHART OF THE WEEK: Bonds Set to Beat Stocks Globally in 2015 After China Falters. Bonds are poised to outperform stocks globally for a second year, the first time that has happened in more than a decade, as slowing growth in China drives demand for the safest assets. The Global Broad Market Index of bonds from Bank of America Merrill Lynch has risen 1.3 percent this year, while the MSCI All Country World Index of shares has slumped 2.9 percent including reinvested dividends. In 2014, debt returned 7.8 percent and stocks advanced 4.8 percent. Bonds haven’t outperformed equities for two straight years since 2001 and 2002 when a bubble in technology shares burst. Read more here-http://bloom.bg/1RDOA1m
-CHART OF THE WEEK: The Bank of Japan’s $2.5 Billion Plan to Buy Non-Existent ETFs. Haruhiko Kuroda has a new plan. He’s going to buy $2.5 billion of something that doesn’t exist. Markets were roiled Friday after the Bank of Japan unveiled measures including purchasing exchange-traded funds that track companies which are “proactively making investment in physical and human capital.” The central bank will spend 300 billion yen ($2.5 billion) a year from April buying such securities to offset the market impact as it resumes selling stocks purchased earlier from financial institutions.
The only problem is such ETFs have never been made in Japan, at least not yet. Even as fund providers start hundreds of so-called “smart beta” products that choose stocks based on everything from dividends to volatility, ETFs that pick companies for how they deploy their cash are rare in global markets. “These kinds of ETFs don’t exist now. Using capital spending as a factor in deciding what goes in an ETF is quite unusual,” said Koei Imai, who oversees $25 billion of ETFs at Nikko Asset Management Co. in Tokyo. “I think the message from the BOJ is for us to go out and make them.” Read more here-http://bloom.bg/1QGSPch
-CHART OF THE WEEK: We Can’t Even With This Millennial ETF. Now you can go long or short generations. Millennials are about to be able to invest in one of their favorite things: themselves. As companies from every industry trip over each other to appeal to a generation of 18-to-33-year-olds, we can all look forward to an exchange-traded fund focused on this very demographic as ETF provider Global X just filed for the first millennial generation ETF, according to ETF.com. Read more here-http://bloom.bg/1m5vR1Y
-CHART OF THE WEEK: Peace in Libya Is Signaling More Pain in the Oil Market. If there was any need for another reason to be bearish on oil, the peace deal brokered by the United Nations in Libya may be it. The accord signed last week between the two rival factions in the North African country may pave the way for shuttered oil fields and export terminals to be reopened. While Morgan Stanley says it’s skeptical of a sustained recovery, an increase in output by 400-600 thousand barrels a day in addition to more supply from Iran may delay any re-balancing in the oil market until 2017, according to the bank. Read more here-http://bloom.bg/1O7qedN
-CHART OF THE WEEK: A Million to None: The U.K.’s Last Coal Miners Stop Work Today. So long, and thanks for all the fuel. A hundred years ago more than a million men made their living digging coal from deep beneath U.K. soil. As of today there will be none. Britain’s last underground coal mine closes on Friday, calling time on an industry that helped propel the U.K. to superpower status in the 19th century. While the underground coal mining industry has been defying a final death since Margaret Thatcher’s assault in the 1980s, a collapse in coal prices and the accelerating fight against climate change has pushed them over the edge. Read more here-http://bloom.bg/22lYGYh
-“I also believe precious metals are inexpensive, though they may stay inexpensive for a bit longer because sentiment is now very negative. Again, if you said, “Marc, here is $1 million, but you have to put everything in either gold or in the Dow Jones,” then I would say I’d take gold. Everything is distorted, and it’s a relative game. Looking at the fundamentals of the world, including the quantity of money, the magnitude of debt as a percent of GDP, the low economic potential and the mad frame of mind of central bankers and their intellectual dishonesty, I would own gold.” Marc Faber
-“A global fire is imminent and investors must own fire insurance before the fire starts because the coming fire will be totally devastate and burn all of the paper money that has been created in the last few decades plus a major part of the assets financed by all of this paper money. The best form of insurance or wealth protection is of course physical gold and maybe some silver. The precious metals will go to levels which are unimaginable today.” Egon von Greyerz
-“The bottom line is a whole new market era is upon us with the end of ZIRP. The Fed has never before tried to normalize rates out of ZIRP, so this new rate-hike cycle is utterly unprecedented. It is certain to have a vast impact on the financial markets, which won’t become fully apparent for weeks or months yet. And this is only an initial step in the long road of reversing the Fed’s extreme monetary policies since the panic. Because the stock markets were artificially levitated by the epically-easy Fed in recent years, a tightening Fed is almost certain to reverse most of their fundamentally-unjustified ZIRP-fueled gains. Traders need to prepare for a new bear market in stocks. And since gold moves counter to stock markets, investment demand is going to return driving its price much higher in the coming years as the Fed normalizes rates.” Adam Hamilton
-“OPEC predicted a slow rebound for oil prices in its annual World Oil Outlook. The OPEC report, released Wednesday, said it expects oil prices to recover to US$70 a barrel in 2020, and US$95 a barrel by 2040. On Wednesday, the price of crude oil was US$37 a barrel.” ctvnews.ca
-“If Brent were to fall through $34.55 or WTI below $32.40 there would be little in the way of crude oil benchmark prices falling into the $20s per barrel.” Jan Stuart Credit Suisse
-“IMF figures say Saudi Arabia gets 80 percent of its revenues from oil.” Businessinsider.com
-“China’s leaders intend make monetary policy more “flexible,” according to a statement from a meeting of top economic policymakers as the government prepares more stimulus to support its flagging economy. In what may be a major shift at the People’s Bank of China, the central bank has been surveying the country’s lenders on the possibility of removing its benchmark deposit and lending rates. Policymakers have been moving toward creating what the central bank calls an interest-rate corridor to guide borrowing costs after policymakers scrapped a deposit-rate ceiling in October.” Bloomberg
