Friday, 6 April 2012
“Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets.”
Warren Buffet, Fortune Magazine, 2/9/2012
An early 2012 Report indicates anti-Gold Sentiment (“Led” by Warren Buffet who is Wrong about Gold, but right about the Dangers of Currency-Based “Investments”) has reached recent record highs except among those in the “know”:
(In the short term) “I expect the (Gold) price to decline and when that happens I will buy more.” Jim Rogers 4/4/12.
While the anti-Gold Sentiment is perhaps baffling at first glance, thoughtful educated Investors should see it as facilitating an Opportunity Window. Consider the following:
· While most of the Eurozone Bailout Money from The Fed and ECB has gone to Banks via Sovereign Debt restructuring – Eurozone lending to non-financial Companies shrank by 3 billion Euros in February 2012. As in the USA, Eurozone businesses and citizens are not much helped (and are arguably hurt) by the Bailouts.
And even the ECB’s $Trillion recent LTRO Injections have not helped the hopelessly indebted Sovereigns either, as recent spiking yields on Spanish and Italian debt testify.
· Last weekend, Eurozone Officials agreed to transfer the remaining Assets of the EFSF to the ESM. That would bring the total Eurozone Bank Bailout Funds available to €700 billion until the middle of next year when the new rescue fund kicks in with a €500 billion ceiling. Already, Officials in the know (e.g., the Secretary-General of the OECD) say it is “not enough” in the long run. And they are right. Indeed the Sovereign Debt Situation is hopeless without more large Creditors “Haircuts”.
· And consider that U.S. Banks hold $641 billion in loan exposure to Europe.
· And the four biggest U.S. Banks hold 95% of the $250 Trillion! in U.S. Derivative Exposure, according to the Bank for International Settlements, the Central Bankers’ Bank.
· And Global Derivatives Exposure rose to $707 Trillion! as of the June 2011 BIS Report. (Path: www.bis.org/statistics/derivatives.htm)
PIMCO’s “Bond King”, Chairman Bill Gross, sums it up. “Greece is a Zit, Portugal is a Boil, Spain is a Tumor.” Bloomberg 4/5/12