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July 31, 2011

You Won’t Believe What Goldman Sachs Is Hiding

Filed under: Forex News — Tags: , , , , — admin @ 3:12 am



Market VentureEarlier this week, I showed you how Wall Street’s fat cats hide their big trades in the option markets. In that article I described some strange yet serious bearish option activity I discovered in the Nasdaq-100 (NDX).

Like clockwork, the Nasdaq dropped 90 points or 3%.

When heavyweights like Goldman Sachs (GS:NYSE) and Morgan Stanley (MS:NYSE) start to invest in something, you can make some “smart money” riding their coattails.

These financial superpowers use their connections and power to get an edge on the average investor. But with a little research and some smart investing tactics, we can uncover their buy and sell list… and get in on their secrets.

Wait until you hear what they are stockpiling…

Goldman Sachs’ New Market Venture

Once in a while, a big firm ventures away from Wall Street to get its hands dirty. When a profit is at stake, nothing is out of reach.

Morgan Stanley took a left turn off Wall Street in 2008 when it took over Chicago’s parking meters for the next 75 years. That deal paid the city $1.15 billion up front and has made Morgan Stanley some serious coin. (Many say that Chicago should have asked for closer to $4 billion.)

Little does most of Chicago know that those parking meters are now controlled by investment groups in the Middle East. Don’t expect Chicago to change their free parking hours easily.

Goldman Sachs’s newest venture is also off the beaten path.

Goldman Sachs is getting in the metals market… in a way no one expected.

(Don’t forget to sign up for Smart Investing Daily and let me and fellow editor Sara Nunnally simplify the market for you with our easy-to-understand articles.)

Gaining Advantage in the Metals Market

When you think about Goldman Sachs, you might think of its exclusive money management services or its elite investment professionals.

You would not expect to hear the news this “white shoe” firm just bought large, run-down warehouses.

That’s right; warehouses. But these warehouses have something special about them… They are chock-full of industrial metals like aluminum, copper, lead, nickel, steel, tin, zinc and plastics.

It all started last year when Goldman Sachs bought warehouse and logistics company Metro International Trade Services. The key to this acquisition was twofold.

  1. The London Metal Exchange approved Metro’s warehouses as designated delivery points for different commodities that trade on the LME.

    That means Goldman gets the metals at today’s prices and sells futures contracts for a higher price. Since Goldman now owns the warehouses, the cost to store the metals is less than the price of the futures contracts.

    In other words, it’s a guaranteed profit!

  2. It can also provide financing for customers who want to buy metals but need some time to pay for them. Goldman buys the material, stores it and charges fees, and interest to the client. It’s a win-win for Sachs.

What’s even more interesting is that Goldman Sachs only has to release a fraction of the metals it takes in. To an extent they can limit supply (delivery) if prices are not favorable or release more when prices are high.

More realistically, this means the rental income continues to roll in while the metal sits idle in the warehouse, even if there are buyers for all of it.

Another way to think about it would be if all the iPhones in the world were held in a warehouse by Apple. Apple gets to collect $5 a day in rent per phone to keep them in the warehouse. Even if there was a buyer for every phone, Apple slowly lets the out inventory to collect as much of that rent as possible.

How Can You Get In on the Action?

Copper and aluminum prices are off their lows and have been coming back along with demand. The key to profits for Goldman Sachs is something called “Contango.” Contango is when future prices get more expensive the further out in time you go. Most commodities like metals, grains and even oil tend to trade in contango.

This is because the costs to store, insure and transport commodities are reflected in the price. If you are buying copper futures for example, the longer you take before delivery, the higher costs you will have.

Even with higher prices for long-dated futures contracts, many manufacturers want to lock in today’s prices because they expect them to climb. Many metals, even aluminum, are being traded and stockpiled like currency and as hedges for inflation. Goldman is ready to take profits with the storage fees and with the serious price appreciation in metals.

Goldman’s investment gives me reassurance in the price strength and demand of metals. As a smart investor, we can use this cue to lead us to our next investment.

Whatever path you choose, remember that visionaries who think outside the box and aren’t afraid to get their hands a little “dirty” will often reap the greatest rewards.