-“Last week during her press conference, Janet Yellen said that economic expansions don’t die of old age. That appears to be true for bull markets as well. The current stock market rally, which started in March 2009 is on the verge of surpassing the bull market that started in June 1949. Still it has a long way to go before it can match the bull market that started in October 1990. Over the past 88 years, the average bull market has lasted 57 months.” Bloomberg
-“Deutsche Bank AG has identified as much as $4 billion in suspicious transactions related to its Russian operations, in addition to $6 billion in so-called mirror trades it is examining. The bank, which announced in October that it was setting aside an extra $1.3 billion in liquidity reserves to cover suspected wrongdoing at the Russian unit, is currently reviewing its operations in high risk locations.” Bloomberg
-“Europe’s best performing stock in 2015 gained 1,391 percent so far this year. Fingerprint Cards AB, which is followed by just one analyst who doesn’t recommend buying the shares, has something of a checkered past including a faked press release that inflated its stock and alleged insider trading by its former CEO. “If you put a lot of money into Fingerprint you should know that you could lose everything,” said Albin Rannar of the Swedish Shareholders’ Association, an independent organization working to protect private investors.” Bloomberg
-“2015 has not been a good year for the hedge fund industry. Total closures in the first nine months of the year were at 674, with 257 of those coming the third quarter. Hedge-fund assets contracted by $95 billion to $2.87 trillion during the quarter, HFR data showed, the most since the fourth quarter of 2008. Funds involved in industrial metals have been particularly hard hit by the commodity rout, with one of the survivors saying the worse may be to come.” Bloomberg
-Deutsche Bank: Here’s why the US dollar will continue to rally. The bull market in the US dollar something that began in the June quarter of 2011 is likely to last for an additional two years and see the currency gain by a further 10% in trade-weighted terms. That’s the bullish forecast offered by Alan Ruskin and George Saravelos, macro strategists at Deutsche Bank, who suggest the bull market in the buck still has some way to run before it reaches its next cyclical peak.
Here’s why they think the bull market in the US dollar is only two-thirds complete: Since the fall of Bretton Woods, big USD down cycles of 9 to 10 years have been followed by big USD upswings of 6 to 7 years. While all cycles are different, the macro backdrop conforms to a view that we are about 2/3rds the way through the big USD up cycle, with the real broad index some 50 months into an upswing. In the same vein, the real Broad TWI has in past cycles largely retraced any prior cycle losses, and increased by 53% and 33% in the 1978 1985 and 1995 2002 upswings respectively. In the last downswing the USD real broad TWI fell by 28%. We expect that the USD will at a minimum fully retrace these losses, fitting with further real broad TWI gains in the order of 10%.
In magnitude terms we are then also likely to be a little over 2/3rds the way through the USD cycle, with USD gains henceforth likely to come at a slower pace. Using history as a guide, Ruskin and Saravelos suggest that in real terms against a basket of currencies, the US dollar has tended to fully recover prior declines, with rallies traditionally occurring over a shorter period than the weakening cycles they have followed. Based on past relationships, it suggests that the bull market in the US dollar will probably run for a further two years and result in gains of at least 10% based on their analysis. Read more here-http://read.bi/1PkljXV
-Ambrose Evans-Pritchard: Fed will have to reverse gears fast if anything goes wrong. Janet Yellen has taken a huge gamble raising rates alone in the world, with manufacturing in recession and the dollar already too strong for comfort. The global policy graveyard is littered with central bankers who raised interest rates too soon, only to retreat after tipping their economies back into recession or after having misjudged the powerful deflationary forces in the post-Lehman world.
The European Central Bank raised rates twice in 2011, before the economy had achieved “escape velocity” and just as the Club Med states embarked on drastic fiscal austerity. The result was the near-collapse of monetary union. Sweden, Denmark, Korea, Canada, Australia, New Zealand, Israel and Chile, among others, were all forced to reverse course, and some have since swung into negative territory to compensate for the damage. The US Federal Reserve has waited longer before pulling the trigger, and circumstances are, in many ways, more propitious. Read more here-http://bit.ly/1RFkcnd
-Switzerland has discovered the unintended consequences of negative interest rates. Negative interest rates called “punishment interest” in Germany have morphed from sheer impossibility to solid reality in Europe. Having seen how they work, the Bank of Canada has invoked them now, and Fed Chair Janet Yellen, has put them “on the table” before a House of Representatives committee. In Europe, after they became established as the latest method of flogging savers until their mood improves, all kinds of absurdities saw the light of the day. For example, bailed-out national governments can now fund their deficits at negative rates, extracting money from their bondholders, rather than paying them. Perhaps the coolest notion was that banks would be “paying your mortgage.” Read more here-http://read.bi/22ob0at
-Something Crazy Is Going On In Swedish Money Markets. It appears Swedish banks are falling over themselves to get rid of excess cash. We noted Swedish banks refusing to open bank accounts in September, and warned in October of a “giant wave of money” heading into Sweden thanks to the Riksbank-ECB policy divergence, and now, Swedish banks are paying each other to take cash off their balance sheets into year-end, as 1-week STIBOR crashes to -1.792%. In other words, “reverse window-dressing” as no one wants to show a negative carry asset on their balance sheet.
