According to BBC News 24 today, we are 'only' -0.5% down on GDP and 'only' on the 'brink' of a recession.
Plenty of steam left in the old engine yet then.
Financial markets dropping like a stone
Moderator: Peak Moderation
-
Aurora
Mosts of the big funds and investors have made highly leveraged investments - e.g. say they have 10 million to invest - they invest in 100 million of equities or commodities by putting down their 10million as, basically, a 10% deposit, with the agreement they will buy or sell the remainder by a particular date. This means that the actual amount 'invested' is much higher than the money they spend.
So the impact of selling out of the position can be multiplied by a factor of ten or so - say everyone wants to close their position in a falling market at the same time, and the impact is multiplied by a factor of 10 - that's one volatile market, whether the fundamentals are sound or not.
It also means that funds are having to sell out of their most profitable positions to meet the margin calls on their bad invesments, meaning that things like oil etc. are bombing as well, meaning that they need to sell even more of their assets, causing them to drop further, setting off a few stop losses on the way down, causing prices to drop even further etc. etc.
I think I may have chosen the wrong time to invest a bit in renewables, although it is money I don't mind being tied up for a long time in any case, and if the renewable energy investments don't rise in the long term, then it doesn't matter what I did with the money anyway cos we're all fekd.
So the impact of selling out of the position can be multiplied by a factor of ten or so - say everyone wants to close their position in a falling market at the same time, and the impact is multiplied by a factor of 10 - that's one volatile market, whether the fundamentals are sound or not.
It also means that funds are having to sell out of their most profitable positions to meet the margin calls on their bad invesments, meaning that things like oil etc. are bombing as well, meaning that they need to sell even more of their assets, causing them to drop further, setting off a few stop losses on the way down, causing prices to drop even further etc. etc.
I think I may have chosen the wrong time to invest a bit in renewables, although it is money I don't mind being tied up for a long time in any case, and if the renewable energy investments don't rise in the long term, then it doesn't matter what I did with the money anyway cos we're all fekd.
Life's too short
The hedge funds are pawning off their golld and driving down the price. Not a viable long term strategy, I should think.
http://ap.google.com/article/ALeqM5jND4 ... gD940UVTO1
GOLD BRIEFLY DROPS TO 21-MONTH LOW AS STOCKS FALL
By STEVENSON JACOBS – 2 hours ago
NEW YORK (AP) — Gold futures briefly plunged to their lowest level in 21 months Friday as a stronger dollar and plunging world stock markets led investors to sell commodities to offset massive losses in equities.
The metal recovered much of its losses later in the day, but prices are still down about 20 percent since the start of the month. That huge decline has raised questions about whether gold has given up its long-held claim as a safe-haven asset during times of economic crisis.
"Gold has not been benefiting from the flight to quality like we would have thought," said Matt Zeman, head trader at LaSalle Futures in Chicago. People aren't stepping up and buying it. They're most comfortable in cash and Treasurys. Everything else is suffering on worries about the global economy."
Gold for December delivery fell $33.70 earlier in the day to $681 an ounce on the New York Mercantile Exchange, the lowest level for that contract since Jan. 11, 2007. Later, prices clawed back up to trade at $708.70, down $6.
The recovery came as U.S. stocks pared some of their early heavy losses.
Still, gold has plummeted about 30 percent since surging to an all-time trading high of $1,033.39 on March 17, confounding some investors who have been predicting the metal could rise as much as $2,000.
Gold has traditionally been seen as safe place to invest during rough times because its known for holding its value. But as global recession worries weigh down financial markets across the globe, hedge funds and other large institutional investors have been cashing in commodities to cover bad bets on stocks and other assets.
"A lot of these funds still have profitable positions in gold, so they're going to sell whatever they can to raise cash," said Jon Nadler, analyst with Kitco Bullion Dealers Montreal.
He noted that the likelihood of a recession means consumers will be buying less gold jewelry, potentially adding to the downward momentum on prices.
Other precious metals also fell sharply Friday. December silver lost 58.5 cents to $8.915 an ounce on the Nymex, while December copper declined 10.95 cents to $1.695 a pound.
Despite gold's decline, not all investors are giving up on it.