Publisher’s Note: The news from Goldman meshes perfectly with a recent report from Taipan’s Kent Lucas. He has found a way to track the world’s silver supply that few folks outside of Wall Street know exist. If you have not read his special report, do it now.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or

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  • Euro Losing More Ground; Few Charts To End The Week

    Filed under: Technical Analysis — Tags: , , , , , — admin @ 3:05 am

    Quote of the day:“Every society clings to a myth by which it lives. Ours is the myth of economic growth. It’s totally at odds with our scientific knowledge of the finite resource base and the fragile ecology on which we all depend for survival.” – Tim Jackson Good morning. Another day, another round of euro Read More

    © 2011 FX Trading Blog – |
    Article Source | Post tags: debt, Debt Ceiling, EURCAD, EURJPY, Euro-zone crisis, EURUSD, usd index

    Stocks: ‘It’s one day at a time’

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    July 30, 2011

    Central Bank of Colombia Raises Rate 25bps to 4.50%

    Filed under: Forex News — Tags: , , , , , , — admin @ 3:13 am

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    The Central Bank of Colombia lifted its benchmark monetary policy interest rate by 25 basis points to 4.50% from 4.25% previously.  The Bank said (translated): “Since March, the average measures of core inflation has been a slight upward trend in June and reached a level close to the midpoint of the target range (3% + / – 1 percentage point).  Inflation expectations at various horizons are also within that range.” and also noted “The increase in the rate of intervention aims to maintain inflation within the target range this year and next and help prevent future financial imbalances that threaten the sustained growth of the economy.”

    Previously the Central Bank of Colombia also increased its interest rate by 25 basis points to 4.25% at its June monetary policy meeting this year.  Colombia reported annual inflation of 3.23% in June, compared to 3.02% in May, 2.84% in April, and 3.19% in March, this compares to the Bank’s inflation target of 3%.  Goldman Sachs is forecasting 2011 GDP growth at 5.5%, while Morgan Stanley is forecasting 4.9% growth for the Colombian economy.  The Bank noted that Colombia saw economic growth of 5.1% in the first quarter.

    Monetary Policy Week in Review – 30 July 2011

    Filed under: Forex News — Tags: , , , , , — admin @ 3:11 am

    Article by

    The week in monetary policy saw 8 central banks announcing interest rate decisions.  Of those that changed rates were: India +50bps to 8.00%, Nigeria +75bps to 8.75%, and Colombia +25bps to 4.50%.  Meanwhile those that held monetary policy interest rates unchanged were: Israel 3.25%, Hungary 6.00%, New Zealand 2.50%, Kenya 6.25%, and the Philippines 4.50%.  Other than interest rates, the Philippines raised its required reserve ratio by 100 basis points to 21%, and Turkey dropped its required reserve ratios by 100-200bps to add extra liquidity to the market.

    In terms of themes, the week was very much dominated by emerging market central bank activity. India surprised the market by raising rates more than expected in response to a persistent inflation threat against the backdrop of still relatively strong economic growth. Indeed the message was that emerging markets are still facing elevated price levels and inflationary impulse, and many of them are still recording relatively high rates of growth, particularly as compared to developed markets.

    A selection of key quotes from the monetary policy statements and media releases are listed below:

    • Bank of Israel (held rate at 3.25%): “Forecasters’ inflation expectations for the next twelve months remained steady at slightly below the upper limit of the target range.  Forecasters’ inflation expectations and those derived from the capital market go together with the assessment that the Bank of Israel will continue to increase the interest rate, but at a slower pace than in the first half of the year.”
    • Reserve Bank of India (increased 50bps to 8.00%): “Considering the overall growth and inflation scenario, there is a need to persevere with the anti-inflationary stance,”.
    • Central Bank of Nigeria (increased 75bps to 8.75%):  “The inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum products,” and that there is “the need for pursuing policies to foster macro- economic stability, economic diversification as well as encouraging foreign capital inflows”.
    • Reserve Bank of New Zealand (held rate at 2.50%): “Provided current global financial risks recede and the economy continues to recover, the Bank sees little need for the March 2011 ‘insurance’ cut to remain in place much longer.  The current very high value of the New Zealand dollar is acting as a drag on the New Zealand economy.  If this persists, it is likely to reduce the need for further OCR increases in the short term.”
    • Philippine Central Bank (held rate at 4.50%): “bank lending has been growing at double-digit rates since January 2011, supported by the strong momentum of domestic economic activity and stable financial conditions…  The Monetary Board is of the view that sustained foreign exchange inflows, driven by upbeat market sentiment over the brighter prospects for the Philippine economy, could fuel a further acceleration of domestic liquidity growth which could pose risks to future inflation.”
    • Central Bank of Colombia (raised rate 25bps to 4.50%):  “Since March, the average measures of core inflation has been a slight upward trend in June and reached a level close to the midpoint of the target range (3% + / – 1 percentage point).  Inflation expectations at various horizons are also within that range.”

