The World Financial Report

World Financial Report – December 6th, 2018

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WORLD FINANCIAL REPORT ON RADIO December 6th 2018
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CHARTS OF THE WEEK-QUOTES-QUICK HITS

-CHART OF THE WEEK: It’s the Worst Time to Make Money in Markets Since 1972. Market statisticians are falling over each other in 2018 to describe the pain being felt across asset classes. One venerable shop frames it this way: Things haven’t been this bad since Richard Nixon’s presidency. Ned Davis Research puts markets into eight big asset classes everything from bonds to U.S. and international stocks to commodities. And not a single one of them is on track to post a return this year of more than 5 percent, a phenomenon last observed in 1972, according to Ed Clissold, a strategist at the firm. In terms of losses, investors have seen far worse. But going by the breadth of assets failing to deliver upside, 2018 is starting to look historic.

Nothing’s working, not large or small-cap stocks in the U.S., not international or emerging equities, not Treasuries, investment-grade bonds, commodities or real estate. Most of them are down, and the ones that are up are doing so by percentages in the low single-digits. That’s all but unique in history. Normally when something falls, something else gains. Amid the financial catastrophe of 2008, Treasuries rallied. In 1974, commodities were a bright spot. In 2002, it was REITs. In 2018, there’s nowhere to run. “Overhanging the markets have been concerns over how asset prices would handle the removal of ultra-easing monetary policies,” Clissold, chief U.S. strategist at Ned Davis Research, said in a note published last week. During previous instances of market turbulence, “there was a bull market somewhere.” Bloomberg

-CHART OF THE WEEK: JPMorgan Asset Says Cash Better Than Stocks First Time in Decade. Cash isn’t only a safe place to invest, it now offers a better risk-adjusted return than equities, according to JPMorgan Asset Management. That was highlighted by the firm’s multi-asset strategy team, with $260 billion under management, which upgraded its recommendation on U.S. cash to overweight for 2019. For the first time in a decade, investors can get a lot more from safe, liquid securities than from the S&P 500 Index, adjusted for volatility, they argued.

“Our cash and duration overweights really distill down to overweights in U.S. cash and Treasuries, where ex-ante Sharpe ratios are now well ahead of those for U.S. stocks for the first time in a decade,” according to John Bilton, head of global multi-asset strategy at JPMorgan Asset Management. A Sharpe ratio is a measure of an asset’s performance relative to its volatility. The team said it’s preparing “for an environment of slowing earnings growth and rising macroeconomic risks” that will weigh on equities, and has led the group to de-risk its portfolios. If they are right, being boring may turn out to be the key to success next year, just like in 2018. U.S. Treasury bills were poised to end the year with the highest risk-adjusted returns of the world’s biggest assets. Bloomberg

-CHART OF THE WEEK: Tumbling Stocks Show You Can’t Ignore the ‘Harbinger of Doom.’ U.S. stocks suffered the biggest rout in almost two months Tuesday, and among the primary culprits is a shift in how bond investors view risks to the economy. Known as the inversion of the yield curve, where short-term interest rates climb above longer-dated ones, the signal is considered among the best predictors of a future slowdown. One relationship, the spread between three-and five-year Treasury yields turned negative for the first time in more than a decade Monday. “There are signs of slowing global growth,” said Kim Forrest, a senior portfolio manager at Fort Pitt Capital Group.

“But what does that mean? Is it a recession or a slowdown? That combined with the harbinger of doom the inverted yield curve I’m paying attention to it.” An inversion of the yield curve is a bad omen for equities, according to Bank of America Corp. strategists. In a note to clients this week, Mary Ann Bartels and Andrew Shields recommended investors reduce stock holdings as the S&P 500 risks falling into a mild bear market next year. The worry is not so much the curve inversion itself, but the factors driving it. “Policy tightening by the Federal Reserve, concerns over trade with China and slowing corporate profits with earnings estimate revisions moving negative are not good ingredients for stocks or bonds as we enter 2019,” they wrote. Increased volatility and a short-lived “baby bear” market are all in the cards, they said. Bloomberg

-CHART OF THE WEEK: Investors Are Starting to Price in Rate Cuts in 2020.Treasuries surged as plunging stocks sparked a bout of risk aversion and traders started betting that the Federal Reserve will cut interest rates as soon as 2020. Traders have been slashing the expected pace of rate hikes since the central bank’s top brass flagged global headwinds to growth and opened the door to a change in the policy path. That move picked up Tuesday.

The swaps market has moved up the timing for when it sees the hiking cycle peaking, toward the end of 2019 or early 2020, a period when the Fed’s own projections indicate tightening will still be under way. The shift in the market’s view gained speed this week. On Tuesday, the yield curve from 2 to 10 years came the closest to inversion that it’s been since 2007. Risk aversion amid losses in stocks fueled demand for Treasuries as skepticism emerged over the tariff deal that U.S. President Donald Trump announced after his weekend meeting with Chinese leader Xi Jinping. Trade friction is seen as a drag on the U.S. economy, which is already showing cracks, such as a slowing housing market. Bloomberg

-CHART OF THE WEEK: The Flattening Yield Curve Just Produced Its First Inversions. A section of the U.S. Treasuries yield curve just inverted for the first time in more than a decade. The spread between 3- and 5-year yields fell to negative 1.4 basis points Monday, dropping below zero for the first time since 2007, and the 2- to 5-year gap soon followed. The 2 to 10-year is more closely watched as a potential indicator of pending recessions. But Monday’s move could be the first signal that the market is putting the Federal Reserve on notice that the end of its tightening cycle is approaching.

