Gold World News Flash

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• Special GSR Gold Nugget: Robert Prechter Jr. & Chris Waltzek
• Spanish debt wilts amid ?250bn rescue plan confusion
• Rick Rule, Part Two: Markets and Risks - June 16, 2010
• Jim?s Mailbox
• Gekko - No Wonder He Went To Prison
• Spotlight Shines on 2010 World Investment Conference
• How to Legally (and Easily) Hold Gold Offshore
• Debt Solutions for Dummies
• DING! This Is Called "A Good Start" (TBW)
• The Inflation Mega-Trend Continues With UK CPI 3.4%, RPI 5.1%
• If You Build It... BP Will Come
• Redesign of Super Tax
• LGMR: Gold Bullish as Correlations Normalize, Analysts Expect More Upside in Silver
• Pay Attention Folks, It's In Your Face
• Client Update – Spanish Mountain Gold Makes Strategic Acquistion
• Gold as the truest measure of value
• BP Inverts, Is Spain Next?
• The 2010 Silver Buying Guide
• BP Credit Default Swaps Show 39% Chance of Default…
• U.S. Debt Bomb Detonation Expedited by 5 Years
• GoldWatch: Why Many Respected Analysts See Gold Going Up to $10,000
• Bad Economic News
• A Colorful View on SPX, Gold & Oil
• Ten Benefits of Expatriation
• Municipal Madness
• Safe as Earth Quakes
• Thanks BP - Here's Some More Truth
• Vive la Différence?
• Gold Seeker Closing Report: Gold and Silver Fall Slightly
• Rothschild in gold
• Futures Swoon As Senate Accepts Expanded Fed Audit
• The Israel-Turkey Rift: Is The Future of NATO At Risk?
• Mainstream News: Incentives Gone, Home Builders Won’t Lift The Economy This Time
• BP Inverts, Spain Next?
• Gold Price is Merely Touching Back to the Starting Line Before Taking Off
• Why Did Fed Advocate #1 Mel Watt (And 7 Others) Hold A Fundraiser Within 48 Hours Of The House FinReg Vote?
• Daily Credit Summary: June 16 - Spain, Pain, And BP's Bane
• Mr. Denninger and Gold – Part Deux or: A Rebuttal to All Fiat Money Apologists
• WEDNESDAY Market Excerpts
• Why Fossil Fuels Remain the Future
• Insured Lives Sometimes Commit Suicide
• CAPE, Tobin q, Imply Market Is 48% Overvalued
• CNBC's Cramer: Get out of stocks now
• Why Does Everyone Believe Spain Is About to Run to the EU/IMF for Help?

Special GSR Gold Nugget: Robert Prechter Jr. & Chris Waltzek Posted: 16 Jun 2010 07:00 PM PDT Special GSR Gold Nugget: Robert Prechter Jr. & Chris Waltzek

Spanish debt wilts amid ?250bn rescue plan confusion Posted: 16 Jun 2010 06:49 PM PDT June 16, 2010 11:15 AM - EU debt markets remain under stress after reports Spain is in secret talks for a support package of up to ?250bn (£208bn), the largest rescue in history. Read the full article at the Telegraph......

Rick Rule, Part Two: Markets and Risks - June 16, 2010 Posted: 16 Jun 2010 06:49 PM PDT Conversations With Casey June 16, 2010 | Visit Online Version | www.CaseyResearch.com • About Casey • Forward this email • New? Free sign up for Conversations With Casey • CaseyResearch.com (Interviewed by Louis James, Editor, International Speculator) L: So, we've talked about how you make money in these markets - can you tell us where are you looking to make money these days? Are you bullish on energy, bullish on gold, bearish on something - where are you focusing your efforts these days, Rick? Rick: I am bullish on gold. I am very bullish on energy. I am near-term - meaning twelve months - bearish on base metals and industrial minerals. When I say I'm bullish on gold, I'm bullish, probably in the way that you and Doug are: bearish on social promises, and as a consequence, bearish on...

Jim?s Mailbox Posted: 16 Jun 2010 06:49 PM PDT View the original post at jsmineset.com... June 16, 2010 09:45 AM "I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretence of taking care of them." –CIGA Eric. Gold & Silver CIGA Eric Volume has been light into the gap(s) support. This is a bullish setup. What cannot go down with force will reverse and attempt to break resistance with force. This will be the third challenge (3 taps and out) of the 5/14 high. Paper Gold ETF (GLD): The junior to major ratio illustrates the increasing leverage towards the rising price of gold. Junior to Major Gold Shares Ratio: Silver continues to struggle under 5/19 resistance. The inflows into stocks and gold suggest that silver will play catch up once the 5/19 gap is cleared. Paper Silver ETF (SLV): More… Bill Murphy Hits Bullseye – again! CIGA Eric GATA’s work and contributions to Main Street’s understa...

Gekko - No Wonder He Went To Prison Posted: 16 Jun 2010 06:49 PM PDT Market Ticker - Karl Denninger View original article June 16, 2010 06:28 PM Here we go again, with yet another unarmed assault: [INDENT](Incidentally, the first rule of linking someone somewhere is that you actually have to make sure that the web address you link to works.  My billing rate is $300/hour if "Gordon" is incapable of managing to get his blog to work on his own, as the link on Zerohedge, along with the links on his site themselves, all say "go here" but when you do you go back where you started... but I digress.) [/INDENT]OK, here we go. [INDENT]I hope that this response will dispel some of the myths and misinformation surrounding hyperinflation, Gold and our paper money system. [/INDENT]I doubt it.  What's more likely is that you're going to introduce yet more claims without evidence, project false light and render unsupported (and unsupportable) claims that require one take their belief as an article of faith. [INDENT]It appears that Mr. Den...

Spotlight Shines on 2010 World Investment Conference Posted: 16 Jun 2010 06:49 PM PDT [INDENT] Conference highlights expose profitable resource investment opportunities, featuring commentary by Al Korelin, Howard Fitch, Lawrence Roulston, David Coffin and many others (6/14/10). [/INDENT][ame=http://www.youtube.com/watch?v=7jtkuZqEJ9M]YouTube - Streetwise Video Spotlight: 2010 Cambridge Conference[/ame] Cambridge House's World Investment Conference—a one-stop-shopping venue for resource education and opportunities—may not have set attendance records, but the videographer found plenty of people on the floors and in the halls to gather general observations about this year's show, opinions on hot commodities and insights into investment topics. Tune in for some snippets from the likes of Al Korelin, Howard Fitch, Lawrence Roulston, Marin Katusa, David Coffin, Roger Wiegand and many others in this Gold Report exclusive. Al Korelin, Korelin Economics Report: Welcome to the Cambridge House World Investment Conference in Vancouver, BC, at the Convention Center We...

How to Legally (and Easily) Hold Gold Offshore Posted: 16 Jun 2010 06:49 PM PDT By Dr. Steve Sjuggerud Wednesday, June 16, 2010 I got some terrible news yesterday… My friend Glen Kirsch died. I was surprised to hear it… Just three weeks ago, Glen and I were chatting about gold and how to hold it offshore. I wanted his ideas, and I wanted the specifics. Glen, as always, delivered. Glen and his business partner Michael Checkan have been reliable contacts for me in the gold world since I started writing investment newsletters in the 1990s. They run a firm called Asset Strategies International and have helped pioneer a few interesting products, including one called the Perth Mint Certificate Program. I've known about Perth Mint Certificates for many years… I know they're a simple, safe way to hold gold. But I never actually thought of these certificates as legally owning gold outside the U.S. However, that's exactly what they are… and that makes them extremely interesting now. You see, the government really wants to ...

Debt Solutions for Dummies Posted: 16 Jun 2010 06:49 PM PDT The 5 min. Forecast June 16, 2010 10:55 AM by Addison Wiggin & Ian Mathias [LIST] [*] N.Y. discovers amazing debt crisis solution: Put it off till next week [*] One coming fiscal calamity almost as massive as subprime [*] Will BP file Chapter 11? Matt Simmons, Byron King weigh in [*] Chris Mayer presents a no-brainer investment argument for global agriculture [/LIST] At long last, we’ve figured out how to solve the U.S. debt crisis. Get ready for it… Weekly emergency legislation. Ta-da! (Confetti drops, crowd cheers. The band strikes up John Phillip Sousa.) Yesterday marked the 11th week in a row the New York State government postponed closing their $8 billion budget gap with emergency legislation. It’s a great scheme. You see, they can make big speeches and debate on the bills due next month… which budgets to cut, who to fire, who to tax, etc. But bills due tonight? Next week? The one thing the whole state can get behind is kee...

DING! This Is Called "A Good Start" (TBW) Posted: 16 Jun 2010 06:49 PM PDT Market Ticker - Karl Denninger View original article June 16, 2010 09:18 AM Barofsky shootshescores! [INDENT]An indictment unsealed today in federal court in Alexandria, Virginia, alleges that Farkas, 57, and fellow conspirators sought to deceive financial firms and TARP by covering up shortfalls at his closely held mortgage lending company based in Ocala, Florida. The company filed for bankruptcy in August 2009. [/INDENT]Yep, and a big part of it was related to Colonial Bank, a firm that I have written about extensively, including their penchant for believing they were "well-capitalized" despite being chock-full-to-the-nuts with commercial real estate holdings in bubble areas. If you remember, I wrote a few pieces on the TBW cease-and-desist order and a raid on a Colonial office, both in 2009.  Then there was the truth that finally came out on the outrageous over-valuation of their "internal values" in the portfolio - 37% in total that was exposed when BB&T took them ove...

The Inflation Mega-Trend Continues With UK CPI 3.4%, RPI 5.1% Posted: 16 Jun 2010 06:49 PM PDT Another month and another release of UK inflation data at far above the Bank of England's target of 2% and above the upper limit of the Banks 1% to 3% range by reporting CPI of +3.4% for May. Thus the BoE Governor, Mervyn King will write another letter to repeat that the high rate of inflation is just "temporary", though when does "temporary" high inflation stop being temporary? 6 months? a year? 2 years? as the country sleep walks into stagflation with all of the consequences for wage earners and savers. Meanwhile the real rate of UK inflation as measured by the publically more recognised RPI index remains even higher at 5.1%, which after stripping out the effects of manipulated low interest rates as a consequence of Quantitative Easing and other direct interventions to support the Housing Market such as the funneling of tax payer cash onto bailed out banks balance sheets leaves the RPIX also at 5.1% which better reflects actual UK consumer price inflation expe...

If You Build It... BP Will Come Posted: 16 Jun 2010 06:49 PM PDT Gold didn't do a heck of a lot on Tuesday until the London p.m. gold fix was in at 10:00 a.m. Eastern time. Then it tacked on about a percent in the ensuing two hours... and showed signs of doing vertical about 11:45 a.m. But, not to worry, at precisely 12:00 noon, a not-for-profit seller showed up and ended the fun. Gold spiked to its high of the day [$1,237.90 spot] in electronic trading at precisely 4:00 p.m. in New York yesterday afternoon... but got cut off at the knees there as well... and ended up closing within a dollar of it's 12:00 noon price. Here's the Tuesday New York chart on its own. Note the precision timing of the price capping... precisely noon and 4:00 p.m. Eastern time. What are the chances these are random market-driven events? None whatsoever, dear reader. One thing I should point out while this graph is posted... and I'm thinking about it... is the London p.m. gold fix. The New York [and sometimes world] low price is ...

Redesign of Super Tax Posted: 16 Jun 2010 06:49 PM PDT By Neil Charnock www.goldoz.com.au Europe is not “all better” by a long shot and the net result will be more turmoil and attraction to gold as a safe haven investment. Volatility is the other most important trend this year as we ebb and flow between risk aversion and risk appetite. Each new “revelation” about German and French bank US$958B, or total European bank US$1.6T exposure to the PIGS of Europe will bring on the volatility. UK has exposed themselves to US$370B in loans to just Spain and Ireland. What many people fail to understand is that Greek debt has been reduced to junk status meaning that banks have to account for these bonds as 100% risk weighted capital. Their reserves have to match Greek exposure on a one for one basis even if the bonds are trading at below par. This means that banks cannot afford to carry Greek debt. The fall out is again like watching a slow motion train wreck. Gold is going to keep on keeping on – t...

LGMR: Gold Bullish as Correlations Normalize, Analysts Expect More Upside in Silver Posted: 16 Jun 2010 06:49 PM PDT London Gold Market Report from Adrian Ash BullionVault 08:35 ET, Weds 16 June Gold "Bullish" as "Correlations Normalize", Analysts Expect "More Upside" in Silver THE PRICE OF GOLD eased back from an early 1-week high vs. the Dollar on Wednesday, trading 0.8% higher from yesterday's London Gold Fix as a rise in Japanese equities failed to spur European stock markets. Euro investors wanting to buy gold saw the price rise further as the single currency dropped, trading more than 1.9% above Monday's low at €32,400 per kilo. Government bond prices rallied as equities stalled, pushing the yield offered by 10-year US and German debt back down to 3.29% and 2.66% respectively. US crude oil contracts slipped 1% to $76 per barrel. "We view [Tuesday's] price action as consolidation before another leg up," says bullion bank Scotia Mocatta in its technical note. "[Gold] remains bullish while $1197 holds." "Yesterday's performance in precious metals was bullish,...

