Initial hesitation and a dip to $889.50 in overnight gold markets gave way to follow-through buying of the metal and prices soon rose to a three-month high of $916 in spot dealings. This time, the rise was not achieved on the back of the more traditional and reliable combination of a falling dollar/rising oil combination. This, as risk appetite made a comeback following Barclays statement that is shall not require additional capital injections. The greenback and the yen declined, despite calls by Merrill Lynch for a resumption of risk aversion and gains in the US currency. Shorting the euro was still being advised by the firm. The dollar was off by 1.14 on the trade-weighted index this morning, trading at 84.87 while crude prices gained $1.32 to rise to $47.80 per barrel.
Silver added 19 cents to rise to $12.12 while platinum rose $4 to $955 but palladium fell $3 to $193 per ounce. One would have expected somewhat better performance in the noble metals complex from collateral effects of safe-haven gold buying, as well as from President Obama's decision to allow states to set strict(er) emission standards for automobiles. Asian markets were largely static as locals focused on ushering in the Year of the Ox tonight and put money-making on a brief hiatus in terms of priorities.
At the end of the day, the global economic picture remains the same, only somewhat worse. Some 43,000 jobs have been slated to go under the axe, as Home Depot, Philips, Sprint, and Caterpillar 'adjusted' their workforce to reflect consumer rigor mortis for...everything from bulldozers to boom boxes and bathroom fixtures. Bed Bath & Beyond shares took an ice-cold bath following analyst downgrades. Stock were broadly higher this morning, mainly on an unexpected rise of 6.5% in existing US home resales amid sharply lower prices for same. Now, if only lenders would wake up and lower mortgage rates to at least 4%, the decimated real estate sector could being to taxi for the runway.
The world's corporate and political leaders gathered in Davos, Switzerland, for a five-day hand-wringing session that is largely being viewed as capitalism's last stand. They came to the Magic Mountain seeking a cure for the economic tuberculosis that is afflicting the planet at this time. In effect, the gathering is an arm-wrestling match for power between governments and corporations and it is replete with finger pointing in an attempt to find the culprit for what is ailing the world today.
The scales appear to be tipping in favor of government-flavored solutions to the malaise. Nationalization, supervision, bailouts, and toxic asset acquisitions are increasingly placing the world's taxpayers in control, and they are evidently fed up with calls of Qu'ils mangent de la brioche! (Let them eat cake) from various mansions and corporate boardrooms. Vive la Revolution? Perhaps not quite yet, but this has to be a wake up call on the order of 130 decibels for the elite.
A good dose of fear is clearly being detected among the 2,500 participants, thus the theme of the summit is Shaping the post-crisis world rather than the What the #^%& do we do now? priority it ought to be reflecting. Nevertheless, we will expect some red meat to be offered up starting with a few communiques on Wednesday. Austerity will be on tap, as Bono will not make an appearance, and the well-dressed men present will not enjoy staring at Sharon Stone, either.
Marketwatch's Bill Watts gives us a glimpse of what the Swiss shindig feels like this year. Shiver my timbers comes close:
A global economic crisis won't be enough to keep CEOs and high-flying financiers away from the helipads in Davos next week, but the corporate elite will no longer be the stars of the show when the World Economic Forum's yearly retreat for top executives, economists and politicians gets under way high in the Swiss Alps. A crippled financial system and the threat of the deepest global downturn since the Great Depression have changed the equation, participants and observers say.
This is not just another Davos, said Andy Stern, president of the Service Employees International Union, the large and powerful American labor union. A regular foe of private-equity firms and an advocate of tougher regulation of businesses and markets, Stern will make his first trek to the mountain resort for the annual gathering. Stern said he hopes the current economic turmoil will result in a humbling and mind-opening moment for many of the forum's regular attendees.
These experts have failed the citizens of the globe. They have wrought economic havoc with financial manipulation, greed and deregulation, he said, in a telephone interview. I don't know if it will do any good, but there is a need for straight talk and ending the backslapping, self-congratulatory noblesse-oblige attitude that I think has been more prevalent in the past.
This year's annual meeting, which begins Wednesday and concludes Feb. 1, is being billed as a showcase for world leaders to weigh what's next for the global economy and attempt to put a stamp on what the world will look like once the dust clears. It comes amid what may be the start of a seismic shift of power away from companies and toward governments, particularly in the sense that the financial sector has demonstrated that if governments take too light a touch on regulation, the system can implode, said Daniel Litvin, a senior research fellow at Chatham House, a London think tank.
Organizers brag that this year's meeting will feature a record number of world leaders, including 40 heads of state and government, 17 finance ministers and 19 central bankers. Russian Prime Minister Vladimir Putin will address the meeting on its opening day. So will Chinese Premier Wen Jiabao, amid jitters over China's ability to provide a much-needed engine of growth for a sputtering world economy.
