Gold World News Flash |
- Hard-nosed Fed sends global markets reeling
- Oil and Gold Respond to Risk Appetite with Similar Volatility, Different Trends
- Why QE Could Trigger a Collapse of the Dollar
- Commodity Prices Show the True Stagflation Story
- U.S. Dollar Threatened by Fannie & Freddie
- Gold Technicals: Are you COT in the Trap?
- MacMurray Whale: Find Energy Catalysts, Find Growth
- The Fed's Biggest Bubble
- What They’re Smoking on Wall Street
- Interesting BNN Interview
- Why The Dollar Is Key
- The Market Ticker - So Riddle Me This (Richmond Fed)
- More Ignorant Snickering About Gold
- Jim?s Mailbox
- In The News Today
- Hourly Action In Silver From Trader Dan
- Hourly Action In Gold From Trader Dan
- Gold Breaks Channel
- LGMR: Gold Falls with Stocks & Euro as Yen Hits 15-Year High, Fed Prepares Fresh QE
- Gold Alert
- Things
- Short Update on Model Portfolio and Grandich Clients
- 2010-08-24 Gold is too expensive now!
- GoldSeek.com Radio Gold Nugget: Peter Grandich & Chris Waltzek
- The Future of Fannie and Freddie
- For Profit Education Jumps From the Frying Pan to the Fire.
- The Feds Biggest Bubble
- US Government To Devaluate The Dollar 50% Overnight?
- Central Banks are NOT ordinary Gold Investors
- Gold Falls with Stocks & Euro as Yen Hits 15-Year High…
- Housing and Jobs: The Underlying Problems Are Re-emerging
- Asian Metals Market Update
- Is Hungary about to witness fall 2008-like volatility all over again?
- To Be Unsure
- 10 More Notes on the Current Market Scene, Part 2
- 10 Notes on the Current Market Scene, Part 1
- Gold Seeker Closing Report: Gold Rises Slightly While Silver Gains Over 2%
- Ben Davies: Market Trend Ready for Silver Up Days of Two, Three, Four Dollars
- A Guest Post: A Bubble In Conservatism
- Are Pensions The Next AIG?
| Hard-nosed Fed sends global markets reeling Posted: 24 Aug 2010 07:20 PM PDT August 24, 2010 12:31 PM - Global bond markets and the twin havens of the yen and Swiss franc have been flashing warning signs for weeks. Read the full article at the Telegraph......
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| Oil and Gold Respond to Risk Appetite with Similar Volatility, Different Trends Posted: 24 Aug 2010 07:20 PM PDT courtesy of DailyFX.com August 24, 2010 12:00 PM We knew that fundamental activity would pick up this week; but the severe impact of today’s US housing data was beyond what could have been expected. It breaks are being thrown on the economic recovery faster than expected and commodities are suffering for it. North American Commodity Update Commodities - Energy Economic Troubles Further Exacerbate the Supply and Demand Imbalance for Crude Crude Oil (LS Nymex) - $71.63 // -$1.47 // -2.01% All too often recently, we have seen the conviction in breakouts from various assets completely collapse as the obvious lack of fundamental drive or questionable bearing on investor sentiment leaves a security drifting. This isn’t the case with crude oil’s bear wave. Though the energy market’s reversal began in the first full trading week of the month and momentum has notably cooled since the strong push on the 11th, this drive has nonetheless run...
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| Why QE Could Trigger a Collapse of the Dollar Posted: 24 Aug 2010 07:20 PM PDT Excerpt from the Hussman Funds' Weekly Market Comment (8/23/10): [INDENT]A week ago, the Federal Reserve initiated a new program of "quantitative easing" (QE), with the Fed purchasing U.S. Treasury securities and paying for those securities by creating billions of dollars in new monetary base. Treasury bond prices surged on the action. With the U.S. economy predictably weakening, this second round of quantitative easing appears likely to continue. Unfortunately, the unintended side effect of this policy shift is likely to be an abrupt collapse in the foreign exchange value of the U.S. dollar. ... In short, quantitative easing is likely to induce what the late MIT economist Rudiger Dornbusch described as "exchange rate overshooting" - a large and abrupt shift in the spot exchange rate that occurs in order to align long-term equilibrium in the market for goods and services with short-term equilibrium in the capital markets. ... Frankly, I've alway...
