pinchaslandau.comThe View From Jerusalem: Global economics & finance; Israel and the Middle East
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Of all the well-known pieces of market lore, the adage to “sell in May and go away” is one of the most often quoted– in Europe as in the US – including in this column – and one of the most useful, because it so often proves to be correct.
Poof! The blow-off in silver capped the extraordinary rise in this precious (and also industrial) metal, which saw the price double in a matter of months. But this week, silver prices plunged more than 20% in three days – the sharpest drop in this volatile commodity since 1983, and very reminiscent of the crash that marked the end of the Hunt brothers’ attempt to corner the market in 1980.
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As expected, it’s been a helluva week. Indeed, at this time of writing, it’s not over because, in the financial sphere the Bank of Japan will make its move at noon on Friday, Tokyo time, whilst in the economic sphere, early Friday morning in Washington will see the publication of the unemployment, wages and other monthly data regarding the US labor market.
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For people who are legally subjects of Her Britannic Majesty, the abbreviation QE2 is understood as shorthand for Queen Elizabeth the Second, the current reigning monarch of the United Kingdom. For most others, the term brings to mind the great ocean liner, launched by and named after Her Majesty and the flagship of the Cunard Line for many years (and today permanently docked in Dubai – sic transit gloria!).
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The ‘foreclosure-gate’ scandal, discussed here last week, rumbles steadily on, with new revelations emerging daily. Yet the full extent of this mess is quite unclear. We can be certain that it will not be a minor matter, since the big banks are estimating their potential losses in the tens of billions of dollars.
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We have the dubious honor of living in times that are not merely ‘interesting’, as the Chinese curse has it, or even ‘dramatic’, as suggested here last week, but truly historic — and not in the positive sense of that term. So weird, so utterly extraordinary is the state of the global economy, that there can be no doubt that some major upheavals are imminent.
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These are dramatic days in the markets, above all in the foreign exchange market. Israelis may be forgiven for thinking that there is some major domestic economic development taking place, that is pushing up the value of the shekel against the dollar – because that’s how the local foreign currency market is being presented in the media. In fact, however – and despite specifically local factors such as interest rates on the shekel being nudge slowly higher – what is happening locally is part of a much broader picture. The dollar has been falling all around the world, and with increasing velocity.
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So it’s war. Although this outcome is hardly surprising, the fact that it is now ‘official’ marks a significant and highly negative development in its own right.
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You can’t get higher in the ranks of European aristocracy than Marie Antionette – more correctly, Maria Antonia Josepha Johanna, scion of the Hapsburg rulers of Austria (and a good deal of the rest of Europe in those days) and wife of Louis-Auguste, Dauphin of France and later King Louis XVI. Some people are born with a silver spoon in their mouths, but she came into the world with an entire tea service, and received another one on her marriage (at the age of 14).
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In the age of information overload, the biggest problem facing anyone, especially analysts, is to make sense of the endless streams of facts and figures pouring in from every side. One of the simplest, but most effective, ways of doing so is by looking for trends. If the same phenomenon keeps recurring daily, weekly or monthly – depending on the kind of data and the frequency with which it is reported – then you know something significant is occurring.
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