The Mess That Greenspan Made - Part 414

Tuesday Morning Links

MUST READS
Euro rescue talk buoys markets – Reuters
Germany at war over eurozone bail-out – Telegraph
German Central Bank Opposed to Merkel’s Euro Course – Spiegel
Europe’s High-Risk Gamble – Feldstein, Project Syndicate
Greece prime minister makes plea for German support – BBC
The Chained CPI: A Bipartisan Path to Deficit Reduction – AEI
Gold Standard Plan Set To Be Offered at Washington – NY Sun
Central banks getting nervous about their gold reserves – CBN
Another step down the road to serfdom – Think Markets
Goldman Sachs Draws Up Deeper Cuts – DealBook
Lost Decades: The Lost Graphs – EconBrowser
Are we the next Japan? – CNN/Money

MARKETS/INVESTING
Oil above $82 on hope for Europe plan – AP
Gold jumps 3 pct on physical buying – Reuters
Stop blaming Greece for plunging stocks – MarketWatch
Do traders dream of defaulting Greeks? – FT Alphaville
Mints can’t keep up with silver coin and bar demand – Mineweb
The only sector Jim Rogers would buy right now – Financial Post
Jim Rogers: US Has More Serious Problems Than Europe – CNBC
In North Dakota, Flames of Wasted Natural Gas Light Prairie – NY Times
Why gold mining stocks are about to skyrocket… – Stockhouse
Cramer: Why It Never Pays to Panic – CNBC

ECONOMY/WORLD/HOUSING/BANKING
Not getting by on minimum wage – CNN/Money
Science and Economics Meet at Hayek – Forbes
Deep Recession Sharply Altered U.S. Jobless Map – NY Times
Berlin Eyeing Early Launch of Permanent Bailout Mechanism – Spiegel
Eurozone crisis: there are no miracles in Greek tragedies – Telegraph
Italy, Spain Borrowing Costs Increase at Auctions of $24 Billion – Bloomberg
S&P Forecasts Strain for China Property Developers – WSJ
Canada’s housing market slows, others stumble – Globe and Mail
Housing Prices collapsing in senior communities – NC Times
Harris Doubts `Real Growth’ in U.S. Housing Until 2013 – Washington Post
Fed Officials Voice Doubt on Inflation as Growth Tool – Bloomberg
The Bernanke of 2003 – Fed Watch

 

I Have to Admit It’s Not Really Getting Better

Today’s big 272 point gain for the Dow Jones Industrial Average makes a total of six 200+ point moves for the stock index in September – two up, four down – in what will likely end up as a less volatile month than August, though, as you might guess by looking at the graphic below, so far, the month has produced a bigger overall loss.

A Wall Street Journal report($) today notes the changing sentiment toward stocks that many investors share today, my only question being what took them so long.

And across the financial markets, a sea change is taking place. Investors are abandoning the time-tested “stocks for the long run” optimism that dominated since the late 1980s. Instead, there is a widening belief that the mess left behind by the housing bubble and financial crisis will be a morass to contend with for years.

Of course, we all know who made that mess…

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Economists and Their Models

Spotted in this item at Naked Capitalism earlier today was the video below of economists defending their models, those same models that seem to have failed spectacularly at providing any useful predictive information about the world in recent years.

When listening to these guys, you get the sense most of them are so detached from reality and insular in their thinking that even if they did venture close to a New York trading floor, they’d be more concerned about getting a wedgie than learning anything useful about what really drives financial markets, at least over the short-term.

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Back Up the Truck for Silver

Normally, I’m not a big believer in conspiracy theories, but recent events really have me scratching my head.

Last week, equity markets sold off and, as has often been the case in recent years, futures traders sold winning positions in precious metals to cover margin calls as a result of losses elsewhere.

There’s nothing new about that.

But, on Friday, with the plummeting gold price already down more than $200 from its early-September high and with the price of silver in a virtual free fall as traders suddenly realize that, at times like this, it’s much more of an industrial metal than a monetary one, CME Group decided announce a new round of margin rate hikes – some 21 percent for gold and 16 percent for silver.

This was followed by a similar move by the Shanghai metals exchange on Monday morning amid word that officials are about to quadruple the capacity of the EFSF (European Financial Stability Fund) from about 440 billion euros to over 2 trillion euros.

Now, maybe it’s just me, but it’s easy to think that the timing of those margin rate hikes was more than just a coincidence.

Read the rest of this article at Seeking Alpha.

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