Saturday, July 11, 2009

The World Financial Report, July 10, 2009

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Gold Correction Coming to An End

I've noted before that, while GLD frequently inhales gold bullion, it rarely sells; and when it does sell, it’s usually a sign of capitulation.

Why does the GLD rarely sell bullion? Contrary to what you might hear in the media about the gold “trade” being “crowded” -- or about “hot money" -- the truth is that gold is hugely under-owned. In fact, according to the World Gold Council, if global pension funds decided to increase their exposure to gold by just 1.2%, it would require more than 44,000 tonnes -- or roughly 27% of all the gold that's ever come out of the ground. (more)

The Great Shift of 2009

Oh my, where do we begin? This beast calls for bullet points:

  • Obviously, Wal-Mart is no longer No. 1. That title now goes to Royal Dutch Shell. The American consumer is out, and a global oil conglomerate is in… ’nuff said
  • There’s a clear sea change in American business. AIG, Lehman and Bear Stearns fell off the list from 2008-2009. Nike, Google and Amazon moved up
  • The world is increasingly less Amero-centric. An American company is not No. 1 for the first time in over a decade. In the whole list for 2009, 140 companies are American, the lowest number on record
  • (more)

Refuting the Deflation Scare, Jason Hommel

A reader asks: "Are defaults deflationary? When borrowers default on loans, does not the currency disappear in the same manner that it appeared?"

I answer:

That's the popular thought, they call that "deflation", but it's not what is happening.

When someone borrows money from a bank, that bank creates the money, lends money out, and that money gets spent, and thus, given to someone else. That someone else, the third party, still has the money, or they spend it, giving it to 4th, 5th, and 6th parties, and that money is NEVER destroyed. (more)