Posts Tagged ‘Global Economy’
Lack Of Overnight Euphoria Follows Japan Yen Jawboning In Light Trading Session
Monday, 20 May 2013 05:55
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A quiet day unfolding with just Chicago Fed permadove on the wires today at 1pm, following some early pre-Japan market fireworks in the USDJPY and the silver complex, where a cascade of USDJPY margin calls, sent silver to its lowest in years as someone got carted out feet first following a forced liquidation. This however did not stop the Friday ramp higher in the USDJPY from sending the Nikkei225, in a delayed response, to a level surpassing the Dow Jones Industrial Average for the first time in years. Quiet, however, may be just how the traders at 72 Cummings Point Road like it just in case they can hear the paddy wagons approach, following news that things between the government and SAC Capital are turning from bad to worse and that Stevie Cohen, responsible for up to 10-15% (Read more…) daily NYSE volume, may be testifying before a grand jury soon. The news itself sent S&P futures briefly lower when it hit last night, showing just how influential the CT hedge fund is for overall market liquidity in a world in which the bulk of market “volume” is algos collecting liquidity rebates and churning liquid stocks back and forth to one another.

In other news, we have a $1.25 – $1.75 billion POMO ending at the usual time of 11 am, which may not be sufficient for the usual 0.1x-0.15x daily S&P500 multiple expansion.

Geopolitical tensions in Syria are getting increasingly more acute, even as North Korea continues to pummel the Eastern Sea, having now fired six missiles in the past three days, in a desperate show of “force.” The sea has yet to retaliate.

Key overnight bulletin highlights via Bloomberg:

  • Treasuries steady, yields holding near highest since March amid Fed tapering speculation; JPY gains vs. USD as Japan’s Economy Minister Amari said a further slide in the yen would have negative effects after its 21% drop over the last six months.
  • Japan 30Y yields surged after a Cabinet Office official told reporters that BoJ’s Kuroda said it’s natural for yields to increase gradually as the economic outlook improves
  • Bernanke said in a speech that technological change will remake fields like health care and belie predictions that innovation will fade and economic growth will wane; testifies before Congress on Wednesday
  • China’s new-home prices rose last month in 68 of 70 cities tracked by the government, indicating Premier Li Keqiang will need to maintain efforts to cool the property market even as economic growth slows
  • Hedge-fund managers are making the biggest ever bet against gold as Soros sold holdings last quarter and Goldman predicted more declines after the longest slump in four years
  • EU leaders struggling to find a consensus on how to overcome the debt crisis and revive economic growth will use a summit meeting this week to focus on fighting tax evasion and on the bloc’s energy policy
  • North Korea fired its sixth missile in three days, demonstrating its military capabilities in defiance of global sanctions and diplomatic efforts to convince the totalitarian state to return to talks
  • BofAML Corporate Master Index OAS at 142bp, tight for the  year, as $44.3b priced last week. Markit IG narrows to 70bps, YTD low 69bps. High Yield Master II OAS at 437bps; $15.27b priced last week. CDX High Yield at 107.13, near record 107.37
  • Sovereign yields mostly higher. Asian stocks gain, with Nikkei +1.5%, Shanghai Composite +0.8%. European stocks mostly higher, U.S. stock-index futures fall.  WTI crude, copper, gold fall

Some comments on Amari’s most recent jawboning of the Yen over the weekend: the same jawboning he said previously said would not be appropriate.

A slow start to the week has been animated in Asia by Japanese economy minister Amari comments that JPY strength has largely corrected and that further weakness could be harmful. This briefly knocked JPY crosses back but should not put a permanent dent in bearish JPY sentiment. BoJ governor Kuroda made a separate intervention, referring to the volatility in JGBs by stating that it is only natural for long-term yields to rise as inflation expectations pick-up. He does not expect the long-term yield rise to be sustained and if that’s the case, then Amari’s statement may prove futile as Japanese investors continue their search for higher returns overseas.