-Canada is considering the ‘unthinkable’ negative interest rates. In his December 8th speech, the Governor of the Bank of Canada, Stephen Poloz introduced the possibility of negative interests as a policy tool. He was adamant that the Bank was not embarking upon this policy, rather it was exploring the implications of using such an unconventional policy instrument in times of economic shock or major dislocations. It was his view that ” it’s prudent to be prepared for every eventuality ”
Yet, his discussion went beyond just academic musings and into the practical realm of how would negative interests impact the Canadian financial markets. In 2009, the Bank looked at the application of negative interest rates ,but rejected it as a possible tool. What has changed since that time that caused the Bank to come out in favor of such an unprecedented policy move? I believe there are two important developments that go a long way towards explain the shift in the Bank’s thinking towards the “unthinkable”.
First, the Canadian economy has weakened further since mid-2015, raising the spectre of a rate cut to revive growth; negative rates are just another form of rate cutting. Secondly, the experience with negative rates in the Eurozone and in the EU in general has proven to be more positive ( less to be feared) than many experts thought early on; some half dozen countries now experience negative rates and continue to function without major market disruptions. Before we look at Canada, specifically, it is helpful to explain why some central banks chose to establish negative rates. Read more here-http://read.bi/1kflff0
-Stalled GDP could spur interest rate cut: analysts. Canada’s economy was stable overall in October, as gains in the resource sector offset declines in production and consumer spending. The country’s gross domestic product was unchanged, after falling 0.5 per cent in September, according to Statistics Canada data released on Wednesday. News that the economy had failed to grow for the month of October prompted analysts to speculate if the Bank of Canada would again cut its key lending rate.
Capital Economics Senior Canada Economist David Madani said that the further decline in the export-orientated manufacturing sector will be “discouraging” to the Bank of Canada. “It has pinned its hopes for growth on an export-led revival. But as we have warned before, this is simply wishful thinking,” he wrote in a response to the StatsCan data. “Overall, with the economy stagnating this quarter, the amount of excess slack will increase, creating more downside risk to the Bank of Canada’s outlook for underlying inflation. This supports our long-held view that another interest rate cut is likely early next year, probably in April, though possibly sooner if oil prices fall any further.”
Madani noted that despite showing a rebound in the summer, it appears that the economy “may never have escaped the recession” this year. CIBC Capital Markets economist Nick Exarhos said the new figures could put Canada on track for zero growth in the fourth quarter. He also said that the lack of growth could mean the another interest rate cut the central bank is on the horizon. In its monetary policy report released in October, the Bank of Canada had predicted growth of 1.5 per cent in the fourth quarter of 2015.
-Economist: The Canadian Dollar’s Demise ‘Couldn’t Have Happened at a Worse Time.’ The U.S. greenback broke above $1.40 vs. the Canadian dollar late last week in the wake of softer-than-expected inflation and wholesale sales prints north of the border. And according to Scotiabank Economist Derek Holt, the timing of the loonie’s slump is abysmal as it drains debt-laden households’ purchasing power precisely when big-ticket purchases, of such items as homes and autos, are running at all-time highs. And the higher they are, the farther they could potentially fall. “The currency’s plunge couldn’t have happened at a worse time for the country’s household sector,” Holt lamented in a note published Friday. “When a currency declines as CAD has alongside a deep negative terms of trade shock, it is among the mechanisms through which markets price a large wealth transfer out of the country to the regions of the world that are large net importers of commodities.” Read more here-http://bloom.bg/22ohhD2 and http://read.bi/1OJlHL1
-The Oil Price Crash Is Taking a Heavy Toll On Canada. And the Worst Is Yet to Come. Crime is rising, home prices are falling and food banks are overwhelmed in Calgary as job losses spread. And the worst isn’t yet over in the heart of Canada’s oil patch. Some of the city’s largest employers are poised to cut more jobs in 2016 as they reduce spending for a second straight year, adding to an estimated 40,000 oil and natural gas positions lost across the nation since the crude price rout began 18 months ago.
“We all know someone who has lost a job,” Naheed Nenshi, the city’s mayor, said in a speech this month, lamenting the “funeral”-like atmosphere in the business community. Calgary, which boasted one of the lowest jobless rates in the nation as crude prices rose over $100 a barrel, is reeling after a global glut pushed prices down by two-thirds. Shares of energy producers have slumped along with oil. While Alberta’s biggest city is benefiting from gains in tourism and transportation, its economy is still 30 percent dependent on oil and gas, according to the mayor. Read more here-http://bloom.bg/1ND54Tq
-Britain just got a clear sign that interest rates won’t rise for ages. The Bank of England is not going to raise rates anytime soon, mainly because Britain’s wage growth is really crappy. That’s according to the BoE’s rate setting Monetary Policy Committee member Martin Weale, who spoke to the Telegraph newspaper. The US Federal Reserve voted to raise interest rates for the first time in 9 years last week. The world expects central banks globally to follow the US’ lead and raise interest rates within the next year. It would bring an end to a period of record low interest rates around the world, sparked by the 2008 financial crisis. But Weale says that stagnant wage growth and tumbling commodity prices are stopping many members at Britain’s central bank from following the Fed and raising rates. “The factors pushing down on inflation have become a bit more prolonged,” Weale told the Telegraph. “I initially thought that the weak wage growth was a wobble that represented stray numbers that you get once or twice from time to time. There has plainly been something more to it than that.” “It’s just another of the things that makes the need [to raise interest rates] slightly less immediate.” Read more here-http://read.bi/1myx6qv
-U.K. Economy Loses Momentum as Pace of Growth Revised Lower. The U.K. economy expanded less than previously estimated in the past two quarters in a sign growth is losing some momentum. Gross domestic product rose 0.4 percent between July and September instead of the 0.5 percent previously estimated, the Office for National Statistics in London said on Wednesday. Growth in the second quarter was revised down by 0.2 percentage points to 0.5 percent. Read more here-http://bloom.bg/1ZpETVA
-Extreme Oil Bears Bet on $25, $20 and Even $15 a Barrel in 2016. Oil speculators are buying options contracts that will only pay out if crude drops to as low as $15 a barrel next year, the latest sign some investors expect an even deeper slump in energy prices. The bearish wagers come as OPEC’s effective scrapping of output limits, Iran’s anticipated return to the market and the resilience of production from countries such as Russia raise the prospect of a prolonged global oil glut.
