2012 January 30 | timiacono.com

[Following are excerpts from the current issue of the Weekend Update at Iacono Research.]

The Federal Reserve sparked a huge rally in precious metals markets on Wednesday when it forecast super-low interest rates for the next three years and hinted at more money printing to come; the gold price surged more than $50 an ounce within about an hour and silver jumping almost $2 an ounce.

The yellow metal is now off to its best start to a year since 1980 when prices rose nearly 70 percent in three weeks to the inflation adjusted record high of $850 an ounce.

For the week, the gold price rose 4.2 percent, from $1,667.00 an ounce to $1,737.30, as spot silver followed up weekly gains of 3.2 percent, 3.5 percent, and 8.2 percent so far this year with an impressive surge of 5.6 percent last week, from $32.20 an ounce to $33.99.

The gold price has now risen 10.9 percent for the year, down just 9.7 percent from its 2011 high, while the silver price is up 22.0 percent in 2012, but remains 31.3 percent below its high last spring. It’s been a remarkable start for 2012 after a disappointing December and this Reuters graphic on central bank gold purchases last year adds to the case for strong metal demand that is not going to go away anytime soon.

[To continue reading this story, please visit Seeking Alpha.]


The Euro Crisis in Economist Covers

I haven’t done one of these animated .gifs in quite a while, but it seemed worth the effort to put together these Economist covers on the euro crisis, particularly when considering the treatment they provide for Germany’s Ms. Merkel, highlighted by that very first one.

Note that you’ll have to read fast because you can’t slow this down, despite the appearance of those little buttons in the lower right. If you’d like to view these at your own pace, just scroll to the bottom of this Economist story about Greece and the euro.

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Bernanke’s War Against Savers – Part 63

More fallout from last week’s Fed announcement of a one-and-a-half year extension to their freakishly low interest rate forecast comes via this MarketWatch story about the dim prospects of money market returns between now and sometime in 2015 (or later).

Money funds are designed to be ultra-safe cash-equivalents, and traditionally they provided a bit more return than bank certificates of deposit or savings accounts.

But for about 18 months now, nearly two-thirds of all money funds have yielded under 0.01%. To see just how horrible that is, consider that if you had $1,000 and split it evenly between a money fund and a piggy bank, at the end of a year the fund would only be ahead by a nickel.

This is not a new problem, but the Fed paints it in a new light. Central bankers made it clear that savers will not see any boost in money-fund returns for the foreseeable future, and can be sure that inflation will take a bite out of their cash. So if you use a money fund for emergency savings, the dollars aren’t growing even as the cost of insurance is rising.

Even when rates rise, money-fund yields aren’t likely to go up. Financial-services firms have been waiving costs, basically operating them at a loss to keep assets in-house; many smaller firms have simply shuttered their money-market funds. When rates finally do go up — and the Fed forecast doesn’t mean it can’t happen, it just suggests that it won’t until 2014 — firms will first take much of any increase for themselves.

By the way, does anyone know how stable value funds are doing these days?  I was tempted to not convert one of our 401ks to a self-directed IRA when we left our cubicle jobs back in 2007 in order to get the 3 or 4 percent these funds paid in the event that the early-decade low rate environment returned which, as it turns out, it did with a vengeance.

I regret that decision a little more each year…

From last week, a series of interviews at Bloomberg with government officials in and around the North Dakota oil boom region where the influx of out-of-state workers is stressing government services, infrastructure, housing, and other things.

We’re only about an eight hour drive from that area and, as a result, we hear quite a bit of the local news that doesn’t make it to the network news broadcasts including two separate instances of locals being murdered by men attracted to the area and, for whatever reason, choosing an alternative path than driving a truck for an oil company.

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Monday Morning Links

Greece, ‘firewalls’ overshadow EU summit – MarketWatch
Greek Debt Talks Risk Derailing EU Summit Plan – Bloomberg
EU leaders struggle to reconcile austerity, growth – Reuters
U.S. Banks Tally Their Exposure to Europe’s Debt Maelstrom – DealBook
Mario Draghi, the Latin Bloc’s monetarist avenger – Telegraph
Thwarted on US oil pipeline deal, Canada looks to China – AP
A modern Pecora Commission could right Wall St. wrongs – Washington Post
A Shrinking Trust Horizon — And Hard Times In The City – Dollar Collapse
The big business of swindling people who trust you – Economist
What Debt Did for Romney – Surowiecki, New Yorker
Warning: Goat Rodeo – Hussman Funds
Rich Buys a House – Piggington

Oil below $99 in Europe on Greece debt concerns – AP
Gold set for biggest daily fall in a month – Reuters
Can You Sum Up Your Investing Philosophy in 10 Words? – WSJ
Will the jobs report threaten the rally? – MSN Money
Will 2012 be the year of the contrarian? – MarketWatch
China gold sales up 57.6% during first week of Dragon Year – BullionStreet
Gold output may fall 3% and silver to gain 4% in 2012: Natixis – Commodity Online
Central-bank gold holdings reach 6 year high: joining the dots – BullionVault
China’s Dragon Lunar New Year sets gold buying records – Mineweb
Emphasize gold miners over bullion ETFs-Don Coxe – Mineweb

The Future of Economics – Debtwatch
The Anti-Keynesian school – mainly macro
Four facts behind the Q4 US GDP miss – Sober Look
Greece and the euro: An economy crumbles – Economist
Spain GDP Contracts, Economy on Edge of Recession – Businesweek
China’s Wen: govt debt risk “controllable”, sets reforms – Reuters
A Brief History of the Housing Bubble – O.C. Housing News
The Federal Reserve Is Doing It Wrong… – Delong
Inflation expectations and the Fed – Econbrowser
Policy Deserving of a Rant – Noland, Prudent Bear
Transparency Has Landed – auctontrarian
ZIRP and Interest Income – Fed Watch

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