Saturday, May 22, 2010

Platinum Investment

Reuters: Redemption possible for platinum group ETFs
Physical investment demand for platinum rose 19 percent in 2009 to 660,000 ounces, boosted by strong growth of platinum and palladium ETFs, Johnson Matthey said.

Rhind said that investment alone, which represented less than 5 percent of total demand, was not enough to keep driving prices higher.


Autocatalytic converter demand traditionally accounts for half of the world's total platinum consumption. Last year, auto-sector buying fell to just 32 percent, JM said.
Businessweek: Chinese Platinum Jewelry Demand to Weaken, Johnson Matthey Says
Platinum investment demand rose 19 percent to 660,000 ounces last year, while palladium investment advanced 49 percent to an all-time high 625,000 ounces. ETF Securities Ltd. started exchange-traded funds backed by both metals in the U.S. at the beginning of the year.


Palladium may climb to a nine-year high of $700 an ounce in the next six months as the metal’s 2009 surplus of 760,000 ounces narrows, Johnson Matthey said. Palladium more than doubled in 2009, the best performance since at least 1993, and is up 26 percent this year at $514. The metal is unlikely to fall below $475 in the next six months, Johnson Matthey said.
Well, that is funny, because the free fall of the Palladium price before 2009 was just as stunning as its recent come back. The drop this week wasn't bad either, and now 475 looks already distant and sky high. Well, just show's that reading any predictions of people who don't show a track record is just a waste of time (and people who do have a respectable track record seem to make no specific predictions).
Total rhodium demand fell 21 percent last year to a 10-year low of 529,000 ounces, widening the metal’s surplus to 241,000 ounces, and Johnson Matthey said it expects another “large” surplus this year. The metal has gained 12 percent this year to $2,800 an ounce. Rhodium is mainly used in auto catalysts and also in the chemical and glass industries.


Ruthenium demand fell 18 percent to 574,000 ounces last year, and iridium consumption slipped 11 percent to 91,000 ounces, Johnson Matthey said. Ruthenium is mostly used for coating computer hard disks and iridium is used in spark plugs and for growing metal oxide crystals.

Friday, May 21, 2010

Pandemic Palladium

From Kitco:

Platinum, Palladium Suffer Serious Technical Damage This Week - Kitco News, May 20 2010 10:22AM

Palladium Has Biggest Two-Day Drop in 12 Years; Platinum Falls - Businessweek, May 20 2010 3:45PM
Europe’s debt crisis and slowing growth in China may erode consumption of the metals used mostly for pollution-control devices in cars. Ford Motor Co.’s deliveries in main European markets fell 17 percent in April, the first drop in 11 months. In two days, palladium dropped 19 percent, the most since May 1998. Before this month, the price surged 36 percent in 2010.


“People should make sure they’re the first out of the exit and not the last,” Sorrentino said.

Prices gained for 12 straight months through April. The introduction of an exchange-traded fund backed by the metal in January boosted demand, Selkin of National Securities said. An ETF for platinum was also launched in New York this year.

“There’s very high speculative interest” in the metals, said Walter de Wet, an analyst at Standard Bank Plc in London. “With risk as high as it has been, we expect to see some liquidation.”
Last not least, Jesse on Gold options/futures:
Gold and silver spot was holding the exact levels where I would have expected them to find something to hang on. Let's see stocks go into option expiration tomorrow. There are a lot of calls that are going to be expiring worthless. I wonder if they will try and jam the puts for a little whipsaw action.

I will be a little surprised if they let gold up for air before its own expiration next week.
The market is rallying sharply now, and if it can retake the old support, now resistance, around 1105 it has a good chance of setting a new uptrend back to the top of the channel. This could just be a bounce. I was looking at some of the indicators last night, and they were at record oversold levels going back at least four years, including the crash.

Was all this a trading gambit mixed with petulance over the financial reform package? In a normal market I would say "nonsense." But this market is thin, like a Ponzi scheme, driven by high frequency trading and artificial liquidity. The few genuine investors are being chased and shot down like the human beings in The Planet of the Apes. The Wall Street gorillas have all the horses, nets and rifles, courtesy of the government, the regulators, and the Fed.

The smackdown in gold and silver ahead of option expiration next week, and the miners' option expiration today, was some of the most blatant and heavy handed market manipulation I have seen in a long time.

The Open Interest on the June Gold contract on May 20 increased from 216,811 to a whopping 273,541 contracts on a sharp decrease in price. This was some viciously aggressive short selling intended solely to drive down price, taking the miners down and out of the hands of the public, and weakening the resolve of the Comex gold bulls. There were roughly 18,000 call options sitting at Gold 1200 earlier this week representing 18 million ounces of gold.

Monday, May 17, 2010

Gold Benchmark

Indeed, it grows very little each year, very little is consumed each year. Difficult to fake, popular and appreciated not only by woman... What better benchmark do you know?

So instead of stating the price of gold in different currencies, it makes much more sense to state everything else in gold units.