A quiet day for Europe with most markets closed for Whit Monday (only Italy new orders and current account data, French bill sale scheduled) means light positions are likely to be observed. We get a first look at the EU PMIs for May on Thursday and the German IFO is due on Friday, but the big day is Wednesday when Fed chairman Bernanke will testify on the economy and the FOMC minutes may offer further insight on the ongoing ‘stimulus exit’ discussions, captured by comments from various voters and non-voters in recent days and weeks. The USD has enjoyed its best start to a calendar year in 2013 since 2005 on speculation that Fed monetary policy is slowly nearing a turning point this year, and further clues that the Fed is planning ahead (even without committing to a timetable as unemployment remains too high, inflation low) would probably convince the market to add to long USD positions and push yields and swaps higher in the process. Commodities have been hit hard as the Fed debate hots up (though Asia/China curbing overcapacity should be apportioned some blame too) and US/EU 10y swaps have widened markedly and are now on the verge of breaking though the 50bp barrier for the first time since April 2010. Our colleagues from Economics preview Bernanke’s testimony and the FOMC minutes in the note ‘Never too early to plan’.

DB’s Jim Reid recaps the relatively quiet day today

Bernanke’s congressional testimony before the Joint Economic Committee this Wednesday will be the highlight in a week where we may learn more about the Fed’s intentions with regards to potential QE tapering. Indeed, Bernanke’s speech will be made on the same day as the Fed publishes minutes from its Apr30th/May1st policy meeting which may shed some further light on the FOMC’s deliberations with respect to asset purchases. In advance of Wednesday, Chicago Fed president Evans will be speaking today, followed by the NY Fed’s Dudley and St Louis Fed’s Bullard who will speak on Tuesday – all are voting members of the FOMC this year.

Outside of the Fed, there’s also a fair bit going on at other central banks. Wednesday will see the Bank of Japan publish its latest monthly policy statement, following the conclusion of its two-day policy meeting which starts on Tuesday. The BoE will be publishing minutes from its last meeting on Wednesday. On Thursday, Draghi will be speaking at an event in the City of London on the topic of “The future of Europe in the global economy” at an event organised by the Lord Mayor. Rounding out the week ahead in policy, the European Council meets on Wednesday where tax policy and initiatives to promote growth are on the official agenda.

In terms of the data flow, Thursday’s global flash PMIs for the Euroarea, US and China will be taking centre stage. The market is broadly looking for a 0.2pt to  0.4pt improvement in the manufacturing and service PMIs across the Euroarea, as well as the individual German and French readings. In China, economic  forecasters are expecting the country’s flash manufacturing PMI to be unchanged at 50.4. In the US, the main data releases this week are existing home sales (Wednesday), new home sales and jobless claims (Thursday) and durable goods (Friday). The UK’s retail sales/Q1 GDP revisions and Euroarea consumer confidence numbers are out on Thursday. The German IFO survey is scheduled for Friday.

Returning to markets, precious metals have been making headlines overnight after spot silver prices dropped by as much as 9% at one stage in early Asian trading. Silver prices have since recovered to trade 4% lower on the day as we type. Gold (-1%) has also recovered after being down 2% at one stage in sympathy with the drop in silver prices. There has been chatter suggesting that the outsized move was driven by a margin call and subsequent liquidation by an investor. Notably, gold is poised to close weaker for the tenth time in 11 sessions, and is now trading at similar levels as the April lows ($1345/oz).

The Japanese yen is also in focus overnight after trading below 102 at point during the Asian session. The move followed comments from Japan’s economy minister Mr Amari who said over the weekend that the yen’s excessive strength has been largely “corrected” and that further weakness could be harmful in terms of living costs (Nikkei). USDJPY has pared initial losses, but is still 0.5% lower this morning. Elsewhere in Asia, equities have begun the week on a firmer footing, helped by the S&P500’s performance on Friday when it finished near the day’s highs of +1%.

Asian gains are being led by Hang Seng (+1.7%), ASX200 (+0.9%) and the KOSPI (+0.2%). The Nikkei (+1.3%) has broken through the 15300 level for the first  time since late 2007, and is trading higher despite the strengthening in the yen. Asian credit markets are about 2-3bp better overnight.

Returning to last Friday, the European subordinated financials credit index’s 14bp tightening (to 200bp) was amongst the interesting market moves. The result capped a three-day streak which saw the index tighten by a cumulative 24bp, outperforming the senior financials index which tightened 9bp in the same period. The sub-senior financials multiple (1.5x) is at its lowest level since Q4 2010. Partially behind the move were recent announcements from ISDA who are considering adding a “bail-in” credit event to financial CDS contracts in response to the EU’s potential bank resolution rules. Other changes include allowing written down bonds to be delivered into a CDS auction based on the outstanding principal balance before the bail-in occurred. Other instruments that bonds may be converted to in the event of bail-ins, such as equities, may be deliverable into a CDS auction under proposals (IFR).