Jeffrey Nichols, managing director of American Precious Metals Advisors, said he still believes gold has "extremely bullish longer-term prospects." He noted that gold is off about 12 percent since the start of the year — far less than most other asset classes.
Gold's drop doesn't "mean that gold is suddenly no longer a safe haven in turbulent times," Nichols said in a note. "But it does demonstrate that at times of panic even the yellow metal can fall victim to developments in other asset markets."[/b]
http://ap.google.com/article/ALeqM5jND4 ... gD940UVTO1
GOLD BRIEFLY DROPS TO 21-MONTH LOW AS STOCKS FALL
By STEVENSON JACOBS – 2 hours ago
NEW YORK (AP) — Gold futures briefly plunged to their lowest level in 21 months Friday as a stronger dollar and plunging world stock markets led investors to sell commodities to offset massive losses in equities.
The metal recovered much of its losses later in the day, but prices are still down about 20 percent since the start of the month. That huge decline has raised questions about whether gold has given up its long-held claim as a safe-haven asset during times of economic crisis.
"Gold has not been benefiting from the flight to quality like we would have thought," said Matt Zeman, head trader at LaSalle Futures in Chicago. People aren't stepping up and buying it. They're most comfortable in cash and Treasurys. Everything else is suffering on worries about the global economy."
Gold for December delivery fell $33.70 earlier in the day to $681 an ounce on the New York Mercantile Exchange, the lowest level for that contract since Jan. 11, 2007. Later, prices clawed back up to trade at $708.70, down $6.
The recovery came as U.S. stocks pared some of their early heavy losses.
Still, gold has plummeted about 30 percent since surging to an all-time trading high of $1,033.39 on March 17, confounding some investors who have been predicting the metal could rise as much as $2,000.
Gold has traditionally been seen as safe place to invest during rough times because its known for holding its value. But as global recession worries weigh down financial markets across the globe, hedge funds and other large institutional investors have been cashing in commodities to cover bad bets on stocks and other assets.
"A lot of these funds still have profitable positions in gold, so they're going to sell whatever they can to raise cash," said Jon Nadler, analyst with Kitco Bullion Dealers Montreal.
He noted that the likelihood of a recession means consumers will be buying less gold jewelry, potentially adding to the downward momentum on prices.
Other precious metals also fell sharply Friday. December silver lost 58.5 cents to $8.915 an ounce on the Nymex, while December copper declined 10.95 cents to $1.695 a pound.
Despite gold's decline, not all investors are giving up on it.
Jeffrey Nichols, managing director of American Precious Metals Advisors, said he still believes gold has "extremely bullish longer-term prospects." He noted that gold is off about 12 percent since the start of the year — far less than most other asset classes.
Gold's drop doesn't "mean that gold is suddenly no longer a safe haven in turbulent times," Nichols said in a note. "But it does demonstrate that at times of panic even the yellow metal can fall victim to developments in other asset markets."[/b]
Some thoughts & questions re the dollar rising, partly at gold's expense.
One entirely novel aspect of gold's decline in this crash
is the very large funds having flowed into so-called "Paper Gold"
which may or may not be available for the investor to sell at need.
I gather there is already a substantial price differential between the metal and its paper proxy -
but can anyone explain how the spot price relates to each of these ?
WRT the climb of the dollar, it's now nearly 40 years since the US shifted from the gold standard
effectively to the petro-dollar -- that is to an oil-based paper credit note.
And guess which nation has done most to deflect efforts to end oil dependence ?
And which nation now finds its currency rising as nearly all others are coming under pressure ?
So at what point can PO be expected to impact the credibility of the petro dollar ?
Regards,
Billhook
One entirely novel aspect of gold's decline in this crash
is the very large funds having flowed into so-called "Paper Gold"
which may or may not be available for the investor to sell at need.
I gather there is already a substantial price differential between the metal and its paper proxy -
but can anyone explain how the spot price relates to each of these ?
WRT the climb of the dollar, it's now nearly 40 years since the US shifted from the gold standard
effectively to the petro-dollar -- that is to an oil-based paper credit note.
And guess which nation has done most to deflect efforts to end oil dependence ?