    Looking to the central bank calendar, next week is set to be dominated by developed market or advanced economy central bank activity (note, the US also meets early in the following week).  So it will be an interesting week in terms of how these banks react to whatever happens with the US debt situation…

    • AUD – Australia (Reserve Bank of Australia) – expected to hold at 4.75% on the 2nd of August
    • GBP – UK (Bank of England) – expected to hold at 0.50% on the 4th of August
    • CZK – Czech Republic (Czech National Bank) – expected to hold at 0.75% on the 4th of August
    • EUR – Eurozone (European Central Bank) – expected to hold at 1.50% on the 4th of August
    • JPY – Japan (Bank of Japan) – expected to hold at 0.10% on the 5th of August


    Article source: 

    Friday Links 7/29/11

    Filed under: Technical Analysis — Tags: , , — admin @ 3:05 am

    What to read today: Which Is in Worse Shape, U.S. or Europe? (NY Times) Japanese Yen And Its Implication For US Dollar (Business Insider) Trojan Asteroid Discovered Stalking Earth (Discovery News) This Country Defaulted Long Ago (Financial Sense) Goldman Sachs Traders Quitting The Bank In Droves (Business Insider) Team Obama Fiddles While Debt Ceiling Fires Burn (naked capitalism) Gold’s not as stretched as Read More

    © 2011 FX Trading Blog – |
    Article Source | Post tags: banksters, debt, Debt Ceiling, default, Dodd-Frank, Dollar, Euro-zone crisis, EURUSD, facebook, funny pictures, Gold, Goldman Sachs, Japan, Obama, Space, USDJPY

    Look up dysfunctional in the dictionary and you’ll see a picture of China

    Filed under: Currency — Tags: , , , , , — admin @ 2:24 am


    “A population weakened and exhausted by battling against so many obstacles — whose needs are never satisfied and desires never fulfilled — is vulnerable to manipulation and regimentation. The struggle for survival is, above all, an exercise that is hugely time-consuming, absorbing and debilitating. If you create these anti-conditions, your rule is guaranteed for a hundred years.”
                                              Ryszard Kapuscinski

    Commentary & Analysis
    Look up dysfunctional in the dictionary and you’ll see a picture of China

    One of our many loyal readers sent me a brief comment the other day (his longer comments are usually very entertaining.) He said, regarding Secretary of State Hillary Clinton being over in China to quell their worst fears of a US default:

    “Kind of wish I was a fly on the wall for these Hillary meetings in China. From where I sit, we really have no leverage on China other than our growing debt.”

    Obviously he has a point – China is stuck in a pretty big investment that’s starting to look a bit inconvenient. David Cohen, a former economist at the Federal Reserve Board of Governors in Washington D.C. is now the Director of Asian Economic Forecasting for Action Economics. Mr. Cohen recently summed up the US position of borrowing from China:

    “I owe $1 and I have to worry. I owe $1 trillion and you have to worry.”

    Now, it might be a bit different if we were privy to all the political theatre in the undisclosed meetings, discussions and deals between leaders of the two countries, but China did play an active and determined role in devoting so much of its FX reserves accumulation to US dollars.

    Why did they continue to make the same decisions to pile so much money into US debt?

    Because it made sense for them. [Them being the Chinese political elite who prefer backing Chinese production at all costs in order to prop up headline GDP.]

    Why did the US continue to borrow money?

    Because it made sense for them. [Them being the US political elite who prefer boosting US consumption at all costs in order to prop up headline GDP.]

    So my point is: damn right China has to worry … but let’s not lump all the blame on the US for this little (or not-so-little) debt predicament.

    Back to our reader comments … it currently seems (to him and others) the US lacks any real long-term leverage over China. At the very least, the US seems to be squandering what leverage it might still have left, which makes the current proposal aimed at deep spending cuts all the more important in restoring credibility and economic prudence that leaves the US in a position to rebuild its economy and retain its status as a world superpower.

    Unfortunately, should a US debt/deficit deal arise in the next week or so, much more restructuring of the US political system will still be necessary. And that’s what should cause China the most worry …

    If the US somehow, in some unforeseen way, gets on the fast-track towards limited government and prudent spending, it will likely bring about important changes in the culture of the US economy. These changes (for the sake of this discussion let’s call these changes ‘global rebalancing’ since that’s a somewhat familiar term) would force China to make a consequent transition in its economy.

    Andy Xie, now just an “independent economist” according to Reuters, notes that US dollars account for 60% of China’s FX reserves; it is their plan to diversify into other currencies as it brings on new reserves. Naturally. No problems with that.

