Thursday, September 10, 2009

Thursday Items of Interest

It would figure that after about a week of having trouble finding compelling things to write about I would stumble upon about 20 things today that I wanted to spend time on! I am way short on time after getting home late and I have a hard stop at 8:30 to watch the opening game of the NFL season. I am very excited about this year in football and I think it could be one of the most competitive seasons in memory. My call tonight, Pittsburgh Steelers 17, Tennessee Titans 10 in a very physical game featuring two of the leagues best defenses.

I will probably do a weekend post because I have a few philosophical musings I want to get into writing. I am going to do a full Friday night post, so get your requests in for pictures (clean ones), film clips, book passages, music, you name it, I find it.

Items of Interest
Long time readers know I hate "link" posts, but that is about all I can muster tonight.

Barrick Gold Observations
The strange move by Barrick gold to end hedges, but pay current contracts in cash (not bullion delivery) by raising money via a stock offering can only be termed "puzzling". Two items on this:
From Jesse's Cafe:
Barrick Capitulates
Recounts the hedge contracts held by Barrick along with JP Morgan gold shorts and ties it all together

From The Golden Truth is this piece about Barrick hedge payouts of cash:
Adrian Douglas: Barrick can't get gold needed to cover hedges
Tantalizing indeed!

How In the World is this Even Possible?
Without hard numbers and projections for review, I have to say up front this story could be another "scare" job to get the kind of fee hand the banks demand in every area. That said, this story DEMANDS more attention:
Proposed Debit Card Regulations Could Cause 1,000 Banks and 2,000 Credit Unions to Fail
According to Michael Moebs, an economic advisor for many banks and credit unions stated that Rep. Maloney’s legislation would effectively kill overdraft services, which could cause up to 1,000 banks and 2,000 credit unions to fold within the next two years. The reason for these potential failures is that 45% of banks collect more in overdraft fees than they make in profits.
I find this to be absurd, yet it is probably true. Can anyone shed more light on this?

You May be Right, I May be Crazy
This market has humbled anyone that has a brain and made heroes of anyone blindly buying equities by the boat load. Just like 1998-2000! Fun stuff.

The Housing Time Bomb wraps up all the dislocations across 4 major market indicators that no longer have any correlation at all which begs the question "what the heck is going on?":
Something Doesn't Add Up
Excerpt of the authors bottom line:
None of these correlations add up folks. The market is trading like it has 5 different personalities. You might as well just call it Sybil these days.
Today alone: Sybil acted bullish, feared deflation, feared inflation, and traded the US currency like its not worth the paper its printed on(which it probably isn't).
Sybil's price action is extremely unstable and inconsistent folks.
This should concern all investors regardless if you are bullish or bearish.
The questions the author raises would be a great exercise in thought for any interested.

Have a good night.


getyourselfconnected said...

For any gold bugs:
check out this museum in Japan:

Note the small 5mm piece of gold hammered into a sheet half a meter in size (bottom left pic)! Wild!

Jeff said...


Nice post. thanks for the props.

Wow, Michael Moebs piece was a shcoker. Nice catch I enjoyed that one.

thats some pretty scary stuff. Just finished watching Geithners Town Hall on CNBC.

It made me want to barf by the end.

Thank god its football time.

Go Steelers!

getyourselfconnected said...

I find it impossible to believe that if overdraft fees are lost banks lose that much money. If I am wrong, then the whole system needs to go by way of fire.

Dave in Denver said...

Titans were getting 6 pts. I took the Titans and the points.

Good game so far.

I couldn't be happier football season has started.


Dave in Denver said...

Just so people reading this post can get a different perspective, this was my comment on Adrian's article (for the record, Adrian has some good analysis, but he also makes a lot of erroneous assumptions - I've been watching Adrian's work for 6 years at

Technically speaking, I don't agree with the analysis about Barrick settling the hedges for cash rather than physical gold as being a default. I think these contracts were stuctured with a cash buyout.

HOWEVER, there is, in all likelihood, a correspoinding market short in gold on the other side of the Barrick hedge, in which the counterparty banks most likely leased gold from the Fed and sold a like amount of gold into the market, thinking the price of gold would never rise and that they were covered by Barrick. I would bet that the gold is still leased out and either the Fed will require JPM to go out and buy the gold back and deliver it to the Fed OR the Fed will let JPM off the hook for cash.

I would bet my left marble that THAT is the case.

I also agree with Adrian's analysis that there is a global scramble for physical possession of gold going on right now - there are signs everywhere - and that in the near future, the price of gold will explode because of this.

The days of the paper games in the gold market are coming to a close. There will be a lot of pain felt by some entities who are short. But that's the subject of a future post.

Stagflationary Mark said...


I'd like to take a shot at Sybil. Perhaps she does make sense.

Money is flowing INTO T-Bills.
Money is flowing INTO T-Bonds.
Money is flowing INTO stocks.
Money is flowing INTO gold.
Money is flowing INTO oil.
Money is flowing INTO foreign currency (falling dollar).

There seems to be a common theme here.

If money was water, I'd say our ship hit an iceberg! ALL of the compartments are flooding. ;)

getyourselfconnected said...

Dave in Denver,
Thanks for stopping in and adding your take on the article.

that is a lot of flow, and as you know, "The Spice MUST Flow!!"

watchtower said...

Ah yes, the spice.

Dave in Denver said...

GO BUFFS! (even though I know the Buffs suck this year)

getyourselfconnected said...

Broncos now have the Patriots McDaniel, but no Jay Cutler.