And which nation now finds its currency rising as nearly all others are coming under pressure ?
So at what point can PO be expected to impact the credibility of the petro dollar ?
Regards,
Billhook
Billhook's right there is huge dislocation in paper and physical gold prices.
I would say the reason for the dollar's current appreciation (which will prob last as long as the deleveraging process and no longer) is the result of huge numbers of investors cashing in their stock/commodity/bond chips, most of which are demoninated in dollars, and therefore settled in dollars. What this is doing is creating a temporary demand for dollars all around the world.
Step up the yen - which ultimately a lot of these dollars are then being exchanged for to unwind original positions.
I would hazard a guess that once the delevarging process is more or less complete then the dollar will start depreciating, hard asset prices will start rising again, and the current period of deflation will give way to hyper inflation. Step up hard assets and precious metals.
What does everyone think about the current low prices of many goods? I think that we are seeing the sell-off of surplus stocks and that once these are sold off, there will be less available because at the end of the day they are going to be more expensive to produce than people will want/or be able to pay.
I would say the reason for the dollar's current appreciation (which will prob last as long as the deleveraging process and no longer) is the result of huge numbers of investors cashing in their stock/commodity/bond chips, most of which are demoninated in dollars, and therefore settled in dollars. What this is doing is creating a temporary demand for dollars all around the world.
Step up the yen - which ultimately a lot of these dollars are then being exchanged for to unwind original positions.
I would hazard a guess that once the delevarging process is more or less complete then the dollar will start depreciating, hard asset prices will start rising again, and the current period of deflation will give way to hyper inflation. Step up hard assets and precious metals.
What does everyone think about the current low prices of many goods? I think that we are seeing the sell-off of surplus stocks and that once these are sold off, there will be less available because at the end of the day they are going to be more expensive to produce than people will want/or be able to pay.
-
kenneal - lagger
- Site Admin
- Posts: 14287
- Joined: 20 Sep 2006, 02:35
- Location: Newbury, Berkshire
- Contact:
Shop keepers and businesses are trying to generate cash flow to pay off their creditors. There won't be many sales on once the shops have destocked.grinu wrote:What does everyone think about the current low prices of many goods? I think that we are seeing the sell-off of surplus stocks and that once these are sold off, there will be less available because at the end of the day they are going to be more expensive to produce than people will want/or be able to pay.
Action is the antidote to despair - Joan Baez
I've seen it opined by a number of commentators that the gold market is, and has been for a long time, fraudulent. Many gold certificates are written on gold that does not exist. This situation is now being exposed by a high demand for gold. As a result physical gold, especially in smaller units and coin, now demands a large premium over the official market price.grinu wrote:Billhook's right there is huge dislocation in paper and physical gold prices.
"When the facts change, I change my opinion. What do you do, sir?"
John Maynard Keynes.
John Maynard Keynes.
What do you think of BullionVault? I guess that's included in the 'paper gold' Billhook was talking about. I'm thinking of putting a chunk of money there.skeptik wrote:I've seen it opined by a number of commentators that the gold market is, and has been for a long time, fraudulent. Many gold certificates are written on gold that does not exist. This situation is now being exposed by a high demand for gold. As a result physical gold, especially in smaller units and coin, now demands a large premium over the official market price.grinu wrote:Billhook's right there is huge dislocation in paper and physical gold prices.
Sadly, that is generally how nature works. (Sadly for the weak, that is. For the Haggises of this world, no doubt it's all going to be rather fun.)dudley wrote:Vortex, have you turned to the philosophy of Ayn Rand for comfort in this time of crisis? The strong will prevail and tough luck to the weak?
Last edited by Ludwig on 27 Oct 2008, 12:48, edited 3 times in total.
"We're just waiting, looking skyward as the days go down / Someone promised there'd be answers if we stayed around."
Ayn Rand? For comfort? I think not.dudley wrote:Vortex, have you turned to the philosophy of Ayn Rand for comfort in this time of crisis? The strong will prevail and tough luck to the weak?
She does however project a positive can-do attitude which New Labour supporters - and many others - seem to lack.
We need more than another Review or another Target to sort out the current economic mess - or Peak Oil for that matter