Pay Attention Folks, It's In Your Face Posted: 16 Jun 2010 06:49 PM PDT Market Ticker - Karl Denninger View original article June 16, 2010 06:20 AM or not, if you wish... [INDENT] "There was massively too much leverage within the financial system," Breeden said at a Bloomberg Link Boards & Risk Conference in Washington yesterday. [/INDENT] And who asked for that "massively too much leverage"?  Hank Paulson, who was subsequently promoted to Treasury Secretary and was thus able to cash out his entire position in Goldman Sachs without paying a nickel of tax, and did so "just in time" to avoid the impact of the meltdown. [INDENT]  "Regulators had the authority to control that and eliminate it. We can keep passing laws, but if the regulators don't have the backbone to enforce the rules and to be realistic, then that's a different problem." [/INDENT] Regulators have acted in collusion with the "regulated" to lie - an act that on its face meets the definition of "bank fraud", specifically in the case of IndyMac which was allegedly (accor...

Client Update – Spanish Mountain Gold Makes Strategic Acquistion Posted: 16 Jun 2010 06:49 PM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here June 16, 2010 05:00 AM The Cedar Mountain acquisition clearly solidifies Spanish Mountain's land position in what could become a very active mining camp. The acquisition expands Spanish Mountains land holdings in the area by 38%. The area now under control by Spanish Mountain increases from its previous total of 37 sq. km to a new total of approximately 51 sq. km, a significant increase in area. Spanish Mountain still remains focused on establishing and demonstrating the economic viability of the main zone of the gold mineralization already outlined in the Spanish Mountain project. The Cedar mountain acquisition appears to be a very smart strategic move by solidifying a land position ahead of any economics being published for the Spanish Mountain project expected before year end. Typically, nearby property prices increase in value on favourable economic news which demonstrates the pote...

Gold as the truest measure of value Posted: 16 Jun 2010 06:14 PM PDT

BP Inverts, Is Spain Next? Posted: 16 Jun 2010 06:01 PM PDT Bruce Krasting submits: Zero Hedge had a piece yesterday (BP Curve Goes Nuts) on the inversion (blowout) of BP’s 1 year/10 year spread. At one point the short date paper was yielding 10% while the long dated stuff was at 7%. You don’t see this too often. When you do, it is always a giant red flag waving “Risky”. What is the price of a 5% AA 10 year if market forces bring it to an 8% yield? 80% of par. As a result, there is a 20% upside to this bond. What is the upside on a one-year investment at 10%? 10%. Therefore short date paper has half the return potential. Who would want that? Short-term yields explode as a result. Complete Story »

The 2010 Silver Buying Guide Posted: 16 Jun 2010 06:00 PM PDT Silver has been sizzling and causing lots of buzz in the industry. Investors are excited. Part of the hubbub is due to its current run. Since its February 8 low, silver has roared ahead 22.4% (through June 21) and has doubled from its November 2008 low.

BP Credit Default Swaps Show 39% Chance of Default… Posted: 16 Jun 2010 05:56 PM PDT

U.S. Debt Bomb Detonation Expedited by 5 Years Posted: 16 Jun 2010 05:38 PM PDT

GoldWatch: Why Many Respected Analysts See Gold Going Up to $10,000 Posted: 16 Jun 2010 05:36 PM PDT

Bad Economic News Posted: 16 Jun 2010 05:25 PM PDT It seems like almost everywhere you turn these days there is bad economic news.  Foreclosures are setting records, unemployment remains depressingly high, poverty is exploding, U.S. government debt is wildly out of control and Europe is on the verge of an economic collapse that could send the entire globe into a devastating financial panic.  If all that wasn't enough, the oil spill in the Gulf of Mexico has destroyed the seafood and tourism industries along the Gulf coast and threatens to push that entire region into a depression for years to come.  The truth is that the more you look at the economic statistics coming in from around the globe the more it becomes obvious that we are headed for a complete and total economic nightmare.  Just consider some of the most recent economic news....  *The number of U.S. home foreclosures set a record for the second consecutive month in May.  How can the U.S. housing industry be recovering when the number of Americans being foreclosed on continues to set all-time records? *As of March, U.S. banks had an inventory of approximately 1.1 million foreclosed homes, up 20 percent from a year ago.  Instead of working their way through the huge backlog of unsold homes, U.S. banks continue to pile up a massive inventory of foreclosed homes at a staggering pace. *According to figures from the U.S. Commerce Department, housing starts in the United States fell 10 percent in May, the biggest decline since March 2009.  The data also revealed that single-family home starts suffered the biggest drop since 1991.  There is already a massive glut of unsold homes on the market, so builders simply do not think it is profitable to build many new homes right now. *Officials now tell us that the cost of "fixing" Fannie Mae and Freddie Mac, the government-backed mortgage companies that last year bought or guaranteed the vast majority of all U.S. home loans, will be at least $160 billion and could grow as high as $1 trillion.  The twin pillars of the U.S. mortgage industry have become financial black holes that the U.S. government endlessly pours massive amounts of cash into.  That is not a good sign. *Fannie Mae and Freddie Mac are to be delisted from the New York Stock Exchange because their stock prices have been trading under $1 per share for more than 30 trading days.  The truth is that Fannie Mae and Freddie Mac would have completely imploded by now if the U.S. government had not decided to step in and bail them out. *The average duration of unemployment in the United States has risen to an all-time high.  Not only are a ton of Americans out of work, they can't find work for a very, very long time once they are unemployed. *For Americans younger than 25 years of age, the unemployment rate is 18.8%.  But even those young Americans that can find employment often find themselves working in very low paying service jobs. *Federal Reserve Chairman Ben Bernanke says that the U.S. unemployment rate is likely to stay "high for a while".  Considering how badly Bernanke has been doing his job, it would be really nice if we could add just one more person to the unemployment rolls. *According to one new study, approximately 21 percent of children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.  There are hundreds of thousands of American children on the streets each night, and yet we continue to insist that we are the greatest country in the world.  *For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.  How many tens of millions of Americans have to be on food stamps before we officially say that we are in a depression? *According to the Wall Street Journal, the debates have begun inside the Fed about what it should do in the event of a "double dip" recession.  If they are already debating what to do during the next economic downturn that means it is probably a foregone conclusion.  *If you were alive when Christ was born and spent one million dollars every single day from then until now, you still would not have spent one trillion dollars by now.  But somehow the U.S. government is now over 13 trillion dollars in debt.  According to a U.S. Treasury Department report to Congress, the U.S. national debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015.  *It is being projected that the U.S. national debt will grow to surpass our gross domestic product in 2012.  Needless to say, that is a really, really bad sign. *The total of all government, corporate and consumer debt in the United States is now equal to 360 percent of GDP.  At no point during the Great Depression did we ever even come close to such a figure. But things may be even worse in Europe right now.  Unfortunately for the U.S., when Europe experiences an economic collapse it will devastate the American economy as well.  The economic news coming out of Europe lately has been extremely alarming.... *George Soros says that a European recession next year is "almost inevitable".  Considering how much access George Soros has to inside information, the fact that he is so pessimistic about Europe is a very troubling thing indeed. *A report by the Bank for International Settlements says that the debt crisis hitting southern Europe resembles the 2007 subprime mortgage crisis.  Is history about to repeat itself? *Moody's has downgraded Greece government bond ratings into junk territory, citing the risks inherent in the rescue package that the rest of the eurozone has put together for them.  Soon Spain, Portugal, Italy, Ireland, Romania and a number of other European nations could have their debt downgraded as well.  *The U.K.'s  new Office for Budget Responsibility has announced that the U.K. economy was more damaged by the recent financial crisis than previously admitted, and that it may never fully recover.  But the same could be said for many other nations across the world as well. *21.5% of all working-age people in the U.K. do not have a job.  It seems like almost every country has a shortage of jobs these days. *New U.K. Prime Minister David Cameron is warning that Britain's "whole way of life" is about to be significantly disrupted for years by the most drastic public spending cuts in a generation.  In fact, severe austerity measures being implemented all across Europe could make this one of the most "interesting" European summers in ages. *Spanish banks are borrowing record amounts of money from the European Central Bank as Spain's financial institutions are finding it increasingly difficult to acquire funds in international capital markets.  But the truth is that it isn't just Spanish banks that are facing a liquidity squeeze - the entire world is heading for a massive credit crunch. But the biggest piece of bad economic news of all is the nightmare that is unfolding in the Gulf of Mexico.  There is no way that the southeast United States is going to be the same after this.  Hordes of businesses and entire industries have been literally destroyed over the past two months.  The total economic damage from this unprecedented disaster will easily run into the hundreds of billions of dollars.  This is an economic blow that the teetering U.S. economy simply could not afford right now.  Once the oil finally stops flowing the crisis will not be over.  In fact, the aftermath from this oil spill could end up echoing for decades. So are things bad out there?  Yes, things are incredibly bad and they are about to get a whole lot worse.  In fact, there are so many cancers eating away at the U.S. economy that it would take an entire book to detail them all.  What we are dealing with is not "just another recession" or "just another economic downturn".  What we are witnessing is the fundamental unraveling of the monstrous debt spiral that our economy is based upon.  Any economy that is built on a foundation of debt and paper money is inevitably doomed. So yes, the bad economic news is going to continue.  Things may get better for a while here and there, but the truth is that we are caught in a long-term spiral of economic decline from which there is no escape. So what do you think?  Do you believe that there is hope for the U.S. economy?  Feel free to leave a comment with your opinion....

A Colorful View on SPX, Gold & Oil Posted: 16 Jun 2010 05:03 PM PDT It's been a bright week so far for stocks and commodities. It appears that the down trend could have ended as of yesterday (Tuesday June 15th). In this mid-week report I figured I would bring back the 80's colors to see if I can spice things up! Below are some charts I did showing my current views on the market. You may want to put on your hyper color shirt, sunglasses and zinc when viewing them in order to get into the zone… lol SPX – S&P500 Index Exchange Traded Fund – Daily Chart I'll keep this short and sweet here are the main points. Moving Averages crossed over this week and when we see this a trend reversal generally occurs. That being said it is best to wait for the moving averages to cluster which means we need a pullback or sideways movement for a few days. I feel this is very likely to happen. NYSE Buying Spikes have returned! We saw these during the previous bottom back in February. As the market continues to trend higher and mature these volume spikes tend to increase also. Long Term Cycle has bottomed and should start to rise this week. As we can see from the February bottom the cycle was also bottoming which is very bullish for the index. We Are Here shows where I think we are currently trading. The market is over bought right now and I feel a quick pullback or sideways move is needed before we see a continued move up. Here is my Pre-Market Trading Video & Squawk Box Recording for today if you want to see my charts as of this morning: http://www.futurestradingsignals.com/trading-education/june-16th-market-reports/ Gold Futures – Daily Chart Gold is trading in a tight wedge at the moment. The long term picture is pointing to higher prices but I feel there is a good change of one last drop which should shake out a bunch of traders before rocketing upwards. August and September are good months for gold to move up and if you have been following the market as long as I have then you know patterns and prices can drag out much longer than we anticipate. So as much as the chart of gold looks like an imminent breakout is about to occur, it could still be a few months way. And to be honest that's how the market works…. If it doesn't shake you out, it will wear you out! Crude Oil Futures – Daily Chart Oil is trading a key pivot point and also looks to have formed a possible bear flag. At the moment I am neutral on oil, it's a 50/50 guess as to which way it will go, so I am just watching for now… But I have pointed out some key resistance and support levels for those with oil positions… This small chart makes it look like I put a ling at ever $2 but if you look closer some are above and below those even numbers. Mid-Week Stock and Commodity Wrap Up: In short, I think the market is on the verge of another rally which is very exciting since we cashed out in late April before the market had the big sell off. It will be nice to put some long term plays to work so we are not so dependent on the short intraday plays which last 1-2 days because of the extreme volatility in the market. I figure we will see stocks and gold move up together but I'm not really sure about oil at this point… If oil does not move up then the market will have limited up side and instead of a new bull market rally to new 2010 highs we could just see move up to test near the April high. Then it could roll over and start heading back down triggering much larger sell off as we enter another bear market. All that being said… it looks to be a couple months away still and a lot can happen in that time. As a market technician I take each chart one day at a time. If you would like to learn my intraday and swing trades along with my trading signals checkout my website: www.FuturesTradingSignals.com Chris Vermeulen