Some analysts attributed the short-end underperformance to demand for riskier assets as global trade tensions eased following this weekend’s tariff truce between U.S. President Donald Trump and China’s Xi Jinping. Others pinned it to modestly higher expectations for Fed hikes next year after the summit between the two leaders. Either way, the five-year is faring better because investors anticipate the end of the central bank’s hiking path beyond next year. Bloomberg

-CHART OF THE WEEK: Traders Bet Bank of Canada Rate-Hike Pause May Come Even Sooner Than Fed’s. Money-market traders, already having written off a hike at Wednesday’s Bank of Canada meeting, are beginning to doubt that policy makers will pull the trigger next month either. While the Federal Reserve is widely expected to proceed with another quarter-point interest-rate increase in two weeks, overnight index swaps are pricing in just 16 basis points of tightening by the BOC’s Jan. 9 meeting, down from 27 basis points less than a month ago. Investors around the world are paring back expectations for policy tightening in the new year amid signs global growth is flagging.

In Canada, tepid third-quarter GDP figures along with subdued oil prices are giving market participants reason to wager on a potential BOC pause. Signs of easing global trade tensions and a rebound in Canadian crude did little to sway traders Monday. The odds of a hike by January hovered around 60 percent, based on OIS prices, down from more than 85 percent last month. “You could take the mix of weakness in the data or the move in oil prices, and you’ve got some pretty substantial headwinds to the economy next year,” said Mark McCormick, North American head of foreign-exchange strategy at TD Securities in Toronto. “The market is just trying to pare back expectations on where they think the bank is headed early next year.” Bloomberg

-CHART OF THE WEEK:Chinese Dumped $1 Billion of U.S. Real Estate in Third Quarter, Extending Recent Retreat. Rising corporate debt levels, concern over currency stability led Beijing to tighten capital outflows and curb overseas acquisitions. Chinese investors offloaded more than $1 billion in U.S. real estate in the third quarter, extending their recent retreat from hotels, office buildings and other foreign property under pressure from Beijing to reduce debt and curb money sent abroad.

Insurers, conglomerates and other big investors from China sold $1.05 billion worth of U.S. real estate in the third quarter, while purchasing $231 million of property, according to data firm Real Capital Analytics. That was the second straight quarter in which Chinese were net sellers of U.S. commercial real estate. The second quarter marked the first time these investors sold more U.S. property than they bought during a quarter since 2008. WSJ

-CHART OF THE WEEK: Toronto Housing Sales Decline Most in Eight Months. Toronto’s housing market posted its biggest monthly sales decline since March while prices remained little changed. Sales in Canada’s biggest city fell 3.4 percent in November to 6,588 units from the previous month on a seasonally adjusted basis, the Toronto Real Estate Board reported Wednesday. That’s the biggest monthly drop in eight months. The benchmark price, which adjusts for the types of houses sold, fell 0.4 percent from last month to C$763,600 ($575,200). The housing market in the Toronto region has been stabilizing after a slowdown in sales and prices earlier this year amid tougher mortgage-lending rules. The market picked up pace through the summer, though sales have declined for the third month in a row now. The drop in sales could in part be attributed to a decline in new listings, which fell 26 percent to 10,534 from last November. Bloomberg

-CHART OF THE WEEK: Goldman Is on the Brink of Erasing the Trump Bump. Goldman Sachs Group Inc. soared in the months after U.S. President Donald Trump‘s election in 2016, enriching shareholders and its staff. That so-called Trump Bump is now almost gone. The stock has tumbled 33 percent from a record high in mid-March, eroded by a broader market slump and troubles specific to the firm. About half of the decline occurred in the past month, as investors worried about the costs and reputational damage the investment bank may incur over its involvement in Malaysia’s 1MDB corruption scandal.

After Trump’s election, investors bet Goldman Sachs would thrive as its alumni joined an administration vowing to ease regulation and slash corporate taxes. That ended as Trump embarked on a trade war with countries including China. Now, if its stock slips just 1.3 percent Goldman will be the only major U.S. investment bank to see its entire bump disappear. Bloomberg

-The Bank of Canada walked back some of its enthusiasm about the economic outlook as it kept interest rates unchanged, suggesting there may be less urgency to tighten monetary policy. The Ottawa-based central bank kept its overnight benchmark rate at 1.75 percent, reiterating it expects to eventually remove all monetary stimulus from the economy. But its statement was more guarded than the last one in October and cited the possibility that recent negative economic developments may mean the economy isn’t running up as much against capacity constraints as previously thought. The less-confident tone is an acknowledgment of growing risks, particularly in the oil sector, to what has largely been a strong expansion, casting doubt on whether the economy can cope with higher borrowing costs.

