September 12, 2003

Checking in From London

Alive and in London and on my way shortly to a meeting with Jim Bianco from Arbor Research. Jim usually has the inside skinny on the bond market, especially Fannie and Freddie. With Congress deciding to give the Treasury Department oversight responsibilities...we'll have to see how much, if anything, changes. And of course the big issue is system risk. Fannie and Feddie guarantee 45% of all mortgage debt in the U.S. If you're counting at home, that's a $7.1 trillion market...all backed by government guarantee. It's larger than the Treasury market...and on one really knows how well Fannie and Freddie are managing portfolio risk. Hopefully we'll find out before it's too late. Also met with the folks at the World Gold Council. Much of what was said was off the record. But suffice it to say the next few months could be huge for gold. Of course right now, there's an epic battle in the futures markets with commercial gold traders short the metal and large speculators long. The spot price was down yesterday, but it's defied the negative sentiment implied by the commercials. A big move--up or down--could be in the offing. More later today after my meeting. regards, dan


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