“We view the oversupply as continuing well into next year,” Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc., wrote in a note on Tuesday, adding there’s a risk oil prices would fall to $20 a barrel to force production shutdowns if mild weather continues to damp demand. The bearish outlook has prompted investors to buy put options which give them the right to sell at a predetermined price and time at strike prices of $30, $25, $20 and even $15 a barrel, according to data from the New York Mercantile Exchange and the U.S. Depository Trust & Clearing Corp. West Texas Intermediate, the U.S. benchmark, is currently trading at about $36 a barrel. Read more here-http://bloom.bg/22nXB2g
-OPEC Sees Demand for Its Crude Oil Falling for Rest of Decade. OPEC said demand for its crude will slide to 2020, though less steeply than previously expected, as rival supplies continue to grow. The organization will need to pump 30.7 million barrels a day by the end of the decade, OPEC said Wednesday in its annual World Oil Outlook. That’s 1.7 million barrels more than projected a year ago, and 1 million less than the group pumped in November. The forecast underlines the struggle faced by the Organization of Petroleum Exporting Countries as it seeks to defend market share against a surge in output from rivals such as the U.S. and Russia. While OPEC is slowly taming the expansion of competitors, the collapse in oil prices means the financial costs of its strategy are immense. Read more here-http://bloom.bg/1OLY3xn
-Something Strange Is Taking Place In The Middle Of The Atlantic Ocean. Early last month, we noted that something very strange was happening off the coast of Galveston, Texas. As FT reported, “the amount of oil [now] at sea is at least double the levels of earlier this year and is equivalent to more than a day of global oil supply.” In short: the global deflationary crude supply glut is beginning to manifest itself in a flotilla of stationary supertankers, as millions of barrels of oil are simply stuck in the ocean as VLCCs wait to unload. Ultimately, this led to nearly 40 crude tankers with a combined cargo capacity of 28.4 million barrels waiting to anchor near Galveston. Here’s what the logjam looked like. Read more here-http://bit.ly/1OiL0TJ
-Gas prices in the US are at a 6-year low. Gas prices in the US are at a 6-year low. As of the week ending December 14, the average price for regular gas was $1.953 per gallon, less than the $1.982 per gallon low seen back in January 2015 after the initial crash in oil prices that took place in the second half of 2014. Read more here-http://read.bi/1J3v7nZ
-Ukraine Defaults on $3 Billion Bond to Russia. Medvedev Says Russia to Sue Ukraine. Russian Prime Minister Dmitry Medvedev ordered the government to prepare a lawsuit to sue Ukraine for non-payment of a $3 billion debt. Ukraine has defaulted and isn’t planning to repay the bond, judging by official statements in Kiev, Medvedev said Monday at a government meeting outside Moscow. Russia expects full repayment, “including, obviously, the penalties that will have accumulated by then by the Ukrainian side,” which is engaged in “manipulation and violation of its international obligations,” he said. Russia will also impose counter-sanctions over Ukraine’s free-trade agreement with the European Union that takes effect Jan. 1, Medvedev said. Ukraine will lose its favorable trade status with Russia on that date and standard duties will be levied on Ukrainian goods entering the Russian market, he said. Read more here-http://bloom.bg/1NAQHit and http://bloom.bg/1OJ4Jw9
-This stunning visualization shows all of the world’s money. How much money exists in the world? Strangely enough, there are multiple answers to this question, and the amount of money that exists changes depending on how we define it. The more abstract definition of money we use, the higher the number is. In this data visualization of the world’s total money supply, we wanted to not only compare the different definitions of money, but to also show powerful context for this information. That’s why we’ve also added in recognizable benchmarks such as the wealth of the richest people in the world, the market capitalizations of the largest publicly-traded companies, the value of all stock markets, and the total of all global debt. Read more here-http://read.bi/1InKc3O
-The Dow is on the verge of doing something it hasn’t done since 1939 and it’s not good. The Dow Jones Industrial Average has lost about 1.5% so far this year. And while stocks usually go up, the decline in the blue chip index this year has been particularly surprising given that it’s the year before an election. Even more bullish for stocks heading into 2015 was data showing that years ending in “5” following a mid-term election have been uniformly positive for stocks. Alas, 2015 has not been that kind of year. On average (based on data going back to 1933), the Dow Jones Industrial Average gains 10.40% during pre-election years. So far, we are facing negative growth during a pre-election year which would mark the first time this has happened since 1939, according to the trader’s almanac. Read more here-http://read.bi/1NM8QaZ
-Something fishy is going on with earnings. Corporate America has a long history of delivering on the bottom line. You hear about this when we in the media report that a company beats earnings expectations. But there’s something fishy going on. Sales are lackluster, and actual earnings are not that great. Financial-management maneuvers some reasonable and some questionable may be being pushed to extremes as executives work toward impressing their investors. If you’ve spent any time following the markets, then you’re probably familiar with some of the tactics companies employ to boost earnings. Read more here-http://read.bi/1mAF9mH
-There is a property bubble in Sweden and people are scared the government won’t do anything about it. Sweden’s housing market appears to be in a bubble, and the central bank, the IMF, and the main Swedish financial regulator are begging the government to intervene. But so far it has not. Mortgages are so cheap, and prices are increasing so fast, that the Finansinspektionen, Sweden’s financial regulatory agency, has warned that Swedes are essentially borrowing money in the form of mortgages and then placing that money in stocks and mutual funds rather than paying off their mortgage debt.
