2012 February | timiacono.com - Part 16

Hedge Funds Bounce Back in 2012

Reuters reports that it’s been a good first month of the year for hedge funds as last year’s losers are turning into this year’s winners following the reversal of the late-2011 decline in early-2012. Even John Paulson seems to be doing well lately, his Advantage Plus Fund already up 5 percent this year after tumbling more than 50 percent last year.

This graphic from the Economist’s Daily Chart depicts how trying it’s been recently, particularly last year when many investors were probably wondering why they were paying big fees to hedge fund managers who underperformed a low cost stock index fund.

Interestingly, according to the Reuters story, after plunging 42 percent last year, the $116 million Henderson European Absolute Return fund claims the top spot in performance this year with a gain of 14 percent through late-January. This compares to a gain of almost 12 percent for the Iacono Research model portfolio so far in 2012 after a decline of 5 percent last year, the same as the average hedge fund performance in 2011.

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Tuesday Morning Links

The Housing Bottom is Here – Calculated Risk
Forty States Sign On to ‘Robo’ Settlement – CNBC
Debt crisis and Greek debt talks: live – Telegraph
Greece exit would not end euro, says EU commissioner – BBC
Citigroup: Risk of Greek Exit From Euro Has Risen to 50% – WSJ
Bernanke testimoney likely to back low-rate stance – Washington Post
Europe’s Banks Reluctant to Lend to Companies in Need of Cash – DealBook
Study links low intelligence with right-wing beliefs – Globe & Mail
To Rush Limbaugh: A Lesson in Seasonal Adjustments – Bondad Blob
Never Mind the Tax Cheats – Go After the Tax Code – Bloomberg
Illusion of Recovery – Feelings Versus Facts – The Burning Platform
Withholding Consent from the Khan – Mises

Oil drops below $97 as traders eye US supplies – AP
Gold eases towards $1,710/oz, all eyes on Greece – Reuters
State media: Iran is ready to ban oil exports to Europe – CNN
Stock gains turn hedge fund losers into winners – Reuters
China gold imports surge 250% in 2011 – Commodity Online
A Closer Look at Bubbles: Natural Gas & Gold – Profitimes
The two sides of the Gold coin – Peter Brandt
Grumpy Old Permabear – Financial Armageddon
It’s 1980 Again – Mises

Last word: BLS Decennial Census Adjustment – TBP
Participation rate shows a troubling trend – Sober Look
Fiscal policy: What does ‘Keynesian’ mean? – voxeu
The Downward Mobility of the American Middle Class – Robert Reich
China to Aid Home Buyers to Balance Crackdown on Speculators – Bloomberg
China growth estimate for 2012 cut to 8.25% – China Daily
Greece to Eliminate 15,000 Government Jobs – NY Times
If Greece Doesn’t Reform, ‘It Can’t Expect Solidarity’ – Spiegel
How did Australia avoid the 2009 recession? – The Money Illusion
Japan Adopts Stealth Intervention to Slow Yen Gains – Bloomberg
Mortgage servicers to begin using new HAMP standards in May – Housing Wire
The Federal Reserve’s Explicit Goal: Devalue The Dollar 33% – Forbes
Fed should raise rates in 2013, Bullard says – Reuters


What’s Another Day in the Greek Debt Saga?

The Greek government is again trying the patience of their creditors, namely, the European Commission, European Central Bank, and IMF, as Prime Minister Lucas Papademos announced at least another day’s delay in securing government approval for the latest Greek bailout deal, required to forestall a messy sovereign default next month.

An agreement has been “imminent” for two weeks now on what are believed to be “very large haircuts” on Greek debt  that seem to get bigger with each day that goes by without a deal in what, so far, appears to be a very successful “Blazing Saddles” style of negotiating.

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Which Way Next for Precious Metals?

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

After marching steadily higher early in the week, gold and silver saw their biggest one-day losses in more than a month on Friday as hopes for more Fed money printing were dashed after the better-than-expected labor report. Still, both metals maintain impressive gains for 2012 after a disappointing end to 2011 as more attention is focused on demand in China and actions by central banks, two of the most important price drivers in recent months.

After rising above $1,760 an ounce for the first time since November, the spot gold price ended the week 0.7 percent lower, down from $1,737.30 an ounce to $1,725.90, as the silver price surged past the $34 mark before reversing course, ending the week down 0.9 percent, from $33.99 an ounce to $33.67. The gold price is now up 10.2 percent for the year, but down 10.3 percent from its 2011 high, and silver has risen 20.8 percent in 2012, down 32.0 percent from its peak last spring.

We’ll find out soon enough if Friday’s sell-off was anything more than a one-day event.

Clearly, there have been many good reasons for the price of precious metals to head higher over the last month – demand from China, loosening monetary policy by central banks, and increased gold purchases by central banks topping that list – and many technical analysts have been shocked by the ease which previous resistance levels have so quickly been surpassed and now function as support. Up until Friday, technical factors were unquestionably positive, but, with the late-week reversal, some now argue that the metals have come too far, too fast and the Friday correction will continue.

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

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The Rise of Central Bank Balance Sheets

Referenced in this Cumberland Advisors commentary by David Kotok on the subject of central banks and gold was the graphic below depicting how the balance sheets of major central banks around the world have changed since the world changed back in 2008.

If you were to extend the chart to the left, you’d see that bank assets rose modestly for decades while the many economic/financial imbalances were being built up as the end of “The Great Moderation” signaled the beginning of “The Great Central Bank Intervention”.

In all, there are a dozen or so more images in this depressingly good collection of charts(.pdf) at Cumberland that will make you wonder anew where this is all headed.

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