The Canadian dollar plunged. There’s “not a lot of room for ambiguity,” said Andrew Kelvin, senior Canada rates strategist at Toronto-Dominion Bank in Toronto. The BoC will “remain data dependent into a slowing economy,” and that “implies a longer time horizon for returning to neutral. Materially reduces the odds of a January rate hike.” Citing moderating global growth, a “materially weaker” outlook for the oil sector, a faster-than-expected deceleration of inflation, a drop in business investment and downward historical revisions to output, policy makers said “there may be additional room for non-inflationary growth.” Bloomberg

Alberta Premier Rachel Notley has announced a temporary 8.7 per cent oil production cut, or decrease of 325,000 barrels a day, in the production of raw crude oil and bitumen starting Jan. 1, 2019. In an announcement Sunday evening, Notley said the daily cuts will remain in place until the 35 million barrels of processed oil currently in storage is shipped to market, likely by the spring. The reduction will drop to an average of 95,000 barrels a day until curtailment ends at the end of 2019, when Enbridge’s new Line 3 pipeline starts operating.

The Alberta government also expects to acquire locomotives and rail cars by the end of next year to transport 120,000 barrels a day. Notley said the decision to impose mandatory curtailments was difficult, but necessary. “In Alberta we believe that markets are the best way to set prices, but when markets aren’t working, when companies are forced to sell our resources for pennies on the dollar, then we have a responsibility to act,” Notley said, adding the government has “a responsibility to defend our province and to defend our resources.” CBC

-The average Canadian family will pay about $400 more for groceries and roughly $150 more for dining out next year, an annual food price report predicts. Food prices will rise between 1.5 to 3.5 per cent in 2019, according to the report from researchers at the University of Guelph and Dalhousie University. That means the average family of four will spend $12,157 next year up $411 from 2018. Vegetables will see the biggest price jumps between four and six per cent for the category, according to the report. Meanwhile, meat and seafood prices are expected to fall, with the meat category to decline by one to three per cent and seafood costs to remain the same or fall up to two per cent. Since 2015, the team has predicted prices in those two categories would rise as high as six per cent each year. Read more here-http://bit.ly/2FWkxDJ

-Plunging automobile sales add to evidence that higher borrowing costs are beginning to eat into Canadian economic growth, possibly faster than the central bank expected. Light vehicle sales dropped 9.4 percent in November from a year earlier, the most since 2009, according to a report Monday by DesRosiers Automotive Consultants Inc. Outside the financial crisis, the decline was the biggest since 2004. Meanwhile, Bank of Canada data show growth in residential mortgages decelerated to 1.38 percent in September on an annualized three-month basis, the weakest pace since 1982. The central bank has raised borrowing costs five times since July 2017.

Policy makers are widely expected to leave the benchmark rate on hold Wednesday at 1.75 percent, however more hikes are predicted for next year. The median forecast in a Bloomberg survey of economists shows the rate at 2.5 percent by the end of 2019. Royce Mendes warns the economy is already feeling the pain, and the central bank may be underestimating the impact of previous increases. The Canadian Imperial Bank of Commerce economist said declines in auto sales and residential investment which contracted for a third-straight quarter, down an annualized 5.9 percent are showing up sooner than expected, with the bulk of the effects still to come. “We’re starting to the signs that the economy cannot handle interest rates at much higher than current levels,” Mendes said by phone from Toronto. “Things are happening at least a little sooner versus previous cycles” because of how leveraged households are, he said. Bloomberg

-Federal Reserve Chairman Jerome Powell said that while the central bank has made progress toward a “strong economy” with rising wages, many lower-income workers have been left behind. “The Federal Reserve’s mission is to promote a strong economy and sound financial system,” Powell said Monday in remarks prepared for delivery in Washington. “I am glad to say we have made a great deal of progress toward those goals.” His comments, at the inaugural Janet L. Yellen Award for Excellence in Community Development, were released by the Fed and had not previously been listed on its schedule of public events.

Powell, reiterating his view of recent U.S. economic strength, said a decline in the U.S. unemployment rate to the lowest level since 1969, wage gains, increased household wealth and higher consumer confidence have supported robust consumer spending. Still, the U.S. economy faces longer-term challenges, including slow growth in wages for low-income workers in recent decades, productivity growth which has picked up only recently, and an aging population, he said. “The benefits of this strong economy and sound financial system have not reached all Americans,” Powell said. “The aggregate statistics tend to mask important disparities by income, race, and geography.” Bloomberg

-Canada has avoided the kind of housing crashes that has bedeviled countries for decades thanks to government regulations to tame soaring home prices, according to the largest closely held home builder in North America. “We’re right in the midst of a soft landing, certainly something that we predicted and actually helped influence,” said Brad Carr, chief executive officer of the Canadian division of Toronto-based Mattamy Homes Ltd. “It was necessary. The market here was running a little hotter than we thought it should for the long-term health of the market place.”

