Gold’s Two-Faced Disappointment

With the price of gold again pulling back from its 18-month highs this morning, we start to see more cracks in the bullish $2000 an ounce gold argument. But that shouldn’t surprise. Gold is a two sided, two-faced coin that has very distinct personalities.

On one side, we have the hedge against inflation, a reserve currency and the only grail that gold bugs from around the world will believe in.

On the other, we have gold as a real commodity, used in jewelry, electronics, computers and space components.

But all that glitters isn’t golden, and gold investors can’t have it both ways.

The best question we’ve heard to date has been where will you spend you golden Krugerrands when the world comes to an end? The answer is you won’t be able to spend them, anywhere.

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Highlights include American International Group, Inc. (AIG), Citigroup, Inc. (C), JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Bank of America Corp. (BAC).This morning, Fed Chairman Ben Bernanke gave a speech on the topic of financial regulation and the lessons learned from the recent disaster. Here is a key section of the speech, with my thoughts interspersed: 

"Looking forward, I believe a more macroprudential approach to supervision--one that supplements the supervision of individual institutions to address risks to the financial system as a whole--could help to enhance overall financial stability. Our regulatory system must include the capacity to monitor, assess, and, if necessary, address potential systemic risks within the financial system. Elements of a macroprudential agenda include:   

"monitoring large or rapidly increasing exposures--such as to subprime mortgages--across firms and markets, rather than only at the level of individual firms ...

Aspire Misery Index for the Week Ended February 20, 2009

February 21, 2009 ndash; Another dismal week in the books, with the broader markets selling off again amidst mounting concerns that Washington may be in over its head in trying to stem the negative influences on the economy and doubts about whether the stimulus plan will do the trick. It is increasingly looking like nationalization of at some banks may be on tap. The White House insists this is not the case ndash; but it may not have a choice.

The DJIA fell 479.96 this week, or 6.1%. On the year to date, the DJIA is down 1,406.58, or 16%. With expectations that unemployment is going to keep rising, companies reigning in the cash reserves and shelving any plans for expansion and growth, and no indication that the credit markets are loosening up, a second half turnaround looks all but unlikely. …

div align=”justify”Quite conceivably, based on the shockingly awful data now flooding out of an imploding Chinese economy. In October, exports in span class=”blsp-spelling-error” id=”SPELLING_ERROR_0″RMB/span terms fell over 10% span class=”blsp-spelling-error” id=”SPELLING_ERROR_1″yoy/span, but despite this the trade surplus hit a record $35span class=”blsp-spelling-error” id=”SPELLING_ERROR_2″bn/span. The explanation is a collapse in imports, not just because of the commodity price slump, but also by volume, very bad news for Asian exporters into China. Other measures that cannot be massaged by government statisticians suggest economic span class=”blsp-spelling-corrected” id=”SPELLING_ERROR_3″free fall/span; emstrongelectricity consumption for instance is down 9.6% in November, reflecting huge industrial contraction such as pig-iron production down 16% and raw steel down 12%/strong/em. I predicted that the export/investment based growth model in China was set to collapse back in March in a href=”http://deadcatsbouncing.blogspot.com/2008/03/china-miracle-faces-meltdown.html”span style=”color:#cc0000;”China ‘Miracle’ Faces Meltdown/span/a at a time when the consensus was wildly bullish, and forecast that GDP growth would halve to …