Typography

Courtesy of Kerry Taylor's twitter feed , here is a chart which was presented during a recent investing conference in Toronto. Apparently bitcoin has a moneyness score of 22 while cowry shells ring the bell at 15, both of them exceeding the moneyness of U.S. dollars at 13. The presentation that contains the chart was created by angel investor Sean Walsh and is available here . Since my blog is called moneyness, and I've written quite a lot on this topic , I feel somewhat obligated to chime in. Let's start with the good bits about the chart. Instead of classifying items as money-or-not, we can appraise objects by their degree of moneyness. Because every valuable object or instrument is exchangeable, some more easily than others, everything lies somewhere on the money spectrum. The diagram below illustrates this idea. This way of looking at things can provide some insights that we don't normally get when taking the money-or-not approach, and its nice to see that folks ...

When people talk about gold, they usually talk about the gold price. But there are a few other key gold market metrics that often go unmentioned. The chart below stacks the gold price on top of the gold forward rate (GOFO), LIBOR, and the lease rate. The gold lease rate is an interest rate. Just as you can lend your cash to a bank at the bank's deposit rate, you can lend your physical gold to a bank at the lease rate. Understanding GOFO and the lease rate is important not only for gold bugs, but for anyone who wants to get a good grasp of the phenomenon of interest rates. GOFO and the gold lease rate demonstrate that interest rates are not phenomena solely confined to paper assets. The ability for an investor to lease their gold and earn an interest return makes up part of gold's peculiar "own-rate". All commodities have own-rates. From our perspective as consumers, we rarely get to see these markets, but they do exist. I've illustrated them in the following chart...

Nick Rowe recently asked what the point of repoing an object was when you could just sell it, repurchasing it later. He could see three reasons. Firstly, you might repo a particluar thing because you hold it dear and want it back. It might not be available were you to simply try buying it back. Secondly, you might repo an asset because future liquidity might be an issue. Thirdly, you might repo an asset rather than sell it because future prices are uncertain. My comment used gold markets as an analogy: Nick, I think for financial assets you are right about points 2 and 3. In gold markets, for instance, you'd rather lend or swap (ie. repo) your gold than sell it (upon the anticipation of buying it back at some future point) because you might fear that, come time to buy the gold back, the future price could be much higher, or that the gold market could be illiquid and you might not be able to buy. Incidentally, you can also sell your gold and buy a futures contract. Selling spot and...

More on the phenomenon of negative gold lease rates at Gold Chat. The points are similar to here .

FT Alphaville commented on gold lease rates in Make your own (collateralised) gold standard . My comment pointed to the fact that much of the conversation on negative lease rates is not considering the fact that storage costs are rising. These rising costs encourage gold owners to lend gold out temporarily so they save themselves the hassle of footing a hefty storage bill, and they may be so eager to avoid this bill that they are willing to pay others a fee to take on the burden. Thus negative interest rates. Relavent links: See Negative Lease Rates at Gold Chat