saveyourassetsfirst3

---

• Silver money for China by Hugo Salinas Price
• Surge Of After Hours Selling Takes Gold Volatility Index To All Time Low
• Spock needs Platinum!
• Who Wins?
• KWN Weekly Metals Wrap – Euro Gold Nears Record
• EU rescue costs start to threaten Germany itself
• Interview with Chris Whalen
• Behind Gold's New Glister: Miners' Big Bet on a Fund
• Gold 'Hump' Shifting from Diwali to Xin Nian
• Interview with John Embry
• "You Cannot Find a Bank Safe Deposit Box in Germany"
• This Past Week in Gold
• Trouble in Europe, China
• Gold "Hump" Shifting from Diwali to Xin Nián
• Use Gold Technicals To Build Core Positions Now
• Euro Debt Crisis Bankruptcy Bailout Queue, Protect Savings & Deposits From Banks Going Bankrupt!
• The FASBI Flop
• Happy Holidays? 28 Hard Questions It Would Be Great If We Could Get Some Real Answers To
• Are There Still Differences Between the Great Powers?
• Looking at Irish -- and Canadian -- Financials
• Evaluating the Prospects of a Continued U.S. Dollar Rally
• 10 Reasons to Prefer U.S. Banks Over European Banks
• 50% of the total gold reserve is in the hands .......
• The Gold Price Over Thanksgiving
• Risk Aversion Leading to Weaker Commodities
• Why the Government Hates Deflation
• Video - The Day the Dollar died
• Gold on Verge of Major Decline; Commodity Currencies Warn of Trend Shift

Silver money for China by Hugo Salinas Price Posted: 27 Nov 2010 02:43 AM PST :bowdown: Another great read from the Mexican Money Master Silver money for China Hugo Salinas Price 26/November/2010 We have been proposing the monetization of a silver coin in Mexico since 2001. According to our proposal a one-ounce coin of pure silver, with no engraved value, would be given a monetary value by the Mexican Central Bank. This coin would exist and circulate as money, in parallel with the paper money system of Mexico. The monetary value would be superior to the bullion value of the silver ounce by about 15%. This margin would allow a profit, called "seigniorage", for the Central Bank. Since the coin would not have an engraved value, rises in the price of silver (which would tend to eliminate the seigniorage of the Central Bank) would be met with new, higher, Central Bank quotes for the monetary value of the coin. The rises in the value of silver in the silver markets of the world would no longer cause the disappearance of the monetized silver ounce. As soon as a rise in the price of silver would begin to affect the seigniorage of the Central Bank, it would produce a new and higher quote. In order for the silver coin to become money and cease to be a commodity, the last quote of the Central Bank would have to remain stable and not diminish if and when the price of silver were to fall, which of course it does from time to time. Granted such immunity from falls in the price of silver, the coin would become legal tender money and could be used for any commercial transaction. Now we read that China is having problems with inflation of its money supply. We think that if China were to monetize a silver coin, its Central Bank would have an effective instrument to assist in dealing with inflation. China used silver exclusively as money for many centuries and restoring it to circulation in China would seem appropriate for China, as it aspires to recover its former glory as the richest country in the world. The hypothetical case of a monetized silver coin in China. The first thing that strikes us as we consider a silver coin to be used as money in China is that given its enormous population a one-ounce coin would appear to be much too large. Let us consider a smaller coin. In the case of silver coins with engraved values we have seen the case of Mexico, whose Central Bank attempted to retain a silver peso (with an engraved value) in circulation all the way up to 1967. The attempt required removing all previously minted and engraved silver coins from circulation and replacing them with new One Peso coins containing less silver. What we are suggesting is radically different. Instead of replacing a One Peso coin with coins with progressively less silver content, we are simply, in the special case of China, "cutting up" a one ounce pure silver coin into smaller pieces. For the purpose of silver in circulation in China, we suggest a small coin, about the size of an American dime, with a pure silver content of 1/10 oz., alloyed with 10% copper to give a fineness of .900. In metric terms, the coin would have a gross weight of 3.45 grams and a pure silver content of 3.11 grams. The determination of the monetary value of the 1/10 oz coin in Yuan Today, November 24, 2010, the exchange rate for the Chinese Yuan is 6.6489 Yuan per dollar, and silver is traded at $27.59 oz. At these values, the value of silver bullion per ounce, in Yuan, is 6.6489 x $27.59 = 183.44 Yuan per ounce. The value of silver in a 1/10 coin would be 183.44 / 10 = 18.34 Yuan. Add to 18.34 Yuan, the cost of minting, which we shall estimate at 10 cents per coin = .67 Yuan for minting costs. Then 18.34 + .67 = 19.01 Yuan. 19.01 Yuan x 1.1 to provide a seigniorage profit to the Chinese Central Bank = 20.91 Yuan. We round up the Yuan figure of 20.91, to 25 Yuan as the initial official quoted legal tender value of the small 1/10 oz coin, using multiples of 5 for steps in future increases of legal tender monetary value as the price of silver continues to rise. This facilitates public use of the coin. The Chinese population will snap up these coins in enormous quantities. As they do so, they will initially be handing over 25 Yuan for each coin purchased. One tonne of silver will serve to manufacture 321,510 coins. One thousand tonnes of silver will allow for the manufacture of 321,510,000 coins. For the population of China, this will be merely the first appetizer. The population of China will gobble up many thousands of tonnes of silver for its savings. Each 1,000 tonnes of silver that is monetized, at 25 Yuan per coin, will initially withdraw 8.04 billion Yuan from circulation. The silver coins that go into circulation will be money, but will hardly be used for purchases. It will be difficult to find these coins, as they will all be treasured up by the Chinese population. Their velocity of circulation will be close to zero and thus they will have no inflationary effect upon the economy. Paper Yuan are withdrawn and replaced with silver money which goes into savings; this is a correct way to fight inflation. Saving these coins will amount to voluntary austerity for the Chinese. Saving is the postponement of consumption. Voluntary austerity is always more effective and sounder from an economic point of view than the forced savings beloved of Statists, who have dictated taxes and scarcity for consumer goods so that the Statists can build factories. The monetization of a silver coin will be a free-market decision that prompts people to save, spontaneously, of their own accord, and which does not require raising interest rates to draw the people's money out of the economy into savings. When the Chinese begin to withdraw silver from the world markets, in order to supply the vast appetite for silver savings of the Chinese, the price of silver will climb to unsuspected heights. We can easily visualize a price four times higher than the present high price: $100 Dollars an ounce. At 100 Yuan per 1/10 oz. – the initial price calculated above, times four – the Chinese Central Bank would be withdrawing about 32 billion Yuan from circulation with each 1,000 tonnes of monetized silver coin placed in the hands of the Chinese people. Silver is sold on the world markets, for dollars. At $100 dollars/oz., the Central Bank would be able to transform part of its vast dollar and euro reserves into silver at $3,125,100 dollars per tonne. One thousand tonnes would require $3.1 billion dollars. A drop in the bucket as far as Chinese C.B. reserves are concerned, but every little bit helps, considering that Chinese reserves are not actually worth a Chinese firecracker and that sooner or later, China will have to take a gigantic bath when this fact is recognized. What about the impact of $100 silver on the price of gold? We think that the ratios of the past and of the present will disappear. Gold will not necessarily rise four times in price, to retain the same ratio with silver, at its new price of $100 dollars / oz. The silver ratio to gold has been as high as 100 to 1, and lately has been around 50 to 1. The silver ratio to gold can continue to fall towards the old ratio of 16 to 1. If China persists in purchasing world silver, the price of silver might far exceed $100 dollars per ounce and become increasingly effective in stemming inflation as higher prices for the silver coin draw off greater amounts of paper money from the economy. Quite apart from the effect of sopping up quantities of Yuan at present in circulation in China, monetizing the silver coin for the use of Chinese in their savings would have a salutary effect upon society in China. Silver as money gets masses of people to think, not of the present, but of the future, and to focus on their long-term objectives as they accumulate savings in real money. It has a binding effect upon society. Tranquility, or peace of mind, is one of the great Confucian philosophical values of the Chinese and solid savings in real money are a great tranquilizer. It seems to us, that more tranquility in a frenzied Chinese society would be of benefit to China. The world is seeking a new paradigm in money. The Keynesians and inflationists and Statists have had their day, and they have fudged it. The world's monetary system is in the initial stage of breakdown. Confidence in fiat money is evaporating. The trend is in place and there is nothing to stop it. The time for real money has arrived, and China can lead the way by monetizing silver into small coins which can be used as money. Perhaps silver will open the way to a further, more far-reaching reform for gold in the International Monetary Process; for what the world has at present is not a System, but only a Process – of meltdown. **** Hugo Salinas Price is President of the Mexican Civic Association Pro Silver; its website, with some articles in English, is www.plata.com.mx http://www.plata.com.mx/mplata/artic...idarticulo=163

