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The Envelope, Please!

By Jon Nadler       Printer Friendly Version
Dec 24 2008 12:09PM

Good Day,

Another day of ups, but mostly downs was on tap for the abbreviated pre-holiday markets this 24th day of December. US first-time unemployment claims rose to a 25-year high, mortgage applications rose sharply, and Treasurys gained on the continuing safe-harbour quest. Oil fell (to the mid-$36 level), base metals fell (few takers on the radar), the Dow fell (100 points at last count), gold fell (very little), the dollar fell (also very little), and consumer spending fell (less than expected). One hedge fund manager has opted to send out his own version of a holiday greeting card. It looks like this:

Insert the word 'commodities' and you get a similar image.

Thin conditions prevailed in the bullion markets this morning, as many circled the eggnog and cookie displays in lieu of the price screen displays. Perfectly justifiable, we say. One more trade will likely not make the year's tally any better, anyway. Gold was seen orbiting the $840 mark with very little momentum to carry it away in either direction by more than one percent. Silver added a dime, and was quoted at $10.29 per ounce. Platinum put a small Santa cap on and rose $9 to $855 while palladium gained $3 to $174 per ounce. UBS forex strategists continue to see the greenback as the beneficiary of risk-aversion and maintaining its safe-haven status despite the morticians' choir belting out "Auld Lang Syne" in memoriam. No requiem just yet. The same cannot be said about the French fund manager who had lost at least $1.5 billion in the alleged Madoff Ponzi scheme. One Chinese astrologer sees 1929-style suicides proliferating among corporate heads in 2009. Again, we won't hold it against any traders if they go for more spiked egg drinks at this point. Everyone can use some cheering up at this juncture - whether by natural, or artificial means. Just be responsible, please.

'Tis that time again; time to make lists of the top ten whatever, time to make bold forecasts, and time to hand out awards for various accomplishments -some of the dubious kind. Bloomberg's William Pesek rounds up his list of worthy recipients and we share it with you now, hoping to bring a quantum of levity to a year best-forgotten:

"It’s been a milestone year for China and the U.S., and for very different reasons. For China, 2008 marked the 30th anniversary of the pro- market policies unleashed by Deng Xiaoping. As China celebrated the fruits of capitalism, the U.S. was veering sharply in the other direction, beginning the process of nationalizing key industries. It’s hard to ignore how far the U.S. government got into the insurance, auto and banking businesses in 2008, while China pledged to stay the capitalist course. This contrast alone captured the seriousness, absurdity and disorienting nature of a world many thought they understood a year ago. Yes, 2008 was the year all hell broke loose. It’s worth looking back at the events, people and ideas that made Asia’s year so memorable.

Drum roll, please.

Fake-Out Award: To the decoupling theory. It was always silly to think Asia’s disparate and developing economies could thrive if the $14 trillion U.S. economy hit a wall. That was the conventional wisdom a year ago as the credit crisis spread around the globe. Asia has decoupled from the decoupling hype.

The It Award: To the Japanese yen, which was among the few things that actually rose in markets. Its 23 percent surge versus the dollar in 2008 came as the U.S. slid into recession and investors fled risky assets. Japan isn’t happy about the yen’s allure. It threatens to push the economy back toward deflation.

Wrecking Ball Award: To Thaksin Shinawatra, the former prime minister who can’t seem to stop undermining Thailand. Far from being silenced by the 2006 coup that ousted him, Thaksin remains a thorn in the side of his numerous successors. Thailand just elected its third prime minister in four months, a dynamic that is scaring investors away from one of Asia’s most promising economies. Thaksin’s supporters are -- surprise, surprise -- speaking out against him, too.

Odd Couple Award: To China and India, or “Chindia.? The theory is that as much as China and India might compete, they would complement each other. This always had a certain appeal. As the world faces its worst crisis in seven decades, Asia should be moving closer together. Instead, leaders, including those in China and India, are turning inward.

Soul Man Award: To Muntadar al-Zeidi, the Iraqi journalist who threw his shoes at President George W. Bush. Whether Zeidi will live a life of riches after auctioning off his famous shoes to the highest bidder or behind bars is anyone’s guess. He provided one of the more memorable moments of a memorable presidency.

Hobbled Giants Award: To China and America, or “Chimerica.? That’s what Niall Ferguson, author or “The Ascent of Money,? dubbed the relationship between the world’s No. 4 and No. 1 economies. Donald Straszheim, vice chairman of Newport Beach, California-based Roth Capital Partners, calls the forced collaboration between China’s savers and America’s consumers the “Group of Two.? Where Chimerica goes, the global economy will follow.

Wile E. Coyote Award: To China and the U.S. China’s tainted milk scandal highlighted the dark side of the nation’s unrestrained industrial boom. The demise of Bear Stearns Cos., Lehman Brothers Holdings Inc. and Bernard Madoff showed the U.S. has cracks in its financial system. Both are looking down wondering where the ground went.

Snake Eyes Award: To Macau, for helping prove gambling isn’t a recession-proof industry after all. Las Vegas Sands Corp., controlled by billionaire Sheldon Adelson, said in November it halted a $12 billion project in Macau. It seems Macau, like Las Vegas, has run out of luck.

Something for Nothing Award: To the Bank of Japan and the Federal Reserve, which effectively cut interest rates to zero. It’s hard to decide who would be more dismayed by this turn of events -- Milton Friedman or John Maynard Keynes. Karl Marx, by contrast, might be just fine with the socialist state of the monetary world. It’s not clear anyone else is.

Big Spender Award: To sovereign-wealth funds, which ended the year wondering where it all went so wrong. China can’t be very happy with its multibillion-dollar investments in Blackstone Group LP and Morgan Stanley. Ditto for Singapore, which invested in Merrill Lynch & Co. In 2008, cash-rich nations learned the best way to make a small fortune was to invest a large fortune. So did the rest of us."

The "You Couldn't Have Been More Wrong, But You're Forgiven" award goes to all of those who guaranteed us gold prices at $1,200-$2,200-$5,000 etc. for 2008, to those who saw COMEX defaulting this very month, to those who cried "Foul!" when gold prices and (especially) silver fell in sympathy with other commodities in the deflationary storm, to those who saw shortages and high premia as the 'new paradigm' in bullion products, to those who saw a bottom being made in mining shares every week of the year, and to those who awarded the "Moron of the Year" award to our 12/31/07 projections for 2008 gold prices ("from $640 (off by $80) to $940 (off by $93) and a chart pattern which might see the highs being made well ahead of the lows" it was March to October).

On the other hand, the "Golden Statuette" can only go to one, best, most-deserving recipient: Kitco and its tremendous team. Working day and night, through crazy markets, floods of calls, record transactions, immense website traffic, staffing changes, new product launches, and many other challenges, the dedicated bunch of "Kitco Family" members from Montreal to New York, to Hong Kong and to Shanghai, all pulled together and rolled up their sleeves to make this a year to remember. Kudos to each and everyone of you! You rule!

My own, "Infinite Gratitude" award goes to all those who clicked on my humble musings 4,580,745 times (up to this day) during this past year and gave their time to read what I had to relay on a given day. With special mention to all of my friends in the media, who had their hands extremely full this year.

Wishing Everyone a Merry, Happy, Joyous, and Peaceful Holiday!

Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.