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| Commodity Prices Show the True Stagflation Story Posted: 24 Aug 2010 07:20 PM PDT Over the weekend I watched dullards on CNN screaming about the dire consequences of deflation. The Federal Reserve and their minions in the MSM are misleading the American public again. They desperately want to keep inflation high so they can rob you blind and transfer your money to Wall Street banks. Their gameplan is to create mass confusion by wailing about the horror of deflation. I know it would really be horrible if I had to only pay $2.00 a gallon for gas, less for bread, less for my clothes, and less for coffee. But wait, let’s see what is really happening. For those who like charts, see below. In summary, these are the true figures: [*]Wheat prices are up 54% since June. [*]Corn prices are up 26% since June. [*]Soybean prices are up 13% since June. [*]Cotton prices are up 20% since June. [*]Coffee prices are up 36% since June. [*]Sugar prices are up 38% since June. [*]Copper prices are up 18% since June. [*]Gold prices have risen 6% in the last month. The ...
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| U.S. Dollar Threatened by Fannie & Freddie Posted: 24 Aug 2010 07:20 PM PDT August 24, 2010 Social subsidies may make good politics, but all too often bad economics. When Fannie Mae was created in 1938, the seeds were planted for the biggest housing bust the world has ever seen; the going was good while the party lasted for the first 80 years, but ended in the financial crisis of 2008 – the hangover for many still remains. In 2008, many feared the dollar might collapse should Fannie Mae and its smaller cousin Freddie Mac (together here Government Sponsored Entities or GSEs) fail; little did those so fearful know that the government would embark on the largest bailout in history; the U.S. dollar rallied as the GSEs were put into conservatorship, making the previous implicit government guarantee just about as explicit as is possible. Now, it appears the proposed “reform” of these entities only has stakeholders in the status quo; we are concerned this may ultimately open old wounds, and next time, the U.S. dollar may ...
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| Gold Technicals: Are you COT in the Trap? Posted: 24 Aug 2010 07:20 PM PDT Stewart Thomson email: [EMAIL="s2p3t4@sympatico.ca"]s2p3t4@sympatico.ca[/EMAIL] Aug 24, 2010 1. The gold uptrend line in place from $1156 broke last night. Here’s a look at that break: Gold Uptrend Snapped 2. There’s a small head and shoulders top pattern on the 60 minute chart which hints at the 1210 area, and 1210 is also support on the daily chart. Here’s a second look. 3. The USD has risen about 5% against the CAD in the time gold has fallen 1.5% from the $1240 area highs. Yet, those of you who have Euros or Canadian dollars (aka the cbone) as your base currency have seen your gold rise in price! 4. Some of you are starting to see some of your gold juniors “pop” upside on various announcements. I maintain that much more such “golden popcorn” will be popping in September, as years of work by many of the juniors starts to come to fruition. I would argue that “Juniors Popping Corn” is goi...
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| MacMurray Whale: Find Energy Catalysts, Find Growth Posted: 24 Aug 2010 07:20 PM PDT Source: Brian Sylvester of The Energy Report 08/24/2010 If there were an alternative energy sector exam, Cormark Securities Analyst MacMurray Whale would ace that test. He knows the micro and macro forces at play in a truly global sector and how those forces are affecting companies seeking growth in largely uncharted waters. It's altogether uncommon knowledge but in this exclusive interview with The Energy Report, Whale provides a heady glimpse at some prospective alternative energy plays with tangible catalysts for growth. MacMurray likes some big-cap energy developers paying dividends and some much smaller solar plays with big upside. It's an alternative energy cheat sheet you don't need to feel guilty about. The Energy Report: MacMurray, if the alternative energy cycle were a year, what month would we be in? MacMurray Whale: In general, I would say about March. But I think that all of the different subsectors have different timelines. Ten years ago, we would have be...
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| Posted: 24 Aug 2010 07:20 PM PDT [FONT=Arial,Helvetica,sans-serif][COLOR=#000000][FONT=Arial]Michael Pento, Senior Economist of Euro Pacific Capital[/COLOR][/FONT] I've made a living out of exposing economic fallacies, but there's one whale that I can't seem to harpoon. Even top-flight Wall Street analysts seem to believe that the Fed's doubling of the monetary base after the credit crunch has not had an inflationary impact on our economy. Their logic can be summed up like so: "The money the Fed created and dropped from helicopters has all been caught in the trees." In other words, the Fed is creating money, but it is just being held as excess reserves by the banking system instead of being loaned to the public. Therefore, the money supply hasn't truly increased, there is no money multiplier effect, and aggregate price levels are behaving themselves. But this is only a half-truth. Yes, most of the money created by the Fed has been kept by commercial banks as excess reserves. However, the Fed do...