The problem is that “their behaviour could amplify an economic downturn” if stocks or mortgages go down, the Finansinspektionen has said. Falling stocks would crush Swedish consumption spending, further hurting the economy. And falling house prices could cause Swedes to liquidate their stock positions, which would in turn exacerbate the cycle. That’s the fear, anyway. Right now, Sweden is enjoying a glorious housing boom! A mystery buyer just paid 104.5 million kronor (£8.2 million / $12.4 million) for the most expensive apartment ever sold in the country, a rooftop terrace in Stockholm with a view of the sea. While £8 million for a flat is small potatoes for London or New York, consider that over the past year flat prices have gone up by 20% and houses have risen by 14%, according to Finansinspektionen. Read more here-http://read.bi/1REbaab
-10 of the most expensive homes sold in 2015. This nation may not be a monarchy, but modern-day palaces fit for royalty grace the estate market, awaiting their Prince (or Princess) Charming. Why do these homes carry the heftiest of price tags? Coveted locales, private stretches of cerulean waters, bountiful grounds, and custom details just scratch the surface. Read more here-http://read.bi/1IkF2p3
-“There is lots of cash in the world right now. At the moment, works of art, diamonds and jewels are a safe haven.” Francois Curiel chairman of Christie’s Luxury Group
-“Having your money in the bank may not mean as much as it used to. Colored diamonds are impressive, durable and portable. In times of global volatility, the ability to easily carry millions of dollars in one’s pocket may well be an attractive prospect.” Angela Berden Christie’s jewelry department senior specialist
-“The Knight Frank Luxury Investment Index puts the price of colored diamonds up 48 percent over the past five years.” DW.com
-The Stories Behind the Biggest Jewelry Sales of 2015. Now is the time to own (and sell) colored gemstones. Blue sapphires, striking red rubies, and pink diamonds made up 9 of the top 10 jewels sold at auction in 2015. Pink diamonds, in fact, accounted for a solid half of those sales. The only clear diamond to make it on the list? A 100-carat, emerald-cut stone that’s so large it looks unreal. Of course, it’s one thing to be a massive colored stone; it’s another to have an equally sparkling provenance. Check out the backstories of this year’s top 10 jewelry sales, which combined for a grand total of $214 million. Read more here-http://bloom.bg/1m6h3jG
1) The Blue Moon of Josephine 13.02 Carats. This headliner sold for $48,468,158 at Sotheby’s, reportedly to Joseph Lau, a Hong Kong billionaire who renamed it after his 7-year-old daughter, Josephine. The price Lau paid set a world record for any diamond of any color, and set another one for price per carat of any gemstone, ever.
2) Ruby and Diamond Ring by Cartier, 25.59 Carats. Sold for $30,335,698 at Sotheby’s. This massive ruby, set between shield-shaped diamonds weighing 2.47 and 2.70 carats, set a world auction record for ruby sales and was the first “colored stone” to sell for more than $1 million per carat at auction.
3) The Sweet Josephine 16.08 Carats. Sold for $28,523,925 at Christie’s. Remember the Hong Kong billionaire from No. 1 on this list? A few days earlier he also bought this ring, also for his 7-year-old daughter, and also named it after her.
4) Emerald-Cut Diamond, 100.20 Carats. Sold for $22,090,000 at Sotheby’s. The next time someone oohs and ahs about your 2 or 3 carat diamond ring, keep things in perspective. Someone out there is carting around a perfect 100-carat ring.
5) The Crimson Flame 15.04 Carats. Sold for $18,372,913 at Christie’s. The auction catalog notes that this color is “poetically referred to as ‘pigeon blood red.’”
6) The Historic Pink 8.72 Carats. Sold for $15,903,422 at Sotheby’s, this stone is believed to have been part of the collection of Princess Mathilde de Bonaparte, Napoleon I’s niece; part of the murky provenance presumably has to do with the fact that it was kept in a bank vault since the 1940s.
7) Purple-Pink Diamond Ring, 8.24 Carats. Sold for $13,866,553 at Sotheby’s. Set between two pear-shaped diamond shoulders, the ring was the second-most expensive lot of Sotheby’s November “Magnificent and Noble Jewels” sale in Geneva.
8) Ruby and Diamond Latticework Necklace, 120.74 Carats. Sold for $13,006,656 at Christie’s. The necklace has 48 rubies for a total of 120.74 carats; each stone was found in the famous ruby mines in Burma (Myanmar). The necklace was made by Etcetera, a Hong Kong-based jeweler founded by Edmond Chin, who ran Christie’s Hong Kong jewelry department for five years.
9) Colored Diamond Ring, 9.07 Carats. Sold for $12,643,776 at Christie’s. Flanked by triangular-shaped diamonds, this “fancy intense pink” diamond was mounted by Harry Winston and is merited a type IIa, the Gemological Institute of America’s designation for the most chemically pure diamonds in the world.
10) Rectangular-Cut Colored Diamond Ring, 5.18 carats. Sold for $10,709,443 at Christie’s. The colored diamond, mounted in gold, is surrounded by oval diamonds that weigh between .59 and .50 carats. They’re each internally flawless.
-CHART OF THE WEEK: Why It’s So Hard to Put a Price on the World’s Biggest Diamonds. When miners unearth the world’s biggest and rarest of diamonds like the golf-ball-sized, 357-carat rock found this year in the southern African kingdom of Lesotho figuring out what they are worth can prove almost as difficult. Gem Diamonds Ltd., which specializes in digging up stones that only a few billionaires are likely to buy, has been taking some unusual steps to confront that dilemma. The London-based mine owner is replicating on a small scale what middlemen normally do.