Surge Of After Hours Selling Takes Gold Volatility Index To All Time Low Posted: 27 Nov 2010 01:49 AM PST http://www.zerohedge.com/article/surge-after-hours-selling-takes-gold-volatility-index-all-time-low Surge Of Inexplicable After Hours Selling Takes Gold Volatility Index To All Time Low Submitted by Tyler Durden on 11/26/2010 20:07 -0500 In addition to the rout in the ES, VIX and GC which we pointed out earlier, there were some additional fireworks behind the scenes in today's after hours session. The CBOE Gold Volatility Index, the ^GVZ plunged by the most in over a year, as the index hit an all time low of 15.92 without the underlying making much of a notable move. The most curious aspect of the trade was that the entire dump occured in the AH session. Many were left scratching their heads over what caused this monstrous unwind in long vol positions: was this the unwind of a massive long ES/short GC arb? We don't know, although if rumors that a major fund is planning to stand for delivery of Dec gold turn out to be true, then obviously someone got confirmation today. Keep a close eye out on the GVZ. Should this price level persist on Monday, then the front futures contract will likely surge. A trader whom we managed to reach late in the day had this to say on this stunning move: Typical course of action for HFT and other commodity pranksters is to shake out new contract holders. They did it with absolute gusto today, shorting thousand of contracts into thin markets. That didn't work. Gold held up. Now, taking into account that peripheral EU spreads are hitting new highs, hedge funds are getting redemption requests etc, why would you go home long ES and short GC? So what they did is they sold ES into and after the close. After that ES/SPY close they can't run these 'start arb' HFT strategies any more that go long S&P and short Gold as well. Gold's closing time is 1:45pm. They had to cover shorts. If the short covering in paper persists, perhaps the world won't even need the Krieger/Keiser physical PM campaign to destroy Blythe Masters. And a bonus observation of the gold curve is the Gold February contract, where in the last minute someone bought 2k contracts, which represents 200,000 ounces or about $272MM worth of gold. Not a bad purchase for the last trade on the slowest day of the year. As usual, we welcome our readers' perspectives on this largely unexpected move.

Spock needs Platinum! Posted: 27 Nov 2010 01:45 AM PST "... a small block of 5 or 6 pounds." :haha:

Who Wins? Posted: 27 Nov 2010 12:19 AM PST Who Wins? Latvia's Third Option Dollar Hegemony and the R... Super Imperialism: The Ec... NeoLiberalism and the Cou... Dollar War in Detail Houses as a Tax Shelter Lifting the Lid on the GFC Why Iceland and Latvia Won't (and Can't) Pay the EU for the Kleptocrats' Ripoffs This post has been generated by Page2RSS

KWN Weekly Metals Wrap – Euro Gold Nears Record Posted: 26 Nov 2010 11:51 PM PST HOUSTON – Gold managed to turn in an increase in the USD price this Thanksgiving week of a net $10.29 the ounce, closing at $1,363.62 on the Cash Market, but that was as the U.S. dollar index (DXY) raced upwards a big 195 basis points from the 78.40s to a last print Friday of 80.35 on escalating anxiety over sovereign debt in the Eurozone. Meanwhile, gold in euro terms advanced about €41.00 to a €1,030 handle, within €21.00 of its all time record high set in June. As wealth once again flees the largest European member of the "fiat currency leper colony," some of that wealth flowed into the just as sick U.S. leper colony inmate, the greenback, but an increasing amount decided to seek safe harbor in the only real money on the planet....

EU rescue costs start to threaten Germany itself Posted: 26 Nov 2010 11:40 PM PST Link:  EU rescue costs start to threaten Germany itself Image:  The next offering from Roy is another story from The Telegraph.  This one is from Ambrose Evans-Pritchard... and the headline reads "EU rescue costs start to threaten Germany itself".  The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union.  "You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver.  It is like an underground Switzerland within our borders. read more

Interview with Chris Whalen Posted: 26 Nov 2010 11:40 PM PST Link:  Interview with Chris Whalen Image:  Before I get into all my gold and silver-related stories, here's a very interesting Interview with Chris Whalen that's posted over at King World News website.  I listened to enough of this interview to know it's very much worth your time... and the link is here.