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| What They’re Smoking on Wall Street Posted: 24 Aug 2010 07:20 PM PDT The 5 min. Forecast August 24, 2010 12:32 PM by Addison Wiggin & Ian Mathias [LIST] [*] Study shows sky-high use of marijuana among Wall Street traders [*] Chris Mayer on a popular investment that will likely prove to be a bummer [*] One unusual trade to protect you from the coming stock market meltdown [*] The worst data point so far this year… proof the recession is far from over. Plus, an income program to help you deal with it [/LIST] Markets make opinions, the old-timers say. Today, we have empirical proof. Or at least a litmus test on the “mood” out there. Gone are the days of the stereotypical high-rolling cokehead on Wall Street, says the drug screening firm Sterling. After conducting tests at 270 firms over the past three years, positives for cocaine have dropped 60%... down to just 7% of all failed tests. Use of ganja, whacky tobacky, sensi, the good stuff -- whatever your favorite name for it is -- is way up. Marijuana now accounts fo...
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| Posted: 24 Aug 2010 07:20 PM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! August 24, 2010 10:40 AM Kaminak Gold’s CEO was on BNN earlier today. I’ve bet the ranch (so to speak) on Silver Quest Resources (I’ve bet my lungs before and lost). I like to bring your attention to his notation about soil samples and the results from drilling under them and suggest you look back at SQI’s press releases and their soil sample results. Fingers, toes and all other items available are crossed. [url]http://www.grandich.com/[/url] grandich.com...
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| Posted: 24 Aug 2010 07:20 PM PDT Stocks: The move to a lower low on Friday puts the odds squarely in the "one more leg down" camp. I've noticed a couple of patterns emerging in the stock market. The first one is the tendency for a market cycle to bottom on an anticipated news event. The last two intermediate cycle lows bottomed on or one day prior to a jobs report. The second is the tendency for a cycle to bottom only after a fake out earlier in the cycle. I've been expecting a short daily cycle to balance out the extremely long cycle into the May flash crash (62 days trough to trough). But it doesn't look like we are going to get one. Every cycle has either run late into the timing band or stretched long. So from here on out I won't be looking for anymore short cycles (which probably guarantees the next one will be). When the market starts to rally out of that cycle bottom we could see a pretty aggressive move as shorts panic and have to cover. I actually expect this...
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| The Market Ticker - So Riddle Me This (Richmond Fed) Posted: 24 Aug 2010 07:20 PM PDT Market Ticker - Karl Denninger View original article August 24, 2010 09:35 AM...
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| More Ignorant Snickering About Gold Posted: 24 Aug 2010 07:20 PM PDT Gold volume during the Monday trading day was so light that it's hard to take any price movements [either up or down] as having any real meaning. Having said that, the pressure that existed yesterday was all on the down side, with the high... such as it was... coming in the wee hours of Monday morning. The strongest selling pressure began at 10:00 a.m. Eastern... at the London p.m. gold fix The low of the day was shortly after the London close at $1,221.10 spot. Gold recovered a bit... and only closed down a few dollars on the day. Not much to see here, folks. There certainly isn't a thing that can be read into Monday's silver price activity. I provide the graph for entertainment purposes only. Volume in silver was very light as well. The dollar didn't do much from the beginning of trading in the Far East at 6:00 p.m. Eastern time Sunday night... and hugged 83 cents right up until gold's low price was in around 11:00 a.m. Eastern time Mond...
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| Posted: 24 Aug 2010 07:20 PM PDT View the original post at jsmineset.com... August 24, 2010 07:58 AM Jim Sinclair's Commentary Yra is spot on. Please read this. Notes From Underground: Amazing Grace has appeared and it's in Jackson Hole By Yra Amazing Grace! How sweet the sound, That saved a wretch like me. I once was lost but now am found, Was blind, but now I see. The markets are reacting to a Wall Street Journal article by the new FED fair-haired minion, Jon Hilsenrath, and the great dissonance that took place at the last FOMC meeting. Our readers know that we have been very critical of the FED and its reliance on models that, on a good day, are so badly flawed. The pursuit of economic policies based on poor analysis has been a major problem and the markets are waking up to the fact that the FEDis neither omniscent nor omnipotent. Today, the markets are responding to the fear that the FED is" lost in the ozone " so risk is being taken off and the algorithm's of the risk-off trad...
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| Posted: 24 Aug 2010 07:20 PM PDT View the original post at jsmineset.com... August 24, 2010 08:02 AM Dear CIGAs, The smoke and mirrors modest upturn in economic statistics primarily due to the FASB capitulation in April of 2009 comes to an end as the Ski Jumper gets airtime. All the MOPE about recoveries and double dip comes into question with the violent nature of major economic statistic dissolution. Central Banks around the world, knowing full well that the assets of financial entities are as weak as they were during the 2008-2009 crash, immediately revert to QE to infinity. This lights fires to the Western World currencies making the dollar weak and the euro outrageously volatile. This gives rise to Currency Induced Cost Push Inflation, better known as the Yellow Brick Road to Hyper Inflation. Central banks are depicted as the devils as QE to infinity is thrown onto the pile in hopes of another illusionary soft landing. This can easily happen so fast that your hair will catch fire and you get whiplash t...
