Φnance

Monday, July 9, 2012

It's been a rough time recently for gold and gold stock investors. The last nine months has been the second worst cyclical downturn in gold and gold stocks during this long term secular bull market for gold. This chart shows how brutal this recent correction has been:

(Click to enlarge)

This bear market was not only the second worst in percentage loss, but also the second longest in time duration:

After closing the year at 573 in 2010, the HUI Gold Bugs Index made 4 attempts during 2011 to takeout the 600 level, and all 4 attempts failed. The next chart shows the HUI's performance since 2003:

Gold meanwhile gained more than 11% in 2011, and muddled through the first half of 2012 with a small gain :

After making a bottom in the middle of May, there are encouraging signs this gold bear market has run its course. First the recent successful test of the 375 level on the HUI that was rejected for higher prices was a logical long term support level. The 375-400 level was major resistance for 2006-2007, then became support briefly in 2008 before the financial crisis hit. Then in 2009 that level was brief resistance again before the HUI broke above it in late 2009, then tested that level as support in early 2010 and didn't look back after that. Now that this 2012 correction has once again retested that level and soundly rejected it (at least so far) it could prove to be the final test for that level for this bull market.

(Click to enlarge)

--> It appears as if the gold sector is gradually coming to the end of the recent bear market, given the technical evidence and severely bearish sentiment. A top in paper assets (the dollar and bonds) would probably be the final nail in the coffin for this gold correction.

Sunday, May 13, 2012

Recycling of precious metals is not too bad!...

Umicore : http://en.wikipedia.org/wiki/Umicore
Euronext : UMI

(Click to enlarge)

JPM : London whale - CDS Loss $2 billion

Article : http://uk.reuters.com/article/2012/05/11/uk-jpmorgan-trading-idUKBRE8491I320120511

Mr. Dimon: "He said it wasn't clear whether the bank had broken any laws or violated any rules. "We've had audit, legal, risk, compliance, some of our best people looking at all of that."

In a conference call disclosing the problem on Thursday, Dimon said the $2 billion in losses could rise by a further $1 billion, and acknowledged they were linked to a London-based credit trader Bruno Iksil. Nicknamed the 'London Whale', Iksil amassed an outsized position which hedge funds bet against, according to a report in The Wall Street Journal in April.

The exact nature of the trading loss is still unclear, although sources said a host of asset managers, arbitrageurs and hedge funds were on the other side of the bet, viewing it as good value and a effective way to insure portions of their portfolio.

Blue Mountain, a hedge fund with offices in New York and London, was among those on the other side of JPMorgan's trade, according to two people familiar with the situation.

The Democrat co-authored the 2010 Dodd-Frank financial reform law designed to avoid a repeat of the recent credit crisis.

=> We need to regulate the CDS market, trade them when we have a real exposure to the underlying asset.