Video: Gold Bubble Seen by Soros on Brink of Bear Market

Gold is poised to complete its 11th consecutive annual gain, the longest winning streak in at least nine decades, on the brink of a bear market. George Soros, the billionaire who two years ago called it the “ultimate asset bubble,” cut 99 percent of his holdings in the first quarter, Securities and Exchange Commission data show. Betty Liu reports on Bloomberg Television’s “In the Loop.” (Source: Bloomberg Television)

Euro Swan Dive Splashes Santa

This morning’s swan dive in the euro stopped the Santa rally right in its tracks. We have two questions: 1) Has the ECB shot its wad as the lender of last resort providing massive liquidity to the banking system and leaving little ammunition for the distressed sovereigns; 2) Will money demand remain stable in the eurozone as the monetary base explodes? That is, will the Germans keep their money in Europe

Volatility Lurks

The S&P 500 volatility index – the VIX – is a measurement of volatility expectations. It has fallen 50% since the (latest) agreement to save the euro was announced. If the VIX falls to 18, call options are worth considering

Market Sentiment Improves After ECB LTRO

US dollar is mixed vs. majors Thursday as market sentiment improving a bit in the wake of ECB’s 3-year LTRO. Merkel advisor Bofinger warned that the euro zone has six months to solve the debt crisis; Greek creditors reportedly balking at IMF haircut proposal; France downgrade rumor made the rounds again. HUF stabilizes after S&P downgrade but further weakness likely; Turkey central bank leaves rates steady at 5.75%, as expected

On Liquidity: Watch What the ECB Does, Not What It Says

The key question remains what the banks will do with the newly acquired funds. We suspect that to the extent banks buy sovereign bonds, they will purchase their own sovereign’s bonds rather than their neighbor’s. More details of the nuances of the auction will likely be forthcoming over the next several days, but it is notable that several Italian banks, include the two largest Italian banks reportedly created bonds, which were guaranteed by the government, for apparently the sole purpose of creating collateral to borrow from the ECB today. Going forward, investors should pay more attention to what the ECB does than what it says. It says it will not backstop sovereigns, yet since it has renewed its bond purchases in August, its bond purchases have almost matched the new bond issuance of Italy and Spain. The ECB’s rhetoric seems somewhat harsher than its actions. To be sure the liquidity provisions are not and cannot be the “bazooka” that so many want. It does not cure what ails Europe, but it treats it and will have to continue to do so in the months ahead

Auerback: Solvency Starts with the ECB

I thought I should highlight that Marshall Auerback was on Fox Business yesterday since he writes here occasionally. I wish it were more often! Marshall was on message regarding the euro zone debt crisis. His point: Additional liquidity is not a long-term solution to what ails Europe. It is about national solvency and economic growth

Bond vigilantes and the currency relief valve

The last post by Randall Wray below is an interesting one because it points out how the world has changed since the end of the gold standard and why the sovereign debt crisis is centered in the euro zone.

While I have an Austrian bias overall, for me, MMT is the best way to think about nonconvertible floating exchange rate systems as distinct from fixed exchange rate, currency board, pegged and convertible systems. The difference is policy space and what I would call the bond vigilante relief valve

The 2012 Blind Side: China’s Housing Bust

Foreign Affairs has just posted a must read piece, “China’s Real Estate Bubble May Have Just Popped”, which will sound very familiar to Global Macro Monitor readers. We’re going to be spend a lot time over the holidays thinking how this plays out in China’s financial sector and the implications for markets

Dollar Firmer As European News Stream Remains Negative

US dollar was firmer vs. majors Monday even as euro zone news stream remains negative; Moody’s cut Belgium two notches Friday to Aa3 and kept a negative outlook. Euro short positions at record high on IMM; euro zone Finance Ministers to hold conference call Monday; France auctions paper today. Reported death of North Korean leader Kim hurt KRW; EM FX mostly weaker as Brazil remains obsessed with

Chart of the Day: Post-Bubble Performance Comps of U.S. Financials and Techs

The guys over at Bespoke put out a great piece yesterday comparing the post-bubble performance of U.S. financials after the February 2007 top and the technology sector after the dot.com peak in March 2000.

Market Facing Strong Headwinds

All in all, the negative fallout from the EU sovereign debt crisis and the outlook for the U.S. economy are likely to have a strong downward pull on the stock market. Rather than reflecting fear, the market seems unusually complacent as investors are overconfident that the world financial authorities can pull a rabbit out of the hat at the last minute.

Downgrades, Upgrades and US Inflation

The dollar is broadly weaker as news developments remain mostly positive, boosting sentiment. North American session sees US November inflation; euro likely supported today on short-covering rally. RBI left rates on hold at 8.5%, as expected; IDR rallies after Fitch upgraded it to investment grade