Ten Benefits of Expatriation Posted: 16 Jun 2010 04:34 PM PDT Everybody has their own personal reasons for expatriating, but here are some of the benefits: 1) Freedom from the global US tax net. Taxing you no matter where you breathe on this earth is wanton American exceptionalism. What other nations don't dare do to their citizens, the US government doesn't think twice about. Once you renounce, it's your choice either to live the rest of your life free of any tax net, or to pick a place you want to be year-round and opt into the tax system (assuming it's not a tax- free jurisdiction). If you do, you'll at least know you have the freedom to walk away from it by simply moving elsewhere. Taxes in the US are already high, and rates are set to increase across the board. To gain some perspective, it's clarifying to calculate the number of months per year you work for the government. How many months did it take to pay all the federal, state, and local income taxes, capital gains taxes, FICA taxes, property taxes, and AMT - plus the raft of permitting, licensing and accounting costs you incur over the course of a year? Add corporate taxes if you're a business owner. And don't forget the new 3.8% health care surcharge tax on all investment income, including dividends. Be honest and add it all up. You'll then have a decent idea of how much it costs you in time and money to be a US citizen every year. That cost will rise dramatically going forward. Here's the take-away: The biggest guaranteed return on your capital that you'll ever have is investing your money free of taxes. Do some long-run compounding calculations with and without taxes to see what I mean. I'll wager John Templeton did. 2) Freedom from the death tax. Its political label is the "estate tax," but the fact is the tax is based solely on your demise. I used to think the death tax only applied to gains on assets that had not been taxed already. How naïve I was! It grabs half of all your assets, regardless of the fact that you've paid taxes on them. If you have over a few million dollars net worth, your heirs will be writing a heart-stopping check to the IRS. They also may be forced to liquidate your assets to raise cash. This has happened to countless small businesses and family farms. And if you're a young, talented entrepreneur who goes on to earn substantial wealth over the course of your life, the death tax has you in its crosshairs too. The death tax is 45% now and is scheduled to jump to 55% in 2011. Either way, the amount is staggering. Expatriation lifts the death tax burden from your children and other heirs. 3) Freedom from the US government's War on Solvency. Washington's crazed debt addiction is uncontrollable and endemic. US politicians have strapped an inconceivably large debt burden on the backs of their subjects. It pays to spend some time on www.usdebtclock.org. The multi- trillion dollar debt avalanche roars on, headed straight towards economic hell. After "Debt Per Taxpayer" and "Liability Per Citizen," check out "US Unfunded Liabilities" to see a number that's suited to astronomical calculations - not economics. Don't be tricked into thinking this is a partisan issue. It's sobering to review the debt records of both Democratic and Republican administrations...to behold what politicians do when given trillions of dollars of other people's money. They spend it all - and then borrow trillions more! Of course, the burden of servicing that debt is on you, not them. Their six-figure salaries are guaranteed, along with their uber-perks and fully funded pension plans. While often described as "the richest nation in the world," the reality is that the US is the most indebted nation, by a country mile. No other government comes close to matching the debt burden that has been dumped onto every taxpayer. The US government is rampantly incurring debt in your name, and you have no way to stop it or slow it down. Standing in free speech zones with protest signs didn't work when it came to war and crony bailouts, and it won't work for the debt burden either. The one truly meaningful act you can take as an individual is to opt out. Unload the government's debt burden off your back. Don't let yourself or your family be a casualty of the government's War on Solvency. 4) Freedom from being treated like a "toxic citizen." When traveling abroad, being a US passport holder used to be a positive thing. Now it's an albatross. The New York Times article I cited earlier explains it plainly: Americans abroad are being treated like "toxic citizens." They're cut off from banking and other business and investing opportunities solely because of their US citizenship. Typical currency controls don't permit you to take money out of a country. The US doesn't have that (yet). Instead, and this is quite clever, the government enacts laws and regulations that function as indirect currency controls. There are so many Patriot Act and other costly impositions forced on foreign banks that handle US customers that they're simply refusing to put up with the harassment. Here's the upshot: Your money isn't fenced in; it's fenced out. If you seek firsthand evidence, visit a major banking center outside the US and try to open a bank account. Odds are you'll be turned away when the bank finds out you're a US citizen. Reports abound of US citizens' long-held accounts at foreign banks being summarily terminated. The US government has made its subjects, along with their money, persona non grata. I've read that some foreign banks are now setting up, in essence, holding pens designed to handle US citizens who want to bank offshore. But, really, what's the point? You're burdened with having to file extra IRS paperwork, along with FBAR forms to the Treasury Department. And even if you don't file all the extra papers (not a smart move), new laws force foreign banks who accept US customers to report on you anyway. They are pressured to sign "information reporting agreements" to have US citizens as customers. Google "FATCA" and "qualified intermediary agreements" if you want details. Now for the most extreme instance of liability. Being a US passport holder can mean life or death in the context of a terrorist attack. The US government's never-ending War on Terror makes the world more dangerous for Americans. After so many years of bombing and military occupation in the Middle East, how can the hundreds of thousands of civilians who've been maimed and killed by the US government NOT be the source of enduring resentment and blowback? Needless to say, the US passport is on the short list of ones you least want to have if somebody sticks a gun in your face and says, "Passport." Unfortunately, this has happened on more than one occasion, and it would be unreasonable to assume it won't happen in the future. 5) Freedom from the paperwork prison. Millions of Americans are plagued every year by days, sometimes weeks, of preparing tax documents and paying thousands of dollars to accountants to decipher the IRS tax code. There are, literally, hundreds of different IRS forms. The tornado of rules and regulations in the tax code fills roughly 70,000 pages. And then you have to save boxes and boxes of papers for years in fear of someday being audited and not being able to produce the demanded documents. If you're unfamiliar with audits, here's how they work: You're guilty of whatever the IRS claims, unless you prove yourself innocent. If that sounds preposterous, I encourage you to ask a tax lawyer. "Innocent until proven guilty" does not apply. Freedom from spending days of tedium on mind-numbing paperwork and thousands on accounting fees has been an absolute joy. Highly recommended. The Casey Research Team for The Daily Reckoning Australia Similar Posts: Moving On Out The Benefits of Sound Money Thomas L. Friedman Trying to Reassure Americans Naturally the Feds Want to Raise as Much Money as They Can Top Ten Reasons Oil Prices Could Fall Twenty Percent

Municipal Madness Posted: 16 Jun 2010 04:31 PM PDT Stocks rallied yesterday. The Dow rose 213 points. Gold went up too - plus $9. So many people are buying gold coins that the storage vaults are getting crowded, says a Bloomberg report. But since we don't trust the numbers anyway...let's return to words. Vise is a funny word. It looks like it should be pronounced like 'vies'...but it is actually pronounced like 'vice.' Whatever. The New York Times says it has a grip on Congress. On the one side, the pols are pressured to cut deficits. On the other, they are pushed to create jobs. Of course, the TIMES misses the point. It makes it sound as though Congressmen were just innocent, well-meaning schmucks, trying to do their best to resolve conflicting pressures. Not at all. They're the ones who built the vise. On the one hand, they passed hugely expensive programs. They didn't have the money to pay for all the boondoggles and bailouts, so they had to borrow. The deficits, in other words, are a problem they brought on themselves. The pressure to cut deficit spending is merely reality raising a boot with which to kick them in the derriere. On the other side of the vise is the pressure to create jobs. The idea is preposterous flattery. Congress never actually created a single additional job in all its history. Jobs come from productive effort. From making things or providing services - at a profit. One person pays another to cut his lawn. Another pays a person to fix his teeth. Both the lawn mower and the dentist have jobs. The government, on the other hand, is a job destroyer. It takes away resources that might have been used to hire a dentist or buy a lawnmower. It can put people to work...but only by taking away resources, and real jobs, from the wealth-producing economy. If it wanted to, government could force everyone to work digging holes or counting each other. It could increase salaries and report 'full employment.' But no one would have a real job. And we'd all go broke. American politicians are facing up to the phony challenge in a phony way. That is, they are pretending to create jobs. The Europeans, on the other hand, say they are cutting deficits. They have to; lenders said they wouldn't give them any more money. As Nouriel Roubini put it, in the Old World, "austerity is not optional." Here at The Daily Reckoning, we're with the Germans. The euro feds are beginning to correct a mistake, albeit dishonestly. Americans are just adding on a new one. Neither Americans nor Europeans are happy with each other's response. US Treasury Secretary accused the Europeans of threatening the 'recovery' by withdrawing demand at a critical juncture. He insinuated that if there were another Great Depression, it would be the Europeans' fault. Claude Trichet, meanwhile, head of the European Central Bank, says it's the American who are to blame. It was they who came up with subprime mortgages and it was they who permitted Wall Street's reckless and greedy speculations. At this point, most responsible journalists and economists would say something such as: "both sides should put aside their differences, work together and put the economy back in order." But you won't get that kind of earnest drivel from us! It's just mealy-mouthy nonsense. The Europeans should stop bailing out French and German banks (by guaranteeing the debts of Greece and the other PIGS). The Americans should stop trying to bail out everyone. Both should stop bailing and merely get out of the way so the economy can collapse if it wants to. Dear readers may find our opinions too radical. Everyone else does. But the evidence shows that collapse is actually a good thing. Free market economies are remarkably robust. They don't require the genius of politicians and bureaucrats in order to operate. And when they occasionally stumble and fall, it's actually healthy for them. It's how they shake off parasites. Bloomberg reports: Currency collapses tend to spur a resumption of economic growth rather than fueling a decline in gross domestic product, according to the Bank for International Settlements. Currency collapses are associated with permanent output losses of about 6 percent of GDP, on average, though the drop tends to appear beforehand, the Basel, Switzerland-based BIS said in its quarterly review yesterday. "This suggests that it may not be the currency collapse that reduces output, but rather the factors that led to the depreciation," Camilo E. Tovar wrote in the study. "To gain a full understanding of the implications of currency collapses on economic activity it is important to carefully examine the full circle of events surrounding the episode." The positive effects of a weaker currency on GDP, including making local products cheaper than imported goods, may outweigh the negative ones, such as rising inflation. Currency collapses occur when the annual exchange rate drops by about 22 percent, according to the BIS, which identified 79 such episodes, "more commonly in Africa than in Asia or Latin America," since 1960, Tovar said. And more thoughts... In a futile effort to prevent relatively small losses, the feds set us up for big ones. The New York Times: President Obama on Saturday implored Congress to provide more aid to states and cities to blunt "the devastating economic impact of budget cuts" by local governments that imperil the jobs of teachers, the police, firefighters and other public employees. In a letter to Democratic and Republican Congressional leaders, Mr. Obama said the "mounting employment crisis" in the states "could set back the pace of our economic recovery." Mr. Obama had supported about $50 billion in aid initially - $25 billion for public employees, $23 billion of which would go for teachers' salaries, and $25 billion to offset states' increased costs for their share of Medicaid, the public health program for the poor, people with disabilities and many nursing home residents. And here is another related report from The Wall Street Journal: As the new head of the Illinois Department of Human Services, Michelle R.B. Saddler knew she would confront tough choices in preparing a budget that juggled rising needs for services with tumbling state revenue. But she wasn't prepared for the long list of mandates and governor's priorities that tied her hands. She wasn't supposed to eliminate services required by law or court order. She was to spare Medicaid- eligible services and food-stamp benefits. And she couldn't jeopardize residents' safety or well-being. "What's left?" she said. State-agency heads nationwide face similar dilemmas as they confront gaping budget deficits. Last month, Illinois lawmakers cobbled together partial remedies to a $13 billion deficit-nearly 50% of its expected general-fund revenue of $27.44 billion for the fiscal year beginning July 1. Illinois agencies are bracing for deep spending cuts, and the cutting falls largely to people like Ms. Saddler, a cheerful 49-year-old who, in October, took over a department with 13,500 employees and a general- fund budget of about $4 billion. Her agency serves two million Illinois residents, coordinating everything from drug and alcohol treatment to home aides for disabled people to food stamps. The state provides about a quarter of the services itself and contracts with private businesses for the rest. Ms. Saddler estimated that budget shortfalls would cost the state a total of 6,220 private-sector jobs and some or all services for 178,500 people. "I'm concerned that we will see a real public-health crisis and a real public-safety crisis with these cuts," she said. Yes, the bureaucrats are indispensable. At least they think so! And more from Bloomberg: Spending cuts by state and local governments from New York to California may act as a drag on the economy into 2011, only the second time in more than a half century that such reductions have restricted growth for three consecutive years. States face a cumulative budget gap of $127.4 billion as 46 prepare for the start of their fiscal year on July 1, according to a report this month by the National Governors Association and the National Association of State Budget Officers. They will have to fill that hole largely on their own, as aid from the federal government under programs including President Barack Obama's $787 billion stimulus package starts to wind down. State and local cutbacks may trim growth by about a quarter percentage point in 2010 and 2011 after shaving it by 0.02 point in 2010, said Mark Zandi, chief economist at Moody's Analytics Inc. He also sees the governments lopping payrolls by 200,000 during the next year after reducing them by 190,000 in the 12 months through May. "The budget cutting that is dead ahead will be a significant impediment to economic growth later this year into 2011," he said in an interview. That impact will help convince Federal Reserve Chairman Ben S. Bernanke and his colleagues to keep the federal funds rate banks charge each other for overnight loans at zero to 0.25 percent through the end of this year, said John Lonski, chief economist at Moody's Capital Markets Group in New York. So there. That's what a collapse looks like. Without aid from the feds, the states will have to make cuts. If they make cuts, thousands of people may die from massive public-health and public safety failures. Not only that, but the decline in state spending will affect the private sector too...resulting in an even worse slump! What the hell... Bring it on! Regards, Bill Bonner for The Daily Reckoning Australia Similar Posts: Krugman and His Hoover History Europe Gets Obamania A Financial World Not Yet Recovered From the Bubble Madness of 2002-2007 IOUSA and IOEU Cleaning Up America's Fiscal Policy