It cuts, polishes and re-sells some diamonds to get a better sense of what the market is for the world’s biggest ones. In September, the company had its biggest sale ever when its prized discovery from Lesotho fetched $19.3 million. “There’s no such thing as an accurate valuation on these stones,” Brandon de Bruin, head of sales at Gem Diamonds, said during an interview in Antwerp, the center of the world diamond trade. Of the hundreds of millions of diamonds unearthed over the past decade, only about a dozen bigger than 250 carats were found, based on a Bloomberg review of company disclosures.
They are so rare that miners aren’t always sure they’re making the best deal. Because large stones favored by the super-rich have held their value during a slump in prices for smaller, more-common ones, producers have an even bigger incentive to get the best price on their big discoveries. Lucara Diamond Corp., which last month found the second-largest ever, hasn’t yet put a price tag on a 1,111-carat gem the size of a tennis ball, which analysts say could fetch $60 million. Read more here-http://bloom.bg/1QWgGTP
-When White Diamonds Won’t Cut It. If there is a holiday gift almost guaranteed to make a recipient swoon with joy, it is a diamond. But while such stones remain appealing as jewelry, the value of certain colored diamonds has increased while traditional white diamonds have fallen. Diamond dealers are talking about pink, blue and red diamonds as investments, citing a recent track record of double-digit returns. This new interest in such rare gemstones can make a holiday gift 10 to 20 times more expensive than a similar, high-quality white diamond. Yet there are others in the trade who question whether these stones will pay the dividends people imagine in the Christmases to come.
Sam, who owns a medical business in New Jersey but asked that his last name be withheld for security concerns, has amassed a collection of dozens of colored diamonds. He bought his first pink diamond in a ring as a gift for his wife in 2005. Then he bought a green diamond and realized that the stones could be used to finance his children’s college education. “I put some money into that green diamond and that started a collecting bug,” he said. “Then it became trying to find some of the best examples of different colors of vivid colored diamonds.” Mr. Fine, who sold Sam many of his stones, said some of his pink diamonds had doubled in value in 10 years. But Sam said he also was aware that his timing was right.
In 2007, he bought a half-carat vivid pink diamond in the Argyle tender an annual private auction of the best pink diamonds from the mine. But this year, he bid four times the price for a smaller pink diamond of lesser quality and lost. Still, as with any thing of beauty, it can be a lot harder to look rationally at sparkling colored diamonds than a list of company names in a securities portfolio. Sam said he had amassed a collection valued at $6 million of 41 colored diamonds in almost every different hue but can’t bear to sell them. “Now I keep them securely in a vault and I go down and look at them,” he said. “It’s a lot of concentrated wealth in a thing of great beauty.” Read more here-http://nyti.ms/22oqb3x
-CHART OF THE WEEK: Gold Bears Just as Bored With the Metal as Everyone Else. Read more here-http://bloom.bg/1QXxr0Y
-Greg Hunter: Egon von Greyerz Interview, 2016 Will Be One Disaster After Another. Financial expert Egon von Greyerz says the recent Fed rate hike will not help the financial markets. Greyerz predicts, “I think we will have one disaster after another, first in the junk bond market, then in emerging markets and, after that, the subprime markets. Subprime car loans and student loans I see as another massive problem area. It is going to be one thing after another that will unravel. Since 2008, when the world almost went under, we have printed or increased credit by 50% or by $70 trillion, and the world economy is still struggling to survive. I think the real change in confidence will come down when markets come down.
I think things will come down very quickly.” On currencies, von Greyerz says, “I think currencies worldwide will continue to come down, and the dollar is overvalued and is going to come down. Of course, that will mean people will start selling bonds. We know that the bond market is the biggest bubble in the world.” Von Greyerz goes on to say, “I do not think the banking system will survive in its present form because the amount of debt outstanding will never be repaid. They will start with bail-ins, but that won’t be sufficient. Sadly, the depositors’ money will not be sufficient. To stop bank runs now, they are stopping people from taking out cash. That is not what people are going to want to see in the next year or so.”
So, what is the timing of the coming calamity? Von Greyerz admits he does not know, but contends, “We are not just talking about the U.S., we are talking about a global level. Once it turns, it is going to happen very quickly. So, when will the turn come? The turn will not only be in the credit markets, but it will also be in the stock markets, and there will be a total loss of confidence. I am happy to admit that I thought these things would have happened already. I have been premature, but I look at risk. To me, you have got to buy your fire insurance before the fire, and we are likely to have a fire in the near term future.” Read more here-http://bit.ly/1NK7sWj
-Gold’s Wild Ride Leaves Best Forecasters Siding With Fund Bears. Janet Yellen sent gold prices on a roller-coaster ride. Now, hedge funds and the metal’s best forecasters are predicting there’s only one way prices are heading next: down. The Federal Reserve Chair on Wednesday raised U.S. interest rates for the first time in almost a decade, sending bullion prices swinging and driving the metal’s 30-day volatility to a six-week high. While traders couldn’t decide on a direction for gold, Robin Bhar and Barnabas Gan, the most accurate forecasters, are convinced futures will keep falling in 2016. Money managers agree, raising their net-short position to the highest ever.
“Because gold is an emotional commodity, you’re dealing with the way that crowds think,” said Brian Barish, the chief investment officer of Denver-based Cambiar Investors LLC, which oversees about $14 billion. “When that’s the case, it’s very hard to predict human emotions other than they’re going to change around from time to time. I wouldn’t touch it personally. I think it has a lot lower to go.” After a decade-long bull market that propelled gold to a record in 2011, the precious metal is poised for a third annual loss. With the end of the U.S. stimulus era and very little inflation, investors see no reason to stay in bullion and are dumping their holdings in exchange-traded products. Higher rates cut the metal’s appeal as a store of value as the dollar strengthens. Read more here-http://bloom.bg/1OlWGer
-Doug Casey: Debunking Anti-Gold Propaganda. So, these are some of the more egregious arguments against gold that are being brought forward today. Most of them are propounded by knaves, fools, or the uninformed. My own view should be clear from the responses I’ve given above. But let me clarify it a bit further. Historically actually just up until the decades after World War I, when world governments started issuing paper currency with no relation to gold the metal was cash, and it was used as money everywhere, on a daily basis. I believe that will again be the case in the fairly near future.