Behind Gold's New Glister: Miners' Big Bet on a Fund Posted: 26 Nov 2010 11:40 PM PST Link:  Behind Gold's New Glister: Miners' Big Bet on a Fund Image:  My first gold-related story is from yesterday's edition of The Wall Street Journal... and I thank reader Randall Reinwasser for sharing it with us.  The headline reads "Behind Gold's New Glister: Miners' Big Bet on a Fund".  It's a story about how the GLD ETF fund was founded.  For you newbies reading this column, it's an interesting looking into how it all started.  But as long as HSBC is the custodian, I still won't own it... and that's just my personal opinion... read more

Gold 'Hump' Shifting from Diwali to Xin Nian Posted: 26 Nov 2010 11:40 PM PST Link:  Gold 'Hump' Shifting from Diwali to Xin Nian Image:  The next gold-related story is courtesy of reader U.D... and is a posting by bullionvault.com's Adrian Ash over at safehaven.com.  The headline of this article reads "Gold 'Hump' Shifting from Diwali to Xin Nian".  Adrian states that "China isn't the world's No.1 gold buyer just yet. But its impact is already showing in how global gold prices move.  Surging demand from China, the world's second-largest gold buyer, is changing seasonal patterns in gold price trends for investors everywhere."  It's not overly long... read more

Interview with John Embry Posted: 26 Nov 2010 11:40 PM PST Link:  Interview with John Embry Image:  Eric King's other interview is with Sprott Asset Management's chief investment strategist John Embry.  John predicts that despite that constant disparagement of gold and silver by respectable market analysts, the need of governments to prevent debt implosions will force them to keep printing money... and thereby keep gold going up in terms of that money. That, Embry says, will induce a mania in the precious metals mining shares.  This interview is also worth your time... and the link is here.

&quot;You Cannot Find a Bank Safe Deposit Box in Germany&quot; Posted: 26 Nov 2010 11:40 PM PST U.S. silver eagles sales at 3,935,000... will the U.S. Mint break the 4 million mark next week? SLV ETF has a huge withdrawal. Silver money for China. EU rescue starts to threaten Germany itself.  Three terrific King World News interviews... and much more. ¤ Yesterday in Gold and Silver Despite how bad the gold chart looks... all is not as it seems.  With most gold traders at the bullion banks officially M.I.A. yesterday and Thursday, the volume associated with the price moves shown below were the smallest in memory.  Over both trading days, the actual net volume [with all roll-overs removed] was well under 10,000 contracts total. As I mentioned in my column yesterday, Thanksgiving day volume [with New York closed] was vapour.  So was Friday's volume.  Don't read a thing into this price action. And no matter how bad the chart looks, exactly the same thing can be said about silver... although silver's net volume on both days was around 12,000 contracts.  This is the first time I can remember silver volume exceeding gold volume over the same period... ever.  But, regardless of that fact, it's basically no volume at all. Ted Butler's comments on yesterday's price action in both metals was, quote... "they slammed the metals intentionally at a very thin time."  But one has to wonder just how many short positions in both metals they were able to actually cover on such thin volume.  Whatever amount it was, won't be known until the final CME open interest numbers are released late Monday morning Eastern time.  The world's reserve currency was already in rally mode when markets in the Far East opened on Friday morning.  The absolute top in the dollar came at 8:40 a.m. Eastern time... up about 80 basis points from the open.  The absolute lows for gold and silver on Friday came at 8:50 a.m.  From there, the dollar basically traded sideways for what was left of the New York trading session.  Here's the dollar chart from midnight Eastern time onward. Despite the big down moves in both metals on Friday, the gold and silver stocks held their own quite nicely.  Yes, the gold stocks gapped down, but overall it could have been far worse... especially for the silver stocks, which did admirably well, all things considered.  Most Canadian precious metals mutual funds closed up on the day... and my own personal portfolio was flat.  It was mostly a handful of the large cap gold companies that affected the overall index.  The HUI finished down 1.65%.  Here's the 5-day chart for the week that was. The CME's Daily Delivery report had nothing of consequence in it. There were no changes in GLD yesterday... but over at the SLV ETF, they reported that a very chunky 5,865,684 ounces of silver were withdrawn. The U.S. Mint had another sales report on Friday.  Another 13,500 ounces of gold bullion were turned into various sizes of gold eagles... but they only reported selling 60,000 silver eagles.  They're obviously loathe to break through the 4 million-per-month silver eagles sales number... as they currently sit at 3,935,000.  They've been close to this level all week... and this is despite the fact that gold eagles sales month-to-date total 100,500 ounces... which is 40% more than they had reported sold just one short week ago. Things were sure quiet over at the Comex-approved depositories on Wednesday, as only 1,980 ounces of silver were reported withdrawn on that date.  Obviously nothing came out on Thursday... and I'm sure that Friday's activity will show little activity as well when that report becomes available on Monday. Sponsor Advertisement Secret Asset Class with 18.5% Annualized Gains Ever heard of the A.O.P.? Over the last decade, this secret asset class has beaten out REITs, Utilities, the S&P 500, the DJIA, even gold. In fact, the A.O.P. has outperformed practically every asset class on the market with average, annualized returns of 18.5%.  