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| Hourly Action In Silver From Trader Dan Posted: 24 Aug 2010 07:20 PM PDT View the original post at jsmineset.com... August 24, 2010 08:25 AM Dear CIGAs, Click chart to enlarge today's hourly action in Silver in PDF format with commentary from Trader Dan Norcini ...
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| Hourly Action In Gold From Trader Dan Posted: 24 Aug 2010 07:20 PM PDT View the original post at jsmineset.com... August 24, 2010 09:47 AM Dear CIGAs, Click chart to enlarge today's hourly action in Gold in PDF format with commentary from Trader Dan Norcini ...
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| Posted: 24 Aug 2010 07:20 PM PDT courtesy of DailyFX.com August 24, 2010 07:38 AM 240 Minute Bars Gold is making its way lower in an impulsive fashion. The first 5 wave decline ended following a terminal thrust from a triangle. The rally is in 2 equal legs, common for corrections, and may be complete. The drop below the corrective channel inspires confidence in the downside....
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| LGMR: Gold Falls with Stocks & Euro as Yen Hits 15-Year High, Fed Prepares Fresh QE Posted: 24 Aug 2010 07:20 PM PDT London Gold Market Report from Adrian Ash BullionVault 08:45 ET, Tues 24 August Gold Falls with Stocks & Euro as Yen Hits 15-Year High, US Fed Prepares Fresh Quantitative Easing THE SPOT PRICE of wholesale gold dropped to a 7-session low Tuesday lunchtime in London, as world stock markets fell hard in thin trade and the Japanese Yen reached a new 15-year high vs. the Dollar. "Monday was about as quiet as it gets," says one London bullion dealer in a note. "Lower gold [today] attracted only light physical interest," a Hong Kong dealer adds. Versus the Dollar, the British Pound fell to a 1-month low and the Euro hit a 6-week low on the forex market, stemming the gold price drop to £787/oz and €30,920/kg respectively. Against the Yen, gold fell to a two-week low of ¥3270 per gram. The Euro dropped to its worst level since late 2001 at ¥105.50. Silver meantime tested last week's lows versus the Dollar, but hit its lowest level against priced in Yen since m...
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| Posted: 24 Aug 2010 07:19 PM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! August 24, 2010 06:34 AM Not more than an hour ago, I noted that one shouldn’t blink when it comes to gold’s pullback and whammo – a tremedous rally took place. How do I feel about this? No matter how we finish, the perma-bears and the vast majority who continue to dislike and discourage gold ownership are in big trouble. [url]http://www.grandich.com/[/url] grandich.com...
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| Posted: 24 Aug 2010 07:19 PM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! August 24, 2010 05:46 AM [LIST] [*]The Illusion [*]Another Illusion [*]Dollar Collapse? [*]Preparing for war [/LIST] [url]http://www.grandich.com/[/url] grandich.com...
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| Short Update on Model Portfolio and Grandich Clients Posted: 24 Aug 2010 07:19 PM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! August 24, 2010 06:24 AM Keeping in mind that my model portfolio is for speculators (the word speculation was created so the word gambling didn't have to be used but that's what one is doing when speculating) and one must be mentally and financially prepared to lose part or all their capital, here are some of my latest thoughts: I continue to limit equity exposure to metals and mining shares and within that group overweight towards precious metals over base metals. I continue to believe uranium has bottomed and the news that Goldman Sachs is getting involved with uranium is bullish. Dennison Mines (DML-TSX-V) is among my favorites. Cameco (CCJ-NYSE) is a core holding while Uranium Participation (U-TSX) is a good way to play the uranium price. One special note in this area, Nevsun Resources (NSU-NY-ALT) continues to make new 52-week highs a...
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| 2010-08-24 Gold is too expensive now! Posted: 24 Aug 2010 07:19 PM PDT “Gold is too expensive now!”—the short-sightedness, the self-assured way in which it is mostly spoken out, the sheer nonsense of it—this line just drives me crazy. I just returned from my bank.
