Corporate Cash Sets Another Record At $1.093 Trillion, Liabilities Climb To $5.9 Trillion

Bob Pisani reports here:

"Cash set a record in the first quarter of 2013 on an absolute basis: $1.093 trillion in the S&P 500. It has set a record for 18 of the last 20 quarters."

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Yeah, but nonfinancial corporate business sector bond liabilities have climbed, too, from $3.7 trillion in 2007 to $5.9 trillion in the latest report.

Financial business sector bond liabilities have declined from $6.2 trillion to $4.9 trillion over the same period.

Bob Pisani's Wrong: GLD ETF Is Much Larger Than He Says

Bob Pisani reported here on Monday that the ETF GLD "only has 1,300 tons of gold":

"The largest gold ETF, the GLD, only has 1,300 tons of gold. Compare that to the 8,000 tons the U.S. has."

But Bloomberg's Nicholas Larkin reported here on Tuesday it's twice that amount as recently as December, and still nearly 2,400 tons since the price drop:

"The metal’s drop wiped out almost $1 billion of hedge-fund manager John Paulson’s wealth in the past two days. The 57-year-old began the year with about $9.5 billion invested across his hedge funds, of which 85 percent was in gold share classes. He’s sticking with his thesis that gold is the best hedge against inflation and currency debasement, John Reade, a partner and gold strategist at New York-based Paulson & Co., said in an e-mailed statement.

"Paulson is the largest investor in the SPDR Gold Trust (GLD), the biggest bullion-backed exchange-traded product. Global holdings in the products declined 9.5 percent this year to 2,382.4 tons, according to data compiled by Bloomberg. Assets reached a record 2,632.5 tons in December.

"The cost of protecting gold from losses in the options market increased. Puts protecting against a 10 percent drop in the SPDR Gold Trust cost 4.28 points more than calls betting on a 10 percent gain, the biggest difference on record, according to three-month data compiled by Bloomberg."

GLD is a much larger market maker for gold than many people realize.

Another Gold Bear Recognizes Fair Value Is Below $500 The Ounce

Noted by Bob Pisani, here:

Gold bears like MKM note that if gold had simply moved with the CPI basket since 1913, it would stand at $490 an ounce. Wow. That is more than 60 percent below it's [sic] already low price. I doubt it will go anywhere near there.

Pisani and just about everyone else is focusing on the run-up in gold since 2008 to its extraordinarily high levels of recent years, finding it nearly inconceivable that gold could lose all of those gains since 2008, while ignoring at the same time the run-up to 2008 which established gold's floor for the last five years' move to the stratospheric level.

It would be easy to blame the financial crisis and/or QE for the last five years of gold price rises to $1900, but QE had nothing to do with the five to seven years before 2008 when gold rose to $800 from $300. Perhaps easy money could be credited with that in the 2000s, but we've had easy money before 2003, too. Alan Greenspan's easy money from 1995 did nothing for gold, which continued down to $263 by late 2000. So what made gold skyrocket beginning after 2003? Everyone is ignoring who were the buyers then who helped drive up the price of gold.

The answer is buyers of GLD, the gold ETF launched in 2004. If puny little Cyprus can set off a wave of gold selling today with 14 lousy metric tonnes in question at the maximum, think about what GLD has done to gold buying, and thus to the gold price, over the years building up a wave of 1300 tonnes from 2004. GLD easily qualifies as the major player in the buying action in an annual production environment of about double that figure. It's just that now the limit has been reached under current conditions, and people are starting to realize that confiscation is becoming thinkable again. The gold price has slowly eroded from the September 2011 peak, and is now being shoved over the edge by confiscation fears.

You build a market and they will come, until actual ownership becomes more important than a paper proxy. That is a problem GLD cannot solve, nor any other gold "investment" which does not involve transfering physical possession to the buyer. Germany, for example, no longer trusts its gold in others' hands and wants it back in country. Try telling that to GLD, which won't be transferring gold to any "owners". I'd say that's very negative for GLD going forward, and very negative for gold prices generally because of GLD's sheer heft, just as possible confiscation of weak sovereigns' gold looming as a very real possibility is negative for gold prices because of their relative size and importance.

When it comes to GLD or any other form of paper gold, the only important question is, "Where are all the customers' yachts?"