Safe as Earth Quakes Posted: 16 Jun 2010 04:26 PM PDT Tax-confiscating, power-mongering, pseudo-intellectual moralistic bullies are like terminator roaches. They never go away and they just seem to keep multiplying. We had hoped to return from our quick trip to Seattle to find that the resource super profits tax and been beaten into the submission and defeat which it so richly deserve. But alas, through sheer stubbornness, ineptitude, or calculated determination, the government is persisting with a policy that's already destroyed shareholder wealth, made Australia a less stable and desirable place for foreign capital, and clouded the future of both existing and profitable resource projects as well as future ones that may never get off the ground now. We haven't caught up on all the fake negotiations in the last week. And we're just guessing...but our guess is that the government will just try and wait out the public. The public will lose interest. Or, if the government repeats often enough that this is an issue of tax fairness - instead of the wanton act of vandalism on the nation's wealth producing assets that it is - the big lie will eventually stick as oft repeated big lies eventually do. Anyway, we'll get back to that story with more precision tomorrow. Today, we again note that an intrusive outside (much like our self) is calling for an Aussie house price crash. It's Jeremy Grantham again, of global investment manager GMO. Granted, Mr. Grantham may not be aware that there is a secret force field that girds this land which makes its housing market immune to the same forces that have caused bubbles and busts in other countries. But you have to give him credit for calling it as he sees it. And he says Aussie house prices would fall 42% were they to return to trend. You cannot possibly miss it," he told the Australian. "The price of housing typically trades about 3.5 times of family income and in bubble it goes to 6 or . . . 7.5 (times)...Australia is having one now. You are at near 7.5 times family income . . . which suggests you are twice the size that you should be." Not everyone got the memo. But seriously, we can see that being daily assaulted by the forces of house price spruiking in Australia, it is easy to give up the good fight (stop using your common sense) and just go along with the group think. You begin to question your own sanity when everyone around you behaves insanely. Grantham says Aussie house prices are a "time bomb." The trouble with credit bombs is that they cannot be defused. They eventually blow in the form of falling asset prices (deflation). This is happening all over the world right now. You could say that continued excessive credit creation funnelled into an asset class is one way of defusing the bomb. But that's really just credit carpet bombing. In any event, the Reserve Bank of Australia, which is an Australian institution run by Australians, begs to differ with Mr. Grantham. In a speech earlier this week, RBA Governor Ric Battelino said that Australian households have taken advantage of a "structural" decline in interest rates to load up on debt. True, this higher household debt level exposes Aussie households to "shocks," like higher interest rates. But Battelino says there ain't no bubble. Specifically, he rubbishes the price-to-income ratio Grantham quotes. The deputy Governor says, "The ratio of house prices to income that are published for Australia tend to focus mainly on prices in the cities, and they are quite elevated. But, if you look across the whole country, the ratio of house prices to income is not that different from most other countries." But with nearly 65% of the population living in Australia's capital cities, according to ABS data, the fact that prices outside the cities are "not that different from other countries" is a hugely unuseful fact. The lending bubble has been concentrated in the capital cities, where most people live, and where price-to-income levels are most unsustainable. Of course you might argue that the dense urbanisation of Australia's population is exactly what supports higher structural house prices. People have to live somewhere. And if they are going to live in a capital city, it's going to cost them. That's fair enough, as long as they can afford it without going into ruinous debt. The last and obvious point will make is that it's pretty stupid to assume interest rates will remain structurally low from now on. Low interest rates are always trotted out as a justification for house prices. But if the world is in a credit depression, Aussie interest rates are not going to stay low. You will have had millions of people buy homes at the top of the price cycle and the bottom of the rate cycle. How do you think that's going to end? When thing are unsustainable, the end comes eventually. Flying from Seattle to Los Angeles on Monday, we saw what looked like fault lines all along the California coast. These are the places where huge forces collide and eventually one gives way sending waves of damage in all directions. Naturally, it made us think of the Aussie housing market, even if there are many in Australia who say it can't happen here. Just wait. Dan Denning for The Daily Reckoning Australia Similar Posts: Australia to Borrow as Much as $300 billion Naturally the Feds Want to Raise as Much Money as They Can China's Economy is the Greatest Bubble on Earth USA Has Fives Times As Much Sovereign Debt As All the PIIGS Put Together Poverty Time Bomb: Prices are Twice as High as They Were Two Years Ago

Thanks BP - Here's Some More Truth Posted: 16 Jun 2010 04:09 PM PDT A commentor posted this analysis. It is a very grim, yet insightful view of what has transpired and what is likely to unfold.  Do not believe anything that you hear coming from the perpetrators of this ultimate crime against humanity OR from the Government that is covering up the truth in order to cover its ass.  There is no Golden Truth coming from either Tony Hayward or Barak Obama. Everyone should read this: We can only hope the race against that eventuality is one we can win, but my assessment I am sad to say is that we will not. The system will collapse or fail substantially before we reach the finish line ahead of the well and the worst is yet to come. Sorry to bring you that news, I know it is grim, but that is the way I see it....I sincerely hope I am wrong. We need to prepare for the possibility of this blow out sending more oil into the gulf per week then what we already have now, because that is what a collapse of the system will cause. All the collection efforts that have captured oil will be erased in short order. The magnitude of this disaster will increase exponentially by the time we can do anything to halt it and our odds of actually even being able to halt it will go down. The magnitude and impact of this disaster will eclipse anything we have known in our life times if the worst or even near worst happens... Here is the link to the whole piece:  Show No Mercy For The Wicked If you don't live in the South and therefore believe that you are likely safe from the chemically corrosive rainfall that will come with hurricane season (and which is setting up to be a doozy based on the extraordinarily warm water circulating in the Gulf right now), don't get too complacent, because the economy is getting ready to take a big tumble.  Housing starts fell quite a bit more than expected.  This on the heels of the homebuilding sentiment index tanking several points to a near-record low.  With Europe reeling, expect exports to start tanking.  And don't think for a minute that the Gulf situation won't affect GDP.  I expect auto sales to start heading south again.  If someone can explain to me how on earth our economy is going to generate real, organic economic growth, please throw out suggestions.  I'm open to anything.  But in the meantime rest easy knowing that Obama is making rock-solid certain that he prints enough money to keep all public employees at their mostly useless jobs and their pension coffers full.

Vive la Différence? Posted: 16 Jun 2010 04:06 PM PDT Via Pension Pulse. Peggy Hollinger and Ben Hall report in the FT, Sarkozy's pension plans fall short of the mark: President Nicolas Sarkozy promised the mother of all reforms but yesterday's proposals to restore the finances of France's debt-laden pension system seemed to fall short of the billing.   For weeks, ministry leaks have been suggesting that the government would take the bold step of raising the retirement age from 60 - one of the lowest in Europe - to 63. There has also been much speculation - again helped along by official leaks - that an attempt would be made to deliver a long-term solution for a system expected to hit a €70bn ($86bn, &ound;58bn) funding shortfall by 2030.   Instead, the government has opted to raise the age by only two years and to target financial equilibrium by 2018, hardly the ultimate solution for a country with a rapidly ageing population and high unemployment. "This is not a once-for-all-time reform," said Gilles Moëc, senior economist at Deutsche Bank.   Nonetheless the outcry that greeted the government's proposals from unions - and even to some extent from employers who attacked the end of certain tax privileges - imply the reform might be more ambitious than it first appears.   Indeed, it may be that the rumour-ridden run-up to yesterday's announcement was deliberately orchestrated to make the government's proposals appear more cautious than they really are in a bid to dampen popular protest. "It is not forbidden for them to be intelligent," said Eric Aubin of the CGT union in an interview in Le Monde newspaper.   Mr Sarkozy has in effect chosen to soften the pain of the reform but apply the remedy with speed to reassure the markets.   Under the proposals the government will raise the retirement age by four months a year, to reach 62 by 2018. The age at which workers are entitled a full pension, regardless of their contribution period, will also be raised from 65 to 67. Civil servants too will be asked to extend their working careers by two years, albeit in certain sectors not before 2017. They will also be forced to give up the discount they enjoy on contributions, which will be brought into line with the private sector over 10 years.   "It is a very difficult reform to do," said Olivier Gasnier, economist at Société Générale.   "But by fixing the age at 62 and targeting 2018, the measures are much more concrete. They have also gone further than expected on harmonising the public and private sector pension systems. I am not sure that in this context the government could have done much more."   The decision to target financial equilibrium in 2018 meant that France would have to come back to pension reform in the near future, as the system would quickly return to deficit. Laurence Boone of Barclay's Capital estimated a shortfall of €24.5bn in 2030, rising to €46.5bn in 2040.   But the taboo of 60 had been broken, Mr Gasnier said, and it was clear the age would rise further in the coming years.   Monika Queisser, head of social policy at the OECD, also welcomed the reform.   "Anybody who touches the retirement age in France can be considered courageous," she said. "It might not be as ambitious as others who have simply raised the retirement age from 60 to 65 but you have to take account of the context in each country."   For the unions, who are hoping to bring the country to halt with a national protest next week, this is a crucial element of any reform that threatens to take apart what was considered a key social acheivement under the left in 1983.   The reform was "very very far from what we wanted", said Marcel Grignard, deputy head of the CFDT, yesterday. "We have every reason to press ahead with our day of action." Similarly, Paul Taylor reports in the Globe & Mail, French reforms substantial but insufficient: After one of the longest drum rolls in history, France finally announced a substantial reform of its generous pay-as-you-go pension system on Wednesday, but it won’t be sufficient to solve the problem.   Raising the legal retirement age#001f5e ! important; padding-bottom: 0px ! important; color: #001f5e ! important; background-color: transparent ! important; background-image: none; padding-top: 0pt; padding-right: 0pt; padding-left: 0pt;"> gradually to 62 in 2018 breaks a taboo in a country where the right to retire at 60 was widely considered one of the major social achievements of the late Socialist President Francçois Mitterrand, adopted in 1983.   Despite a string of concessions meant to ensure social justice, President Nicolas Sarkozy’s centre-right government will face strong trade union opposition, with strikes and demonstrations likely after the summer break.   But in contrast to revolts against his predecessors’ labour market reforms, this time the street is unlikely to prevail.   “The symbol is important. It was important to break the psychological barrier of retirement at 60. Then you can start doing things. But by itself it won’t assure the health of the pension system,” said Gilles Moec, an economist at Deutsche Bank#001f5e ! important; padding-bottom: 0px ! important; color: #001f5e ! important; background-color: transparent ! important; background-image: none; padding-top: 0pt; padding-right: 0pt; padding-left: 0pt;"> in London.   This will probably be the last big economic reform of Mr. Sarkozy’s five-year presidential term, which runs until May, 2012, but it certainly won’t be the last pension overhaul.   It still leaves France, which has one of the highest life expectancies in the world, with one of the earliest departure ages among industrialized countries. Germany is gradually moving from 65 today to 67 in 2029 and Britain to 65 for women as well as men in 2020, and 68 for both sexes by 2046.   Labour Minister Eric Woerth said the pension system would reach financial balance in 2018 and run a small surplus in 2020.   But that is based on a wildly optimistic assumption that unemployment will fall to 6.5 per cent by 2018 – a level last seen in 1981. The jobless rate stood at 10.1 per cent in April.   It will also involve raiding a €35-billion contingency fund created earlier this decade to cope with future pensions shortfalls which was not supposed to be touched until 2020.   On the revenue side, Mr. Sarkozy broke a self-imposed taboo by raising income tax on high earners and increasing levies on capital gains and stock options to help plug the pensions deficit.   Those measures, worth €3.7-billion from next year, punched a hole in the “tax shield” for the rich which the president enacted in 2007 to fulfill an election promise that no one should have to pay more than half their income to the state.   The government managed expectations and timing skilfully. Senior conservatives including Prime Minister François Fillon called for raising the retirement age to 63, making Sarkozy look moderate when he decided at the last minute on “only” 62. After weeks of leaks to government-friendly media and trial balloons, the proposals were announced shortly before the summer holidays, after the congress of the main reformist trade union and in the middle of the soccer World Cup.   Voters had been softened up by months of headlines about a euro zone debt crisis in which most other European governments are taking more painful austerity measures and bolder structural reforms than France.   The government left the level of pensions unchanged and increased contributions for civil servants only gradually to match the private sector by 2020.   It also exempted about half a million heavily unionized public utility workers from a later retirement age until at least 2017 in a bid to limit protests.   That may have contributed to splitting the trade unions, with the Force Ouvriere union refusing to join protest actions staged by the two biggest confederations – CGT and CFDT.   The main Socialist opposition party is also split on the reform. Party leader Martine Aubry was forced to row back and defend retirement at 60 after saying earlier this year she was not against raising the departure age.   International Monetary Fund managing director Dominique Strauss-Kahn, seen by voters as the strongest potential Socialist challenger to Mr. Sarkozy in 2012, has said that retirement at 60 should not be a dogma.   Nevertheless, the government is bound to face protests when the demonstration season resumes in September, just as the pensions bill goes to parliament.   Minor amendments may be possible at that stage if the unions manage to mobilize big protests, but most political analysts believe the key points of the reform will go through. Raising the retirement age from 60 to 62 isn't exactly what I consider major reform. But this is France, and you know what they say: Vive la Différence!