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| GoldSeek.com Radio Gold Nugget: Peter Grandich & Chris Waltzek Posted: 24 Aug 2010 07:00 PM PDT GoldSeek.com Radio Gold Nugget: Peter Grandich & Chris Waltzek
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| The Future of Fannie and Freddie Posted: 24 Aug 2010 06:59 PM PDT Tom Lindmark submits: The recent Treasury-HUD confab on the future of housing finance has elicited a lot or pretty good comment and analysis. Predictably, there two sides — those who want Fannie (FNMA.OB) and Freddie (FMCC.OB) in some form preserved along with the government’s unholy involvement in the housing industry, and those who think that we should learn from failure and get about the business of letting the industry makes its way in the world without artificial props. The status quo crowd is not surprisingly populated by those of the Left, though it was left to an outlier to make their case. Bill Gross of PIMCO fame came out calling for full nationalization of housing finance, and followed up his statements today in his monthly letter. I’ll leave it to you to read it in its entirety, but here’s the nub of his argument: Complete Story »
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| For Profit Education Jumps From the Frying Pan to the Fire. Posted: 24 Aug 2010 05:43 PM PDT
This is turning into a major home run for those who took my advice the sell the sector on June 2 (See “Hedge Funds Target for Profit Education” by clicking here at http://www.madhedgefundtrader.com/june_2__2010.html , and my follow up here at http://www.madhedgefundtrader.com/august-5-2010.html ). I knew I was on to a great trade here because of the torrent of emails I received from these schools threatening me major leagal action, adverse publicity, or worse. That’s always a good sign for a new short play. For those who haven’t been following this drama, for-profit schools have made a killing from naïve, aspiring students taking out $5 billion in Pell grants and $20 billion in federal subsidized loans. On graduation they end up with a diploma useless in this job market and a staggering load of debt. A few weeks after my initial report, the General Accounting Office reported the results of an undercover investigation showing widespread fraud and abuse in the sector, with some financial aid officers advising students to lie on their applications. The chickens have come home to roost. Since my call, lead stock Apollo Group (APOL) of University of Phoenix fame has fallen 27%, DeVry (DV) 33%, and Capella Education (CPLA) 35%. Those who cast a wider net caught Corinthian Colleges (COCO) down a spectacular 62% and Strayer Education down 30%. The management of Strayer said they were shocked, shocked that repayment rates were so low, as Claude Raines might have said in the classic film, Casablanca. I’ve has some friends get their eyes ripped out by these guys through running up $50,000 in debt to obtain useless degrees, so this couldn’t be happening to a nicer bunch of people. Although these stocks have already gone down a lot, there may be more to go. It is safe to say that the Obama administration hates these predatory schools, and that criminal prosecutions are certain to follow. On the other hand, if you prefer to sleep at night, you might want to book some profits now. To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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| Posted: 24 Aug 2010 05:42 PM PDT
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| US Government To Devaluate The Dollar 50% Overnight? Posted: 24 Aug 2010 05:41 PM PDT (snippet) A highly reliable sage source from the gold banking world and international consulting is loaded with deep insight, vast experience, solid connections, ongoing relationships, privileged insider information, and diverse industries tied to banking. He tipped the Jackass off in early August 2008 as to the weekend of September 15th being one to mark in history as three great failures would occur. He gave one month advanced notice of a locus of failure in three places, with great urgency. My guesses of Lehman Brothers and Fannie Mae were correct, but a blank came on the third which turned out to be AIG. He has frequently shared a viewpoint on the inevitable USTreasury default in the coming years. He first enlightened me as to the USFed resignation pathway to default, after it was loaded to the gills in toxic irredeemable impaired assets that no banks wanted. As buyers of last resort, the USFed would choke to death. Rather than a citation of path to default, he shared a great risk of a major event. He said, "The USGovt will devaluate the More Here.. 
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| Central Banks are NOT ordinary Gold Investors Posted: 24 Aug 2010 05:30 PM PDT
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| Gold Falls with Stocks & Euro as Yen Hits 15-Year High… Posted: 24 Aug 2010 05:30 PM PDT
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| Housing and Jobs: The Underlying Problems Are Re-emerging Posted: 24 Aug 2010 05:10 PM PDT
From The Daily Capitalist Existing Home Sales Today's report that existing housing sales plummeted 27% in July should not come as a surprise. Consider the fact that we are coming off of the greatest boom-bust credit cycle in world history. The focus of that cycle was residential housing which resulted in massive overbuilding of homes. Now we are seeing the inevitable result of the housing boom — the housing bust which requires the liquidation of this malinvestment. From 2001 to 2006 housing starts jumped 40%, from about 1.6 million units per year to 2.250 million units per year. That period coincided with a massive expansion of the money supply by the Fed. When the cheap money stopped, the ride ended, and projects that, but for the cheap money were unprofitable, went broke. The liquidation phase is never pretty but it is necessary for recovery. And that is why the government has been unable to prop up the housing market, except temporarily though tax credits. You can't push a string as they say, and the inevitable process of liquidation is continuing after the tax credits expired in April. According to the National Association of Realtors report, demand for existing single-family housing dropped to a 15 year low. The 27% drop was the biggest one-month drop since 1968. Sales dropped 29.5% in the Northeast, 22.6% in the South, 25% in the West, and 35% in the Midwest. June sales figures were revised downward to 5.26 million homes from 5.37 million previously reported.
