Wednesday, June 8, 2011
Traders Are Dumping Stocks and Buying Gold and Silver
Gold and silver have outperformed the S&P 500 by 8 percentage points over the past month as traders choose precious metals over stocks to stash cash.
The move is fueled by a number of worries: The European Union is planning its second Greek bailout, the Federal Reserve is angling to keep interest rates low while the second round of quantitative easing runs out—and global economic growth is slowing.
“Gold is more valuable at this juncture as the flight to quality accelerates,” said Stephen Weiss of Short Hills Capital. “Global equity indices will all be in decline as multiple growth engines sputter: US, China, Eurozone and Japan. Only place is commodities, and specifically gold, because that is where perceived safety and momentum will be.”....read on
Fiat cash is now dangerous to your physical as well as financial health
Makes me think about the large numbers of frequent air travelers in Australia, some do the Sydney<-->Melbourne or Sydney<-->Canberra trip up to 4 times a week. So that would be 8 full body x-rays each week for 48 weeks a year for a total of 384, or more than 1 per day.
Of the comments to the article I thought this one summed up the situation the best:
Until they discover being x-rays that many times give you cancer or something. A leading U.S. expert on the biological effects of X-radiation is Dr. John Gofman, Professor Emeritus of Molecular and Cell Biology, University of California, Berkeley. Dr. Gofman’s exhaustive research leads him to conclude that there is NO SAFE DOSE-LEVEL of ionizing radiation. His studies indicate that radiation from medical diagnostics and treatment is a causal co-factor in 50 percent of America’s cancers and 60 percent of our ischemic (blood flow blockage) heart disease.
From the UK Telegraph:
The 21 feet long smart tunnel combines all existing and imminent security technology in one place and would slash the time passengers wait at airports. Passengers would simply walk the length of the tunnel while they are scanned.
It would prevent the frustration many passengers feel when they have to partially undress at a security gate.
A version is expected to be trialled within 18 months and could be rolled out at major airports within five years. British authorities are known to be keen to use the next generation of airport security scanners as soon as possible.
Currently the aviation industry allows 30 seconds for passengers to pass through the existing security system.
But this time only allows for walking through the detector, removing shoes and belts, placing metal objects in a separate container and producing liquids for inspection.
It does not take into account the time passengers spend putting gathering their belongings afterwards, nor the time they have to queue before reaching the metal detector in the first place.
This can take around 10 minutes at the most efficient airports which now includes Heathrow’s Terminal 5.
It is hoped that the waiting time would also be cut as a result of the quicker screening process.
A prototype of the new technology was unveiled in Singapore yesterday by the International Air Transport Association (IATA), which represents the world’s major airlines.
It features screening methods which are either already commonplace at airports - such as body scanners - and those which are expected to be introduced soon, including liquid detectors.
The IATA system would divide passengers into three categories, who would initially be identified by an iris-recognition system before entering the arches.
So-called “known travellers” who have been pre-screened would only face an x-ray, metal and liquid detector.
“Normal travellers” would also have their shoes scanned automatically and pass through an explosive trace detector.
Anyone whose behaviour raised concern - such as a passenger buying a one way ticket in cash - would go through a different channel which would also feature a full body scanner.....read on
Decline and fall of the American empire
America clocked up a record last week. The latest drop in house prices meant that the cost of real estate has fallen by 33% since the peak – even bigger than the 31% slide seen when John Steinbeck was writing The Grapes of Wrath.
Unemployment has not returned to Great Depression levels but at 9.1% (or have returned to depression levels of 22% if you refer to the shadowstats graph at the bottom of this blog) of the workforce it is still at levels that will have nerves jangling in the White House. The last president to be re-elected with unemployment above 7.2% was Franklin Delano Roosevelt.
The US is a country with serious problems. Getting on for one in six depend on government food stamps to ensure they have enough to eat. The budget, which was in surplus little more than a decade ago, now has a deficit of Greek-style proportions. There is policy paralysis in Washington.
The assumption is that the problems can be easily solved because the US is the biggest economy on the planet, the only country with global military reach, the lucky possessor of the world's reserve currency, and a nation with a proud record of re-inventing itself once in every generation or so.
All this is true and more. US universities are superb, attracting the best brains from around the world. It is a country that pushes the frontiers of technology. So, it may be that the US is about to emerge stronger than ever from the long nightmare of the sub-prime mortgage crisis. The strong financial position of American companies could unleash a wave of new investment over the next couple of years.
Let me put an alternative hypothesis. America in 2011 is Rome in 200AD or Britain on the eve of the first world war: an empire at the zenith of its power but with cracks beginning to show.
The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are the a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.......read on
Janet Tavakoli: "Greater Global Risk Now Than At Time Of LTCM"
Greater Global Risk Now Than At Time Of LTCM
Sir, The Financial Services Authority claims that hedge fund gearing has decreased (report, May 2) and the Federal Reserve Bank of New York suggests that there is no close correlation between hedge fund returns making the current situation less alarming than in the past (May 3). I believe it was Winston Churchill who said we must alert somnolent authority to novel dangers; but in this matter authority seems complacent, and the dangers are not novel.
The FSA produced numbers from a partial survey of hedge funds and discussed "average" leverage, thus highlighting the well known flaw of averages. If a swimming pool's average depth is four feet, but the deep end of the pool is eight feet, non-swimmers are presented with unacceptable risk. The average would suggest non-swimmers can safely use the pool, but a drowning man finds out the hard way that the average doesn't contain information descriptive of the risk.
The NY Fed uses data to examine volatility and correlations, both of which are not of much use in a crisis when correlations deviate from historical measures and even approach one. Indeed even today, one should consider that hedge fund returns are anything but independent. Hedge funds are often called "alternative" assets, but they have not created new asset classes. Hedge funds invest in the global markets along with other investors, albeit hedge funds may be more creative, more illiquid and may employ more leverage.
"Tavakoli's law" states that if some hedge funds' returns soar above market averages, then others must crash and burn. If one accepts that passive investors are indexed and reap average market returns, then active investors that reap extraordinary returns above the market average are offset by active investors who experience extraordinary losses in aggregate.
The current situation may indeed be different from that presented by Long Term Capital Management, but it may be even more alarming, not less alarming. Due to the use of structured products and derivatives, hedge funds can take on hidden leverage above and beyond that which can be explained by polling prime brokers. Furthermore, illiquid structured products will experience a classic collateral crash when hedge funds try to liquidate these assets to meet margin calls or collateral "cures".
Since 2000, assets invested in hedge funds have more than tripled to around $1,500bn. While on average leverage may appear manageable, some hedge funds - Amaranth to cite a recent example - employ high degrees of leverage. A potential source of a "great unwind" arises from a trigger event affecting highly leveraged hedge funds, and another potential source is systemic risk that effects a larger cohort of hedge funds.
Many hedge funds are not highly leveraged, and they will weather the storm. But the explosion of hedge fund investments in illiquid assets combined with leverage currently pose a greater risk to the global financial markets than we experienced at the time of the LTCM debacle.
Keiser Report: Selling Kidney for iPad
This week Max Keiser and co-host, Stacy Herbert, present a special episode to enlighten a baffled Wall Street. They discuss selling kidneys for iPads, Saudi Arabia's planned nuclear reactors and oil traders threatening their competition with kidnapping.