Gold Seeker Closing Report: Gold and Silver Fall Slightly Posted: 16 Jun 2010 04:00 PM PDT Gold traded mostly slightly higher in Asia and London and rose to as high as $1237.63 around the open of trade in New York, but it then chopped its way back lower into the close and ended near its early afternoon low of $1226.93 with a loss of 0.22%. Silver climbed to as high as $18.65 in Asia and fell to as low as $18.37 in late morning New York trade before it bounced back higher into the close, but it still ended with a loss of 0.7%.

Rothschild in gold Posted: 16 Jun 2010 02:47 PM PDT By Emiliya Mychasuk and Emiko Terazono June 17 2010 (Financial Times) — Lord Rothschild has returned to equity markets for higher rates of return, through his RIT Capital investment vehicle. But RIT is hedging its bets by holding a stash of gold and remains conservative in its investment choices. "We face . . . an outlook and an uncertainty unlike much that we have been used to," the 74-year-old investor warns in the latest RIT report. … Ahead of the May markets slump, it favoured cash-rich companies with a global spread. Currency plays helped significantly, as RIT cut back on sterling and euros and lifted dollar and dollar-pegged Asian currencies. But Lord Rothschild kept "significant" stores of gold and gold shares "for defensive reasons" — gold made up 9 per cent of net assets by this June. [source]

Futures Swoon As Senate Accepts Expanded Fed Audit Posted: 16 Jun 2010 02:37 PM PDT The EURJPY, and its immediate computerized secondary derivative, the general market, its taking a nosedive. The reason, as HuffPo's Ryan Grim reports, is that the Senate has now accepted an expanded Fed audit. As usual, we will believe it when we see the full list of banks bailed out by the Fed, the collateral they pledged, the cash they received, the amount of bonus paid out, the Fed credit facilities involved, the total taxpayer money lost and never to be recovered, etc. Which is why we don't buy it for a bit, and we are fairly confident that Chris Dodd is blatantly misrepresenting reality, when he tells the House panel that "the Senate will accept an expanded Federal Reserve audit proposal from the House as part of Wall Street conference committee deliberations." The House proposal allows repeated future audits of discount window and open market transactions, whereas the Senate proposal had only allowed a one-time audit. The Senate's provision had already been stronger than what the Federal Reserve and Treasury Department had previously been willing to accept. The details of the final proposal are still being worked out, but momentum is with advocates of Federal Reserve transparency. Depending on the specific language, however, Fed critics are worried the House proposal will still allow the Fed to keep information secret by keeping certain operations ongoing. Chris Dodd (not to mention the congressman from recently delisted HFT sweetheart Fannie Mae, Frank) whose annuity is contingent on preserving the Fed's status quo, would be the last person to allow the Fed to lose its position in the shadow oligarchy, and open up its books to the general population, whereby even a cursory analysis by a 3rd tier powerpoint-happy blogger would expose the Fed's chairman as liable to treason proceedings. Which is why we advise readers to keep a track on the E&Y FX rate: once the smoke clears, it should become perfectly obvious that Dodd has done nothing less than what his moneyed masters have demanded of him, yet presented in a tidy little package. At the end of the day, the Fed will not lose its grip on the ponzi until the pitchforks come swinging. Alas, for that to happen, one can only hope that AT&T keeps the preorder block on the iPhone 4 for at least a few more months. At that point, no matter what the doctored CPI is, the day or reckoning will finally be at hand.

The Israel-Turkey Rift: Is The Future of NATO At Risk? Posted: 16 Jun 2010 01:42 PM PDT If anyone still harbored any doubts that there is an urgent need to resolve the Middle East crisis one needs only look at the events that unfolded two weeks ago off the coast of Gaza when Israeli commandos stormed a Turkish relief vessel .. Read More...

Mainstream News: Incentives Gone, Home Builders Won’t Lift The Economy This Time Posted: 16 Jun 2010 12:42 PM PDT WASHINGTON - Homebuilders are sending a message: They won't be able to contribute much to the economic recovery now that government home-buying incentives have vanished. Home construction and applications for building permits sank in May, overshadowing favorable reports on manufacturing and wholesale inflation. Fewer homes mean fewer jobs. Construction fuels a broad swath of industries across the economy. Yet double-digit unemployment is among the main reasons people have passed on buying new homes. Even with near-record-low mortgage rates, the industry is struggling. More Here..

BP Inverts, Spain Next? Posted: 16 Jun 2010 12:16 PM PDT Zero Hedge had a piece today (BP Curve Goes Nuts) on the inversion (blowout) of BP’s 1 year/10 year spread. At one point the short date paper was yielding 10% while the long dated stuff was at 7%. You don’t see this too often. When you do, it is always a giant red flag waving “Risky”. What is the price of a 5% AA 10 year if market forces bring it to an 8% yield? 80% of par. As a result, there is a 20% upside to this bond. What is the upside on a one-year investment at 10%? 10%. Therefore short date paper has half the return potential. Who would want that? Short-term yields explode as a result. It works on the downside as well. If there were a default that led to a payout of 60% of par the guy who buys at 80% loses a quarter of his money. The holder of the short-term stuff pays 90% and loses a third of their money. The BP inversion is a function of the uncertainty the company faces. I doubt there was much liquidity. That said, the market was making a prediction of a default. When the dust settles in a few days it will be interesting to see if the inversion is sustained. There is another case of an inversion in the making that is worth watching. Rather than a one-day explosion like BP this one has been on a slow burn. It is every bit a red flag. The following is a “Before and After” look at Spanish and Greek bonds. First consider Greece on 5/2 (white) and 6/16 (blue). You can see how the yield curve inverted from 2yr -10. Today it has “normalized” at very high rates. The market perception is that the risk of default is less. This is backed up in Greek CDS pricing. Now consider Spain on 6/15 (yellow) and six weeks ago (red). The disorderly market that Greece suffered is not evident, yet. I see a steepening curve, higher rates across all maturities and a sharp flatting around the 2-5 year. This is where the inversion will take place. The following is a different look of the 2s/5s for Spain. The spread is still positive (65bp) but we just broke levels not seen since the world was ending in 2008. This deterioration is happening during a ‘risk on’ period for the markets. When the sentiment pendulum swings the other way in a few weeks Spain will face an inverted curve. This will shut them out of the long-term debt market. Call that a crisis. The only thing preventing it from happening is the ECB. They are buying sovereign paper to the tune of E40-50b per week of late. I don’t believe they can keep up that level of buying for another month.

Gold Price is Merely Touching Back to the Starting Line Before Taking Off Posted: 16 Jun 2010 11:31 AM PDT Gold Price Close Today : 1229.30Change: -3.90 or -0.3%Silver Price Close Today : 18.432 Change -13.7 cents or -0.7%Platinum Price Close Today: 1569.90Change: 9.10 or 0.6%Palladium Price Close... This is a summary only. Visit GOLDPRICE.ORG for the full article, gold price charts in ounces grams and kilos in 23 national currencies, and more!

Why Did Fed Advocate #1 Mel Watt (And 7 Others) Hold A Fundraiser Within 48 Hours Of The House FinReg Vote? Posted: 16 Jun 2010 10:41 AM PDT These are the kinds of stories that just make one's blood boil: the WaPo reports that the Office of Congressional Ethics (find the 10 oxymorons) is investigating either allegedly violently corrupt congressmen who held fundraisers within 48 hours of the House vote on Wall Street reform. This is not only pathetic, this is stupidity on a gargantuan scale: America deserves its manifest despotism for allowing such cretins to be voted in. And who leads this particular parade of 8 dunces? Why our old friend, North Carolina Democrat, Mel Watt, whom we have written extensively about before, specifically in his capacity of Fed advocate #1, who repeatedly tried to kill the Paul-Grayson bill to audit the fed (we refuse to capitalize this institution any longer). For previous stories on Watt's BofA/Wachovia/American Express/ABA-facilitated escapades, read here and here. And just in case the purpose of the probe was not quite clear to our less than cynical readers, here is the WaPo explaining why these are 8 Congressmen who have hopefully just waved all their chances to reelection goodbye, and hopefully will find a job at their Wall Street-based sponsors: "The probe is focused on whether the timing of accepting the campaign checks created an unacceptable appearance of a conflict, according to sources familiar with the investigation and letters sent by the OCE to lobbyists requesting information. The OCE's spokesman declined to comment for this article, citing the ongoing nature of the investigation." More from WaPo: The office is scrutinizing five Republicans and three Democrats, a diverse group that includes a conservative, Rep. Jeb Hensarling (R-Tex.), and a liberal member of the Congressional Black Caucus, Rep. Melvin Watt (D-N.C.). Seven of the eight members held fundraisers for their reelection campaigns on Dec. 9 or Dec. 10 -- just before the House voted Dec. 11 in favor of a bill to make broad changes in how Wall Street and financial firms are regulated, according to a Washington Post analysis. Rep. Tom Price (R-Ga.) held a "Finance Services luncheon" at the Capitol Hill Club on Dec. 10. On the same day, a lobby firm with financial clients, Davis & Harman, hosted a fundraising breakfast for Rep. Earl Pomeroy (D-N.D.) at its Pennsylvania Avenue offices. Watt held a Dec. 9 fundraiser and soon after withdrew a proposal he had introduced to subject auto dealers to tougher regulations, according to congressional records. The fundraiser generated checks largely from finance groups, including Goldman Sachs and the Investment Company Institute. In an interview, Watt said he will answer the OCE's questions and declined to comment on the investigation. The House ethics manual instructs members to steer away from accepting campaign donations if the timing creates an unacceptable appearance of a conflict of interest. The other members under review are Republicans John Campbell of California, Frank D. Lucas of Oklahoma and Christopher Lee of New York and Democrat Joseph Crowley of New York. Jamey Delaplane, partner at Davis & Harman and a former Pomeroy staff member, said his event for Pomeroy was planned seven weeks prior, when the timing of the House vote was not known. "Clearly, we had no sense this would coordinate in any way with the House financial services vote," he said. And all this is happening even as Dodd and Frank are selling the collective future of American generations at an NPV of some hyperinflated discount rate, just so Wall Street can pick the pockets of the working class for a couple more years.

