Looking for a Reason for the Gold Moves

Maybe this story from Marketwatch explains something: Hong Kong Recalls Gold Reserves. Another reason is that China has eased restrictions on owning gold and silver in China. A third was mentioned by David Rosenberg yesterday. China has made an agreement to buy $50 billion in notes from the IMF, which holds a lot of gold.

The first two stories are bullish for gold, the last is bearish for the dollar. The good news is that the second, middle story is not just a one-time thing, as the other two are. This is something I will have to do more research on. Private sector demand in China could be huge, given their massive credit bubble. If I lived in China, I'd be scared out of my wits about inflation. Gold is the only commodity you could buy there which isn't being stockpiled by the mountainload.

And some great charts from Mish's blog, showing the inadequacy of bank reserves against writedowns. It looks like only about 10-30% of banks have Allowances for Loan & Lease Losses that exceed nonperforming loans. In other words, as Mish observes, "bank earnings have been wildly over-stated." I concur. The FDIC problem bank list has over $300 billion in assets.

Other trades I'm considering right now are short Ford, because of the ridiculous belief in "cash for clunkers." This program is just guaranteed to cause a cliff-dive in demand as soon as the juiced numbers are out of the pipeline. Why Ford? Because they're up 40% in the last 3 months, while Toyota is up only 12%.

Another thing I'm thinking of doing is shorting the S&P 500 etf, SPY. It's at 130 times reported earnings, for Pete's sake! Talk about ridiculous.

And the last thing I'm thinking of doing is shorting oil. The historical relationship between oil and natural gas is that oil is about six times the price of gas. It's now 27 times. And there's no sign of demand for oil from tankers either.

Bloomberg reports that Supertankers May Halt Oil Trading, Frontline Says. Frontline says that they might start refusing cargoes within the next few months, as owners contribute $942 a day in fuel costs. This shows the dire situation of the industry, in my opinion. Why would anyone accept a money-losing lease? Hidden in the article is the fact that boats lose safety approvals if they're idle for too long. So the thing to do is fill up with oil and float with the current to save fuel.