As A.O.P. recipient Rick H. of Hingham, Mass. says, it seems "too good to be true." Click here to watch video. ¤ Critical Reads Subscribe Ireland unveils austere €15bn budget to cut deficit Early yesterday evening when I started this report, I didn't have too many stories... but as the night and early morning hours progressed, I received a lot more.  As always, you can pick and chose. The first four stories in today's column are all courtesy of reader Roy Stephens.  The first one is out of Thursday's edition of The Telegraph in London.  The headline reads "Ireland unveils austere €15bn budget to cut deficit".  To describe the budget in one word, I would use the word 'draconian'.  To give you a "for instance"... the VAT [Value Added Tax] will be raised from 21%-23% in 2013, with a further increase to 24% in 2014.  Wow!  Here in Alberta it's 5%.  The link to the story is here. View full GSD edition EU rescue costs start to threaten Germany itself The next offering from Roy is another story from The Telegraph.  This one is from Ambrose Evans-Pritchard... and the headline reads "EU rescue costs start to threaten Germany itself".  The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union.  "You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver.  It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings." says Professor Wilhelm Hankel of Frankfurt University.  I highly recommend that you read this from start to finish... and the link is here. View full GSD edition Merkel seeks to calm euro breakup fears as markets lose faith Roy's next story is from the france24.com website and bears the headline "Merkel seeks to calm euro breakup fears as markets lose faith".  If this isn't a classical example of 'whistling past the graveyard'... I don't know what is... and the link is here. View full GSD edition Debt Crisis Woes: Merkel's Reputation on the Decline in Europe The last story from Roy Stephens is posted over at the German website spiegel.de.  This article bears the headline "Debt Crisis Woes: Merkel's Reputation on the Decline in Europe".  It's obvious that the German media has the 'long knives' out, as the first paragraph reads "Everyone is talking about German Chancellor Angela Merkel these days -- and most of what they have to say isn't complimentary. Her plan to create a bankruptcy mechanism for euro-zone countries, they say, has worsened the debt crisis in Ireland and elsewhere. Merkel's name, once widely respected, is now mud."  This has now become an international pissing contest, with ugly images of the past resurfacing.  This story is well worth the read... and the link is here. View full GSD edition Putin: Russia will join the euro one day The next item is a story that I stole from a GATA release yesterday.  It's another piece from yesterday's edition of The Telegraph.  The headline of this article reads "Putin: Russia will join the euro one day".  Vladimir is visiting German Chancellor Angela Merkel at the moment and it's obvious that not only is trying to talk up the euro, but attempting to improve relations between Russia, Germany and the rest of Europe.  I know enough history about Russian/German relations over the last 100 years or so, to put this story into the proper context.  It's also another shot at the U.S. [and its currency] as well.  The link is here. View full GSD edition CHINA TELLS AMERICA: Turn Around The USS George Washington My next offering is from reader 'David in California'.  This is a Reuters story that was posted yesterday morning over at businessinsider.com.  It bears the headline "CHINA TELLS AMERICA: Turn Around The USS George Washington".  China's Foreign Ministry said in an online posting that naval exercises risks starting a war: "We oppose any military act by any party conducted in China's exclusive economic zone without approval."  The link to this very short story is here. View full GSD edition Interview with Chris Whalen Before I get into all my gold and silver-related stories, here's a very interesting Interview with Chris Whalen that's posted over at King World News website.  I listened to enough of this interview to know it's very much worth your time... and the link is here. View full GSD edition Behind Gold's New Glister: Miners' Big Bet on a Fund My first gold-related story is from yesterday's edition of The Wall Street Journal... and I thank reader Randall Reinwasser for sharing it with us.  The headline reads "Behind Gold's New Glister: Miners' Big Bet on a Fund".  It's a story about how the GLD ETF fund was founded.  For you newbies reading this column, it's an interesting looking into how it all started.  But as long as HSBC is the custodian, I still won't own it... and that's just my personal opinion... and I have lots of company in that regard.  The link to the story is here. View full GSD edition Gold 'Hump' Shifting from Diwali to Xin Nian The next gold-related story is courtesy of reader U.D... and is a posting by bullionvault.com's Adrian Ash over at safehaven.com.  The headline of this article reads "Gold 'Hump' Shifting from Diwali to Xin Nian".  Adrian states that "China isn't the world's No.1 gold buyer just yet. But its impact is already showing in how global gold prices move.  Surging demand from China, the world's second-largest gold buyer, is changing seasonal patterns in gold price trends for investors everywhere."  It's not overly long... and has some interesting graphs... and the link is here<

