A Barbaric Relic No More ~ The Risk Averse Alert

Thursday, January 17, 2013

A Barbaric Relic No More

Excellent Fast Money conversation today per Germany's announced intention to repatriate by 2020 half its physical gold holdings stored in foreign vaults, some significant portion currently located in New York City. Adami's fear of a developing "run on the bank," so to speak, seems a worthy concern, while Seymour contrarily suggests nothing systemically threatening is to be inferred because gold bears no correlation to the banking system's myriad assets.

Yet there is one, no? $GLD. So, could it be the German Bundesbank fears gold's physical shortfall due to regulatory mismanagement of the $GLD ETF? Or might this move simply be intending to insure against any such disparity from developing? In other words, the Bundesbank could be issuing a shot across the bow in a crazy world of modern finance beset by razor thin confidence. Likewise, recognizing an arrangement at whose core is a voracious appetite for capital whose impact on the German economy will inexorably marginalize it, the Bundesbank might be seen moving in a direction increasing Germany's leverage to determine its own fate.

So far, this development has not negatively impacted the euro. Nevertheless, the euro bears watching in light of it...

One thing notable about developments in the evolution of the dismantling of the euro-zone are "bumps in the road" circled above. These coincide with bouts of stock market weakness throughout the trans-Atlantic. All the more problematic appears financial support necessary to sustain the euro-zone—this leading to a rising euro—when the 20-day EMA of $XEU:$SPX relative strength flattens. Apparently, any indication the euro-zone's dismantling might be threatened, a "risk off" inclination at the bottom rung of the capital structure precipitates.

Germany's move to repatriate physical gold certainly could be a troubling development gumming up the post-2008 crisis dynamic. It's difficult to imagine this decision being taken lightly in those most vulnerable financial circles within the trans-Atlantic. At any rate uncertainty it no doubt breeds finds $XEU:$SPX relative strength ominously poised here. According to Mark Hulbert, too, there are other reasons to be concerned about the market. Moreover, as fate would have it, AAPL is not out of the woods either...

Word on the Street
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