Posted on 12/09/2014 7:38:07 AM PST by blam
Tyler Durden
12/09/2014
Gold prices have surged this morning to their highest since October (over $1221) as leveraged hot money greatly rotates its repo-driven way out of risk assets and into Greenspan's alternative currency. However, there is a bigger problem for the biggest pairs trade that no one is discussing - apart from us - the decoupling of the long Nikkei, short gold trade as the repo market folds in on itself from the suck out of $80 billion in collateral by China...
Gold back at its highest since October...
(snip)
(Excerpt) Read more at zerohedge.com ...
The dollar is down, compared to gold.
"While it took a few hours for people (and machines) to realize exactly what China did last night, the fallout in risk markets is now clearly evident when a central bank decides enough-is-enough for speculative wealth creation bubble-followers. As we described last night, China's tightening has dramatically influenced the carry trade (USDJPY back under 120) and thus global stocks (from Abu Dhabi to Greece), global corporate bonds (all significantly wider) and European peripheral bonds (cracking wider) all face pressure. The beneficiary safe havens so far are precious metals (Gold > $1315) and US Treasuries (30Y at 2014 low yields). For now the mainstream media's narrative is that this oil-driven (which is fantasy as oil prices are up today) - this is the fallout from the marginal removal of $80bn of leverage collateral from the world's carry trades...
First - the winners...
(snip)
"Gold prices have surged this morning to their highest since October (over $1221) as leveraged hot money greatly rotates its repo-driven way out of risk assets and into Greenspan's alternative currency. However, there is a bigger problem for the biggest pairs trade that no one is discussing - apart from us - the decoupling of the long Nikkei, short gold trade as the repo market folds in on itself from the suck out of $80 billion in collateral by China..."
The italized parts are Greek to me. What's this in English?
the price of gold measured in gold, is flat on the day
Is there some new definition of “surge” about which Iam unaware?
first of all, it’s the ravings of a lunatic, as ALL POSTS on that website are. Second, it’s very badly written, prizing glibness and certainty over a realistic depiction of events.
But broadly translating what he/she/it is saying:
leveraged hot money: hedge fund and trading desk capital moves in and out of investements very quickly, seeking rapid returns - greater than the cost of the borrowed money they are using to invest
rotates: when lots of investors move from one asset to another because of some perceived change in the investing environment it’s called rotation
repo-driven: just refers to one of the methods of financing positions, selling the collateral for cash, with a commitment to repurchase (repo) later at a prearranged price
Greenspan’s alternative currency: gold
decoupling of long nikkei/short gold trade: Nikkei has been seen as a risk-on trade, that would thrive if economic health was good, while gold prices would fall under those conditions, so long nikkei and short gold tended to move in the same direction, but apparently that relationship has changed of late
suck out of 80 billion: Chinese markets have been under sharp pressure, and in order to cover losses, leveraged chinese investors have sold positions, meaning those positions are no longer available as collateral for repo agreements
first of all, it’s the ravings of a lunatic, as ALL POSTS on that website are. Second, it’s very badly written, prizing glibness and certainty over a realistic depiction of events.
But broadly translating what he/she/it is saying:
leveraged hot money: hedge fund and trading desk capital moves in and out of investements very quickly, seeking rapid returns - greater than the cost of the borrowed money they are using to invest
rotates: when lots of investors move from one asset to another because of some perceived change in the investing environment it’s called rotation
repo-driven: just refers to one of the methods of financing positions, selling the collateral for cash, with a commitment to repurchase (repo) later at a prearranged price
Greenspan’s alternative currency: gold
decoupling of long nikkei/short gold trade: Nikkei has been seen as a risk-on trade, that would thrive if economic health was good, while gold prices would fall under those conditions, so long nikkei and short gold tended to move in the same direction, but apparently that relationship has changed of late
suck out of 80 billion: Chinese markets have been under sharp pressure, and in order to cover losses, leveraged chinese investors have sold positions, meaning those positions are no longer available as collateral for repo agreements
This is all way beyond my simple mind. What does it all mean long term?
I think it means the price will go up, or go down, or both, or neither.
It’s like climate change, but for commodities.
What’d I tell you folks. I predict metals aren’t going anywhere and what happens?
LOL
rotates = groupthink and herd activity. Have they ever heard of Buffalo Jump? And a group of lemmings is called a slice.
repo-driven = pawning on a large scale
decoupling of long nikkei/short gold trade = things are predictable, until they are not. Don't be on the wrong side of the change.
suck out of 80 billion = They're using Chinese assets as pawn objects??? Really? And they're going to rely on Chinese courts to make them whole after they're ripped off. Okey-dokey, good luck with that.
If I were a business owner or CEO, I'd try to isolate my company as much as I could from international finance. It makes the old mob numbers game look like an honest play.
Bravo!
well, John Maynard Keynes said it best: “In the long run, we’re all dead.”
They borrow money from the banking system, at near zero rates. Then when the bets blow up, the banking system is threatened, and must be bailed out by the taxpayers.
They borrow money from the banking system, at near zero rates. Then when the bets blow up, the banking system is threatened, and must be bailed out by the taxpayers.
:^)
Anything to help...
Great! How do I get into the game? I get to bet and bet and bet, keep my winnings and put my losses onto taxpayers. There can’t be a better deal than this.
Goldbug ping.
Greetings SeaHawkFan:
The hyperbole is a source of amusement. Gold up 2.96%, silver up 5.33%, yet relative to silver gains, somehow gold “surged.”
Cheers,
OLA
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.