Various levels of government instituted regulations to cool markets, including a foreign buyers tax and stricter mortgage lending rules after home prices surged 60 percent in Toronto and about 70 percent in Vancouver in the past five years. The housing market has cooled dramatically since the latest rules were implemented in January, though prices and sales have since stabilized. Now builders across the country, including Toronto-based Mattamy Homes, are lobbying for a pullback of the tougher mortgage regulations, including one that ensures prospective buyers can meet mortgage payments at interest rates 2 percentage points above the contracted rate. “It’s been achieved so it’s kind of overkill now,” Carr said. Rising interest rates are now doing some of the work for the government, he said. Bloomberg

-The savings rate in Canada has dipped to the lowest in more than a decade, a sign consumption driven growth may be nearing an end. Statistics Canada reported Friday the household savings rate, which represents the proportion of disposable income that remains after spending, fell to 0.8 percent in the third quarter, the lowest level since early 2017. It’s averaged 1.4 percent over the past year, the worst on an annual basis since 2005. The low rate leaves Canadians more vulnerable to an economic shock, according to Brian DePratto at Toronto-Dominion Bank. “It’s concerning that households aren’t building up buffers and prepping for retirement like they used to,” the Toronto-based senior economist said by email. “The extent to which Canadians turn around their priorities when it comes to their financial situation could also mean less money for consumer spending.” Bloomberg

-Big-money investors see the bull market ending in 2019 and another crisis in 5 years or less. Institutional investors believe the bull market in stocks will come to an end over the next 12 months. They also expect the next financial crisis to come in one to five years, according to a Natixis survey. The results come as market tumult has left stocks barely positive for 2019. CNBC

-Dmitry Balyasny is cutting at least 125 people from his hedge fund firm, about one-fifth of the total, as losses and client withdrawals erased $4 billion in assets. The firm eliminated 13 stock teams, accounting for about 40 investment professionals, said people familiar with the firm. It plans to reduce the balance of employees from the back office before the end of the year. Job reductions of this size are a rarity in the hedge fund industry. Chicago-based Balyasny, a multi-manager, multi-strategy firm, started 2018 with $11.3 billion in assets, and expects to begin next year with $7.3 billion, the people said.

The firm’s Atlas Global fund fell 3.9 percent in November, bringing year-to-date losses to 5.3 percent. A leveraged version dropped 5.7 percent in the month, and is down 7.9 percent for the year. That performance has lagged other multi-strategy rivals like Citadel and Millennium Management. Prior to the job cuts, the firm had roughly 80 internal teams, or about 272 investment professionals, running strategies ranging from credit and global macro to quantitative systematic and equity trading. Most of the losses have come from equities this year, the people said. Bloomberg

-Billionaires Ken Griffin, Izzy Englander and Steve Cohen posted monthly losses in November that rank among their worst ever as stock hedge funds dumped holdings at a rate not seen since the financial crisis. Griffin’s Citadel lost about 3 percent last month, its poorest showing since the first quarter of 2016. Englander’s Millennium Management slid 2.8 percent, its third-worst month on record. Cohen’s Point72 Asset Management dropped about 5 percent, largely wiping out its 2018 gains, according to people familiar with the firms.

Their performance is a comedown from October, when these multi-manager firms rode out a nearly 7 percent plunge in the S&P 500 Index with only minimal losses. The damage underscores a risk faced by firms that farm out money to dozens of managers and run their stock portfolios in similar ways: When other hedge funds cut and run, the multi-manager giants can get caught up in the havoc. These firms market themselves as steady money makers because their stock managers tend to run portfolios with a roughly equal weighting of longs and shorts, or small net exposure in either a bullish or bearish direction. They also try to neutralize the market’s style, factor and sector biases. These tweaks can send the firms crowding into the same trades. Bloomberg

-Robots are coming to a Walmart Inc. near you, and not just as a gimmick. The world’s largest retailer is rolling out 360 autonomous floor-scrubbing robots in some of its stores in the U.S. by the end of the January, it said in a joint statement with Brain Corp., which makes the machines. The autonomous janitors can clean floors on their own even when customers are around, according to the San Diego-based startup. Walmart has already been experimenting with automating the scanning of shelves for out-of-stock items and hauling products from storage for online orders. Advances in computer vision are also making it possible to use retail floor data to better understand consumer behavior, improve inventory tracking and even do away with checkout counters, as Amazon.com Inc. is trying to do with its cashierless stores. Brain’s robots are equipped with an array of sensors that let them to gather and upload data. Bloomberg

-A village in northern Switzerland hoping to pay people up to 2,500 francs ($2,510) a month has failed to raise enough funds for the basic income project. The crowdfunding campaign yielded just 151,836 francs, a fraction of the 6.1 million francs required for the experiment. More than half the 1,300 inhabitants of Rheinau, by the River Rhine close to the German border, had signed up to be part of the test. It was led by filmmaker Rebecca Panian, who hoped to make a film about it and had set a self-imposed deadline of Tuesday for the fund raising. Although the concept of paying people money with no strings attached has been around for more than a century, it has garnered more attention in recent years due to worries about rising inequality and jobs losses due to automation. The Swiss rejected an unconditional basic income in a national plebiscite in 2016. Bloomberg

-The majority shareholders of German car-parts maker Continental AG have lost about $16 billion more than half of their combined wealth so far this year. Continental Chairman Georg Schaeffler and his mother Maria-Elisabeth Schaeffler-Thumann, the vice chairman, have seen their fortunes tumble 53 percent after the company warned that extra costs and tough business conditions in Europe and Asia would weigh on profits. A senior executive said this week that the challenges will persist into 2019. They’re now worth a combined $14.1 billion, according to the Bloomberg Billionaires Index, after the biggest wealth drop this year among Europe’s richest families. The mother and son also control Schaeffler AG, a publicly traded German engineering group that has faced similar pressures as Continental, the world’s second-largest car-parts maker.