Daily Credit Summary: June 16 - Spain, Pain, And BP's Bane Posted: 16 Jun 2010 10:40 AM PDT Commentary courtesy of www.creditresearch.com Spreads closed tighter today with HY notably outperforming IG and both ahead of stocks at the close. HY has now outperformed stocks and US outperformed EUR for three days in a row but we suspect a lot of this index performance is skew and roll related as we are not seeing as positive sentiment in the broader market (and skews were much narrower in EUR initially). Stress in the Spanish banking system is nothing new but with DS-K swooping in this week from the IMF, and the oh-so-trustworthy Stress-Tests due to be announced, anxiety was running high as Spain sovereign risk broke back above 250bps and BBVA and Santander struggled wider and flattened (CEE sovereigns also floundered today). Of course, far more importantly, World Cup favorites Spain lost their first round football match to the Swiss 1-0 (shame I hear you all cry). Today's option expiry in credit helped with some early activity but volumes were relatively low as we stayed within a pretty tight range. Notably that range was the sweet spot for much of the recent comments we have said about negative gamma (117-120ish) where we had seen some major rushes across this region and recently backfilled and traded it more fully. Today's expiry might help to lift some of that technical impact and bring back IG and HY to more 'real' trading. Breadth was solid in US credit single-names today with tighteners outpacing wideners about 2-to-1 and while the HY index compressed 10bps or so (outperforming IG) we saw a very clear theme in single-name of HY outperformance of IG names. In fact, lower rated credits significantly outperformed BBB to AA- rated names today with the latter on average wider by cohort - mirroring the strong underperformance of these cohorts during this roll. Between the CDS roll this weekend, the continued skew compression in HY14, and the much more notable 3s5s flattening, we are less convinced of this as any re-emergence of risk appetite en masse (although HY bond yields did compress today and we saw a pick up in volume from recent days - though well below average). HY, The Roll, Skews, and Risk Appetite We suspect much of the HY improvements are CDS roll related and more discriminatory unwinds into short-term strength. The higher-rated underperformance today was largely due to the weakness in Energy and Utility names as those two sectors were the clear losers on the day (the only two sectors that showed average decompression today). A glance at the skew on HY14 shows that we are currently at the tightest the index has been to intrinsics since inception (see below) suggesting the macro overlays are being lifted against underlying unwinds but of course beta to stocks is leading them both tighter - we feel that a narrower skew (more in line with XOver) is much better for post roll resets since it removes a potential hole in any decompression trade - we will likely be adding to the HY-IG decompression here over the next couple of days. http://www.scribd.com/doc/33140705/HY14-Skew Since inception the HY-IG trade has done very well but has pulled back close to our trailing stops here (although positively we see skews much narrower providing for a cleaner trade in our view). Today's close below 600bps in HY is the first time since 5/17 (and we note that IG is 9-10bps wider of the comparable levels from 5/17). We feel the compression in HY is as much related to the roll and index arb and while a 110bps compression close-to-close since 6/9 is significant (and somewhat beta-risk related), the fact that we have had three days in a row of double-digit HY spread compression (first time since mid Feb) and outperformance of S&P futures for three days in a row (as intrinsics and 3s5s curves have tended to be far less sanguine) suggests HY index moves are a little ahead of real risk appetite for now (and with HY bonds underperforming on a pick up in volume helps to support our case). Perhaps notable is the fact that both IG and HY are pulling back to their longer-run averages. We track this relationship via Z-Scores and while we saw IG's 50-day cross above its 200-day and continues to rise (and HY continues to move in the same bearish direction - now only 15bps away from the cross), both HY and IG were well over 3 standard deviations above their 50-day averages during the last few weeks - suggesting at least some level of oversold bounce was likely. Today's moves brings both back to less than 0.5 stdevs cheap to their 50-day average - a much more comfortable level of relative risk. Of most note though and worth paying close attention to was HY's close tighter than its 200-day average for the first time since 5/17 and the rolling beta between IG and HY is back at 4.7x (its highest since 4/27). Balancing these short-term signals of momentum with a understanding of roll and skew technicals as well as 3s5s flattening (which in HY14 just broke below its flattest since inception) provides us with some mental cushion against jumping on the rerisking bandwagon. Financials outperformed followed by Leisure, Media, and Basic Materials - which obviously corresponds to the sectors with the worst performance of the last roll and supports somewhat the idea of pre-roll unwinds which likely as not have been spurred by some thin-volume stock rallies and EUR stability. In Financials, consumer finance and insurers were the better performers (again perfectly mirroring their positions as recent major underperformers). Builders were weak following the disastrous prints and we found TOL's confirmation that things aint so good somewhat comforting - it seems once again that Bob was on his game a few week's back - but ABX and CMBX were modestly higher in price on average today. Movers in Detail Spreads were mixed in the US with IG tighter, HVOL wider, ExHVOL better, and HY rallying. IG trades 11bps wide (cheap) to its 50d moving average, which is a Z-Score of 0.7s.d.. At 117.25bps, IG has closed tighter on 213 days in the last 376 trading days (JAN09). The last five days have seen IG converging to its 50d moving average. HY trades 80.1bps wide (cheap) to its 50d moving average, which is a Z-Score of 0.2s.d. and at 593.81bps, HY has closed tighter on 98 days in the last 376 trading days (JAN09). Indices generally outperformed intrinsics with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL underperformed but widened the skew, ExHVOL outperformed pushing the skew wider, HY outperformed but narrowed the skew. Comparing the relative HY and IG moves to their 50-day rolling beta, we see that HY outperformed by around 10.5bps (or 62%). Interestingly, based on short-run empirical betas between IG, HY, and the S&P, stocks underperformed HY by an equivalent 16.6bps (~ 98%), and stocks underperformed IG by an equivalent 1.3bps (~ 96%) - (implying IG outperformed HY (on an equity-adjusted basis)). The names having the largest impact on IG are Hartford Financial Services Group (-37.5bps) pushing IG 0.28bps tighter, and Halliburton Company (+27.5bps) adding 0.21bps to IG. HVOL is more sensitive with SLM Corp pushing it 1.01bps tighter, and RR Donnelley & Sons Company contributing 0.59bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Hartford Financial Services Group (-37.5bps) pushing the index 0.37bps tighter, and Halliburton Company (+27.5bps) adding 0.28bps to ExHVOL. The price of investment grade credit rose 0.06% to around 99.25% of par, while the price of high yield credits rose 0.63% to around 96.38% of par. ABX market prices are higher (improving) by 0.59% of par or in absolute terms, 2.86%. Volatility (VIX) is up 0.05pts to 25.92%, with 10Y TSY rallying (yield falling) 4.2bps to 3.26% and the 2s10s curve flattened by 1.8bps, as the cost of protection on US Treasuries fell 2.17bps to 37bps. 2Y swap spreads widened 0.1bps to 36.75bps, as the TED Spread tightened by 1.8bps to 0.45% and Libor-OIS improved 0.3bps to 32.5bps. The Dollar strengthened with DXY rising 0.18% to 86.136, Oil rising $0.56 to $77.5 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 1.08% today (a 0.91% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold dropping $4.25 to $1229.9 as the S&P rallies (1113.9 0.04%) outperforming IG credits (117.25bps 0.06%) while IG, which opened wider at 120bps, underperforms HY credits. IG13 and XOver13 are -3.5bps and -11.5bps respectively while ITRX13 is -2bps to 126.25bps. Dispersion fell -1.4bps in IG. Broad market dispersion is less than historically expected given current spread levels, pointing to a more sanguine view of credits as investors discriminate less between names, with dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails. 36% of IG credits are shifting by more than 3bps and 51% of the CDX universe are also shifting significantly (more than the 5 day average of 50%). The number of names wider than the index increased by 1 to 53 as the day's range fell to 5.5bps (one-week average 5.64bps), between low bid at 116.5 and high offer at 122 and higher beta credits (-1.3%) outperformed lower beta credits (-0.21%). In IG, tighteners outpaced wideners by around 2-to-1, with 36 credits wider. By sector, CONS saw 21% names wider, ENRGs 71% names wider, FINLs 21% names wider, INDUs 19% names wider, and TMTs 29% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) outperformed US (IG exFINLs) with the former trading at 115.63bps and the latter at 113bps. Cross Market, we are seeing the HY-XOver spread compressing to 33.31bps from 38.78bps, but remains below the short-term average of 63.12bps, with the HY/XOver ratio falling to 1.06x, below its 5-day mean of 1.11x. The IG-Main spread decompressed to -9bps from -9.62bps, but remains below the short-term average of -6.49bps, with the IG/Main ratio rising to 0.93x, below its 5-day mean of 0.95x. Among the HY names, we see higher risk names (>500bps) outperforming lower risk (<500bps) names. In the IG names, we see higher beta names outperforming lower beta names. In the US, non-financials underperformed financials as IG ExFINLs are wider by 0.1bps to 113bps, with 54 of the 106 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 4.71bps to 157.43bps, with Finance names (worst) tighter by 13.5bps to 389.77bps, Banks (best) tighter by 9.46bps to 128.04bps, and Brokers tighter by 9.75bps to 201.92bps. Monolines are trading tighter on average by -196.65bps (6.18%) to 2696.2bps. In IG, FINLs outperformed non-FINLs (3.85% tighter to 0.07% wider respectively), with the former (IG FINLs) tighter by 7.6bps to 189.2bps, with 13 of the 19 names tighter. The IG CDS market (as per CDX) is 13.4bps cheap (we'd expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (103.82bps), with the bond ETFs underperforming the IG CDS market by around 53.24bps. In Europe, ITRX Main ex-FINLs (underperforming FINLs) rallied 1.68bps to 115.63bps (with ITRX FINLs -trending tighter- better by 3.25 to 168.75bps) and is currently trading tight to its week's range at 0%, between 122.69 to 115.63bps, and is trending tighter. Main LoVOL (trend tighter) is currently trading tight to its week's range at 4.74%, between 115.63 to 107.22bps. ExHVOL underperformed LoVOL as the differential decompressed to -12bps from -12.18bps, but remains below the short-term average of -8.83bps. The Main exFINLS to IG ExHVOL differential decompressed to 20.01bps from 19.64bps, but remains above the short-term average of 17.17bps. The Emerging Market index is 0.2% riskier (0.7bps wider) to 277.2bps. EM (Trend Tighter) is currently trading tight to its week's range at 2.12%, between 308.9 to 276.5bps. The HY-EM spread compressed to 316.62bps from 334.26bps, but remains below the short-term average of 361.67bps, with the HY/EM ratio falling to 2.14x, below its 5-day mean of 2.25x. Index/Intrinsics Changes CDR LQD 50 NAIG -3.23bps to 103.71 (7 wider - 33 tighter <> 25 steeper - 25 flatter). CDR Counterparty Risk Index fell 4.71bps (-2.9%) to 157.43bps (4 wider - 10 tighter). CDR Government Risk Index rose 0.05bps (0.04%) to 112.04bps.. CDX14 IG -1.38bps to 117.25 ($0.06 to $99.25) (FV -1.06bps to 124.29) (36 wider - 68 tighter <> 67 steeper - 58 flatter) - Trend Tighter. CDX14 HVOL +0.75bps to 185.745 (FV -3.5bps to 0) (10 wider - 19 tighter <> 12 steeper - 18 flatter) - Trend Tighter. CDX14 ExHVOL -2.05bps to 95.62 (FV -0.31bps to 105.56) (26 wider - 69 tighter <> 40 steeper - 55 flatter). CDX14 HY (30% recovery) Px $+0.63 to $96.38 / -17bps to 593.8 (FV -13.28bps to 586.4) (16 wider - 82 tighter <> 62 steeper - 36 flatter) - Trend Tighter. LCDX14 (70% recovery) Px $+0.75 to $96.25 / -21.84bps to 352.43 - Trend Tighter. MCDX14 -1bps to 209.5bps. - No Trend. ITRX13 Main -2bps to 126.25bps (FV+0.62bps to 130.54bps). ITRX13 Xover -11.5bps to 560.5bps (FV-11.17bps to 555.83bps). ITRX13 FINLs -3.25bps to 168.75bps (FV+0.48bps to 178.06bps). DXY strengthened 0.18% to 86.14. Oil rose $0.56 to $77.5. Gold fell $4.25 to $1229.9. VIX increased 0.05pts to 25.92%. 10Y US Treasury yields fell 4.2bps to 3.26%. S&P500 Futures gained 0.04% to 1113.9. Single-Name Movers The biggest absolute movers in IG were Halliburton Company (+27.5bps), RR Donnelley & Sons Company (+18bps), and Anadarko Petroleum Corp. (+16.2bps) in the underperformers, and Hartford Financial Services Group (-37.5bps), SLM Corp (-35bps), and American International Group, Inc. (-25bps) in the outperformers. The biggest percentage movers in IG were Halliburton Company (+17.46%), RR Donnelley & Sons Company (+8.7%), and General Mills Inc. (+7.21%) in the underperformers, and Hartford Financial Services Group (-11.11%), XL Capital Limited (-6.9%), and Barrick Gold Corp. (-6.21%) in the outperformers. In Main, the biggest percentage movers were Gas Natural SDG SA (+15.3%), Iberdrola SA (+13.21%), and Repsol YPF SA (+11.36%) in the underperformers, and Xstrata Plc (-6.64%), Muenchener Rueckversicherungs AG (-5%), and Holcim Ltd (-3.38%) in the outperformers.The largest absolute movers in Main were BP PLC (+47.5bps), Gas Natural SDG SA (+34.82bps), and EDP-Energias de Portugal, S.A. (+26.54bps) in the underperformers, and Banco Espirito Santo SA (-16.5bps), Xstrata Plc (-16bps), and Glencore International AG (-15bps) in the outperformers. The biggest percentage movers in XOver were Valeo SA (+1.6%), Codere Finance SA (+1.27%), and GKN Holdings Plc (+1.11%) in the underperformers, and FCE Bank PLC (-6.02%), UPM-Kymmene Oyj (-5.36%), and Fresenius SE (-4.35%) in the outperformers.The largest absolute movers in XOver were Codere Finance SA (+10.11bps), Valeo SA (+3.5bps), and GKN Holdings Plc (+2.5bps) in the underperformers, and BCM Ireland Finance Ltd (-61.13bps), Seat Pagine Gialle SpA (-48.54bps), and FCE Bank PLC (-37.5bps) in the outperformers. In the names of the HY index, the biggest percentage movers were Pride International Inc. (+5.26%), KB Home (+4.17%), and RadioShack Corp (+3.32%) in the underperformers, and Dole Food Company, Inc. (-9.6%), Dillard's, Inc. (-8.5%), and Nalco Company (-7.69%) in the outperformers. The largest absolute movers in HY were KB Home (+20bps), Pride International Inc. (+19bps), and Royal Caribbean Cruises Ltd (+15bps) in the underperformers, and Dole Food Company, Inc. (-71.35bps), First Data Corp (-65.23bps), and Clear Channel Communications Inc (-49.59bps) in the outperformers. The CDR Counterparty Risk Index Series 2 (of brokers and banks) fell -4.71bps (or -2.9%) to 157.43bps. UBS AG (5bps) is the worst (absolute) performer among the banks/brokers of the CDR Counterparty Index, whilst UBS AG (3.13%) is the worst (relative) performer. Citigroup Inc (-24bps) is the best (absolute) performer among the banks/brokers of the CDR Counterparty Index, and Citigroup Inc (-12.21%) is the best (relative) performer. The CDR Aussie Index fell -2.08bps (or -1.68%) to 121.4bps. Foster's Group Limited (0.88bps) is the worst (absolute) performer, whilst Foster's Group Limited (1.19%) is the worst (relative) performer. Macquarie Bank Limited (-8.5bps) is the best (absolute) performer, and RIO Tinto Ltd (-4.04%) is the best (relative) performer. The CDR Asian Index fell -1.57bps (or -1.17%) to 132.26bps. KT Corp (7.66bps) is the worst (absolute) performer, whilst KT Corp (6.76%) is the worst (relative) performer. Promise Co Ltd (-26.89bps) is the best (absolute) performer, and Sharp Corporation (-9.42%) is the best (relative) performer.

