Posted: 12 Dec 2014 02:43 PM PST

In an interview with Bloomberg's Tom Keene, Janus Capital's Bill Gross said that he left PIMCO 'in good hands.' Gross said, "…it's obviously an opportune situation at Janus. Running $2.5 billion is different than running $2 trillion, so it makes it more flexible for me."

link if video does not play: "New Natural Interest Rates is Zero or Negative"

Gross said that the Federal Reserve may become more "dovish" after oil price drop and would have to take lower prices "into consideration."

If he would to give advice to Stanley Fischer, Gross said, "the Fed as the central banker of the world basically has to worry about financial conditions not just in the United States but the world. And so next week in terms of their language and their stance going forward, they should be very cautious about any type of tightening indications."

Gross also told Keene:

Fed must adjust to drop in oil price
'New natural' interest rate is 'zero percent or lower'
Very little liquidity in corporate bonds

Economic Illiteracy

In response to the above video, Pater Tenebrarum at the Acting Man blog pinged me with:

"Good grief, the world is brimming with economic illiteracy. If the "natural interest rate" were at zero or negative, we would all stop consuming altogether and would soon starve to death, because that would imply everything - even a slice of bread - one year hence would be worth more to us that one we can eat right now."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Is Gold Tracking Movements in the Yen, Euro, Anything?

Posted: 12 Dec 2014 10:05 AM PST

Recently, several people emailed me stating an observation that gold is directly correlated to movements in the Yen.

Let's investigate that idea with a couple of charts courtesy of Nick at SharelynxGold (Gold Charts "R" Us).

Nick has 1,000's of pages and over 10,000 charts on a subscription basis, but you can check out the site for free until December 14. He made the following charts for me on request.

Euro vs. Yen. Vs. Gold Priced in Dollars Since 2012

click on either chart for sharper image

Sure enough. Since 2012, Gold has been tracking the Yen with pretty amazing accuracy. But let's hone in on 2014.

Euro vs. Yen. Vs. Gold Priced in Dollars Since 2014

Since the beginning of the year, gold has tracked movements in the euro even better than the Yen. But look still closer. Since November, gold has been inversely correlated to both the Yen and the Euro.

This past year shows why these kinds of correlations are typically meaningless. Sometimes gold tracks the euro, sometimes the yen, sometimes the dollar, and sometimes inversely to all of those.

I see no fundamental reason for gold in dollars to track the Yen.

For whatever reason (or more likely, for no reason at all), the divergence since November (a shift to an inverse correlation from a positive one), might be the end of the previous trend.

Often, by the time people spot such trends, that trend is about to end.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

China Enters Fight Against ISIS

Posted: 12 Dec 2014 08:24 AM PST

To protect its oil interests in Iraq, it eventually had to come to this: China Offers to Help Iraq Defeat Isis.

China has offered to help Iraq defeat Sunni extremists with support for air strikes, according to Ibrahim Jafari, Iraq's foreign minister.

Wang Yi, Mr Jafari's Chinese counterpart, made the offer to help defeat the Islamic State of Iraq and the Levant, known as Isis, when the two men met in New York at September's UN antiterrorism meeting, Mr Jafari said.

Any Chinese assistance would be outside the US-led coalition. "[Mr Wang] said, our policy does not allow us to get involved in the international coalition," Mr Jafari told the Financial Times in Tehran, where he was attending an anti-extremism conference earlier this week.

China is the largest foreign investor in Iraq's oil sector and stands to lose the billions its state-owned groups have ploughed into the country if the fields are lost to the insurgents. Sinopec operates in Kurdistan, while China National Petroleum Corp has interests in the giant Rumaila field near Basra and in Maysan province near the Iranian border. CNPC has already effectively abandoned oilfields it operated in Syria.

Global Times, the Chinese newspaper, reported this week that Isis crews were dismantling a small refinery, in which a Chinese company has invested, west of Baiji to scavenge equipment for Isis-controlled refineries in Mosul, Iraq's second-biggest city.

What Iraq needed now was more weapons, Mr Jafari said: "Our problem is with the supply of arms and weaponry." The Iraqi army was trained and equipped by US forces before 2011, but many of its US-supplied weapons have fallen into the hands of Isis.

US-Made Mess

There you have it. China volunteers to help clean up a 100% US-made mess.

It's not out of the goodness of their hearts, China's own interests are in play.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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