Shares of both companies have plunged more than 40 percent this year. Continental faces “a perfect storm,” Bloomberg Intelligence auto analysts Michael Dean and Gillian Davis said in a research note this month. Continental is now valued at about $30 billion, compared with $28.6 billion for O’Reilly Automotive Inc., a less profitable U.S. rival. Georg Schaeffler, 54, inherited 80 percent of the ball-bearing business that carries his surname when his father died in 1996, while his mother inherited the rest, and then orchestrated one of Germany’s largest hostile takeovers by acquiring Continental a decade ago for more than $17 billion. He’s now the world’s 113th-richest person, according to the Bloomberg index. Bloomberg

-A massive Miami Beach penthouse at the 66-unit Eighty Seven Park is poised to hit the market Wednesday and with a massive price tag to match. The duplex pad, with 12,410 square feet of interior space and an even-bigger 18,247 square feet of private outdoor space, will ask a sky-high $68 million. The Wall Street Journal, which first broke news of this forthcoming listing, says that if the six-bedroom spread sells for close to that number, it would be the priciest apartment ever sold in the state of Florida. The current record belongs to hedge fund titan Ken Griffin, who in 2015 shelled out $60 million for a penthouse at Faena House. “I don’t think there’s ever been an apartment that can, in my opinion, compete or even excel [living] in a mansion,” David Martin, president of Miami-based Terra, tells The Post. NYPost

-Your True Love Will Get a Bargain for Christmas This Year. Holiday lovebirds might get a better deal on partridges, golden rings and maids-a-milking this year than Americans who don’t base their gift lists on classic carols. The cost of buying all goods and services in “The Twelve Days of Christmas” has gone up by roughly half the pace of overall U.S. inflation, according to a Christmas price index compiled by PNC Financial Services Group. While replicating the song isn’t cheap the total cost would be more than $39,000 that’s only 1.2 percent higher than last year. Price increases in the rest of the economy have averaged about 2.5 percent so far in 2018. PNC says the lower inflation rate can be explained in part by plunging gold prices, which have made five 14-carat gold rings $75 dollars cheaper to buy this year than last.

The cost of many types of birds listed in the song have remained stagnant, with the notable exception of egg-laying geese, whose prices shot up. A static federal minimum wage means nine ladies dancing will receive the same compensation as they did last year. The same goes for eight maids-a-milking, though PNC doesn’t factor the cost of dairy cows into its analysis, and only a tiny fraction of the U.S. population would have those readily available. The presumably more skill-based work of lords-a-leaping, pipers piping and drummers drumming is seeing a bump in pay, however, as the labor market tightens. Here are the 12 items listed in the song, with their latest cost and inflation rate. Bloomberg

-Money talks especially in relationships. When looking for a partner, 56 percent of affluent Americans want someone who provides financial security, versus 44 percent who want to be “head over heels” in love, according to more than 1,000 respondents surveyed by Bank of America Corp.’s Merrill Edge. Of those polled, 63 percent said they preferred a career-focused partner over a socially conscious mate. “There’s a level of realism” for couples who face economic uncertainty and a lack of financial planning, said Aron Levine, head of consumer banking and Merrill Edge, which offers online investing. “How do you keep the love of your life if you can’t pay for a vacation?” he said in an interview in New York. While respondents placed a high priority on the finances of potential mates, most were more tight-lipped about their own, rarely discussing debt, salary, investments and spending habits with significant others, the survey showed. Bloomberg

-At 100 years old, the world’s oldest billionaire would be forgiven for taking it easy and enjoying the riches of his eight-decade career. But for Chang Yun Chung, founder of Pacific International Lines (PIL), staying at home isn’t an option. Despite handing over the role of executive chairman to his son, Teo Siong Seng, earlier this year, the centenarian Singaporean insists on going into the office every day. “It’s my habit,” Chang told CNBC in a recent episode of “Managing Asia.”