So did Robert Rethfeld: Bezugsgröße Gold

Sunday, May 16, 2010

Financial Fraud System

Some years ago when starting to work at a bank, I was wondering what could be the maximum amount possible to steal from a bank. After a certain threshold, a whole army would come after them, wouldn't they? Of course, unless everything gets stolen, then the thiefs are the one with the army anyway?! And that's how it turned out. The whole western capitalistic system has been subverted. And as every banker has become a bankster, it is even impossible to pinpoint any individuals. Coup d'etat. Let's see what will follow. Europe has just capitulated too. Yes, why rob a bank when you can work for one (Mr. Dougan)?! And BTW, as the final name of this crisis is still out, my pick would be "Accounting Crisis". But then, maybe just a matter of time to attach the word Catastrophe onto it.

James K. Galbraith via Jesse's Cafe Americain: The US Intelligentsia and Middle Class Are In the Firm Grip of Fear, Fraud and Denial
Thus the study of financial fraud received little attention. Practically no research institutes exist; collaboration between economists and criminologists is rare; in the leading departments there are few specialists and very few students. Economists have soft-pedaled the role of fraud in every crisis they examined, including the Savings & Loan debacle, the Russian transition, the Asian meltdown and the bubble. They continue to do so now. ...

There are exceptions. A famous 1993 article entitled "Looting: Bankruptcy for Profit," by George Akerlof and Paul Romer, drew exceptionally on the experience of regulators who understood fraud. The criminologist-economist William K. Black of the University of Missouri-Kansas City is our leading systematic analyst of the relationship between financial crime and financial crisis. Black points out that accounting fraud is a sure thing when you can control the institution engaging in it: "the best way to rob a bank is to own one." The experience of the Savings and Loan crisis was of businesses taken over for the explicit purpose of stripping them, of bleeding them dry. This was established in court: there were over one thousand felony convictions in the wake of that debacle. Other useful chronicles of modern financial fraud include James Stewart's Den of Thieves on the Boesky-Milken era and Kurt Eichenwald's Conspiracy of Fools, on the Enron scandal. Yet a large gap between this history and formal analysis remains.


The complexity of the mortgage finance sector before the crisis highlights another characteristic marker of fraud. In the system that developed, the original mortgage documents lay buried – where they remain – in the records of the loan originators, many of them since defunct or taken over. Those records, if examined, would reveal the extent of missing documentation, of abusive practices, and of fraud. So far, we have only very limited evidence on this, notably a 2007 Fitch Ratings study of a very small sample of highly-rated RMBS, which found "fraud, abuse or missing documentation in virtually every file."


Latter-day financial economics is blind to all of this. It necessarily treats stocks, bonds, options, derivatives and so forth as securities whose properties can be accepted largely at face value, and quantified in terms of return and risk. That quantification permits the calculation of price, using standard formulae. But everything in the formulae depends on the instruments being as they are represented to be. For if they are not, then what formula could possibly apply?

An older strand of institutional economics understood that a security is a contract in law. It can only be as good as the legal system that stands behind it. Some fraud is inevitable, but in a functioning system it must be rare. It must be considered – and rightly – a minor problem. If fraud – or even the perception of fraud – comes to dominate the system, then there is no foundation for a market in the securities. They become trash. And more deeply, so do the institutions responsible for creating, rating and selling them. Including, so long as it fails to respond with appropriate force, the legal system itself.

Control frauds always fail in the end. But the failure of the firm does not mean the fraud fails: the perpetrators often walk away rich. At some point, this requires subverting, suborning or defeating the law. This is where crime and politics intersect. At its heart, therefore, the financial crisis was a breakdown in the rule of law in America.

Ask yourselves: is it possible for mortgage originators, ratings agencies, underwriters, insurers and supervising agencies NOT to have known that the system of housing finance had become infested with fraud? Every statistical indicator of fraudulent practice – growth and profitability – suggests otherwise. Every examination of the record so far suggests otherwise. The very language in use: "liars' loans," "ninja loans," "neutron loans," and "toxic waste," tells you that people knew. I have also heard the expression, "IBG,YBG;" the meaning of that bit of code was: "I'll be gone, you'll be gone."


But you have to act. The true alternative is a failure extending over time from the economic to the political system. Just as too few predicted the financial crisis, it may be that too few are today speaking frankly about where a failure to deal with the aftermath may lead.

In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case.

