George Soros, Ivory Coast Cocoa and Silver
George Soros, Ivory Coast Cocoa and Silver
Soros Says ECB Rate Hike “Inappropriate” in Debt Crisis
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0:20 It’s a one-sided directive in Europe. The ECB’s only job is to control inflation.
0:55 The big question is whether the U.S. dollar should be the reserve currency; it no longer is, it shares that role with the euro, other currencies, and commodities. But it’s not just gold being used as a substitute, but oil too, which is putting upward pressure on the market.
1:55 The euro is under “some cloud.” It is “quite inappropriate” for the ECB to raise rates right now.
2:30 China, and its inflation problem, is a serious concern. It stimulated its economy, but is now trying to reign in its rate of growth. It is putting restraints on the banking system, but now a shadow banking system is rising. Big banks may not be willing to lend, but the shadow banking system is growing out of control. Real risk of wage and price inflation. Real estate price spike has led to a wage price spike. The Chinese government should have let its currency inflate, but because they didn’t, they now face wage inflation.
4:40 China was the main beneficiary of globalization, and the big winner in the financial crisis.
6:00 State capitalism may have worked better in China lately, but it’s a mistake for others, like Brazil, to follow suit now.
On the ECB vs. the Fed – who is doing it right?:
“Two different directives govern the European Central bank and the U.S. Federal Reserve. In the case of Europe, it’s a one-sided directive. Their only job is to prevent inflation, and in the case of the U.S., it is more balanced, to maintain employment and financial stability.”
On whether the U.S. dollar is still a safe asset:
“There’s a big question whether the U.S. dollar should be the main reserve currency and in fact it no longer is because it maybe accounts for two-thirds of the monetary reserves. The euro is an alternative and there’s a lot of diversification into other currencies and even more into commodities. Not only gold, but actually oil is now an asset class for investors. That has put some upward pressure on the commodities.”
On whether the sovereign debt crisis has diminished euro’s chances of becoming a reserve currency:
“The euro is under a cloud, but that is exactly because there are some inflationary pressures from the price of commodities, particularly now oil and also food prices have risen. That is what has induced the European Central Bank to raise interest rates at a time which is, in my opinion, quite inappropriate…It is not appropriate in current circumstances when you have a number of countries that are suffering from too much debt and high interest rates that they have to pay.”
On China’s economy:
“China has really stimulated its economy full force very successfully and now it is trying to rein in the rate of growth, and is exercising very strong constraints on the banking system. But because of that constraint, and because of the big demand for money, a shadow banking system has arisen and is growing very rapidly. So while the big banks under direct central control are in fact refusing to lend, there is a shadow banking system that is growing out of control. There is a real danger there of wage price inflation because prices have gone up, particularly real estate prices have gone up because there was a real estate boom.”
“Therefore, wage demands have risen, and we now have 20%, 30% wage increases. The Chinese government has made a mistake not allowing its currency to appreciate, which would have controlled the price of inflation. Instead of that, we now have this wage pressure, which is a little bit out of their control.”
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Gbagbo stages bloody fightback in Ivory Coast
Violence continues as former president refuses to concede defeat
What began as the week when Laurent Gbagbo would finally concede defeat ended with the Ivory Coast strongman defying the world from his bunker in Abidjan. After watching his area of control shrink to only a few pockets of the lagoon city, his forces pushed back dramatically overnight on Friday with an assault on the French ambassador’s residence.
AFP reported yesterday that Abidjan’s Golf Hotel, headquarters of the internationally recognised President-elect, Alassane Ouattara, had come under attack. The UN evacuated 17 British citizens from the high commissioner’s residence, which is close to the Gbagbo compound.
The heavy weapons that had supposedly been destroyed in joint UN and French air strikes re-emerged as Gbagbo loyalists retook some ground. Arrayed against the 65-year-old loser of November’s election are the combined might of the French Operation Licorne (Unicorn) force, UN peacekeepers and Mr Ouattara’s ragtag army.
The violent standoff has created its own tale of two cities: each day the commercial capital seems poised to return to normal but at night the shooting starts and everything becomes uncertain.
It is not a war with a single frontline. The complications of Abidjan’s lagoon is matched by the complex of alliances that rule its neighbourhoods. In the south of the city, the long queues for food outside the only working supermarket show the struggle to return to normality.
I have been following this one closely.
I had a feeling Laurent Gbagbo wasn’t going to roll over.
Gbagbo forces advance again in Ivory Coast
And as if silver bulls needed some more good news, here is a report from the Morgan Stanley metals desk…
I was told on Wednesday that big buying went thru on Tuesday in may atm silver calls which should make the market short gamma.
A short gamma position will become shorter as the price of the underlying asset increases. As the market rallies, you are effectively selling more and more of the underlying asset as the delta becomes more negative.
So what that means is that the SELLER of the calls, probably bought Physical to delta hedge themselves neutral. As this market jumps just about 1-2% daily (this week alone +6.5%) they would need to now re hedge to bring themselves back to neutral by BUYING more Physical as SILVER goes higher, essentially driving the market Higher still and so the chase goes theoretically moving the market higher causing them to buy more to hedge and moving the market higher, thus buying into rallies.
Now they could BUY puts also to create positive Gamma as well to offset some of that pain they are not bound to the Physical for their hedge. Lots of what if’s but that’s the idea.
On the other side if Silver were to gap lower, this would not help either as they would need to SELL Physical into a falling market to re-hedge themselves.
Great in a slow steady market, nightmare in a volatile
Silver has just been insane. When is that pullback going to happen?
Should have gone in even heavier. Although hindsight is 20/20.
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The Rest is Up to You…
Michael Porfirio Mason
AKA The Peoples Champ
AKA GFK, Jr.
AKA The Sly, Slick and the Wicked
AKA The Voodoo Child
The Guide to Getting More out of Life
http://www.thegmanifesto.com
09/04/2011 at 10:21 pm Permalink
Great report. Dennis Gartman’s got nothin’.
Bought puts on silver last week, got hit hard, sold’em, Made a killing in Jan/Feb longing SLV calls then I thought it had gone up too high and started looking for the correction which never came… silver’s too wild for me right now, I’m going to a different table.
10/04/2011 at 7:25 am Permalink
*sigh*
You INVESTORS. You economic vultures. You opportunistic bunch that exploit “the situation.”
Although I do have my ounce of respect for the investors, as they’re the lubricants that make the gears of economy to run, often smoothly, as an absolute necessity in economy, my highest respect goes to the entrepreneurs who bend the forces of reality to create what never was, the new wealth, the means of the wealth that uplifts the multitude.
The system chasers vs. The system builders.
Bravo, and even some kudos to you, The G Manifesto. This piece alone proves you’re an investor with an adroit caliber. Bravo. It’d be foolish to take your investment advise lightly.
If you’re an investor, it’d be foolish to ignore a piece like this. It’s a brilliant piece.
If you’re an entrepreneur, in most cases, it’d be foolish to harness the information in this piece. You should be busy inventing the future. Instead of chasing the current forces and factors of economy.
It’s funny that I’ve never come across all-love situation in anything in life. It’s always love and hate. The same goes with the investors. The architect of the universe is indeed diabolical.