As chairman emeritus of PIL a title honoring his contribution to the 51-year-old company Chang said he visits the firm’s Singapore headquarters daily to run through its operations and check in with every department. “Every day, I write down all my activities in my diary, everything,” said Chang. “Every department comes to see me.” For him, it’s a way of keeping his mind active and staying in touch with the company he set up in 1967 with two second-hand ships. “I cannot stay at home,” said the self-made billionaire. “(I’d get) very, very bored.” CNBC

-A bottle of Macallan 1926 60-Year-Old just shattered auction records for the most expensive bottle of whiskey ever sold. It sold for a mind-blowing $1.5 million. The sale comes a mere two months after another bottle of Macallan 60-Year-Old set a briefly-held record when it sold for $1.1 million in early October. Businessinsider

-Einstein Letter Sold for $2.4M. A 1954 letter written by Albert Einstein just sold for $2.4 million. Einstein wrote that the word God is the “product of human weakness.” Bloomberg

-“I once heard it said of man that the idea is to die young as late as possible.” George W Bush eulogizing his father George H.W. Bush

-Former President George W. Bush choked back tears eulogizing “the best father a son or daughter could have” as official Washington turned out Wednesday to honor the late President George H.W. Bush with the full pageantry of a state funeral. Bush paused and tapped his father’s flag-draped casket twice as he walked up to the altar at Washington National Cathedral to offer a personal remembrance of the 41st president. He called his father a political leader of unrelenting optimism and steadfast personal character. “He showed me what it means to be a president who serves with integrity, leads with courage, and acts with love in his heart for the citizens of our country,” Bush said. Bloomberg

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-Sotheby’s Magnificent Jewels Sale. December 4th 2018 New York City. Auction Results Here: http://bit.ly/2zH4pQX

-Christie’s Magnificent Jewels Sale. December 5th 2018 New York City. Auction Results Here-http://bit.ly/2zITyGa

-Blue Diamond Fails to Sell at Sotheby’s. A blue diamond estimated at up to $30 million failed to find a buyer at Sotheby’s in New York on Tuesday. The pear-shaped, 10.62-carat, fancy-vivid-blue, VVS1-clarity diamond had a presale valuation of $20 million to $30 million. Another pear-shaped stone a 2.76-carat, fancy-intense-purple-pink diamond also remained unsold at the auction. It was estimated at $1.3 million to $1.6 million. Proceeds at the New York Magnificent Jewels auction came to $46.4 million.

A collection of Barbara Sinatra’s jewels sold out, with a 20.60-carat, D-color, VVS1-clarity diamond engagement ring fetching $1.7 million, beating its presale estimate of $1 million to $1.5 million. Two Van Cleef & Arpels pieces belonging to the wife of legendary singer Frank Sinatra also sold: A pair of mystery-set ruby and diamond pendant ear clips garnered $362,500, well above their estimate of $100,000 to $150,000, while a mystery-set ruby and diamond butterfly brooch went for $567,000, exceeding its valuation of $125,000 to $175,000. A cut-cornered rectangular step-cut, 6.46-carat, fancy-orangey-pink, VVS2-clarity diamond achieved $206,656 per carat. The ring went for $1.3 million against its estimate of $600,000 to $800,000. Read more here-http://bit.ly/2G1F61Q

-Sotheby’s Magnificent Jewels Auction, Featuring Sinatra and Rockefeller Gems, Reaps $46.4 Million. At the “Magnificent Jewels” and “Storied Provenance & Iconic Designs” Auctions at Sotheby’s in New York today, a total of $46.4 million was plunked down on some magnificent jewels ls sold led by several important pieces. It was at this auction that pieces from Frank Sinatra were put up for sale, as well as Barbara Sinatra’s jewelry collection.

Everything from Sinatra’s jewelry collection sold for a total for $4.7 million, including her 20.60-carat emerald-cut diamond engagement ring, which took in $1.7 million alone. This particular sale had a host of highly coveted diamond and colored gemstone jewelry, much of which belonged to private collectors such as Frank and Barbara Sinatra. The engagement ring, dubbed Lady Blue Eyes, which Frank had slipped to her in a glass of champagne, went for higher than its estimated $1 to $1.5 million. It sold for $1,695,000 and had some intense bidding apparently mostly between two telephone bidders. Read more here-http://bit.ly/2Qcq2TL

-18ct. Diamond Smashes Estimate at Bonhams. An 18.04-carat diamond fetched $828,500 at Bonhams on Monday, exceeding its presale estimate of $400,000 to $600,000, Bonhams said Tuesday. The emerald-cut, G-color, VS2-clarity ring flanked by trillion-cut diamonds led the company’s New York Fine Jewelry sale. It was the first time the stone which was from a private collection had appeared at auction. “We saw some fierce bidding for this magnificent diamond and are delighted with how well it performed,” said Caroline Morrissey, head of sales for the US jewelry division at Bonhams. Read more here-http://bit.ly/2Plupqf

If you need an idea for a Christmas present then think about the Rubik’s Cube which is the best selling puzzle toy in the World.

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GOLD-SILVER-PALLADIUM

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

-Gold Plows Toward Its Strongest Season. As investors across all asset classes limp toward the end of 2018, gold is approaching what has been a reliably strong season in recent years. Since 2013, there’s been a more than 80 percent chance of a positive return in gold prices in January. And in the past two years, the best-performing producers of the precious metal have returned as much as 40 percent during the period, according to National Bank Financial analyst Mike Parkin. The strength is linked to demand from Asia, where giving gold as gifts is customary during the Chinese New Year, he said. Gold futures have fallen 7.1 percent in 2018, which has proven difficult for investors in every asset class from equities to real estate and government bonds.