Courtesy The Wall Street Journal The important existing inventory index increased to 12.5 months from 8.9 months. Which means it will take a year to sell off existing inventory, a substantial jump and a significant problem for the market. Normal inventory is a 4 to 6 months supply. While prices had appeared to have stabilized (median home prices rose 0.7% to $182,600 in July) because of the tax credits and speculator competition for foreclosure sales, this inventory glut will put negative pressure on prices. Ultimately I believe foreclosure speculators will create a floor under prices (based on the level of activity I have seen), so I don't think the downside will be drastic. Jobs Reports Last week's report on initial claims showed a MoM jump of 25,000 claimants, a 6% increase over the previous week. The 500,000 claims was a 9-month high. Initial claims had dropped to 439,000 in February, 2010, then flattened out showing a stalled recovery, and has been climbing since July. A brighter statistic was that continuing claims were down 13,000 for the week of August 7. The four-week average is 4.527 million, the lowest since the peak in March, 2009.
Courtesy The Wall Street Journal The bulk of job cuts have been in small companies:
This graphic gives a good picture of job activity by company size:
The job situation is weakening again because the underlying problems are reasserting themselves after the Fed and the government tried to paper over the problem with monetary and fiscal stimulation. Those policies have failed and underlying issues remain: local and regional banks' balance sheets are still tied up with bad loans related to commercial real estate, slow liquidation of excess housing, falling consumer demand, increased personal savings, deleveraging by consumers and companies, and business uncertainty caused by major legislation. These factors have resulted in a limitation on lending, a lack of credit demand, a declining money supply, and deflation. The government has done everything in their monetarist-Keynesian playbook to prevent a resolution of the underlying problem, but it only delayed recovery, making it worse for those who are unemployed. And that is why unemployment will rise further until these underlying problems are resolved.
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| Posted: 24 Aug 2010 05:04 PM PDT Gold and silver rose on the back of US housing woes. Sales of previously owned U.S. homes took a record plunge in July to their slowest pace in 15 years as the wind went out of the housing sector's sails and underlined a struggling economy.
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| Is Hungary about to witness fall 2008-like volatility all over again? Posted: 24 Aug 2010 05:02 PM PDT
Hungary is mired in a double whammy of declining economic data and forced austerity from the IMF. H1 2010 GDP was -0.6% s.a. and as global growth concerns come to light, it can only spell trouble for Hungary’s already-weak internals. On top of that, there exist about $2.5t in Hungarian mortgages > 5yr denominated in other currencies, namely the Swiss Franc, as presented in the chart below. This means that the entire Hungarian homeowner collective is leveraged into a massive carry trade financed by the ever-surging Francs that denominate their suddenly-surging mortgages, while the Forints they earn in and save with are plunging on ever-increasing economic deterioration in their home nation.
And with the recent euro decline, large supplies of euros are being converted into Francs again, as the CHF safe haven bid is back with EURCHF hitting a new cycle low. The SNB’s intervention attempts in the spring proved futile, so CHF regional strength may be here to stay in the foreseeable future, which has vast implications.
Bringing the Hungary story all together, a rising CHF and declining HUF both have fundamental and technical basis for the foreseeable future and trading timeframe. The picture gets even more interesting when the CHFHUF chart is considered. It is in a very long term cup & handle-esque pattern, and is approaching June highs around 220, which correspond to March 2009 highs as well. If this round of risk aversion continues, it will likely send CHFHUF breaking out into new crisis highs and the charts suggest a massive move would result. This is one of the most bullish charts I’ve ever seen for such a long timeframe and unless something big happens, Hungary could be thrust back into the spotlight as a very relevant investment (or divestment) theme. I will be going long CHFHUF on any selloff to the 212-215 region.