Mr. Denninger and Gold – Part Deux or: A Rebuttal to All Fiat Money Apologists Posted: 16 Jun 2010 10:31 AM PDT via Gordon Gekko's Blog The last post saw almost a holy war break out between the opposing camps of paper-bugs and the gold bugs (truth-bugs, really) resulting in a record number of comments1 (645 at last count) the highest for any post on ZH – ever (pending Marla’s confirmation of course. Where are you, Marla?). I wish to thank everybody who participated in the discussion for their insightful comments and feedback.  In his rebuttal to my previous article - eloquently titled "Listen to the Hucksters, Lose Your A**" - Mr. Denninger raised certain points - ill-informed as they may be (not to mention classic fiat money apologists' arguments)- to which I wanted to respond. I hope that this response will dispel some of the myths and misinformation surrounding hyperinflation, Gold and our paper money system. I must warn you though: it’s going to be a bit longish read (although interesting, I hope), so sit down with your favorite cup of coffee and without further ado let’s get started.   On Anonymity It appears that Mr. Denninger has an issue with anonymity, perhaps being irritated at not getting the opportunity to engage in ad hominem attacks, as is his custom. Karl conveniently forgets the fact that one of the websites he has frequently referred to, quoted and even praised ever since its inception – ZeroHedge – has the principle of anonymous speech at its very core. In ZH’s own words:  Though often maligned (typically by those frustrated by an inability to engage in ad hominem attacks) anonymous speech has a long and storied history in the United States. Used by the likes of Mark Twain (aka Samuel Langhorne Clemens) to criticize common ignorance, and perhaps most famously by Alexander Hamilton, James Madison and John Jay (aka Publius) to write the federalist papers, we think ourselves in good company in using one or another nom de plume. Particularly in light of an emerging trend against vocalizing public dissent in the United States, we believe in the critical importance of anonymity and its role in dissident speech. Like the economist magazine, we also believe that keeping authorship anonymous moves the focus of discussion to the content of speech and away from the speaker- as it should be. We believe not only that you should be comfortable with anonymous speech in such an environment, but that you should be suspicious of any speech that isn't. (All emphasis mine) Indeed, anonymous speech is protected by the First Amendment to The United States Constitution, as has also been affirmed by the Supreme Court of the United States (McIntyre v. Ohio Elections Commission 514 U.S. 334 (1995)) – and with good reason: Protections for anonymous speech are vital to democratic discourse. Allowing dissenters to shield their identities frees them to express critical, minority views . . . Anonymity is a shield from the tyranny of the majority. . . . It thus exemplifies the purpose behind the Bill of Rights, and of the First Amendment in particular: to protect unpopular individuals from retaliation . . . and their ideas from suppression… at the hand of an intolerant society. (Emphasis mine) The fact of the matter is that people care more for the ideas expressed rather than who is expressing them. Are you afraid to contest on the strength of ideas and facts alone, Mr. Denninger? The Metals Forum Specifically, I got tired (fast) of the incessant and mentally-deficient spamming of my forum with goldbug crap and thus have deemed it off-topic everywhere except in.... surprise.... the metals forum. That's right, I have a specific place for all such discussions where they're perfectly welcome - even if I believe the people running their particular beliefs are wrong (or worse.)   (Emphasis mine) Just because you have a specific forum for the “metals” does not mean that you promote an open discussion regarding them or do not ban people who dare to have ideas different than yours. This is what one of the commenter’s on my blog (and, apparently, a former participant of your "metals forum") “George K” had to say about your “metal forum”: I would like to note that I am one of the people who got banned from Denninger's forum for daring to question his judgment on gold. Although Karl has a subforum for metals, that does NOT change the fact that he created it precisely so that he could force "gold bugs" into his little gold ghetto, and so that Karl could point to it as a justification for banning anyone who dared to question his judgment on gold when he makes comments denigrating it in his "tickers" or elsewhere on the forum. “Perfectly welcome”. Right. On Hyperinflation Worthless currency eh?  Hmmm... all I have to do is be able to obtain a return that exceeds the devaluation of the currency in question, assuming it does in fact devaluate. Also, first you say: Of course what really happened was that gold's price collapsed and the promised hyperinflation didn't occur. But then you say: Those who are looking for hyperinflation are about 20 years too late. We already had it. First in stock prices, and then in houses.  Anyone who cares to argue that taking the SPX from 100 to 1500 over a period of 20 years is not "hyperinflation" has rocks in their head. (Emphasis mine) Well, what is it Karl? Did the hyperinflation occur or not? Of course, it would help if you actually knew what hyperinflation is which clearly you don’t, or perhaps you deliberately choose to define terms according to your convenience.    Seriously, I mean that has to be the first “hyperinflation” in history where only two asset classes rose. Not only that, these were financial assets (or investments) and they rose much higher than the commodities and goods needed for everyday living. I mean this has to be the most prosperous “hyperinflation” in the history of mankind! If this is what “hyperinflation” looks like, then I think every country should have one. I mean Zimbabwe should be a freakin’ world superpower right now! Yeah, somebody definitely has rocks in their head. Clearly, this is NOT what hyperinflation is. Many people tend to think that hyperinflation is simply a higher rate of inflation. Not so. The only similarity between your everyday government-theft enabling inflation and hyperinflation is in the name. There is a phase transition that occurs going from simple inflation to hyperinflation, namely, a “crisis of confidence” which eventually renders the currency worthless. In a hyperinflation we are not dealing with linear functions anymore, but exponential ones. Now I’m not going to go into a detailed explanation of how and why a hyperinflation occurs, in general, and why it will occur in the US, in particular, because excellent discussions regarding both of these topics can be found on Wikipedia and FOFOA respectively, and I’m sure Mr. Denninger will be interested in going through them. Suffice to say that hyperinflation is a currency collapse which occurs when people lose confidence in the currency, i.e. people are not willing to hold the currency for any length of time and rush to exchange it for real goods as soon as they receive it. This results in not only a high inflation rate, but an exponentially increasing one where prices double every few weeks, days or – during the end stages of the currency - even hours.  The inflation rate is reported monthly, even daily, instead of annually.  In real terms, a hyperinflation is, in fact, a deflationary depression, as even though the nominal amount of currency in circulation might reach multi-trillions, its real value is depreciating exponentially due to the high velocity and subsequent high (and increasing) inflation rate. Indeed, there is a shortage of currency in a hyperinflation as the demand for currency outstrips ability of the Central Bank to create it. Did you realize what just happened!? No matter how fast the CB prints (or digitally creates) currency, people are always one step ahead of the Central Bank2. So even though the CB can print currency, it can no longer steal! The people have finally realized the scam and will have no more of it.  To give you an idea about what a hyperinflation looks like, here are some excerpts from The Nightmare German Inflation: By 1923, the wildest inflation in history was raging. Often prices doubled in a few hours. A wild stampede developed to buy goods and get rid of money. By late 1923 it took 200 billion marks to buy a loaf of bread….Millions of the hard-working, thrifty German people found that their life's savings would not buy a postage stamp. They were penniless….By mid-1923 workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods. However, by this time, more and more often, shops were empty. Storekeepers could not obtain goods or could not do business fast enough to protect their cash receipts. Farmers refused to bring produce into the city in return for worthless paper. Food riots broke out. Parties of workers marched into the countryside to dig up vegetables and to loot the farms. Businesses started to close down and unemployment suddenly soared. The economy was collapsing….Meanwhile, middle-class people who depended on any sort of fixed income found themselves destitute. They sold furniture, clothing, jewelry and works of art to buy food. Little shops became crowded with such merchandise. Hospitals, literary and art societies, charitable and religious institutions closed down as their funds disappeared. And to give an example as to what kind of inflation to expect during a “currency collapse” a.k.a. hyperinflation, here are inflation rates from some of the worst hyperinflations in history (via Wikipedia): Is that what happened in the United States in the 20 year period that Mr. Denninger is referring to? No. But it sure as hell IS what’s in store. Seriously, I would love for Karl to explain how he intends to outrun the exponential devaluation of the currency when prices are doubling every few days or even hours with…umm…LEAP Calls. Even if, for arguments sake, we assume that the rise in the value of your LEAP calls outpaces the devaluation of the currency, at some point you are going to have to cash out to realize the “gain” - assuming, of course, that the counterparty who wrote the calls is still solvent and is actually able to pay up (more likely the exchange will declare a force majure as counterparties go bust left and right due to the exponential increase in price, so now you are left with nothing instead of the rosy profits you had been dreaming about)- you’re still stuck with the damn currency - toilet-paper! What is your “out”? That which the government cannot create at will out of thin air - real goods and commodities, or whatever’s left of them for sale at that point. And what is the best “real good” to hold in a hyperinflation? The one which is the “most marketable”3 of them all - Gold! – which unfortunately won’t be available for sale anymore then. So you would have been better off if you just swallowed your hubris, bought Gold at the outset and gotten with the program [of protecting your savings]. Karl’s LEAP Call Profits - Now tell me this is something you [will] want more of! (Courtesy Wikipedia) Moreover, each and every hyperinflation in history – and there have been many, with the US itself having experienced one - has occurred simultaneously with a gold corner, i.e., Gold stopped being quoted in that currency – there was no Gold available at ANY price in the hyperinflating currency, whereas many other goods were (or whatever was left of them). Quite an interesting coincidence, don’t you think? Well, only if you don’t know (or refuse to accept) the fact that Gold is the only real money there is – a fact people quickly come to realize when the fire of hyperinflation starts burning. Why You Should Stay OUT of the Stock Market in a Hyperinflation Let’s take a look at what happened in the Weimar Stock Market: We can say that those who bought a well-diversified list of stocks in solid, well-established companies quite early in the inflation and who held on throughout the period and also through the stabilization crisis saved much or all of their capital. However, there were many pitfalls along the wayside for the greedy, the fearful and the over-clever. Those who did best were investors with a certain unemotional, stolid character, a basic confidence that strong, well-managed companies would come through, and an immunity to excitement, anxiety and speculative temptations. Many very sharp but brief advances and declines in the market led to widespread speculation, and well-intentioned investors often wound up as traders. Naturally most of them did as badly as amateur speculators generally do. Many decided that speculation was the only sensible approach; when the entire economy and financial structure was visibly crumbling, who could wait patiently with confidence in the long-range value of anything? So to be sure, the stock market may rise tremendously during a hyperinflation but is not as straightforward as it seems. There is a lot of accompanying volatility – before the system finally becomes unhinged and collapses [into hyperinflation]- as is occurring in the US Stock Market right now –where one wrong move can destroy your life savings. We've already had two spectacular rises followed by two equally spectacular crashes (2000 and 2008) followed by another spectacular rise in 2009 – how many people were able to successfully trade around that? Very few. Buying “protection” with LEAP calls or any other instrument attached to the stock market during a hyperinflation is simply GAMBLING, and we all know how all gambling endeavors end up. Yes, you can buy and hold companies you think are solid, but you don’t know which companies will survive the hyperinflationary storm. Even worse, during times of economic distress when its own revenues are collapsing (again, in real terms), the government can confiscate any company it wants to – often the ones which are most profitable thus rendering your stock holdings in that company worthless. I really don’t understand is why you would risk your life savings gambling in the stock market CASINO when you have a much safer and better alternative which will not only preserve but increase your purchasing power when the government currency falls apart, as has been CONCLUSIVELY demonstrated throughout the various hyperinflations that have occurred in human history so far. The Dollar, Gold and Exter’s Pyramid Then Mr. Denninger points to the DXY chart which does not present a very accurate picture in my opinion as it simply reflects the different rates at which various fiat currencies are sinking in terms of real purchasing power. Moreover it is easily manipulated as Central Banks can and do intervene in currency markets all the time. But yes, the dollar has risen in terms of real purchasing power against a lot of things, although not all. Still, both of these phenomena are easily explained as the dollar is still the world reserve currency and is considered to be the most liquid asset i.e. “money” (for the time being anyways) by many people. As I already said: Initially, of course, many people (such as Mr. Denninger) – mistakenly thinking the dollar to be “money” – will rush to its perceived safety causing the dollar to rise. Which is what has happened “since the financial crisis in 2007”. But here is the thing – Gold has risen much more in terms of purchasing power than the dollar, i.e., you can buy a lot more real goods, commodities and services including “actual hard productive assets” - ounce for ounce - with Gold than with the dollar - dollar for dollar - since 2007. And this is not simply a coincidence. The model that best describes, in my opinion, what will happen – and is indeed happening - as we move along this [Gold] deflationary depression is Exter’s Pyramid. Exter’s pyramid As the higher layers are liquidated – indeed, evaporate (h/t Trace) as the market for them simply stops existing -  in search of the “most marketable good” or the most liquid asset, initially everything will fall against the dollar and Gold. In fact, as I’ve said before, this pyramid is the reason why - as capital accelerates its flow down the pyramid - we can expect more and more instances of the dollar and Gold going up together. Indeed, a final spectacular rise in the dollar – lulling many dollar-deflationists into a false sense of complacency - will be our signal that the show is about to end. It is this collapse of the second-last layer – the dollar or the “Federal Reserve Note” layer - that will manifest as hyperinflation. Many dollar deflationists who realize the truth about Gold think they can time this, trade around it and switch to Gold when the time comes. However, there is no guarantee that Gold will be available at anywhere near today’s prices – or indeed available at all – at that point. Much of it will happen too quickly for many people to even comprehend what hit them.  Many people will go through the different layers of the pyramid losing chunks of their capital along the way, before they come to the conclusion that Gold is the ultimate “go to” asset – at which point they may not have anything left to preserve. Trading in the rigged paper markets casino will virtually assure that outcome. But those who know what’s really happening will go directly to Gold. They will be the ones who really hit it out of the park. On “Lawbreaking”