This Past Week in Gold Posted: 26 Nov 2010 08:29 PM PST By Jack Chan at www.simplyprofits.org 11/27/2010 GLD – on sell signal. SLV – on buy signal. GDX – on sell signal. XGD.TO – on sell signal. Summary Long term – on major buy signal. Short term – on mixed signals. We continue to hold our core positions with a hedge in place to lock in profits. We will lift that hedge upon evidence that the correction has completed. Disclosure We do not offer predictions or forecasts for the markets. What you see here is our simple trading model which provides us the signals and set ups to be either long, short, or in cash at any given time. Entry points and stops are provided in real time to subscribers, therefore, this update may not reflect our current positions in the markets. Trade at your own discretion. We also provide coverage to the major indexes and oil sector. End of update

Trouble in Europe, China Posted: 26 Nov 2010 08:08 PM PST Trouble in Europe, China Why Europe Can't Look Aft... Entrepreneurs: From the N... Krugman, China and the ro... Schemes of the Rich and G... Forever Blowing Bubbles Tainted Transactions: An Exchange What Caused The GFC Privatizing Social Security to Inflate Stock Market Prices This post has been generated by Page2RSS

Gold "Hump" Shifting from Diwali to Xin Nián Posted: 26 Nov 2010 05:16 PM PST

Use Gold Technicals To Build Core Positions Now Posted: 26 Nov 2010 04:02 PM PST Gold Bullion.  6 Month Price Chart Super Force Gold Bullion Analysis: Gold has a Super Force Buy Signal as of Friday Nov. 12th on SGOL at $135.41 and $131.70 is also a buy.  Sell at $141.73. Bullion equivalent buy price:  $1354.  Nov. 12 Bullion sell price:  $1417. Bullion buy price: $1317. I see Gold going remarkably higher over the next several months and years. Any investor who is light on Gold (under 30% precious metal assets) should begin accumulating now, and buy much heavier if Gold goes lower. As I examine the precious metal sector, I see some key developments that stand to open further buying opportunities. The first development I see is a continued impressive move in the US dollar.  The dollar, over many years, will continue to lose its value.  Over the course of the next several months, I see the USD making a move higher.  That doesn't necessarily mean Gold has to "tank", but it will likely, at least, pause the move in this sector. SFS subscribers have taken full advantage of current weakness in the Precious metals sector, particularly last week, as price was slammed lower.  Those of you who tried out my free alerts offer got in on those buys!  This week I offered faster profit booking for you with the higher velocity trades of my newest SF60 Service . The second development I want draw to your attention is the 50% retracement of the November decline.  I'm referring to the  $136.50 price area.  Note the detail of this area on the six month chart above.  When prices correct, they never go in a straight line. We have seen the initial decline followed by a bounce, that bounce has brought price to the 50% retracement line in Gold and Gold stocks. The third area correlates with the above point. As price has rebounded, note the heaviest volume, sorry to say, is to the downside. I expect more downside price action in the coming weeks. All that weakness must be bought now. I see this as a great opportunity. Use my charts to lay in capital for long term holding and trading positions. I have marked on the 6 month chart an area of initial support followed by an area entitled Floor Support. Listen carefully to my words here: The initial support has already held, followed by a bounce. I believe price will break that initial support. My Super Force Floor Support is the $1260 gold price area. It is vital to understand that any corrective action is a process. If you understand the process, you can make additional money by taking advantage of the correction. Why?  Because Gold is going much higher! Gold Bullion.  One Year Price Chart Here is the longer term daily chart. This particular chart was key in the ability of the Superforce team to successfully identify the previous 1425 peak. The only sensible way to play a correction is to buy as price goes lower. It is a total mistake to wait, target a price where you think the correction might end, and end up missing this great opportunity here now. Let me close the commentary of this section the way I started it. Gold will be remarkably higher. Gold Juniors – GDXJ Chart. Super Force Gold Juniors Analysis. I issued a sell signal to book solid profits on Tuesday, Nov. 9, at $42.18.  I then issued a Super Force Buy Signal on GDXJ on Friday Nov.12.  That's just 3 days later.  This market is starting to move!  Your buy price was $38.74. After gains of 24% in just a couple of weeks on GDXJ, this signal, from Sell to Buy, saved you another 8.1%.  These numbers of size come from the increase in market volatility.  They are not going away, and are more likely to increase! The current GDXJ rally is a counter trend move in what appears to be intermediate corrective action. Note the 50% retracement line on the one year chart! The volume story over the past week on GDXJ is absolutely critical to understanding what is happening. GDXJ has been the leader in the gold sector. Studying volume bores most technicians.  It is all-critical and points to further corrective action into the GDXJ 33-34 price area.  I'm buying all the way down. I created my SF60 Trading System to manage exactly this kind of volatility, and that volatility is growing.  I don't guess what's going to happen or "wing it".  I take all the signals, all of them, myself. Why trade Gold Stocks if they are going much higher? Why not just hold all the positions for the long term? I trade Gold stock recommendations using my 60 minute chart proprietary indicators for two reasons. 1) I have successfully traded GDX and GDXJ in these markets.  Each time lowering my average share cost basis, and enlarging my core. That is what the shorter term trading is all about.  My core is already 30% larger than it was in early summer, and yet my cash levels are higher.  The market, not me, paid for that increase in my long term core positions. 2)  Trade something you have confidence in.  Start with gold.  If you have no confidence in gold, how can you have confidence in anything in the market?  You can't.  My rule is to book wins, not losses! If that is your philosophy on trading then you want to trade items that have the highest probably on going higher over both the short and long term. Buy well.  Sell better. GDX- 9 Month Chart GDX.  Massive Breakout On 3 Year Chart Super Force Gold Stocks Analysis: My Super Force GDX Buy Signal was issued on Oct 19th for GDX at $54.26. I then gave you the GDX Sell Signal  Nov 9th at $62.73. My Super Force Buy Signal  on Nov 12th  at $59.61 gave you  substantial savings. 5.0% savings from the sell to the re-buy. The most important fact in the investment world now, is to understand correctly, just how far the Gold Stocks are, behind Gold itself. GDX is trailing Gold by over 40% since late 2008. Gold is up substantially and the chart shows zero progress for GDX, which is why you need to focus on buying it now. It's also very important to remember there is not enough gold. There are no Ben Bernanke electronic printing presses for gold. The only way to get more Gold is to mine it!  Fiat Currency is credit, not money.  You can't print money.  You have to mine it! The above facts underscore why the juniors (GDXJ) are in great demand, demand that may increase beyond even some of your imaginations. Sorry to those who had hoped for a parabolic move before Christmas, but I believe we are in a corrective phase that could take up to two months to unfold.  In this Bull Market, it would be unwise to try to time your buys at the bottom, at the end of the correction.  Gold Stocks are dramatically undervalued because of the 2008 meltdown.  As you can see on the above chart, I will help you buy into this correction systematically. Silver Chart I issued a Buy Signal  Nov. 12th on SIVR at $25.71. As you know, Silver is an asset that I hold a large core position in, and is likely going much higher in the long term. I added to positions of physical silver, locked in on the spot market at $25.00, which is the low for the correction, so far. A look at my silver chart identifies the key buying zone you need to focus on. The silver market rallied 68% from July to its peak, hit this month.  This key zone is the 50% retracement of the correction to date. What is of more importance, particularly for those who don't have any allocation to silver at all, is to buy any further weakness.  As far as whether price goes back to $25 silver, or even lower, my key indicators suggest it could happen, and I want you to be prepared to buy into such an event.  There are warnings developing on my charts.  In particular, my Price Volume Wedge Indicator is flashing a significant warning.  Systematically, I want to see everyone in the gold community buy into this correction! My SuperForce Proprietary Surge Signals: 25 Surge Index Buy or 25 Surge Index Sell: Solid Power. 50 Surge Index Buy or 50 Surge Index Sell: Stronger Power. 75 Surge Index Buy or 75 Surge Index Sell: Maximum Power. 100 Surge Index Buy or 100 Surge Index Sell: "Over The Top" Power! Stay alert for my signals, sent by email to subscribers, for both the daily charts on Super Force Signals at www.superforcesignals.com and for the 60 minute charts at www.superforce60.com About Super Force Signals: Our Surge Index Signals are created thru our proprietary blend of the highest quality technical analysis and many years of successful business building.  We are two business owners with excellent synergy.  We understand risk and reward.  Our subscribers are generally successful business owners, people like yourself with speculative funds, looking for serious management of your risk and reward in the market.   Frank Johnson: Executive Editor, Macro Risk Manager. Morris Hubbartt: Chief Market Analyst, Trading Risk Specialist. Email:   trading@superforcesignals.com trading@superforce60.com