The $9.2 billion VanEck Vectors Gold Miners ETF is down 16 percent this year, putting it on track for its biggest annual decline since 2015. If history is any guide, both could be poised for a rebound. In the past 10 years, January through February has been the strongest period for gold prices, and miners have reaped the benefit, according to Bloomberg’s seasonality chart of spot gold and gold-linked ETFs. Since 2009, the spot gold price saw total of 5 percent return in the period, while VanEck Vectors Gold Miners ETF saw 6.1 percent gain. Gold miners with highest leverage to gold-price changes include New Gold Inc., Kinross Gold Corp., Agnico Eagle Mines Ltd. and Detour Gold Corp., according to Parkin. Looking at their average returns during January and February since 2009, shows that cumulative gain would have been around 35 percent. Bloomberg

-As Fed Rethinks Path for Rates, Gold’s Poised to Jump in 2019. Gold may be poised to rally as speculation mounts that the Federal Reserve will hit the pause button on interest rate hikes in 2019. After lift-off in late 2015 followed by a rise a year later, the central bank has since steadily raised benchmark rates and is widely expected to do so again this month. But the path after that is clouded after Chairman Jerome Powell said Wednesday rates are “just below” estimates of the so-called neutral level, which markets took to mean a softer stance than previous comments. It was “getting pretty obvious that at some point Powell would have to flinch,” said Trey Reik, senior money manager at the U.S. unit of Sprott Inc., which oversees $7.6 billion. “Once you get to the consensus view that the Fed may be done, the dollar may come under severe pressure. Gold will erupt.”

While bullion was weighed down in the second and third quarters by a stronger dollar and rising borrowing costs, the dynamic may now be shifting as doubts build over the Fed’s tightening path in 2019. Drivers that favor further gains in bullion include a steady build-up in exchange-traded fund holdings as well as votes of confidence from top banks. Goldman Sachs Group Inc. recommends an outright long gold position into next year. “If U.S. growth slows down next year, as expected, gold would benefit from higher demand,” analysts including Jeffrey Currie said in a Nov. 26 note that endorsed bullion as one of its top-10 trade ideas for commodities. “The market has already priced in 10 out of the 12 rate hikes that we expect.” Bloomberg

-Gold’s Rally To Resemble The Surge In Natural Gas. Gold has the same upside potential as natural gas right before its rally earlier this year, said Bloomberg Intelligence (BI), adding that “peak U.S. dollar” is key to gold’s potential rally. “Indications from precious metals, notably gold, offer a setup that’s similar to natural gas before its big rally,” BI senior commodity strategist Mike McGlone said in his update December outlook.

“Bound to historically compressed trading ranges with many typical pressure factors nearing multiyear extremes, precious metals appear close to a maximum loss of faith vs. the strong stock market and greenback.” McGlone highlighted a unique similarity between gold’s set-up and that of natural gas, which surged in November on supply concerns in the U.S. “Much like natural gas earlier this year, gold has the drivers in place to rally from its compressed range. Increasing inflation and debt levels are positive companions, as is gold’s divergent strength to the dollar,” he said.

The idea of the U.S. dollar rally topping is at the center of BI’s bullish outlook for gold prices, the outlook noted. “Overdue normalization in the equity and crude-oil bull markets, and a subsequent reduction of Federal Reserve rate-hike expectations, indicate the dollar’s run is at an elevated risk of ending,” McGlone wrote on Friday. “Mean-reversion risks in the trade-weighted broad dollar near the 2002 and 2016 highs may outweigh further appreciation potential.” Gold is “ripe for a rally”, described McGlone, stating that the Federal Reserve monetary policy tightening could be nearing the end next year.

“The narrowest 24-month Bollinger bands for the longest period in 16 years indicate the metal’s upside,” the strategist said. On top of that, gold has been showing divergent strength in light of higher U.S. dollar, the outlook added. “The best performer, gold, is down about 6% on a spot basis but would typically be much lower in such a backdrop. Relative to the trade-weighted broad dollar, gold’s beta is minus 1.7 on an annual 20-year basis. A top-performing major asset class this year, the 8% increase in the dollar would normally be equivalent to dollar-denominated gold that’s worth about 14% less.” GoldSeek.com

-Gold Gets Leapfrogged as Palladium Extends Rally to Record Again. Gold just got left behind by one of its sister metals. After a demand-fueled rally over the past four months that’s seen prices hit successive records, palladium topped gold. Palladium, which hasn’t traded at a sustained premium to gold in 16 years, has gained as buyers scramble for supplies of the metal used in vehicle smog-control devices. Demand has risen as consumers turn away from diesel toward gasoline-powered cars, which tend to use more palladium in autocatalysts.

The metal “should continue to benefit from strong fundamentals in 2019,” according to Bloomberg Intelligence. While most metals have languished this year amid global trade concerns and a rising dollar, palladium climbed to records four times in November amid expectations that production will continue to fall short of demand. Holdings in exchange-traded products backed by palladium are at the smallest in almost a decade as investors pull the metal and offer the commodity for lease. “People are grasping for whatever ounces of material they can get” in the palladium market, Tai Wong, head of base and precious metals trading at BMO Capital Markets, said before Wednesday’s levels were hit. “It’s very expensive to borrow, and that is perhaps the biggest factor driving the spot price higher.”