    Xie also comments on why the need for this diversification (which is obvious to everyone at this point but I still want to share his choice word) …

    He states the US was once a powerful and efficient system capable of overcoming crisis and financial adversity, but now the US is stuck with a dysfunctional political system.

    Dysfunctional? I read that word and I am embarrassed.

    Surely the US government is not dysfunctional, right? As much as I think our government is awful and needs a major haircut, that word dysfunctional bothers me. But it is reason for Mr. Xie to suggest that US Treasuries are no longer the safe-haven they once were and that China might instead consider diversifying into US stocks … since corporate balance sheets are strong.

    Gee. Talk about a vicious cycle …

    China is afraid its massive base of reserves will lose value, rightly so … so they will diversify out of US dollars (Treasuries) which are at risk because the US economy is shaky and overly reliant on debt and deficit spending … they will diversify into US stocks which are supported by global optimism stemming from persistently high Chinese GDP which the latest data shows is decelerating (and to some extent perpetual quantitative easing from the Fed of which there is no guarantee will continue) … and they will feel comfortable with these reserves in US stocks as global deflation looms, the real estate bubble deflates, and private deleveraging seems to be leading to a deeper manufacturing pullback? Hmmm …

    The US may be dysfunctional. I’ll argue that China is more dysfunctional. A good way to test that would be to see who can restructure themselves most quickly.

    My guess is that China’s potential restructuring would not send shock waves through the US economy. I cannot say the same for a potential US restructuring.

    Which is the more dysfunctional system? Which has the most leverage (the good kind)?

    Jack just wrote an excellent report for some of our members about how this all might come to pass, specifically how painful an inescapable global rebalancing and economic restructuring will be for China. If you’d like to read the report, you can do so by subscribing to our monthly newsletter – Global Investor – for only $49 per year. Click here to read more about it.

    Prepare yourself.

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    Daily Forex Fundamentals – July 29, 2011

    Filed under: Currency Charts — Tags: , , , , — admin @ 1:33 am

    What’s on the Economic Horizon
    Boehner Bill vote postponed
    Canadian GDP to show 0.1% uptick for May
    House prices in U.K. dipped by 0.1% this month?

    U.S. Dollar (USD)

    Is the U.S. dollar selloff over? The Greenback managed to score some wins against the Aussie, Loonie, and euro but lost a bit of ground against the Kiwi, Swissy, yen, and pound. Will we see more mixed results today or can the U.S. dollar find a clearer direction? Read more…

    Euro (EUR)

    It was just one of THOSE days for the euro. Once again, it came under selling pressure as weak economic data and European debt concerns bogged down the shared currency. While EUR/USD slid 65 pips, EUR/JPY fell 84 pips, finding support at the 111.00 handle. Read more…

    British Pound (GBP)

    You know what they say about outrunning a lion – you only gotta outrun the person next to you! And that’s exactly what the pound’s been doing! With everyone souring on the euro zone and the U.S., GBP/USD managed to edge 10 pips higher from its opening price to end the day at 1.6346. Read more…

    Japanese Yen (JPY)

    Thanks to risk aversion, the Japanese yen was able to chalk up gains against its major counterparts yesterday. USD/JPY opened at the 78.00 handle but ended at 77.77 while EUR/JPY slid from its 112.10 open to close at 111.26. Read more…

    Canadian Dollar (CAD)

    Make that back-to-back! For the second day in a row, the Loonie took a hit as a cloud of risk aversion continued to hang over the markets. Will we get a silver lining today? Read more…

    Australian Dollar (AUD)

    You can’t win ’em all, can you? The Aussie was forced to end its 7-day winning streak against the Greenback yesterday as AUD/USD closed 35 pips below its 1.1018 open price. AUD/JPY also chalked up a loss as it closed 60 pips below the 85.00 handle. Let’s take a look at the upcoming data to see whether the Aussie can rebound today. Read more…

    New Zealand Dollar (NZD)

    Oooohhhhh baby, it’s starting to look like the Kiwi has run out of steam! For the second day in a row, NZD/USD failed to sail higher, as it closed right at its opening price of .8692. Is this the top for the Kiwi? Read more…

    Swiss Franc (CHF)

    Looks like that .8000 handle is too much for the Swissy to break through! Once again, USD/CHF found good support at the major psychological handle and has now formed TWO dojis on daily chart at the level. Is this the bottom for the Swissy? Read more…

    Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

    In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

    Head on to Big Pippin’s Daily Chart Art for some pip-locking technical setups!

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    Moody’s: Boehner and Reid bills won’t cut it

    Filed under: Business — Tags: , , , , — admin @ 12:21 am
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