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| Posted: 24 Aug 2010 04:07 PM PDT We interrupt this update on Australia's protracted electoral standoff with news that hangover from the global debt binge of the last 30 years just got a lot worse. Bad headaches. Indigestion. A rumbling from below. Our story begins today in Ireland. Ratings agency Standard and Poor's has lowered its long-term sovereign credit rating on the Emerald Isle to AA- from AA. S&P said, "The downgrade reflects our opinion that the rising budgetary cost of supporting the Irish financial sector will further weaken the government's fiscal flexibility over the medium term." To be sure, to be sure, you get the feeling S&P could be saying that about a lot of governments in the next few years. Financial sectors in the Western world are still burdened with high levels of debts backed by commercial and residential real estate. To prevent those firms from failing, governments have assumed or backed their debts. But that transfers the ultimate liability for failed private sector investment to the public sector. And the question then becomes: how much debt can the government guarantee before government debt itself comes into doubt? In Ireland, net government debt is headed toward 113% of GDP by the end of 2012. That's too high, according to the S&P. Stocks in Europe reacted as you'd expect. Most of the big indexes were down over one percent. And then came the very unwelcome news that the collateral underlying so many bank assets is under massive attack. Well, that's how we'd put it. Technically, it was U.S. existing home sales. And officially, they were awful. The U.S. National Association of Realtors reported yesterday that existing home sales in July were down 27% versus June and 26% from the same month last year. That's about twice as bad as "the experts" had predicted and the lowest annual rate since the NAR began keeping track of such day. The fact that there is now enough existing home inventory to meet demand (at this pace) for the next 12.5 months may not seem like it has any significance at all to Australia or Australians. But it does. To be sure, to be sure, one aspect of the U.S. housing bubble was a massive inventory expansion by homebuilders to meet the bogus "demand" created by cheap credit. That inventory expansion never happened here in Australia. Hence the constant repetition of the idea that there's a housing "shortage." Blah blah blah. This is one of the facts cited by the bulls that apparently proves a crash cannot happen here. But what yesterday's U.S. numbers really reveal is that not even low interest rates can spur demand for credit when an asset class is in a bear market. The U.S. managed to "bring forward" housing finance demand with a tax credit for first time buyers that expired in April. That goosed demand for a bit. It's gone now, though. And what's left is a market where the only buyers for houses are speculators. All these easy money tricks have exhausted any potential demand that might be out there. No, the prudent thing to do is wait for prices to do what they always do when demand flat lines: crash. This is the possibility that spooked equity markets yesterday: that America isn't growing in the second half of this year at all. In fact, the housing numbers indicate that the American household sector is in a world of hurt and could see more of its net worth wiped out. Unless Australian share markets start tracking China and stop tracking America, this U.S. housing wipe-out part II is going to be a big fat negative for shares. And more importantly, investors are now realising that the huge household and sovereign debt problems in the West are nearly impossible to simply grow out of. What are we looking for on the ASX/200? Keep 4,180 in mind. That is about the year-to-date intra-day low for the index. It reached those levels once in June and once in July. If the index breaches them in the next month, look out below. But wait! What if all that is doomer porn and balderdash? Last night we ventured out to Flinders Lane to hear an alternative and intriguing presentation on what's moving the markets and where they're headed. During that presentation we were warned to keep our eye on one specific day: September 7th. Tomorrow, we'll tell you why. Until then! Dan Denning
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| 10 More Notes on the Current Market Scene, Part 2 Posted: 24 Aug 2010 04:07 PM PDT  David Merkel submits:
Complete Story »
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| 10 Notes on the Current Market Scene, Part 1 Posted: 24 Aug 2010 04:02 PM PDT David Merkel submits:
Complete Story »
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| Gold Seeker Closing Report: Gold Rises Slightly While Silver Gains Over 2% Posted: 24 Aug 2010 04:00 PM PDT Gold fell as much as $16.50 to $1210.10 by about 8:30AM EST before it rallied to see an $8.75 gain at $1235.35 and then fell back off a bit into the close, but it still ended with a gain of 0.33%. Silver dropped to as low as $17.73 and climbed to as high as $18.452 before it also moderated its gains a bit in the last few hours of trade, but it still ended with an impressive gain of 2.06%.