Palladium futures for March delivery climbed 0.4 percent to settle at a record $1,184.40 an ounce at 1:01 p.m. on Nymex in New York. Palladium for immediate delivery climbed as much as 2.4 percent to a peak of $1,261.80 an ounce, and was at $1,241.47 in New York, according to Bloomberg pricing. Spot gold was 0.1 percent lower at $1,236.69 an ounce. The cost to borrow palladium for a month was at a record 22 percent, more than seven times higher than the 10-year Treasury yield. Holdings of exchange-traded products backed by the metal are at the lowest since February 2009.

Palladium’s deficit is set to widen to about 1.4 million ounces in 2019, adding to a shortfall of 1.2 million ounces this year, according to London-based Metals Focus Ltd. Supply is likely to remain broadly stable in 2019, while there will be growing demand from the automotive sector, according to Junlu Liang, a senior analyst at the consultancy. Consumption of palladium in autocatalysts could rise in-line with the production of electric vehicles amid the global effort to cut emissions for cleaner air, Eily Ong, an analyst at Bloomberg Intelligence, said in a report. “The EU has a binding target of cutting emissions by at least 40 percent by 2030 from 1990 levels, while China aims for 26-28 percent cuts from 2005 levels,” she wrote. Bloomberg

-Palladium Likely to Break More Records, Boosting Automakers’ Costs. Automakers aren’t likely to catch a break on palladium prices anytime soon as the metal used to reduce exhaust emissions is poised to extend its record-breaking rally. Auto-industry demand for the silvery-white metal especially from China will probably keep supplies tight for the foreseeable future, as reflected by surging lease rates for the metal, said Steven Dunn, head of exchange-traded funds at Aberdeen Standard Investments, which oversees about $736 billion.

Palladium is a rare metal produced mostly in two countries, so it may not be possible to boost output immediately to meet industry demand, Dunn warned. More than 80 percent of global production comes as a byproduct from nickel mining in Russia and platinum mining in South Africa, so supplies are dependent on the extraction level and investment in other minerals. Even if the price rally provides production incentives for mining companies, there’s likely to be a lag, and any uptick in demand from automakers “could just suck up” any output gains, Dunn said. “Our expectation is that we should continue to see that shortfall for a number of years going forward.” Bloomberg

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1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 1980
  • Total Price: $50,000
  • Price per Carat: $50,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 1990
  • Total Price: $150,000
  • Price per Carat: $150,000
  • Source: Auction

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2000
  • Total Price: $500,000
  • Price per Carat: $500,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2008
  • Total Price: $1,000,000
  • Price per Carat: $1,000,000
  • Source: Auction

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2009
  • Total Price: $1,090,500
  • Price per Carat: $1,090,500
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2020
  • Total Price: $2,828,187*
  • Price per Carat: $2,828,187*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2025
  • Total Price: $4,361,506*
  • Price per Carat: $4,361,506*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 1980
  • Total Price: $1,000
  • Price per Carat: $1,000
  • Source: Auction

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 1990
  • Total Price: $3,000
  • Price per Carat: $3,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2000
  • Total Price: $9,000
  • Price per Carat: $9,000
  • Source: Auction

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2008
  • Total Price: $23,500
  • Price per Carat: $23,500
  • Source: Private Sale

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2009
  • Total Price: $26,300
  • Price per Carat: $26,300
  • Source: Auction

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2012
  • Total Price: $32,000
  • Price per Carat: $32,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2020
  • Total Price: $53,993*
  • Price per Carat: $53,993*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2025
  • Total Price: $74,873*
  • Price per Carat: $74,873*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 1980
  • Total Price: $60,000
  • Price per Carat: $60,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 1990
  • Total Price: $200,000
  • Price per Carat: $200,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2000
  • Total Price: $600,000
  • Price per Carat: $600,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2008
  • Total Price: $1,350,000
  • Price per Carat: $1,350,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2009
  • Total Price: $1,494,000
  • Price per Carat: $1,494,000
  • Source: Auction

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2020
  • Total Price: $4,555,497*
  • Price per Carat: $4,555,497*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2025
  • Total Price: $7,561,708*
  • Price per Carat: $7,561,708*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Red

  • Year: 1950
  • Total Price: $13,800
  • Price per Carat: $13,800
  • Source: Private Sale

1 Carat Radiant Cut Fancy Red

  • Year: 1987
  • Total Price: $927,000
  • Price per Carat: $927,000
  • Source: Auction

1 Carat Radiant Cut Fancy Red

  • Year: 2008
  • Total Price: $2,000,000
  • Price per Carat: $2,000,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Red

  • Year: 2009
  • Total Price: $2,074,600
  • Price per Carat: $2,074,600
  • Source: Private Sale

1 Carat Radiant Cut Fancy Red

  • Year: 2020
  • Total Price: $3,103,720*
  • Price per Carat: $3,103,720*

*Estimated value based on current market trend