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  • GBI Daily Insights: 12/2/13 0 comments
    Dec 2, 2013 10:41 AM | about stocks: GLD, GLDX, GDX, GDXJ, ANV, NEM, SPY, ABX


    Featured Chart: S&P 500 5-Year Rolling Returns

    (click to enlarge)

    More than five years after the Lehman Brothers bankruptcy, it makes sense that five year rolling equity returns are breaking higher. These returns should move even higher as get closer to the five-year anniversary of the March 2009 bottom, unless stocks sell-off in the meantime. This chart does show that, for the most part, investors have done well putting their money into equities over the past 40 years. Sure there have been excruciating sell-offs but a buy-and-hold strategy has ultimately served them well. However, as always, past performance does not predict future returns.

    Gold in the Headlines:

    Cloud over gold has silver lining - Financial Times
    HSBC is forecasting that sales of coins, medals and small bars could increase by more than a third to a record 1,700 tonnes in 2013 as this year's fall in prices has attracted more interest from retail investors.

    Gold price heading for biggest monthly fall in five months - The Guardian

    Gold has already lost 6% of its value this month, fuelling market speculation that it could end the year worth less than its price at the start of 2013. This would be the first annual fall in value for 13 years and a remarkable turnaround in the status of the metal that investors turned to in the depths of the economic crisis.

    Bitcoin worth almost as much as gold - CNN

    The price of one bitcoin rose as high as $1,242 early Friday, just two days after crossing $1,000 for the first time. Prices subsequently fell back to about $1,155. Meanwhile, gold prices were trading around $1,250 an ounce, down about 25% for the year.

    Overnight Macro Developments:


    Moody's: China banking system outlook remains stable, but challenges remain

    Japan PM Abe and US Vice President Biden said to agree to ask China to remove its air identification zone

    India - Nov HSBC/Markit Manufacturing PMI: 51.3 v 49.6 prior; first growth in 4 months and highest in 8-months

    India Central Bank (RBI) to keep all options open on settlement for oil marketing companies including INR currency settlement.

    Japan Nov Vehicle Sales Y/Y: 13.3% v 17.3% prior; 3rd consecutive monthly rise

    Goldman Sachs Chief Japan strategist Matsui: Sees signs Japan is exiting deflation

    Thailand Nov CPI M/M: 0.1% v 0.0%e; Y/Y: 1.9% v 1.8%e; CPI Core Y/Y: 0.9% v 0.8%e

    Five people killed and over 50 injured in overnight clashes between supporters of Thailand PM Shinawatra and protesters


    German Fin Min Schaeuble commented that Euro region no longer faced contagion risks and reiterated view that Euro was a stable currency

    ECB €74M borrowed in overnight loan facility vs. €11M prior; €56.1B parked in deposit facility vs. €40.8B prior - Daily Eurosystem Liquidity Conditions

    Germany Nov Final PMI Manufacturing: 52.7 v 52.5e; confirmed 5th straight month of growth

    Italy Nov PMI Manufacturing: 51.4 v 50.7 prior; 5th straight month of expansion

    Spain Nov Manufacturing PMI: 48.6 v 50.9 prior; first contraction in 4 months

    Greece Nov Manufacturing PMI: 49.2 v 47.3 prior; 50th straight month in contraction territory but a 51 month high

    Turkey Nov Manufacturing PMI: 55.0 v 53.3 prior; highest since March 2011 (32-month high)

    Russia Nov Manufacturing PMI: 49.4 v 51.8 prior; 4th contraction in 5 months

    Iceland govt to write off €24K from every mortgage of every household; Overall costs of the measure over a 4-year period to be about €900M


    Holiday sales update from ShopperTrak - total brick-and-motor traffic on Thanksgiving and Black Friday rose 2.8% while sales in the period increased 2.3%. The numbers where somewhat underwhelming and there were signs Thanksgiving sales stole from Black Friday - Black Friday traffic fell 11% and sales were down 13% from the year-ago period. ShopperTrak reiterated its prediction that sales for the whole season will increase 2.4%

    Fed is unlikely to change the current ZIRP thresholds at the next meeting according to Reuters. While the idea has received some attention, Fed officials in aggregate don't seem enthusiastic about moving the 6.5% UR or 2.5% inflation thresholds. Fed rhetoric has become more effective and credible and therefore there is less a need to change specific targets - Reuters

    Biden will travel through Asian in the coming week and attempt to do "damage control" w/China over a series of recent diplomatic incidents - Washington Post

    US budget talks - while there has been some hope expressed by both sides for a mini deal to get reached by the 12/13 deadline, some in Congress aren't holding their breath; House Republicans are now prepared to pass a short-term continuing resolution to fund the government at the $966 billion level that's dictated by the Budget Control Act - National Journal


    Chile, the world's No. 1 copper producer, produced 507,694 tonnes of copper in October, a 6.5 percent increase from the year before, due to a recovery in a key deposit and production improvements at other mines, the government said on Friday. Chile, which produces one-third of the world's copper, is struggling with dwindling ore grades in many of its aging deposits, although output has increased this year on the back of operating improvements - Reuters

    Guinea has released two officials of BSGR, the mining arm of Israeli billionaire Beny Steinmetz's Business Empire, after detaining them for seven months for alleged involvement in a corrupt mining deal. Ibrahima Sory Toure, a vice president of BSGR in Guinea, and Issaga Bangoura, a security official, were released on bail on Friday evening, a government source and the company's lawyer in Conakry told Reuters - Reuters

    OPEC divided over output; according to the WSJ, some OPEC members would like to see overall cartel output curbed due to surging output in Iraq, a gradual resumption in Iranian output, and the US energy revolution. However, no final decision to lower production is expected at this week's meeting. If anyone within OPEC does cut, it would likely be one of the Gulf states - WSJ


    Gold trade between Turkey and Iran will resume, albeit at lower levels than last year, once sanctions on Iran are eased, Iran's ambassador to Turkey said on Friday. Turkey's gold trade with Iran boomed in 2012 when Ankara was paying for its natural gas and oil imports with Turkish lira and Iranians were using those deposits held in Turkey's Halkbank to buy gold - Reuters

    GBI Data Points*:


    We got some interesting feedback from our note last week that stated Germans view equity investment as outright speculation. Why Germans don't invest in stocks is a great question, especially considering the stocks was one of the few asset classes that reasonably held value during the Weimer Republic. Over half of Americans own equities in some form, whereas only 15% of German own stocks directly, and only 21% own shares in mutual funds.

    DAX (orange) - German 10Y Yields (white)

    (click to enlarge)

    This is even more perplexing when you consider that the DAX is trading at all-time high and the German 10Y is yielding less than 1.75%. And yet most Germans still leave the vast majority of their money in savings accounts which have yielded them a mere 3.1% over the past five years, and even less in real terms.

    German Real 10Y Yields

    (click to enlarge)

    Germans continue to have relatively high incomes yet their average wealth is just average. According to a 2011 survey, 30% of Germans said they were saving for old age, 27% for emergencies, 27% for major purchases, and a mere 7% for accumulating wealth. This speaks volumes about the German ideology, and also seems to explain why they don't participate in the stock market.

    Bonus: The Umbrella Man.

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