Another surprising announcement from a 'name' financial management firm that ought to be in a position to have an informed opinion arrived on the news. Yesterday both Morgan Stanley and the Royal Bank of Scotland forecast a meltdown in financial assets, and today Schroder Investment Management posits the shocking target of $5000 per ounce for gold.
Obviously we cannot address this type of a forecast, or even intelligently surmise if Schroder is basing this on a realistic extrapolation from the course of the financial crisis, or is just talking their book, in the same way some were forecasting Dow 36,000.
We do believe strongly that at some point the ratio between the Dow Jones Industrial Average and the price of gold in dollars/ounce will be "2" and perhaps closer to "1" but cannot say if this will occur at 2,000, 4,000 or 5,000.
What we are also convinced of is that at some point the train will leave the station, the boat will leave the dock, and if you are not on it before it leaves finding a place of any substance will not be easy, and may not even be possible for some time.
Consider the question, how many fiat currencies have lasted for more than 100 years before being replaced and devalued because of the ravages of inflation?
Let's hope we do not see this, as it will represent a significant deterioration in the purchasing power of the dollar and the pound and probably a few other currencies. But given the other forecasts of the past few days, and the outrageous actions of the Federal Reserve in corrupting their base assets, we are not as surprised or skeptical of this forecast as we might have been only a month or so ago.
Gold May Rise to $5,000 on Inflation, Schroder Says
By Bei Hu
June 19 (Bloomberg) -- Gold prices may rise to $5,000 an ounce as investors seek to protect themselves against accelerating inflation, said Schroder Investment Management Ltd., which oversees $277 billion of assets globally.
''You could easily see for the next several years that prices rise not to $1,000 an ounce, but prices rise to $5,000 an ounce or beyond as inflation psychology becomes more and more embedded and people become desperate to have a source of value,'' said Christopher Wyke, London-based emerging market debt and commodities product manager at Schroder, which oversees about $10 billion of commodity assets.
Investors are turning to gold for protection as two-thirds of the world's population cope with inflation rates that are climbing to more than 10 percent, Wyke said. Cash and inflation-linked bonds are poor substitutes as low interest rates, coupled with surging inflation, erode the real value of assets, he said.
Bullion for immediate delivery was down 0.2 percent at $892.48 an ounce at 9:57 a.m. in Singapore, after gaining 3 percent in the past four days. Wyke didn't give a time frame for his gold prediction.
Demand for gold will also rise as central banks become net buyers for the first time in 20 years, driven by developing countries, he added. Last year, world production of gold sank to the lowest since 1937 as reserves are depleted and few new sources of gold have been found.
New Fund
Wyke was speaking at a press conference in Hong Kong today to market the Schroder Alternative Solutions Gold and Metals Fund, the first commodity fund authorized for sale to individuals in the city that invests primarily in derivatives, including futures, warrants, swaps and options. Robert Howell and Paula Bujia will manage the fund.
Gold may account for about 40 percent of the fund's assets, based on a ''model'' fund used to simulate returns, said Wyke. The fund would also buy securities linked to metals including aluminum, copper, iron ore, zinc and uranium.
The limited amount of gold available, relative to the size of the global capital markets, means a small shift in investments may lead to significant price changes for the metal, Wyke said. Total gold above ground is worth about $4.8 trillion, compared with global stock and bond markets worth $135.2 trillion.
UBS AG, Hang Seng Bank Ltd., KBC Groep NV and Lehman Brothers Holdings Inc. are among firms that manage commodity funds in the city, according to the Hong Kong Securities and Futures Commission. Bank of East Asia Ltd. in February started a fund that buys shares of companies that produce materials and energy.
19 June 2008
Schroder Investment Management Says Gold to $5000 per Ounce. Is it Probable?
Evergreen Investment to Liquidate Ultra Short Term Opportunities Fund
Interesting, but it will be more significant when Lehman, Citigroup, or Wachovia itself go on the block. What do you think the NAV of their shares are? (Hint: refresh your knowledge of imaginary numbers.)
