August 01, 2013

August 01, 2013

Declining Profits, Fines, and Regulatory Pressure Are Encouraging Big Banks to Forget Commodities
After the banking reforms of the Depression era, U.S. regulators spent much of the 20th century constraining banks from participating in activities that were perceived as being too dangerous to the financial system or that could distort markets.  In the de-regulatory political atmosphere of the 1980s and 1990s, however, those barriers were eroded, famously leading to the Gramm-Leach-Bliley Act of 1999.  Many observers, ourselves included, believe that its removal of the barrier between investment and commercial banking helped lead to the financial crisis of 2008…

Banks in the Commodities Business

Recent statements from the Federal Reserve have shone a light on a set of activities in which big banks have been able to trade very profitably since 1999 — commodities…

Regulators Begin to Pay Attention

These activities have been under increasing scrutiny for at least a year.  Metals warehousing has been a particularly sore point, with industrial users of aluminum (such as brewers and soft drink manufacturers) alleging that the banks have used their dominance in metal warehousing to delay supply and squeeze out extra storage costs, which then find their way into spot metal prices worldwide…

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Larry Summers: A Policy Game-Changer?

After President Obama gave public notice to Chairman Bernanke on the Charlie Rose Show that his days as Fed Chair are numbered, the emerging consensus about his potential replacement has shifted.  The former frontrunner, Janet Yellen, who is not only a solid and competent monetary economist, but also the current Fed Vice Chairman, has lost status.  Many observers believe that President Obama favors Larry Summers.  The Financial Times quoted insiders as saying that a list of qualifications was being drawn up that only Mr. Summers can fulfill…

Troubled History

Few people have lukewarm opinions about Summers.  He has a long shadow behind him which effectively curses him in the eyes of people across the political spectrum...

Summers As Fed Chair: Implications

But what can his record tell us about his policy approach and its likely implications?

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More News on China’s “Debt Bubble” — And Why it’s Not a Crisis in the Making

IA piece we read in Bloomberg reinforced the message we delivered in this letter last week: that China’s highly-leveraged corporate sector and local governments may eventually produce a bumper crop of nonperforming loans, but that this does not foreshadow a 2008-style financial collapse in China…

What are the negatives?

And what are the reasons not to worry?

Is China going to collapse?

Guild Basic Needs IndexTM

According to the GBNI data for June, the cost of food, clothing, shelter and energy components are up about 6.1% over the past 12 months.

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Track our analysis in these letters and at

In this week’s Premium Global Market Commentary available to Gold Subscribers, we feature:

  • Executive Summary 


  • Truck Sales, Easing Labor Concerns Give Platinum A Boost

    We noted last week some of the reasons why the luster of physical metal may again be catching eyes, and gold building a bottom.  In other precious metals, we see improving fundamentals in platinum, and think this bodes well for the precious metals complex as a whole (though we are less sanguine about silver)... 
  • Earnings Season So Far: Improving PictureThe second-quarter earnings season winners are shaping up to be financials, tech, and health care, with 72 percent, 67 percent, and 69 percent beating earnings per share expectations, respectively…
  • Good News?We are encouraged by one piece of good news: as a result of the Basel 3 rules, Barclays Bank and Deutsche Bank, two of Europe’s most undercapitalized banks, are moving to raise more capital to strengthen their balance sheets…
  • Guild’s Premium Global Market Summary

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