British Prime Minister Gordon Brown, wrestling with a recession and a massive bank bailout that he's touted as a model for governments everywhere, is also scheduled to speak next week. Other world leaders set to attend include German Chancellor Angela Merkel, U.N. Secretary-General Ban Ki-Moon and Mexican President Felipe Calderon.
This year's gathering meets under the theme, Shaping the post-crisis world.
Klaus Schwab, the Swiss academic who founded the World Economic Forum in 1971 and also serves as its chairman, told reporters Wednesday that the meeting is among the most crucial in the organization's history.
What we are experiencing is the birth of a new era, a wake-up call to overhaul our institutions, our systems and, above all, our way of thinking, Schwab said. The high-level dialogue, however, may be missing input from the world's largest economy. While the White House is sending top economic adviser Lawrence Summers, U.S. President Barack Obama, Treasury Secretary nominee Timothy Geithner and Federal Reserve Chairman Ben Bernanke won't attend.
Meanwhile, CEOs and company chairmen will number more than 1,400, the forum said.
Despite the crowds of big shots and power brokers, observers say the meeting is still likely to fall short of the goal of re-shaping the world. But discussions this year are likely to reflect a significant change in tone from the recent past, said Simon Zadek, a veteran of past annual meetings and CEO of AccountAbility, a non-profit group that deals with social and environmental issues.
Two years ago to have a discussion (at Davos) about hedge fund managers' incentives was simply not possible, he said. Two years ago to talk about long-termism in investing did not pass the laugh test among most investors, who were making money hand over fist, not by investing but by making short-term trades. But when it comes to world leaders, Davos serves more as a forum for pronouncements rather than policy debates, economists said. Leaders will likely try to use the media megaphone provided by hundreds of journalists to argue that efforts to stabilize the banking sector and insulate the economy will prove effective in the long run.
I think they'll be trying to reinforce the view that the global economy will turn up in the second half of this year, said Stephen Lewis, chief economist at Monument Securities in London. That's been a consistent message from finance ministers all around the world in recent days.
Whether they can convince anyone of that remains to be seen, Lewis said.
It's questionable, because jobless totals are mounting and that's going to put a damper on consumer spending. And still, the credit flows are not being restored. And in circumstances like that, companies are sure to be cutting back on their capital expenditure, he said. No doubt, policy makers typically don't hammer out formal agreements on trade, cross-border financial regulation or currency interventions at Davos. But much of the meeting's appeal centers on the opportunity to make connections - and lots of them, observers said.
It is an efficient place to go and do business, whether you are in the private sector or the public sector, because everybody is there, said Edwin Truman, a senior fellow at the Peterson Institute for International Economics in Washington, D.C., and a former U.S. Treasury official.
You save on transaction costs. You can see people from 15 different countries in three days rather than having to fly around the world to see them, Truman said.
Amid calls (demands?) for this (2009) being it (again) for all things gold and related shares, the Vancouver Resource Investment Conference drew a good crowd, and it had the chance to spend better quality face-time with the half-as-large-as-last-year exhibitor list. Expectations are running high in a sector that saw many a share plummet 80 or 90 percent last year within just six months of being seen as reaching all-time highs. Undoubtedly, there is value out there. Many of the stocks are trading for less than the cash positions of the issuing firms.
Gold, on the other hand, is trading at some $300 above its 'cash in the bank' equilibrium level, fueled by fear (as well as some greed). For some, however, the metal is trading at no less than $1000 under what they feel is 'fair value. From our perspective, at this moment, the first priority is to maintain the $900 level, and then proceed with successful assault on the $925 and $940 levels that loom ahead. Much depends on collective belief, in order for this to actually take place. At the Davos gathering, Gregory Berns holder of the Distinguished Chair of Neuroeconomics at Emory University in Atlanta, is a seminar that explores the relationship between fiscal judgment and brain waves. Most traditional economists believe this endeavor is a waste of time, the professor says.
Berns and his colleagues at the 120-member Society for Neuroeconomics nonetheless study human perception and how the brain represents the value of any asset. Subprime was a collective illusion, the 44-year-old Berns explains. The market said subprime investments weren’t all that risky. A neural adaptation, what magicians call a cognitive illusion, took place. People stopped valuing the asset based on their own perceptions and reasonable assumptions.
Money illusions actually create the most powerful magic, Frewin says. Money always triggers an extremely personal and emotional response, but a magician or an investment banker must believe in the illusion or it won’t work. Equally applicable to that which is seen as real money, gold. Its value is in your brain.
Happy Neuronal Processing.