Evergreen Investments Announces Liquidation of Ultra Short Opportunities Fund
Ticker Symbol: U:WB
BOSTON, June 19 /PRNewswire/ -- Evergreen Investments today announced that the Board of Trustees of the Evergreen Funds approved a plan to liquidate Evergreen Ultra Short Opportunities Fund (EUBAX).
Shareholders of record as of June 18, 2008 will receive a cash distribution based on a $7.48 per share net asset value (NAV) calculated after the close of business on June 18. As of such date, the Fund had total net assets of $403 million.
Evergreen's parent company, Wachovia Corp. , will provide financing for the liquidation which will occur on or about Thursday, June 26, 2008. Effective immediately, shares of the Fund will no longer be available for purchase by new shareholders.
Web site: http://www.evergreeninvestments.com/
Ultrashort Opportunities Fund
The investment seeks current income consistent with preservation of capital and low principal fluctuation. The fund invests primarily in commercial and residential fixed and variable rate mortgage-backed securities, including CMOs and other mortgage-related investments. It may invest up to 25% of assets in debt securities of issuers located in developed foreign countries and up to 10% in bonds denominated in foreign currencies, with no more than 3.33% in debt securities denominated in any single foreign currency. It normally maintains an average portfolio duration of approximately one year or less.
Citigroup Spoils Option Expiry Antics with a Simple Statement of the Obvious
The usual suspects were walking up the XLF to squeeze the short interest in financials when this little truth-bomb from Citigroup hit the wire, spoiling their traditional quad witching option expiry market manipulation.
It is not over yet. The worst is yet to come. They have taken the easiest writedowns first.
You don't like to hear this do you? Well, how many times does someone have to lie to you about something important before you realize they are a liar? That they view the truth as something to convenient bend to their will to get their way, to skin you from your money? To take away your family's wellbeing?
We are in for some hard times. Don't believe much of what you hear because the lies and scams and propaganda are coming hot and heavy, and it is not designed to help you. Try to use your critical judgement, or at least your common sense. A useful step is to get your information from sources beside CNBC and Fox. Reading is a useful habit to acquire.
There is a list of interesting internet sites over on the left under the title Divertissement Éducatif. Read some. Get some other viewpoints, some other sets of facts, some other interpretations. If you are not doing so well, maybe, just maybe, you are being used badly, and you are allowing it to happen.
Gold and silver are not contingent on anyone else's word, but can be slammed by the same short term forces that make stocks go up against all reason. Now might be a good time to have some at hand.
Citigroup CFO Crittenden Expects More Writedowns on Bank's CDOs
By Josh Fineman
June 19 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, will have substantial writedowns on its holdings of collateralized debt obligations, Chief Financial Officer Gary Crittenden said.
The second-quarter markdowns won't be as large as last quarter, Crittenden said today on a conference call with investors hosted by Deutsche Bank AG.
Citigroup fell as much as 4.4 percent on the New York Stock Exchange after the comments. The shares dropped 81 cents to $19.59 at 11:42 a.m., after reaching $19.51.
To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net.
Last Updated: June 19, 2008 11:43 EDT
Citi's CFO: More 'substantial' write-downs in 2Q
Thursday June 19, 1:16 pm ET
Citigroup CFO predicts 'substantial' write-downs on debt instruments in 2nd quarter
NEW YORK (AP) -- Citigroup Inc.'s chief financial officer on Thursday warned that the nation's largest bank by assets would suffer more "substantial" write-downs on debt investments in the second quarter.
CFO Gary Crittenden also said that there will likely be more write-downs related to leveraged loans and bond insurers.
Citigroup shares fell 77 cents, or 3.8 percent, to $19.64 by early afternoon trading.
Crittenden did say that Citi's second-quarter write-downs on structured debt products known as collateralized debt obligations, or CDOs, would be lower than they were in the first quarter. In the first quarter, Citigroup marked down the value of its CDOs by about $3 billion. All told, the bank in the first quarter wrote down more than $14 billion.
The executive spoke at a conference hosted by Deutsche Bank. His comments come on the heels of profit declines at three major Wall Street investment houses, and Fifth Third Bancorp's decision to raise $2 billion in capital. Futures and options broker MF Global Ltd. has also warned that tight credit spreads will weigh on its fiscal first-quarter earnings.