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| Ben Davies: Market Trend Ready for Silver Up Days of Two, Three, Four Dollars Posted: 24 Aug 2010 03:24 PM PDT
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| A Guest Post: A Bubble In Conservatism Posted: 24 Aug 2010 02:56 PM PDT
Submitted by Plan B Economics, (as a reminder none of the guest posts appearing on Zero Hedge necessarily reflect the views of Zero Hedge or its various spokes) A Bubble in Conservatism When one thinks of financial and economic bubbles images of reckless speculation, lavish galas and luxurious consumables are conjured. Bubbles are tied to euphoria and new economic paradigms. Bubbles grow out of the expectation of permanent prosperity. Individuals are drawn into the euphoria with the assurance they won’t lose money and that ‘everybody’s doing it’. Nobody wants to see his neighbour work half as hard and spend twice as much, so jealousy can motivate the average man to become a speculator. Eventually, in an effort to out-do one another, individuals begin taking more risk – such as investing on margin (or $0-down adjustable rate mortgages) – to achieve bigger returns (or to achieve the same returns when returns on capital inevitably shrink). During a bubble, recent asset price returns provide comfort to the few that wonder about the risks. At the point when the speculators are plenty and margin debt is high, a small change in the economic winds (usually prompted by businesses scaling back excess capacity) starts a cascade of financial ruin. While bubbles can take form in unlevered environments, it is debt that takes bubbles to ruinous proportions and makes the equity held by individuals so sensitive to otherwise innocuous economic events. Given that bubbles are classically associated with the pursuit of prosperity, is there such a thing as a bubble in conservatism? When individuals are scared about their prospects they act conservatively by saving and paying down debt. Can a massive wave of conservatism, such as the one we’re experiencing today, hit a threshold that forces it to reverse (i.e. the ‘bubble’ pops)? While a bubble in risk assets leads to a self-feeding spiral of leverage, overcapacity and low returns on capital that eventually hits a threshold causing it to self-correct, a bubble in conservative assets does not need to self correct. True, after a certain amount of time – months, years or decades – individuals may feel comfortable about their personal balance sheets and begin to reduce their savings rates and increase their use of credit. (If starting from a sound base, this transition can fuel a secular bull market.) But there are no financial constraints forcing such a change in behaviour. Let’s take this to the micro level. If you make $10,000 a year and feel euphoric about the economy you can increase your consumption – by spending all your earnings, plus borrowing – to a certain threshold. Once a threshold is hit and the bank starts calling in your line of credit, your behaviour must change. On the other hand, if you make $10,000 a year and feel wary about the economy you can save half your earnings each year. In this case, there is no threshold that is hit that forces you to start spending again. Conservative behaviour can continue indefinitely, and has done so in numerous countries with high savings rates. Today, many are saying that US Treasuries are in a bubble. I’m not arguing that the US government doesn’t have fiscal challenges, but I am arguing that the supply of funds to finance those challenges can continue flowing for a very long time. The flow of investor (individual, banks, corporate) cash into US Treasuries is driven by conservatism and not by the misguided pursuit of wealth. Individuals are not eying their neighbour’s new Porsche with envy, running to their broker to borrow $100k to invest in government bonds. Quite the opposite: investors are looking at their unemployed neighbour, their decimated 401k and their looming ‘retirement’ (whatever that may look like) and focusing on capital preservation. Wealth accumulation was so 2000s (or dare I say so 1990s). The new frugality, the liquidity trap and risk aversion are funding the US Treasury…and this ‘bubble’ is being driven by cold hard cash (as opposed to leverage). This is why the flow of funds into US Treasuries can continue for a very long time. Perhaps bonds are expensive. Perhaps the US Treasury needs to borrow a lot of money. Someday (could be sooner, could be later) the US Treasury trade won’t be a good one. I agree that the US is borrowing extreme amounts of money and Treasuries may not be a good ‘buy and hold’ long-term investment. I also agree that the US may one day implicitly default via inflation, and Treasuries may eventually fall in value. So this is not a commentary on the merits of US Treasuries as an investment (I’ll leave that to experts like Gary Shilling and David Rosenberg who both forecast double-digit returns for long bonds). This is a commentary on the characteristics of a ‘bubble’ – I believe that strong demand for funds does not necessarily characterize a ‘bubble’. Bubbles are determined by the exuberant supply of capital, not by the demand for capital. And, as previously stated, the supply of capital today can hardly be considered exuberant, as it is generated prudently from incomes and portfolio re-allocation (not from leverage or irrational investor enthusiasm). As long as risk aversion remains dead and US Treasury issuance remains within a digestible flow, US Treasuries will have a firm bid from conservative individuals, banks and corporations looking to park their cash. Yield and returns for US Treasuries will experience ups and downs – sometimes violent. But throughout those ups and downs, a strong bid for US Treasuries will remain as long as current macro-conditions prevail. To call investor demand for relative safety a bubble is to not understand the definition of a bubble. For there is no such thing as a bubble in conservatism.
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| Posted: 24 Aug 2010 02:39 PM PDT
Tyler Durden of Zero Hedge posted an excellent comment, Illinois Teachers' Retirement System Enters The Death Spiral: AIG Wannabe's Go-For-Broke Strategy Fails As Pension Fund Begins Liquidations.
You can read the Bloomberg article, Illinois Pension May Sell $3 Billion of Assets to Pay Benefits as well as the Chicago Tribune article. According to Barry Burr of Pensions & Investments, the system is the fifth Illinois statewide defined benefit plan to sell off investments this fiscal year to pay benefits:
When the financial crisis erupted, it first hit banks, insurance companies, hedge funds, real estate/ private equity funds, asset managers, and then hit pension funds. But pensions remain very vulnerable because as interest rates fall and assets dwindle, their pension deficits explode, and if they need money to cover benefits, well guess what, they're forced to sell liquid stocks to meet those obligations.
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