Gold

Well, well, well ...

FT: "SHANGHAI/BEIJING, April 24 – China revealed on Friday that it had quietly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying. Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure. ...

"China’s reserves were now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes, she said. ...

" 'The comments indicate that China will buy more gold as reserve to improve its foreign reserve portfolio. This is a trend,' said Yao Haiqiao, president of Longgold Asset Management.
Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes. 'It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis,' he said.
'The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage.'

"The European Central Bank recommends its member banks hold 15 percent of their reserves in gold, but among Asian nations the percentage is far smaller, said Albert Cheng, World Gold Council managing director for the far east. "

China should be buying some gold for its monetary base. This is bullish for gold, by the way, over the long term. It shows a huge potential buyer for the gold in European central banks and the IMF gold, if those institutions are stupid enough to sell their gold. The amount of Chinese buying is a lot, but not quite as much as the incremental amounts going into gold ETFs over the same period.

Gold

For a few years, I've been watching and buy & selling gold. I follow the monthly gold chart for guidance on value. Long term, readers know I'm bullish. I sold a lot around $1,000 last year and re-bought some around 750 early this year. From the monthly chart there is a very long term uptrend line dating back to the bottom in 2000-1 that is about 600 now. Another multi-year trend line now exists dating to 2006 that is around 750 now. So I'm still not a buyer, and will wait for a better price. Chartwise, the recent failure to punch through the peak prices in early 2008 shows a bearish pattern, or at best a long consolidation pattern.

I invest in gold three ways: the ETFs in a retirement account, physical gold American Eagle coins, and a gold stock fund in a retirement accounts. Long term gains in gold are taxed at 28%, so this bifurcation helps me keeps taxes low.

It's Wasn't All a US Bubble.

FT: "The number of Spanish unemployed rose sharply in the first quarter of this year to more than 4m, confirming Spain’s position as the European Union state worst affected by job losses during the global economic crisis. Unemployment rose to 4.01m, or 17.4 per cent of the workforce, up from 13.9 per cent in the fourth quarter of last year, the National Statistics Institute said on Friday.

"Spain’s economy had grown rapidly in recent years on the back of a surge in home construction, and the collapse of the housing market wiped out nearly 700,000 building jobs over the past year. In the latest quarter, however, it was in the services sector where most jobs were lost. "

A housing bubble in Spain, too. And the UK. And others. One should keep these facts in mind when hearing all the handwringing and anguish about this crisis.

Markets

Amazon revenues up: "revenues rose 18.2% year/year to $4.89 bln vs the $4.76 bln consensus" from Briefing.com. What happened to the Depression ?

I am doing nothing, waiting for better prices.

Word of the Day

"Obtrude" - verb [$10]
Obtrude means (intransitive) to be or become obtrusive; (transitive) to thrust forward importunely.
Sentence: Today's "stress test" reports to bank CFOs and the inclusion of counterparty risk in them will likely obtrude uncomfortably, like a poke in the eye with a sharp stick, into staid mindset of these cluster fubars*.

["fubar" is WW II slang for F***ed Up Beyond All Recognition. I wonder if I can translate that into French ? Hmmm I think so ... ]

Le Mot du Jour

Reading parts of Le Monde this morning was fun. I'm going to break form a bit here and copy an entire paragraph, then paraphrase it. Remember Jerome Kerviel, the trader who lost about $6 billion for Societe General ? It's about him.

Le Monde: "Jérôme Kerviel, le trader accusé d'avoir fait perdre 4,9 milliards d'euros à la Société générale, aurait investi 800 milliards d'euros entre 2005 et 2007 (achats et ventes), selon son nouvel avocat Olivier Metzner, pour qui ces dérives ne pouvaient pas passer inaperçues de l'"employeur" : "C'est deux fois le budget de la France et 120 fois le budget du ministère de la justice ! A moins d'être non-voyant, on ne peut pas ne pas le voir", relève Me Metzner."

Mr. Kerviel's lawyer say the aggregate buys and sells of Mr. Kerviel totaled E800 billion ! And such sums, being twice the national budget of France and 120 times the budget of the ministry of Justice, could not have gone unnoticed. His point, I presume, is that Mr. Kerviel was simply trading under his bosses supervision and should not be fired under French law. Maybe he has a point.

"Inaperçu, e" - adjective
Inaperçu means unnoticed. The usual usage is with the verb passer, "passer inaperçu" meaning to go unnoticed.
La Phrase: Est-ce que Ken Lewis a crû que l'affaire de Merrill Lynch passerait inaperçue ?
Sentence: Did Ken Lewis believe that the Merrill Lynch affair would go unnoticed?