Swiss Private Assets

Private Household Assets in Switzerland 2008

Source: SN, 2009 (via B2B magazine)
43.4%  1315 Mia CHF  Immobilien
24.7% 748 Mia CHF Versicherungen/
15.9% 481 Mia CHF Bargeld/Einlagen
5.6% 169 Mia CHF Aktien
5.3% 161 Mia CHF Anteile an
4.3% 130 Mia CHF Schuldtitel
0.9% 28 Mia CHF Strukturierte
3032 Mia CHF

Saturday, May 08, 2010

Off-Shore Centers

Here are some off-shore assets under management numbers from the Swiss Bilanz magazin:
Location        AUM (CHF bia)
Luxemburg 3'916
Cayman Island/Caribic 3'200
Switzerland 2'655
London 1'426
Singapore 1'222
Jersey 420

Wednesday, May 05, 2010

Steve Cohen

The Washington Post:

How hedge fund manager Steve Cohen averaged 30% returns for 18 years
Cohen maintains the temperature on the trading floor at 69 degrees Fahrenheit to make sure no one dozes. If a portfolio manager or analyst can't answer a question about a stock, Cohen is likely to lash out. "Do you even know how to do this . . . -ing job?" is a standard barb, current and former employees say. Portfolio managers make money, or they're fired.


Cohen has since returned his focus to what he has done for most of his career: buying stocks and selling them short. He typically holds positions for two to 30 days, according to a document sent to potential investors in early 2009.

Unlike many hedge funds, which tend to have a handful of executives making investment decisions, SAC runs what amounts to 100 small funds. SAC borrows as much as $4 for every $1 of its own from prime brokers, including Goldman Sachs, Morgan Stanley and J.P. Morgan Chase, then distributes the hoard to various teams.

Managers' contracts have "down-and-out" clauses: Lose 5 percent from your peak assets, and SAC can take away half of what remains. Suffer a 10 percent loss, and you could be out.

In 2008, 12 portfolio managers and their teams were fired or resigned, according to a person familiar with the matter.

Cohen, a Long Island, N.Y., native and graduate of the Wharton School of the University of Pennsylvania, taught himself to trade stocks at an early age. He is a master "tape reader," according to people who know him, able to predict the direction of a stock by watching each tick of the price and the volume of shares traded.

In addition to trading his own stocks and overseeing 300 managers, analysts and traders globally, Cohen buys and sells "minis," says one former employee. "Mini" is short for a security called the S&P 500 E-mini future, an electronically traded derivative that rises and falls with the Standard & Poor's 500-stock index and is sold in smaller units than other index futures.

"He does that all day, every day, completely intuitively," the former employee says.

Betting on a bubble

Cohen demonstrated his investing prowess during the dot-com and investing boom of the late 1990s. In 1999, at the height of the Internet bubble, the firm's biggest fund returned 69.7 percent, after fees, betting that technology shares would soar.

Then SAC turned around and bet that the Internet and tech bubble would pop, which it did. The fund earned 71.8 percent in 2000.


Working at SAC is tough, even as hedge funds go. One of the worst aspects, at least for people who like weekends, is Sunday "homework." Every week from 5 to 9 p.m., Cohen has his portfolio managers and analysts call in to tell him what's coming up that week for the companies they follow.

Monday, May 03, 2010


Charlie Munger:
But you can argue that if you are not willing to react with equanimity to a market price decline of 50% two or three times a century, you are not fit to be a common shareholder and you deserve the mediocre result you are going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations.

BBC NEWS Business Charlie Munger Boom and Bust Is Normal

Palladium & Rhodium

From Johnson Matthey's 1h2009 report regarding palladium and rhodium in general:
The palladium market is expected to remain in fundamental surplus in 2009. Net demand is forecast to be down by 4%, although autocatalyst demand will fall less than for platinum as scrappage schemes introduced in many countries have favoured sales of small engined, gasoline powered vehicles which use palladium based technology. The booming automobile market in China is also supportive of palladium demand due to the dominance of gasoline engines. Industrial demand is expected to fall, with soft consumer demand leading to a downturn in the use of palladium in electronic applications. Although total demand will exceed mine supplies, significant sales of metal from Russian state stocks will keep the market in surplus. The average price for the first half of Johnson Matthey’s financial year
was $255/oz, down 35% compared to the same period last year.
In general, platinum can also be used in diesel catalysts, palladium is so far mostly used in standard gasoline engines. For this purposes, palladium and current levels is much cheaper and therefore preferred by manufacturers, however more palladium is needed per catalyst than when platinum is used.
The rhodium market has been relatively calm in comparison to 2008 when a record price in excess of $10,000/oz was recorded in the first half of the year before collapsing to less than $1,000/oz by November. With demand subdued due to falling car production, rhodium is expected to be in surplus in 2009. The price is nonetheless trending modestly higher in what is a small and often volatile market. The average price in the first half was $1,509/oz, substantially lower than an average in excess of $8,000/oz recorded in the same period last year.
Rhodium is also used in the jewelery business, bought in grams, and then fumed over other white precious metals to make it even more shining!

Saturday, May 01, 2010

Pharmacy Sales

The biggest pharmacy companies ranked by sales - half a trillion USD in total. To put it in perspective, all sales of Wal-Mart are at USD 405 bia. The company price to sales ratio for the big pharma sector is 2.65 (0.5 for Wal-Mart, just to give the number).

Sources: SIX Telekurs, FactSet, theScreener