Euro Debt Crisis Bankruptcy Bailout Queue, Protect Savings &amp; Deposits From Banks Going Bankrupt! Posted: 26 Nov 2010 03:53 PM PST The global banking system that publicly went bankrupt during September 2008 prompting government interventions in the form of capital injections, buying of toxic assets, insurance of bad debts and even outright nationalisation's has started to bankrupt the states that bailed them out, starting with the smaller states with Iceland setting the ball rolling, and this year the bailiffs came knocking on the doors of the Eurozone club members, with first Greece, and now Ireland requiring a Euro-zone bailout (German) to prevent debt default bankruptcy, where if one falls then soon would all of the dominos tumble. The Euro 200 billion bailout out of Greece and Ireland is in the form of a series of loans set at a 5% interest rate, against which one can measure the relative credit risks in the market as theoretically 5% should be seen as a cap with the view that market rates should be below the 5% bailout rate. However the bond markets are NOT responding positively to Ireland's bailout as they had done during May's Greece bailout, which is evidenced by the yields on 10 year euro-zone sovereign bonds rising across the board: Greece's 10 year yield continues to trade at a high 12% despite the Euro 110 billion bailout at 5%, because Greek bond holders continue to discount a highly probable eventual debt default / restructuring as a deflating economy has sent public debt to GDP soaring to 135%. Ireland's yield has surged higher to stand at 9.2%, following Monday's bailout low of 8%, again suggesting debt restructuring given depression inducing public debt at 95% of GDP. Portugal's yield has crept higher to a new credit crisis high of 7.1% from Mondays low of 6.7%, confirming that a bailout of Portugal at an estimated Euro 40-80 billion is imminent for an uncompetitive economy carrying a rising debt to GDP ratio at 83%. Spain's yield has now crossed above the 5% bailout rate to 5.2%, which suggests that the market is pricing in a bailout for Spain, which is not surprising given the exposure of Spanish banks to Portuguese debts, official debt is put at 64% of GDP but this does not fully take into accounts Spanish banks bad debts that as with Ireland could easily send Spain's debt to GDP to well over 100%. Italy's yield has trended higher to 4.42% putting Italy firmly in the queue for a debt crisis blowout given that public debt is already at 120% of GDP. Belgium's yield rose to 3.7%, which illustrates an elevated risk as a consequence of the failure of the political parties to form a new government and public debt is already at 100% of GDP. UK – Whilst not part of the eurozone has seen its 10 year yields continue to trend higher to 3.3%, marginally below the recent high of 3.4%. The lower UK yield despite Britains huge debt mountain illustrates the flexibility afforded by being OUTSIDE the euro-zone as it allows Britain to continue to stealth default on its debts by means of printing money induced high inflation that the Eurozone countries cannot do individually I.e. the UK government prints money that it loans to the bankrupt banks at 0.5% to buy UK government bonds at 3.3%, hence why the yields are lower than the likes of Spain and Italy, which acts as a safety valve preventing outright bankruptcy but the price paid is in high inflation, with the doctored official inflation measure of CPI is at 3.2%, the more recognised RPI at 4.5% and real inflation at 6% as the following graph illustrates. The CPI inflation trend is inline with forecast expectations as of December 2009 (27th December 2009 (UK CPI Inflation Forecast 2010, Imminent and Sustained Spike Above 3%) France's yield at 3.14 illustrates that France still retains some room for manoeuvre despite being in the Euro-zone. Germany, the primary funder of the Euro-zone bailouts and also the benchmark for where the Euro-zone debt collectively used to trade, saw its 10 year bund yields rise a little to 2.7%. The Debt Interest Spiral Virtually all countries continue to run huge budget deficits well above the 3% limit / targets that ensure the total debts will continue to grow which means if the economies fail to grow GDP faster then they accumulate debt, then Debt as a percentage of GDP will grow even faster thus triggering an out of control debt interest spiral as warned off in December 2009 (03 Dec 2009 – Britain's Inflationary Debt Spiral as Bank of England Keeps Expanding Quantitative Easing ). The problem for the bankrupting PIIGS remains is that they cannot inflate their way out of debt, therefore economic austerity resulting in contracting economies means an ever higher debt burden which means that ALL of the bailed out countries will require further bailouts down the road as their debt mountains continue to grow. Thus ultimately the bailouts are just delaying the inevitable debt defaults / restructuring. Again I have to reiterate – DEBT DEFAULT IS INEVITABLE, with Greece and Ireland now at the top of the Debt Default List. With the first in the queue to experience default being bond investors that have loaned monies to the bankrupt banks. Clearly the Euro-zone is attempting to delay inevitable debt default until the Euro-zone financial system has repaired itself enough to withstand a Greece and Ireland default. The Euro-Zone Bankruptcy Queue My original analysis of the countries at the highest risk of going bankrupt of March and April 2010 (13 Apr 2010 – Britain's Accelerating Trend Towards High Inflation and UK Debt Default Bankruptcy ) warned that a far bigger problem was brewing in Ireland that would blow up over the coming months during which period the mainstream press has been focused on Greece. If it were not for the E.U. bailout than Ireland and Greece would have gone the way of Iceland i.e. bankrupt. However as the graph illustrates the risk of bankruptcy does not stop with Ireland and Greece, as whilst the mainstream press has finally woken up to Portugal being next, however they still are asleep to the third country on my list of countries most likely to go bankrupt, requiring a bailout namely Belgium, which in fact at the time I rated as being a head of Portugal. The current state of the trends towards bankruptcy taking the earlier bond yields analysis into account suggests that the situation for Portugal, Spain and Italy has deteriorated since my original analysis of March 2010, and improved for the UK and to a lesser extent for Belgium, therefore I would now rank the bankruptcy order as : Greece – Bust requiring bailed Euro 110 bailout Ireland - Bust requiring Euro 85 billion Bailed out Portugal - Pending an imminent bailout of approx Euro 40-80 billion Belgium - Pending bailout of approx Euro 50 billion. Spain - Pending bailout of approx Euro 400 to 500 billion. Italy - Pending bailout approx Euro 1 trillion+. According to May's bailout of Greece, the total funds made available to bailout the Euro-zone members was put at Euro 750 billion. Therefore after Portugal, there would just not be enough to bailout Spain that could reach as high as Euro 500 billion, which is why the Chancellor Angela Merkel made the statement on Nov 25th, warning bond investors that they should prepare themselves for a haircut as debt is restructured (partial default). "Do politicians have the courage to place the risk burden on those who make money? Or is trading in sovereign debt the only business in the world in which there is no need to take risk?" and "This is about the primacy of politics, this is about the limits of the markets." Off course the Eurozone could do what the U.S., Japan and UK are doing which is to say to hell with it, we are just going to keep printing money and monetizing government debt forever! Though the German memories of the 1920′s hyperinflation and subsequent collapse of the German state into a long depression that gave rise to the Third Reich is strong enough to suggest