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Interest sparked in physical commodities
By Gregory Meyer in New York and Javier Blas in London
Published: October 6 2009 19:15 | Last updated: October 6 2009 19:15
A looming crackdown in the commodity futures markets is arousing investor interest in the real thing.
Facing a limit on holdings in paper futures contracts, bankers say they have received inquiries from pension funds and other big investors about the practicality of warehousing industrial metals or chartering supertankers.
The inquiries raise thorny issues for the US Commodity Futures Trading Commission as it devises constraints on holdings of energy futures after last year’s surge in oil prices. Gary Gensler, chairman, has said he wants position limits to be consistently applied across commodity markets.
Critics say investors could respond by bailing out of futures and hoarding actual commodities, an ugly prospect in the event of a global shortage. Neither the CFTC nor the UK Financial Services Authority has jurisdiction over spot commodity markets.
At Morgan Stanley, the investment bank with the biggest physical commodities operation, “most large investors in commodities in general are worried about position limits – whether they’ll be able to carry the exposure they need to carry,” says Boris Shrayer, global head of commodities marketing. “We’ve had a lot of discussions with clients about the physical.”
ScotiaMocatta, the Canadian bank, is seeking regulatory approval for a fund that will invest in copper inventories. Credit Suisse is working with Glencore, the world’s largest trading house, on an exchange-backed fund backed by aluminium supplies.
ETF Securities, a $15bn manager that offers commodity investment products open to small investors, has launched US gold and silver exchange-traded funds backed by metals in vaults, not futures.
The company is considering a US oil fund tied to swap contracts with a major oil company, which as a commercial participant may be exempt from new CFTC limits. ETF Securities has a similar arrangement with Royal Dutch Shell in the UK, says William Rhind, director of sales and marketing.
Dear CIGAs,
I will be interviewed on Bloomberg Radio tomorrow morning at 9:35am Eastern. Be sure to tune in.
Jim Sinclair’s Commentary
When considering today’s action in currency and gold please note how long ago the denials of the energy producers desire for alternative settlement currencies were issued.
They do however wish a Super Sovereign Currency as an alternative to the US dollar.
Denials we made as long as 19 hours ago or before the US markets opened today, Tuesday August 6th.
That makes today even more meaningful. Things happen when they should happen
33 days to go.
Gulf States Deny Secret Plan to Dump Dollar – 19 hours ago
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Jim Sinclair’s Commentary
Now here is an event calling for dollar reform in the form of a Super Sovereign Currency alternative to the dollar for use in everything Sovereign, which would include energy. You need ears to hear.
IMF should start on int’l monetary reform-China
Tue Oct 6, 2009 6:19am EDT
ISTANBUL, Oct 6 (Reuters) – The International Monetary Fund should start work on a reform agenda to fix "intrinsic defects" in the international monetary system, Chinese Finance Minister Xie Xuren said on Tuesday.
The IMF should aim to "provide a stable monetary environment for global growth and financial stability," Xie said in an address to the semiannual meeting of the IMF and World Bank.
Jim Sinclair’s Commentary
Everyone has their own opinion of Michael Moore, but whatever that opinion is you must admit he has a timely sense of humor.
Jim Sinclair’s Commentary
Remember, what I told you in July about the USA/China emergency economic summit called by China? Well here is part of it.
33 days to go.
China calls time on dollar hegemony
You can date the end of dollar hegemony from China’s decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners.
By Ambrose Evans-Pritchard
Published: 7:33PM BST 06 Oct 2009
Beijing does not need to raise money abroad since it has $2 trillion (£1.26 trillion) in reserves. The sole purpose is to prepare the way for the emergence of the yuan as a full-fledged global currency.
"It’s the tolling of the bell," said Michael Power from Investec Asset Management. "We are only beginning to grasp the enormity and historical significance of what has happened."
It is this shift in China and other parts of rising Asia and Latin America that threatens dollar domination, not the pricing of oil contracts. The markets were rattled yesterday by reports – since denied – that China, France, Japan, Russia, and Gulf states were plotting to replace the Greenback as the currency for commodity sales, but it makes little difference whether crude is sold in dollars, euros, or Venetian Ducats.
What matters is where OPEC oil producers and rising export powers choose to invest their surpluses. If they cease to rotate this wealth into US Treasuries, mortgage bonds, and other US assets, the dollar must weaken over time.
"Everybody in the world is massively overweight the US dollar," said David Bloom, currency chief at HSBC. "As they invest a little here and little there in other currencies, or gold, it slowly erodes the dollar. It is like sterling after World War One. Everybody can see it’s happening."