The question is: At what price will that occur, relative to other things? It’s not just a question of picking a dollar price, because the relative value of many things houses, food, commodities, labor has been distorted by a very long period of currency inflation, increased taxation, and very burdensome regulation that started at the beginning of the last depression. Especially with the fantastic leaps in technology now being made and breathtaking advances that will soon occur, it’s hard to be sure exactly how values will realign after the Greater Depression ends. And we can’t know the exact manner in which it will end. Especially when you factor in the rise of China and India.
A guess? I’ll say the equivalent of about $5,000 an ounce of today’s dollars. And I feel pretty good about that number, considering how shaky the world financial situation is, and that we are I believe about to enter another gold bull market. Classic bull markets have three stages. We’re still in the “Stealth” stage when few people even remember gold exists, and those who do mock the idea of owning it. Next, we’ll enter the “Wall of Worry” stage, when people notice it and the bulls and bears battle back and forth. At some point, we’ll enter the “Mania” stage when everybody, including governments, is buying gold, out of greed and fear. But also out of prudence. Read more here-http://bit.ly/1mzp68o
-Clive Maund: Gold Market Update. Read more here-http://bit.ly/1U5lJAJ
-Important Update On The War In The Gold Market. Read more here-http://bit.ly/1YysbH1
-Frank Holmes: SWOT Analysis: China’s Money Supply Could Indicate Additional Room for Gold Demand. Read more here-http://bit.ly/1Irl9g8
-Lawrie Williams: Russia adds another 21.8 t gold and 46t more drawn out of China’s SGE. Friday saw two announcements demonstrating that physical gold demand remains at a strong level as the year draws to a close. The Russian central bank continued to expand its gold reserves by just under 22 tonnes in November, while in China another 45.99 tonnes of gold were withdrawn from the Shanghai gold Exchange. Read more here-http://bit.ly/1JtOem1
-Kazakhstan Extends Gold Buying Spree With Russia as Turkey Adds. Kazakhstan increased its gold reserves for a 38th month as Russia and Turkey also expanded holdings, according to the International Monetary Fund. Kazakhstan raised its stash to 7.03 million ounces in November from 6.96 million ounces a month earlier and Russia boosted assets to 44.78 million ounces from 44.07 million ounces, data on the IMF’s website showed. Turkey’s reserves increased to 16.39 million ounces from 16.10 million ounces.
The central banks bought bullion amid a 6.8 percent decline in prices last month as investors anticipated an increase in U.S. borrowing costs, a move confirmed by the Federal Reserve last week. While the IMF’s last update on China’s reserves is for September, figures from the People’s Bank of China show the country has boosted holdings by 5.1 percent since announcing in July a 57 percent jump in the previous six years. “The buying trend will continue,” Feifei Li, an analyst at Barclays Plc, said by e-mail before the data were released.
Emerging market countries such as Russia, China and Kazakhstan “have a long-term need to increase their reserves due to portfolio and strategic reasons.” Central banks and other institutions boosted bullion purchases in the third quarter to the second highest on record to diversify their assets, according to the World Gold Council. Kazakhstan has about 27 percent of its reserves in gold, while Russia has 13 percent and China about 2 percent. Top holder U.S. has 73 percent of its reserves in the metal, council data show. Read more here-http://bloom.bg/1mgeQ4I
Gold to silver ratio at 80 to 1 with gold at $2,000 the silver price would be $25.00
Gold to silver ratio at 70 to 1 with gold at $2,000 the silver price would be $28.57
Gold to silver ratio at 60 to 1 with gold at $2,000 the silver price would be $33.33
Gold to silver ratio at 50 to 1 with gold at $2,000 the silver price would be $40.00
Gold to silver ratio at 40 to 1 with gold at $2,000 the silver price would be $50.00
Gold to silver ratio at 30 to 1 with gold at $2,000 the silver price would be $66.67
Gold to silver ratio at 20 to 1 with gold at $2,000 the silver price would be $100.00
Gold to silver ratio at 15 to 1 with gold at $2,000 the silver price would be $133.33
-U.S. Mint sells last of its of 2015 silver American Eagles Dec. 15. 47 million total establishes new calendar-year sales record. Read more here-http://bit.ly/1JtM0Dc
-US silver production plunges by 20%. The U.S. Geological Survey (USGS) released their September silver production numbers this week and the results were incredible. Only 82.6 metric tons (mt) of silver were produced domestically in September versus 103 tons during September of last year. This represents amassive decline of 20% and is part of a greater trend of declining silver supply. Read more here-http://bit.ly/1mgEZQE
-Clive Maund: Silver Market Update. Read more here-http://bit.ly/ZVqylt
-Gary Christenson: Silver: May the 100 Year Force Be With You. Read more here-http://bit.ly/1JvPgOx
-Surprising News In The War In The Silver Market. Read more here-http://bit.ly/1ZpVUyT
-Steve St. Angelo: Something Broke In The U.S. Silver Market. Read more here-http://bit.ly/1m6RNtt
-I admit to focusing mainly on the market structure forces on the COMEX as the prime price determinant and how that has overwhelmed actual supply/demand developments. But I know that the actual supply/demand fundamentals are what matter most in the end and I have spent more than three decades immersed in them. Although I haven’t seen it reported on just yet, the new omnibus budget passed by both houses and signed by the president [on Friday] has what I believe may be an important silver kicker. Included in the budget was an extension until the end of 2019 of the 30% tax credit (due to expire) for residential and commercial installation of solar panels, which is an important and growing demand component for silver.