that after Portugal, a bailout of Spain and others will be accompanied by increasingly heavy losses for bond investors and highly likely bank depositors which would therefore impact everyone regardless of where they reside. BREAKING NEWS INSERT - The most recent breaking news coming out of Germany is for a doubling of the Euro 750 billion bailout fund to Euro 1.5 trillion, which is clearly to address the increasing speculation around the fact that the balance of the existing fund would not be enough to bailout Spain, which as earlier analysis shows has tipped into the bailout zone during recent days. UK Savers Need to Plan Ahead For a Banks Going Bankrupt My focus from this point forward will be on the risks of UK's bankrupt banks bankrupting Britain, whilst the risk is relatively low at about 17%, however there is the contagion factor where a cascade of bankrupting Eurozone countries that UK banks are exposed to such as Spain, Italy or even France would bring Britain down with them. Especially as Britain would NOT survive a collapse of the Euro-zone which many UK Euro-skeptic politicians gleefully look forward to without contemplating the consequence in terms of the accompanying collapse of economic activity that would make the Great Recession of 2008-2009 look like a picnic. However the UK going bankrupt would not mean that the government would default on its debts, instead it would seek to inflate them away at a far faster pace than it already is with real inflation reaching in the region of 20% per annum, which given recent trends in inflation implies a CPI of about 10% as the earlier inflation graph illustrates. However a bankrupting state would mean savers would not only lose the value of their savings as inflation erodes it by as much as 20% per annum. But that the government would seek to restructure bank debt which means bond holders would take a hit and in a worse case scenario the government would be forced into nationalisation and restructuring the whole banking sector which means that savers could lose deposits upto the FSA limit of £50,000 per banking group. Whilst the worst case scenario at this point in time is not on the horizon, however that does not mean that savers would be fully protected if a country such as Spain goes bust where a bailout would require it's banks be restructured including loss of depositor cash upto a certain limit as occurred following Iceland's bankruptcy. In such an eventuality given the size of UK depositor funds with the likes of Spain's Santandar, the government may be forced to only cover UK depositors upto the FSA limits. Santandar and other foreign banks have been allowed to run amok amidst Britain's retail banking sector as a consequence of an incompetent regulator and a desperate government eager for anyone to take on the responsibility of restructuring a string of bankrupt banks which allowed Santandar to gobble up a string of UK small to medium sized banks which now poses a real risk to UK depositors. The only way people can protect themselves against a risk of bankruptcy triggering the FSA limit protections is by ensuring that deposits per banking GROUP are under the FSCA compensation limits which are currently £50,000, and from 1st of January 2011 will rise to Euro 100,000 or about £83,000. However savers with amounts deposited above the guaranteed limits need to ensure that they have measures in place well ahead of a banking crisis to ensure that they survive one both in terms of the ability to transact business as well as ensuring total funds exposed are LESS than the banking limits at the time of a bank run. Scare Mongering ? Am I scare mongering? Try asking those that were locked out of their savings accounts when the Icelandic banks went bust during October 2008. The banks froze UK customers out of their accounts on the 7th of October 2008. My analysis of 2nd October 2008 had warned that small countries such as Iceland were at risk of going bankrupt, with Iceland's bankruptcy preceded by some 24 hours earlier by Iceland Going Bankrupt?, – "savers should at the first opportunity seek to repatriate their savings to a 100% UK bank as the consequences of a country going bankrupt could render guarantees meaningless". Still think I am scare mongering ? Did you know that funds deposited by some 2 million UK depositors with the Post Office are not guaranteed by the UK FSCS ? Which are in fact guaranteed by the Irish government. This illustrates why savers need to be aware of the risks and make appropriate contingency plans for when the SHTF. Now for some good news for Post Office savers, the Bank of Ireland (operates Post Office accounts) is in the process of transferring its Post Office depositor base to fully fall under the UK regulator and compensation scheme as per a statement of 1st November 2010, with more clarification pending. However UK savers HAVE been blindly thinking for the past 2 years that their savings were safe in the British Post Office, when all along they were no more secure than in any other Irish bank so could have just as easily woken up to a shock Iceland style. UK Savers Emergency Plan: a. Ensure that you have at least 2 current accounts across banking groups. b. That you have procedures in place to ensure that you can act fast to initiate transfer of funds from instant access savings accounts, especially if your total funds with a particular banking group exceeds £50k / £83k (1st Jan 2011).The best strategy is to limit exposure per banking group to the limit. c. Do not have ANY savings are fixed deposit exposure to banks that do not fall under the UK Financials Services Compensation Scheme. d. Limit exposure to PIIGS banks, that is Greece, Ireland, Spain, Portugal and Italy as these are at the most risk of going bust thus triggering a lengthy process of Savers having to wait for compensation. The following list represents Britians' largest deposit taking banking groups and the banks that fall under each. Note whilst banking groups may have multiple licences as a consequence of mergers and takeovers, however they also may be in the process of merging licences so for ultimate safety one should remain focused on banking groups. LLOYDS BANKING GROUP Lloyds TSB Bank AA Savings Bank of Scotland / HBOS Birmingham Midshires Capital Bank Cheltenham & Gloucester Savings Halifax Intelligent Finance Saga SANTANDAR GROUP Santandar bank Abbey National Asda Savings Alliance and Leicester Bradford and Bingley Cahoot Moneyback Honycomb Nationwide Building Society Nationwide Building Society Cheshire Building Society Derbyshire Building Society Dunfermline Building Society BARCLAYS GROUP Barclays Bank Standardlife Bank HSBC GROUP HSBC Bank First Direct Marks and Spencer Financial ALLIED IRISH GROUP Allied Irish Bank First Trust CITI GROUP Citibank Egg CO-OPERATIVE GROUP Co-operative Bank Britannia Smile Unity Trust Bank RBS Group Royal Bank of Scotland Nat West Bank Direct Line Savings Lombard The One Account Drummonds Ulster Bank Additional comments Foreign Banks under UK FSCS Scheme – ICICI (India), First Save (Nigeria) Small business are covered by the FSCS on the basis of 2 of following 3 conditions – upto a turnover of 6.5 million, less than 50 employees, balance sheet total not more than £3.26 million Banks not under the UK FSCS. Post Office – Currently Guaranteed by the Irish Government, pending coming under the UK FSCS. ING Direct, Tridos – Dutch Anglo Irish, Bank of Ireland – Ireland Don't delay! Act today to form a quick personal savings protection contingency plan, otherwise you may wake up one day to find yourselves locked out of your funds Iceland style! For more on how to protect your wealth from debt default bankruptcy see the Inflation Mega-trend Ebook (FREE DOWNLOAD) Comments and Source: http://www.marketoracle.co.uk/Article24572.html By Nadeem Walayat http://www.marketoracle.co.uk Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved. Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