WEDNESDAY Market Excerpts Posted: 16 Jun 2010 10:22 AM PDT Choppy gold ends slightly lower The COMEX August gold futures contract closed down $3.90 Wednesday at $1230.50, trading between $1228.30 and $1239.50 June 16, p.m. excerpts: (from TheStreet) Gold prices stalled as traders searched for direction and debated between riskier assets and gold as a safe-haven investment. Gold's move past $1,230 an ounce prompted some profit-taking but investors, worried over the health of Spain and other European Union nations, also supported prices. The euro's recent rally was hurting gold but some analysts expect its strength to be short-lived. Any more bad headlines out of Europe will drag on the currency but be good for gold prices as investors pile into the precious metal as a form of money that retains its value…more (from Reuters) "The whole sovereign debt situation lingers on," said Ole Hansen, senior manager at Saxo Bank. "There will be persistent fear that some government debt in Europe will have to be readjusted, and that will lend support (to gold)." Fresh concern about Spain's banking and credit system knocked the euro off two-week highs against the dollar, and forced the premium investors demand for holding Spanish debt over German bunds to a euro life high…more (from AP) A Spanish newspaper reported that the IMF and European Union were trying to come up with a financial rescue for Spain. That hit the euro and pushed the dollar higher, though officials in Spain denied the report. U.S. markets have been tracking the moves of the euro because it is seen as a measure of confidence in Europe's economy. European countries are in the midst of cutting spending, and investors are concerned that those cutbacks could curtail the region's economic rebound, and in turn, the U.S. recovery…more (from Xinhua) Gold futures retreated after hitting a one-week high. The U.S. Federal Reserve reported a 1.2% increase in industrial production in May earlier Wednesday, which was stronger than expected. The upbeat data enhanced investor's confidence in a U.S. economic recovery and weighed on the gold price. But after a significant decline in housing starts and permits raised investor's concern that a weaker demand for homes may hurt an economic rebound, and sparked fears over potential deflation in the U.S. economy, gold soon recovered and surged to $1,239.50 per ounce. But gold trimmed its gains as the U.S stock market started to rally on burgeoning risk appetite, ending modestly lower…more (from Dow Jones) Kevin Grady, gold trader with MF Global, said that, despite the modest retreat, he still views gold's trend as higher. "On dips, there are people under the market waiting to buy it." He said this is in large part due to ongoing concerns about whether some European nations can pay back their debt. "The only way to do that is print money. And by printing money, you're going to devalue currencies … that is the underlying point as to why people are buying gold." Traders are also mindful of the large U.S. deficit, he added…more see full news, 24-hr newswire… June 16th's audio MarketMinute

Why Fossil Fuels Remain the Future Posted: 16 Jun 2010 10:11 AM PDT Wealth Daily submits: By Christian A. DeHaemer Three quarters of the way through his snooze-fest of a speech last night, Barack Obama said: Complete Story »

Insured Lives Sometimes Commit Suicide Posted: 16 Jun 2010 10:00 AM PDT Moral hazard is a term with specific meaning in the financial community. Originally the phrase was mainly used to describe a phenomenon within the insurance industry related to the uncertainty about the honesty of those insured. Premium writers have at times noticed that a few who buy insurance lose any incentive to minimize risk, correctly thinking this has been laid off on the company writing their policy. Insured lives sometimes commit suicide but leave no notes. Warehouses burn down more often when filled with hard-to-sell inventory. Auto owners sometimes fail to lock their cars if they are behind on their lease payments. Expensive jewelry gets misplaced when its holders come under financial pressure. This phrase now is more often used to describe components of systemic financial system risk that have sprung up in the financial crisis that began in 2008. The odd marriage of Wall Street and government has produced two enormous moral hazards: the securitized mortgage, as well as its cousin, the credit default swap, which together brought down the financial system in 2008. It has begotten conflicted market structures, such as the government mortgage agencies that promote home ownership through weakening standards, but at the same time implicitly guarantee these loans. Large brokerage firms and banks fearlessly extended credit knowing they had the Federal Reserve standing by to slash the cost of funds and repair their balance sheets. Depositors readily handed over their savings to them, because the FDIC guaranteed against loss. Other strange beasts have evolved over time: Ratings agencies are paid handsomely by issuers, particularly for high margin, complex derivative securities. For years many feared a conflict between commercial banking and brokerage, but this separation was irrelevant in the current crisis, as proven by the better performance of institutions in Canada and other countries. No one objects that investment banks give away purportedly objective research that happens to compliment high-margin corporate finance activity and proprietary trading operations, a structural flaw that damages the competitiveness of those who would author reports on investments with an independent perspective. While these financial hazards have gained attention, the largest by far gets no recognition at all. The operation of a fiat currency encourages the accumulation of debt, which in turn pumps up the value of assets including stocks. After generations so much can be amassed that a mega – collapse can ensue, one far greater than if gold backed the currency and also bank reserves. Gold acts as a brake on reckless expansion because the threat of conversion of paper back to gold is always a possibility. In fact it is likely whenever pyramiding of national currencies or bank loans is uncomfortably high. The danger of fiat currency is invisible to the public, professional investors, and political commentators, who are oblivious of its mechanism. Thought to be a "normal" element of finance ever since we moved off direct specie systems shortly after the Constitution was ratified, its inherent flaw has remained concealed despite the meltdown of the financial system in 2008. Since it is likely to remain unknown, it provides the ideal vector for transmitting the disease of socialism throughout the economic corpus. The collapse of the economy permitted the majority – controlled Congress in conjunction with the new administration to authorize an unprecedented quantity of government spending, which will be funded in part by some $1 trillion of freshly minted fiat currency. There can be no question that this is a seizure of wealth roughly equivalent to one year's collection of income tax, yet there is more outcry over making a trivial increase in the topmost bracket from 35 percent to 39.6 percent. The conditions for vulnerability to this virus are ideal, for the window for fiat money growth through bank loan expansion, which would normally accrue to the private sector, was closed once the public discovered it could no longer tolerate debt levels at over three times national income. As the adage goes, when one door closes another opens; money creation can only be done now through fl at-out printing, and this solely flows through a pipeline directly into the U.S. Treasury. The historical record is such that helicopter dumps of cash through the monetization of debt enliven an economy temporarily, like the flash of burning magnesium. So it is likely that another downleg could follow, which would require repeated doses of the same inefficacious medicine. The effect is to exhaust the wealth from savers and investors and dispense it to the lowest income brackets of society through entitlements such as expanded health care. Thus, in addition to spreading socialism through changing the tax code, the new administration will be able to utilize the interlocking system of fiat currency and fiscal spending to redistribute far more wealth quickly than ever was collected and redirected by the IRS. Commentators on Wall Street greeted the first salvo of the economic recovery strategy by cheering on a massive stock market rally that began in March 2009, while talk radio focused only on the spending and taxation angle of the stimulus, completely missing the point that none of this could have been accomplished without facilitation from the Fed. Regards, Bill Baker, for The Daily Reckoning [Editor's note: This passage is reprinted from William W. Baker's book, Endless Money: The Moral Hazards of Socialism, with the permission of John Wiley & Sons, Inc (©2010). You can get your own copy here.] Insured Lives Sometimes Commit Suicide originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

CAPE, Tobin q, Imply Market Is 48% Overvalued Posted: 16 Jun 2010 09:56 AM PDT A quick observation for those who care to see just how disconnected from rality the market is at these levels, comes courtesy of Smithers & Co., which has updated its CAPE (Cyclically Adjusted PE) and Tobin q chart. Briefly, as of June 10, the S&P was 46% overvalued based on CAPE and 50% overvalued based on q. Incidentally, this makes perfect sense: when the FNM and FRE churnamathons advised their HFT sponsors they would no longer be able to play hot potato with these two bankrupt stocks, they immediately dropped by 50% as soon as the HFT brigade exited stage left. It is not a stretch to see how the computerized trading brigade has made a comparable valuation anomaly with the broader market. Shut down HFT, and next thing you know the market will drop to its fair value: somewhere 50% lower. From Smithers & Co: With the publication of the Flow of Funds data up to 31st March 2010 (on 10th June 2010), we have updated our calculations for q and CAPE, which show very little change from our previous calculations. Non-financial companies, including both quoted and unquoted, were 62% overvalued according to q at 31st March 2010, when the S&P 500 index was 1169. Adjusting for the subsequent decline to 1087 (10th June, 2010), the overvaluation had fallen to 50%. Revisions to data had little impact on q, with downward revision to net worth for Q4 2009 of 2.9% being offset by a downward revision to the market value of non-financial equities of 2.1%. Net worth for Q1 2010 fell slightly as equity buy-backs exceeded profit retentions. The listed companies in the S&P 500 index, which include financials, were 58% overvalued at 31st March 2010, according to our calculations for CAPE, based on the data from Professor Robert Shiller’s website. Adjusting for the subsequent decline to 1087 (10th June, 2010), the overvaluation had fallen 46%. (It should be noted that we use geometric rather than arithmetic means in our calculations.) Data for our calculations of q are taken for 1900 to 1952 from Measures of Stock Market Value and Returns for the Non-financial Corporate Sector 1900 - 2002 by Stephen Wright, published in the Review of Income and Wealth (2004) and for 1952 to 2009 from the Flow of Funds Accounts for the United States (“Z1”) published by the Federal Reserve. Data for our calculations of CAPE are taken from the data published on Robert Shiller’s website. As net worth and cyclically adjusted earnings per share change little during a quarter, only changes in share prices are important for changes in the market value between our quarterly updates. The value of the market can thus be readily adjusted by viewers to this website. As the S&P 500 index changes, viewers can simply insert the new value and calculate the q and CAPE values, i.e: With the S&P 500 at 1169 as at 31st March 2010, q was 1.6166 and CAPE was 1.5761. To update as at 10th June 2010, when the S&P 500 was 1087, for q take 1.61 × 1087 ÷ 1169 = 1.50 and for CAPE take 1.58 × 1087 ÷ 1169 = 1.46.

CNBC's Cramer: Get out of stocks now Posted: 16 Jun 2010 09:42 AM PDT From Zero Hedge: After catching a few soundbites of Cramer's spiel today, we were stunned: for once theStreeter did not lose his marbles over an engineered, 20 handle, 200DMA breakout rally. Quite the opposite. In what is likely a first, the Mad Money host actually told his viewers it is time to get out of the market: "I am calling this a bad rally. This market has now become... Read full article (with video)... More on stocks: This chart says stocks could be in big trouble Top manager Zulauf: Stocks are on the verge of another huge collapse Richard Russell: The terrible costs of Obama's and Bernanke's ignorance

Why Does Everyone Believe Spain Is About to Run to the EU/IMF for Help? Posted: 16 Jun 2010 09:42 AM PDT Reggie Middleton submits: The EU Denies Planning Spain Credit Line with IMF, US, although rumors and leaks are propping in more places that a Swiss damn being plugged with a bunch of slender, fair fingers of those many blond maidens – after all, Greece did not want and was not looking for aid either. That trillion dollar bailout fund was the result of a bunch of politicians with too much money on their hands having absolutely nothing else to do with their time. Cliff Wachtel gathers much of the evidence: Complete Story »

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