Turning to the day ahead, it will be relatively quiet start to the week with Whit Monday public holidays in parts of Europe. Economic data will be relatively thin today. The Chicago Fed’s Charles Evans will be speaking at 6pm London time.

    



 
Is EVERY Market Rigged?
Sunday, 19 May 2013 19:38
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CNN reports:

The European Commission raided the offices of Shell, BP and Norway’s Statoil this week as part of an investigation into suspected attempts to manipulate global oil prices spanning more than a decade.

 

None of the companies have been accused of wrongdoing, but the controversy has brought back memories of the Libor rate-rigging scandal that rocked the financial world last year. (Read more…)

 

***

 

A review ordered by the British government last year in the wake of the Libor revelations cited “clear” parallels between the work of the oil-price-reporting agencies and Libor.

 

“[T]hey are both widely used benchmarks that are compiled by private organizations and that are subject to minimal regulation and oversight by regulatory authorities,” the review, led by former financial regulator Martin Wheatley, said in August . “To that extent they are also likely to be vulnerable to similar issues with regards to the motivation and opportunity for manipulation and distortion.”

 

***

 

In a report issued in October, the International Organization of Securities Commissions — an association of regulators — said the ability “to selectively report data on a voluntary basis creates an opportunity for manipulating the commodity market data” submitted to Platts and its competitors.

 

Responding to questions from IOSCO last year, French oil giant Total said the price-reporting agencies, or PRAs, sometimes “do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer.” But Total called Platts and its competitors “generally… conscientious and professional.”

 

***

 

“Even small distortions of assessed prices may have a huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers,” the European Commission said this week.

USA Today notes:

The Commission … said, however, that its probe covers a wide range of oil products — crude oil, biofuels, and refined oil products, which include gasoline, heating oil, petrochemicals and others.

 

***

 

The EU said it has concerns that some companies may have tried to manipulate the pricing process by colluding to report distorted prices and by preventing other companies from submitting their own prices.

 

***

 

Unlike oil futures, which set prices for contracts, the data used in the MOC process is based on the physical sale and purchase of actual shipments of oil and oil products.

 

***

 

According to Statoil, the EU investigation stretches back to 2002, which is when Platts launched its MOC price system in Europe. The suspicion is that some companies may have provided inaccurate information to Platts to affect the oil products’ pricing, presumably for financial gain.

Fox points out:

At issue is whether there was collusion to distort prices of crude, refined oil products and ethanol traded during Platts’ market-on-close (MOC) system – a daily half-hour “window” in which it sets prices.

 

But the European Commission also is examining whether companies were prevented from taking part in the price assessment process.

The Guardian writes:

The commission said the alleged price collusion, which may have been going on since 2002, could have had a “huge impact” on the price of petrol at the pumps “potentially harming final consumers”.

 

Lord Oakeshott, former Liberal Democrat Treasury spokesman, said the alleged rigging of oil prices was “as serious as rigging Libor” – which led to banks being fined hundreds of millions of pounds.

 

He demanded to know why the UK authorities had not taken action earlier and said he would ask questions of the British regulator in Parliament. “Why have we had to wait for Brussels to find out if British oil giants are ripping off British consumers?” he said. “The price of energy ripples right through our economy and really matters to every business and families.”

 

***

 

Shadow energy and climate change secretary Caroline Flint said: “These are very concerning reports, which if true, suggest shocking behaviour in the oil market that should be dealt with strongly.

 

“When the allegations of price fixing in the gas market were made, Labour warned that opaque over-the-counter deals and relying on price reporting agencies left the market vulnerable to abuse.

 

“These latest allegations of price fixing in the oil market raise very similar questions. Consumers need to know that the prices they pay for their energy or petrol are fair, transparent and not being manipulated by traders.”

 

Shadow financial secretary to the Treasury Chris Leslie said: “If oil price fixing has taken place it would be a shocking scandal for our financial markets.

The Telegraph reports:

“97 per cent of all we eat, drink, wear or build has spent some time in a diesel lorry,” said a spokesman for FairFuel UK, the lobbyists. “If it is proved, they have been gambling with the very oxygen of our economy.”

 

***

 

Platts – to determine the benchmark price – examines just trades in the final 30 minutes of the trading day. A group of half a dozen analysts gather round a trading screen and decide on the final price. As with much that goes on in the City, it is a surprisingly old-fashioned method, reliant on gentlemanly conduct. Critics say it leaves the market open to abuse, and the price can suddenly spike or fall in the final minutes of the day.

The New York Times notes of agencies like Platt and Argus Media:

Their influence is extensive. Total, the French oil giant, estimated last year that 75 to 80 percent of crude oil and refined product transactions were linked to the prices published by such agencies.

The Observer points out that manipulation of the oil markets has long been an open secret:

Robert Campbell, a former price reporter at another PRA, Argus – he is now a staffer at Thomson Reuters, which also competes with Platts and others on providing energy news and data – said this a few days ago in a little-noticed commentary: “The vulnerability of physical crude price assessments to manipulation is an open secret within the oil industry. The surprise is that it took regulators so long to open a formal probe.”

Reuters reports that the probe may be expanding to the U.S.:

In Washington, the chairman of the Senate energy committee asked the Justice Department to investigate whether alleged price manipulation has boosted fuel prices for U.S. consumers.

 

“Efforts to manipulate the European oil indices, if proven, may have already impacted U.S. consumers and businesses, because of the interrelationships among world oil markets and hedging practices,” Sen. Ron Wyden (D-Ore.), chairman of the Senate Energy and Natural Resources Committee, wrote in a letter to Attorney General Eric H. Holder Jr.

 

Wyden also asked Justice to investigate whether oil market manipulation was taking place in the United States.

Not only are petroleum products a multi-trillion dollar market on their own, but manipulation of petroleum prices would effect virtually every market in the world.

For example, the Cato Institute notes how many industries use oil:

U.S. industries use petroleum to produce the synthetic fiber used in textile mills making carpeting and fabric from polyester and nylon. U.S. tire plants use petroleum to make synthetic rubber. Other U.S. industries use petroleum to produce plastic, drugs, detergent, deodorant, fertilizer, pesticides, paint, eyeglasses, heart valves, crayons, bubble gum and Vaseline.

The India Times reports that:

The price variation in crude oil impacts the sentiments and hence the volatility in stock markets all over the world. The rise in crude oil prices is not good for the global economy. Price rise in crude oil virtually impacts industries and businesses across the board. Higher crude oil prices mean higher energy prices, which can cause a ripple effect on virtually all business aspects that are dependent on energy (directly or indirectly).

The Federal Reserve Bank of San Francisco notes:

When gasoline prices increase, a larger share of households’ budgets is likely to be spent on it, which leaves less to spend on other goods and services. The same goes for businesses whose goods must be shipped from place to place or that use fuel as a major input (such as the airline industry). Higher oil prices tend to make production more expensive for businesses, just as they make it more expensive for households to do the things they normally do.

 

***

 

Oil price increases are generally thought to increase inflation and reduce economic growth.

 

***

 

Oil prices indirectly affect costs such as transportation, manufacturing, and heating. The increase in these costs can in turn affect the prices of a variety of goods and services, as producers may pass production costs on to consumers.

 

***

 

Oil price increases can also stifle the growth of the economy through their effect on the supply and demand for goods other than oil. Increases in oil prices can depress the supply of other goods because they increase the costs of producing them. In economics terminology, high oil prices can shift up the supply curve for the goods and services for which oil is an input.

 

High oil prices also can reduce demand for other goods because they reduce wealth, as well as induce uncertainty about the future (Sill 2007). One way to analyze the effects of higher oil prices is to think about the higher prices as a tax on consumers (Fernald and Trehan 2005).

The Post Carbon Institute notes (via OilPrice.com) that high oil prices raise food prices as well:

The connection between food and oil is systemic, and the prices of both food and fuel have risen and fallen more or less in tandem in recent years (figure 1). Modern agriculture uses oil products to fuel farm machinery, to transport other inputs to the farm, and to transport farm output to the ultimate consumer. Oil is often also used as input in agricultural chemicals. Oil price increases therefore put pressure on all these aspects of commercial food systems.

Figure 1: Evolution of food and fuel prices, 2000 to 2009
Sources: US Energy Information Administration and FAO.

Economists Nouriel Roubini and Setser note that all recessions after 1973 were associated with oil shocks.

Interest Rates Are Manipulated

Unless you live under a rock, you know about the Libor scandal.

For those just now emerging from a coma, here’s a recap:

Derivatives Are Manipulated

The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.

Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed: through gamed self-reporting.

Gold and Silver Are Manipulated

The Guardian and Telegraph report that gold and silver prices are “fixed” in the same way as interest rates and derivatives – in daily conference calls by the powers-that-be.

Everything Can Be Manipulated through High-Frequency Trading

Traders with high-tech computers can manipulate stocks, bonds, options, currency and commodities. And see this.

Manipulating Numerous Markets In Myriad Ways

The big banks and other giants manipulate numerous markets in myriad ways, for example:

  • Engaging in mafia-style big-rigging fraud against local governments. See this, this and this
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here
  • Pledging the same mortgage multiple times to different buyers.  See this, this, this, this and this.  This would be like selling your car, and collecting money from 10 different buyers for the same car
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this
  • Participating in various Ponzi schemes. See this, this and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments

    



 
It’s Official: Gold Is Now The Most Hated Asset Class
Saturday, 18 May 2013 20:37
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Submitted by Pater Tenebrarum of Acting-Man blog,

Full Court Press

Not a day passes without the financial media denouncing gold as an investment option and hailing the bureaucrats heading the world's monopolist monetary central planning agencies as superheroes. It began prior to gold's recent breakdown, with widely cited bearish reports on gold published by Credit Suisse and Goldman Sachs, among others. Never mind that most of their arguments were easily unmasked as spurious. It should be no wonder though: gold's rise was the most conspicuous evidence of faith in central banking being slowly but surely undermined. (Read more…) The banking cartel relies on the fiat money system remaining intact; the legal privilege of fractional reserve banking provides it with what is an essentially fraudulent profit center unparalleled by any other in the world (fraudulent in terms of traditional legal principles, but not in terms of the current law of course). Not surprisingly, ever since the completely unrestrained fiat money system became operational in the early 1970s, the financial sector's share of corporate profits has inexorably risen and finally eclipsed all other sectors of the economy.

 

financial share of profits

The share of financial profits of total corporate profits – a direct result of the fractional reserve banking privilege and the central bank monopoly on money (via Ed Yardeni) – click to enlarge.

 

In other words, the banks have to protect a major franchise. It is a good bet that if gold had continued to rise in the face of money printing being accelerated all over the world, the inevitable loss of faith in central banks would have happened sooner rather than later. That it will eventually happen is unavoidable – the modern monetary system was fated to self-destruct the moment it was conceived. This is so because central planning and price controls cannot work in the long run, even though central banks are socialistic institutions adrift in a capitalist sea, so to speak. They can to some extent observe prices in the market, but the problem is that the market price most relevant to them – namely the ratio of future against present goods as expressed in interest rates on the credit markets – is not independent of their actions. There is therefore nothing that can tell them whether their administered interest rates are too high or too low. It is a system that is condemned to fail at some point (unfortunately with grave consequences for the economy at large).

The fact that a great many people ostensibly believe in its viability is not proof that it is viable; most of those who are most vocal about retaining the central bank money monopoly are directly profiting from its existence after all. That the commercial banks only want to protect a source of large profits and an invaluable backstop in case their speculations go wrong is clear, but the same is true of most academics in the economics profession. The great bulk of them derives its income from the State, and the central bank is at the forefront of supporting the livelihood of its apologists.

Among commercial banks, Credit Suisse has been a leader in the recent rhetorical onslaught against gold, and has just published a follow-up, duly repeated by Bloomberg under the non-too-subtle title: 'Gold Seen Crushed'.

“Gold, down 17 percent since January, is poised to lose 20 percent in a year as inflation fails to accelerate and with the worst risks to the global economy waning, Credit Suisse Group AG said.

 

Gold will trade at $1,100 an ounce in a year and below $1,000 in five years, according to Ric Deverell, head of commodities research at the bank. Lower prices are unlikely to lure more central-bank buying, said Deverell, who worked at the Reserve Bank of Australia for 10 years before joining Credit Suisse in 2010.

 

“Gold is going to get crushed,” Deverell told reporters in London today. “The need to buy gold for wealth preservation fell down and the probability of inflation on a one- to three-year horizon is significantly diminished.”

 

Investors are losing faith in the world’s traditional store of value even as central banks continue to print money on an unprecedented scale. Bullion slumped into the bear market last month after a 12-year bull market that saw prices rise as much as sevenfold. Gold is a “wounded bull,” Credit Suisse said in a Jan. 3 report.

(emphasis added)

Color us unsurprised that the main author of the report is an ex-central banker. As regards inflation, below is a chart we have recently shown, US money TMS-2. The good people at Credit Suisse neglect to mention in their report that official 'CPI inflation' has rarely risen beyond the central bank's 'target' of 2% during the entire gold bull market to date. It was completely irrelevant to the gold market thus far, so why should the outlook for the government's 'inflation' data suddenly become relevant now? Monetary inflation has been higher over the past five, 10 and 15 years than at any time since the end of WW2 in a comparable period – and it continues to accelerate.

It is therefore erroneous to claim that 'the probability of inflation on a one to three year horizon is diminished' – the exact opposite is the case. As noted above, Credit Suisse's argumentation has been spurious in its first bearish gold report already and it continues to be so. It seems more likely that a concerted public relations campaign against gold is underway, while parallel to that, a pro-central banking campaign is in full swing. We're not really big fans of conspiracy theories, but in this case, everything points to this being the case; it is just as transparent as the pro-war campaign prior to the Iraq war was.

 

US-TMS-2-LT
Monetary inflation in the US since the year 2000. Money TMS-2 has more than tripled – click to enlarge.

 

Success! Gold Now Seen as 'Worst Performing Asset' by Investors

The gold market is of course complying so far, as the clients of the banks issuing bearish reports are bailing from their gold positions. Skeptical voices like Elliott Capital Management's Paul Singer have been drowned out by the incessant barrage of propaganda. Gold continues to decline in the near term and its chart has begun to look rather ominous.

 

Gold-one week

Gold over the past week (most active futures contract) – down every day of the week – click to enlarge.

As Credit Suisse incidentally also reported, its campaign has been crowned with success: not only has the gold price declined sharply, gold has now become the 'most hated asset class' with the 'worst outlook among commodities' according to a recent CS survey among institutional investors:

“Gold has the worst 12-month outlook among commodities and will trade below $1,400 an ounce in a year, according to an investor poll by Credit Suisse Group AG.

 

Sixty percent of respondents named bullion as having the worst outlook, 18 percent picked copper and 16 percent selected corn, the bank said in an e-mailed report today. Fifty-one percent predicted gold will fall under $1,400 in 12 months, it said. The bank polled 185 investors including hedge funds, pension funds and family offices on May 15 in London.

 

“Bearishness for gold was a very clear consensus,” said Kamal Naqvi, the head of commodities sales for Europe, Middle East and Africa at Credit Suisse. “It’s not about just not buying gold, it’s about shorting it,” or wagering on a drop.

 

Gold slumped into a bear market last month as investors lost faith in the metal as a store of value. Bullion is down 17 percent this year, compared with the 2.9 percent drop for the Standard & Poor’s GSCI gauge of raw materials.

 

Fifty-three percent of investors expect commodity prices to stay near current levels, Credit Suisse said. Most were underweight raw materials or had zero exposure, while they expected to be overweight or neutral in 12 months, the bank said. Investors named relative value trades, fundamentally based directional trades and volatility as the best ways to extract value from commodities.”

(emphasis added)

The general bearishness on commodities jibes with what we have seen in the recent Merrill Lynch fund manager survey. The bearishness on gold is in keeping with what we have seen in the Barron's 'Big Money' survey and other polls. Apparently though the people who write the gold reports at Credit Suisse are oblivious to the contrarian implications of their own survey.

As we have recently pointed out, just before Japan's stock market embarked on a 75% rally in the space of a few months, fund managers absolutely hated Japan (they love it now!). As we wrote in our October 30 review of the Barron's Big Money poll:

“However, what we really love is that they hate Japanese stocks even more! As it were, we are busy writing an article on Japan that will be entitled 'Reconsidering Japan' and should be published sometime this week. There are quite a few reasons to believe that Japanese stocks will finally do the unexpected and come back to life.”

At the time, a full 76% of the 'big money' fund managers surveyed declared themselves bearish on Japan. Currently, 69% of the managers surveyed in the most recent Barron's poll are bearish on gold. One must of course admit that from a technical perspective gold currently looks weak. That is undeniably the case and there could therefore be more near to medium term downside. However, the most important fundamental data as well as the sentiment backdrop clearly remain bullish. In fact, the skepticism of investors regarding commodities in general and gold in particular in the face of the biggest money printing orgy of the modern age is what we would call an 'extreme long term bullish dichotomy'. It seems highly likely to us that a year from now or maybe even earlier,  the conversation will have profoundly changed.