Jim Sinclair’s Commentary
The saga drags on as Pakistan goes Taliban. This is more dangerous than Iran.
Pakistan braces for more bombings
By RAVI NESSMAN (AP)
ISLAMABAD — Pakistan braced Tuesday for more militant attacks ahead of an anticipated offensive against a Taliban stronghold, as the insurgents said they bombed a U.N. relief agency because international aid work was not in "the interest of Muslims."
The suicide bombing Monday at the World Food Program headquarters in Islamabad killed five people, prompting the U.N. to temporarily shut all its offices across the country.
The attack proved the Taliban retained the ability to launch deadly strikes in the heart of Pakistan despite government hopes that the Aug. 5 killing of their leader Baitullah Mehsud in a CIA drone attack and recent military successes in the Swat Valley would send the group spiraling into chaos.
Pakistani officials have said they are prepared to launch another offensive to rout the Taliban from their mountain redoubts in South Waziristan. A media report last week said a major ground offensive was imminent, and an AP reporter in the area Sunday saw Taliban fighters taking up positions and villagers fleeing.
Such an offensive would likely come at a high price for the military. The army has been beaten back there three times since 2004 and analysts say 10,000 well-armed militants, including foreign fighters, are dug in around the region.
Helicopter gunships, jet fighters and artillery batteries pounded suspected militant hide-outs in South Waziristan on Tuesday, killing two militants and seven other people, intelligence officials said, speaking on condition of anonymity because they were not authorized to speak to the media. They said the army was trying to establish whether the seven unidentified victims were militants.
Jim Sinclair’s Commentary
This pot continues to boil and will eventually boil over creating the most serious of all geopolitical problems.
Fears rise over militants in Pakistan’s Punjab
Tue Oct 6, 2009 3:16pm IST
By Zeeshan Haider
BAHAWALPUR, Pakistan, Oct 6 (Reuters) – Three burly gunmen stand menacingly at the gate of a mosque complex in the Pakistani town of Bahawalpur as hundreds of men file in listen to a prayer for victory of Muslim fighters around the world.
This is Osman-o-Ali, the headquarters of Jaish-e-Mohammad, an al Qaeda-linked militant group which has a long record of violence including an assassination attempt on former president Pervez Musharraf.
While Pakistan’s attention is focused on the Taliban and al Qaeda threat on the Afghan border in the remote northwest, there are fears that the militants are quietly expanding their influence and winning recruits in the country’s heartland.
"South Punjab is a fertile ground for extremists and militants," said security analyst Hasan Askari Rizvi.
The flourishing Jaish complex in Bahawalpur, in the south of Punjab province, illustrates the ambivalence that Pakistani authorities have long shown towards hardline Islamists.
Islamist factions were nurtured by the security agencies during the 1980s and 1990s when they sent their fighters into Afghanistan to take on Soviet occupiers and later into the Indian part of the Kashmir region to battle security forces.
But Jaish was officially outlawed by Musharraf in early 2002 after it and another group, Lashkar-e-Taiba, were blamed for an attack on the Indian parliament which brought nuclear-armed Pakistan and India to the brink of their fourth war. Continued…
Jim Sinclair’s Commentary
This is more important to China, the BRICs and the dollar than yesterday’s report on the probability that a Super Sovereign Currency is desired by energy producing countries as an alternative to the US dollar. In fact they have already said that if you have the ears to hear.
Obama Weighs Spending to Stem Job Cuts Without Second Stimulus
By Mike Dorning and Nicholas Johnston
Oct. 6 (Bloomberg) — President Barack Obama is considering a mix of spending programs and tax cuts to respond to widening job losses that would amount to an additional economic stimulus without carrying that label.
The discussion of the initiatives, including a boost in transportation spending and an extension of an expiring tax credit for first-time homebuyers, comes as the White House is balancing rising concern about unemployment and a budget deficit the Congressional Budget Office estimates will total $1.6 trillion for 2009, and $1.4 trillion in 2010.
Administration officials have told allies in Congress that a broader transportation bill, and extensions of a homebuyer tax credit and unemployment benefits are all on the table, a Senate aide said.
Representative Chris Van Hollen of Maryland, who chairs the Democratic Congressional Campaign Committee that is tasked with holding the party’s House majority in next year’s midterm elections, said additional transportation funding would be popular among Democratic lawmakers.
“If there was to be another round of stimulus, additional infrastructure would be at the top of the list,” Van Hollen said in an interview. Money for roads, transit and bridges would be a priority.
