August Treasures

Wouldn’t It Be Loverly?

Usually when there are rumors flying around the internet about commodity intrigue, with deliveries potentially causing a shortage and a subsequent price spike, we are talking about gold or silver.  In this, very unusual case, we are talking about… chocolate.

An originally mysterious investor stood for delivery on a massive number of cocoa contracts causing wild theories to circulate.  Just how much was it?  About a billion dollars worth.  The markets will have to wait to see what kind of impact such a wild and unexpected investment has.

Japan’s Unwanted Strength

The Japanese politicians and bankers have been struggling under what they see as their currency being far too strong in recent months.  It now looks like China has been pouring money into Japanese treasuries instead of American bonds for a change.

A Chinese economist commented, “Investing in Japanese bonds is safer because so much of the country’s debt is held domestically, and the yen is on course to strengthen further.”    The irony in the economist’s statement is that Japan and China are the foreign holders of all of that American debt and that China’s actions of purchasing so much Japanese debt seem sure to be the driving force behind the yen’s “course to strengthen further.”

Rare Earth

So called rare earth metals are a crucial component of modern technology (especially the “green power” technologies).  August was a pretty big month as far as this behind-the-scenes portion of our world goes.  Just as China (which essentially controls the rare earth market) was nearly banning exports to potentially corner the entire market, the American company MolyCorp (MCP) launched it’s IPO.

It turns out that there are some great rare earth deposits in the US for MolyCorp to exploit, it’s just that the Chinese made it so wildly attractive for companies to mine it on their soil that all of them closed up shop and moved to the Middle Kingdom.  Now that all of the world’s rare earth mining companies are well-established in China, almost none of the rare earths are allowed to be exported out of the country.  Neat trick.

Investing In Yourself

Not enough people buying your country’s shaky bonds?  Sure, you could have your central bank buy them like the US does, but why not just use the national pension system to hold interest rates down?

Spain, at least, thought this sounded like a great idea, and the Spanish version of social security now holds a full 90% of its worth in very dubious Spanish treasuries.  In for a penny, in for a Euro, I guess.