Those familiar with investment tax credits know just how powerfully they can influence spending decisions. In the case of potential new installations for solar panels, The Wall Street Journal estimated that the impact would be massive basically increasing the base of solar power installations in the U.S. by 50% over the next few years and increasing employment in the industry from 200,000 to 340,000. In response to the news, shares of some solar power companies jumped 50% or more this week, very much in contrast to overall stock performance. There was no mention of silver in the article (there never is), but all this will require a lot more industrial silver consumption. The link to that Wall Street Journal article is here. Silver analyst Ted Butler Dec 19 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN
-Obviously, something accounts for the sharp contraction in silver price volatility over the past two years from the much wider trading ranges of the prior four years. In keeping with my COMEX positioning premise, there has been a literal explosion in the size of the aggregate net positions of the managed money category over the past two years as well as a much faster resolution of extreme positioning. In other words and for some unknown reason (and not because it has been profitable), the technical funds have put on bigger net long and short positions and then flipped those positions faster over the past two years than in the four prior years. (This pattern is similar in gold, but not as pronounced as it has been in silver)
It has become routine for the technical funds in COMEX silver to collectively buy and then sell (it is more correct to say sell short, then buy) aggregate net amounts of COMEX silver contracts on the order of 50,000 contracts, or 250 million oz. Since the start of 2014, the technical funds have done so on six different occasions, with several other occasions of big, but less than 50,000 contracts of net positioning. Such collective changes were much less in size and in frequency compared to 2010 thru the end of 2013. Of course, the COMEX commercials, led by JPMorgan have been not only the counterparties to the technical funds, but the puppet masters who have guided the technical funds into and out from positions.
My conclusion is that the expanded positioning taken by the technical funds and commercials is the price shock absorber behind the increasingly subdued price volatility in silver. The paper game on the COMEX has become so extraordinarily large and is being turned over with such increasing frequency that it has temporarily eliminated the big silver price moves of the past. However, the emphasis here is on “temporary” as this is not a circumstance that can last indefinitely. Just like a paper price manipulation must end at the point the physical market says so (by shortage), the artificial low price volatility must end as well; and it seems to me both will end simultaneously and with a burst to the upside. Silver analyst Ted Butler Dec 16 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN
-The important point is that the market structures in gold and silver are strongly bullish and can only turn bearish after prices rally sharply. Up until then, it doesn’t seem very constructive to worry much about lower prices. I can’t rule out sell-offs ahead, considering how crooked and rigged this COMEX price game is, but any such sell-offs, should they occur, will prove to be temporary and should be thought of as such. What’s most remarkable of all is just how favorably positioned the commercials are in COMEX gold and silver and accordingly, how unfavorably positioned and vulnerable are the technical funds. Price action in gold and silver have been rotten since the end of October and it is that rotten price action that has allowed the commercials to set the technical funds up like bowling pins for a price rally.
Most remarkable of all is that the average price at which the commercials have bought more than 150,000 net contracts of gold and more than 40,000 contracts of silver in less than two months is, essentially, right around current price levels. Please think about that for a moment. The COMEX commercials deliberately rigged prices lower in order to induce the technical funds to sell and allow the commercials to buy the equivalent of 15 million ounces of gold and more than 200 million ounces of silver and were able to do so without having to absorb even temporary unrealized losses of any significant size.
I would calculate that the average price at which the commercials bought and the technical funds sold in gold at around $1080 and in silver at around $14.30. Usually, the commercials have to absorb, at least temporarily, much larger unrealized losses in establishing such large positions, but not this time. At a minimum, that proves just how manipulated are these markets. I suppose the commercials could toy with the funds on a short term basis for a bit longer as a result of their complete wizardry and mastery in controlling the actions of the tech funds, but the biggest payday for the commercials is to let prices rip higher before selling aggressively. I repeat myself, but if the commercials don’t sell aggressively on the next rally (which could have started), prices go boom to the upside. Silver analyst Ted Butler Dec 16 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN
-How dumb are these [Managed Money] technical funds that they don’t realize they are the marks in this crooked poker game? Too dumb to quantify and that’s reflected in their long-term performance. The other point is that while I do believe no one as dumb as the technical funds could be intentionally losing (some might argue with that), the same can’t be said of the commercials. It’s not just that the commercials are smarter than the technical funds, as that would appear to be obvious; but something else entirely. The price patterns are clear we jump or fall quickly in price within minutes and then trade at the sharply higher or lower price for hours, as it takes some time for the idiot technical funds to then react fully to the newly rigged prices.
While the technical funds are nitwits for following the commercials’ price setting, something else emerges. That something is the certain collusion apparent in the commercials’ activities. Whether there are prearranged agreements among the commercials, or they have all just learned how the technical funds operate, a certain level of collusion is required on the part of the commercials to pull this off. The commercials are too patient as a group in waiting for the technical funds to finish buying or selling.
There is usually little competition between the commercials [the ‘Big 4’ the ‘5 through 8’and the raptors Ed] and it’s more a case of them behaving as the Three Musketeers. But being “all for one, and one for all” in market matters is collusion and manipulation, not bravery and chivalry. Don’t get so caught up in this line of thinking to miss the big picture. The big picture is that the market structure, despite the temporary gyrations [last] week, indicates sharply higher silver and gold prices to come. It seems to me at this point that the trading since [last] Tuesday’s cut-off, is mostly a wash, or at least not at all damaging to the incredibly bullish market structure. I can’t know when the commercials will rip the technical funds a new one to the upside, but sense that moment is close at hand. Silver analyst Ted Butler Dec 19 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN