Prospective Puerto Rican John Paulson may have an unpleasant tax problem here in New York, but he’s got a bigger problem with his biggest investment. Despite his faith in and love for shiny objects, the rest of the world simply does not share his insatiable appetite for gold. Read more »
Is oil overpriced compared to gold?
That’s what cantankerous trader/real estate entrepreneur/ blogger/dj Lawrence Lewitinn argues in this piece in PopSerious, a hipster group blog more prone to features about puppies, fashion, and what commodities to bake with rather than money, finance, and what commodities to trade. Lewitinn maintains that since April, the ratio of barrels of oil to ounces of gold has gone from a five-year average of about 9.5-to-1 down to 7-to-1 and that the trade to make is to go long December gold and short December oil until that ratio goes back to at least 9-to-1.
We’re sure there’s more to this but we were distracted by pictures of contributors who are far better looking than Lawrence.
Black Gold (And How You Might Make Money Off of Speculators’ Stupidity) [Popserious]
Apparently, it’s never happened before. CBOT’s gold contract is up and running while Comex is closed. We’re still trying to figure out if this will mean anything for the price of gold contracts today but we can’t get that “Mr. Hot Stock Tip Giver-Out” song out of our head to think long enough clearly.
From Peter Brimelow’s MarketWatch column:
Friday, in fact, will be a historic day: It will be the first occasion on which the Chicago Board of Trade gold contract is open when the Comex division of Nymex is closed. The CBOT contract became a serious competitor to New York’s within the last year.
The Chicago contract outflanked New York by going electronic. In commodities courses at Stanford Business School a million years ago I was taught an entrenched futures markets could not be displaced.
They reckoned without the computer.
This means that Friday could actually be an interesting day for gold in America. If speculators wish, they can make a statement.
Friday will be historic day for gold [MarketWatch]
Barron’s has an interview with James Turk, the founder of Goldmoney.com who correctly predicted the rise in the price of gold. As Finance Trends Matter points out, if you cannot buy, steal or borrow a copy of the latest issue, you can read it online here.
Lots of good stuff. But this exchange was particularly interesting.
Let’s talk about the pressures on the dollar.
They are taking on a bit more urgency. One of the things I picked up on a recent trip outside the States was a much greater level of concern about the prospects for the dollar than had previously been the case.
Concerns among whom?
Among sophisticated investors — wealthy individuals as well as some money managers. That’s been linked to two specific events. First, Chinese National Offshore Oil Co., or Cnooc, was not permitted to purchase Unocal. Most people at the time shrugged it off as just a one-off event. But when the Dubai Ports deal was blocked, that really changed people’s perceptions, because it made clear holders of dollars outside the United States are not going to be permitted to exchange those dollars for things of tangible value. There’s an increasing desire to convert dollars into, say, commodities, which dollars can still buy. The boom in commodities to a large extent is the result of people exiting dollars. People are looking for alternatives to the U.S. dollar, and the dollar’s role as the world’s reserve currency is being questioned seriously now. The Russian finance minister raised the issue in the recent G-7 meetings. This questioning is a critical development. Financing the growing federal budget deficit and trade deficit requires that a large amount of dollars be created. These dollars are being created as demand for the dollar is declining.
As it turns out, those foreign people who have loaded up on dollars over the years expected to be able buy stuff with them. Silly foreigners.
Interview with James Turk, Founder, Goldmoney.com [Barron’s in the Stockhouse Forums via Finance Trends Matter]