The FASBI Flop Posted: 26 Nov 2010 10:30 AM PST What Bailout? The Spillihp Curve The FASBI Flop It's all about spending & more Gloom, or just Government? Newspapers these days! It's all just bad news. Between them, the Herald Sun and The Age had four front page news items a few mornings ago. Stories of war, corruption, harassment and we can't remember the fourth one. But what struck home is that each of these stories was about the failures of government and its minions. Yes, not one smidgeon of anger directed at the free market. Truly heart warming. What Bailout? The Irish bailout is not a done deal. The Irish have to live up to several imposed changes if they are to get the money. And politicians are deserting the government's efforts to impose those changes. Now the whole thing is descending into a game of chicken. Will the opposition oppose the budget, which carries out the required changes? This little skirmish could really rout the markets. If people expect the bailout to go ahead, but the Irish put up a fight, things could go very fast from there. But why are the Irish not glad to get Europe's cash? Well, some of the "proposals" are pretty harsh on the welfare state. And some are downright stupid. Remember when people worried about bank bailouts resulting in even bigger "too big to fail" banks? Well, according to The Age, the Europeans are requiring "Ireland to merge banks as part of [the] bailout." Yes, too big to fail was the problem, so let the solution be bigger banks. Remarkably, the IMF has come up with some constructive bailout requirements: Cut the minimum wage and the dole. In other words, create jobs and free up workers. Although it probably doesn't sound that way. The German newspaper Der Spiegel has been doing what it can to help the Irish. Its piggybank, which has an Irish flag pasted on the side, featured at the Euro Finance Week in Frankfurt. The aim was to collect money for the Irish from the bankers attending. The raised sum wasn't disclosed. There are other reasons to be optimistic about Ireland's future. "Irish Teenagers are some of the most politically aware in the world, according to a survey which places them seventh in a table of 36 countries." That's not the important part. This is: "However, the international survey on civic and citizenship education also found that almost half of teenagers surveyed did not trust the Government and more than half did not trust the media." So there you have it. A future market for the Daily Reckoning is flourishing on the Emerald Isle. You can be less enthusiastic about the likes of Portugal: "Portugal's prime minister, José Sócrates, has echoed his Irish counterpart Brian Cowen in stating that his country needs no bail out." How's that for ominous? The UK and Ireland's austerity measures, let alone Greece's, do not reduce public debt. They only reduce the deficit. In other words, those nations are still going in the wrong direction, only at a slower speed. Now, it may take a while to turn a big ship around, but until it's heading the right way, it's still the wrong way. That should make anyone think twice about whether this half baked austerity effort will actually work. The cat is out of the bag and the outlook remains bleak. As governments borrow more, resources will remain stuck in the public sector, unavailable for job creating investments. So why not simply default, as suggested in Bloomberg's opinion column? The banks need bailouts, why not wipe them out completely by defaulting on the government bonds they hold? The Irish didn't need to create a "bad bank", they have plenty of them already. Then, once the dust settles, start again. It's happened all through history and it happens in people's personal lives all the time. Bankruptcy is not the end. Of course, funding a welfare state if you are the defaulting type will be pretty difficult. Inflation In China Bernanke is having a tough time getting the stock market to inflate. But in China, prices are going up... except in the stock market of course. One way to view this is that Bernanke is flooding the Chinese built foreign exchange dam until it cracks. And water is beginning to seep through at a rapid rate. Eventually, China will be forced to revalue its currency upwards to stop the inflation. For now, the Chinese are putting up a pitiful fight. And directing it at their own people instead of the Fed (like everyone else is doing). Yes, it's the old price controls and hoarding penalties rubbish again. Even the local academics are onto the flaws: "They are just not addressing the fundamental problem at all." One measure that might cause an interesting outcome is China's raising of bank reserve requirements for the 5th time. It's like pulling the tablecloth out, without sending dinner flying. While all this is going on, the Chinese are making their beds elsewhere. By avoiding the US dollar as a go-between currency, China and Russia will be trading with each other on their terms. No more of these toilet paper dollars! The FASBI Flop "Fair-Value Fight in Finance Making Volcker Rue FASB Dissonance." How's that for a title! The shenanigans the article features is about the valuation method used by banks. Don't skip this, it gets interesting. The American accounting body (FASB) wants to apply "fair value" valuation to all financial assets, which basically means that assets are valued for what you can sell them. The international accounting body doesn't want to apply that valuation method to all assets, for several reasons. If FASB gets its way and US banks have to value their assets at fair value, the US banking system risks swaying between solvency and insolvency on the whim of asset markets. Why the American accounting body thinks this is a good idea is a mystery. Particularly when "U.S. home prices fell 3.2 percent in the third quarter". And, "the new Basel III banking rules will leave the biggest U.S. banks short of between $100 billion and $150 billion in equity capital..." Yes, the banks remain risk takers. But which ones? "90 per cent of the shortfall concentrated in the top six banks, the Financial Times said, citing research from Barclays Capital." Too big to fail and not afraid to flaunt it. The Spillihp Curve As many of the world's governments are being clobbered towards fiscal sanity by bond markets, central bankers continue to clutch at straws. The Phillips curve turned out to be rubbish, so now they have decided to try it backwards. No longer do jobs create inflation, as Kiwi economist William Phillips claimed. Now inflation creates jobs. Neither is correct, of course. Bernanke's theory, which he calls "the wealth effect" instead of Spillihp Curve, seems to be failing on all counts (as the Phillips Curve did in the 1970's stagflation). Under the wealth effect, QE is intended to drive up prices to make people feel wealthy enough to buy things. The fact that they have to buy more expensive things is beyond his understanding. As the Phillips Curve failed to grasp, the Spillhp Curve doesn't consider the monetary side to inflation. And that is where the action is taking place: "The 30-day correlation coefficient measuring how often the Standard & Poor's 500 Index moves in tandem with 10-year Treasury yields fell... Stocks and debt are ending a lockstep relationship that began in July 2007 and lasted through the worst recession since the 1930s." Demonstrating their belief in the Spillihps curve, Bloomberg calls this development "greed beats fear". They think people are moving from safe treasuries to risky stocks. Another possibility is that it signals inflation expectations are moving forward. This is because equities rise during inflation, while bonds fall. The safe and risky assets switch spots. To summarise, Bernanke is like the character in the movie Caddyshack who uses a gasoline truck as cover as he sets off his explosives. Safe? It's all about spending Keynesians continue to celebrate and lament the mixed messages the American consumer sends them. They see spending as the source of wealth. Keep things chugging and churning, no matter the cost. But is wealth really how much you can spend, regardless of how you get the money? That fallacy gave you consumer borrowing, as opposed to borrowing for investment. Simply viewing aggregate demand as the driver of the economy is the sure fire way of misunderstanding what gives you demand in the first place. Consider Robinson Crusoe, alone on his island. How much he demands is irrelevant and infinite. It is his productive power that gives him wealth. Even when you introduce Friday, Crusoe's neighbour, it is still easy to understand that it is the more productive of the two who will be wealthier. Continue to add island residents and nothing changes. However, if you add a second island, the analysis takes on an additional consideration. This was beautifully demonstrated by the Spanish many years ago. They discovered and brought back South American gold, which was subsequently spent on all sorts of things. Did this spending make them wealthy? It certainly made them feel wealthy. But the real growth in wealth took place elsewhere: In England, where Spain's spending brought on the industrial revolution. It was the producing Brits that were left the world's dominant power. But they failed to learn the lesson of their prosperity. Unable to discover a second El Dorado to mislead them as it had for the Spanish, they eventually went about creating the world's most sophisticated government bond market to finance their empire. Did it make them feel wealthy? Yes. Did it make them truly so? Nope, this time it was the Americans who became wealthy as they provided the productive power needed to satisfy Britain's hollow aggregate demand. Do you see a pattern? Need the next paragraph be written, with America's empire crumbling and Asia rising? Artificial aggregate demand is the source of economic instability. It is dangerous, not beneficial. Two faced Keynesians This two tier economy talk has us a little confuzzled. (Confusion relating to the fuzziness of Keynesian economic theories.) Treasury Secretary Ken Henry is a big expert on the topic, which is why he warned a bunch of Senators on the matter recently. But if the free market can cause such turmoil, isn't the government's stimulus spending of the very same nature? Using Keynes' own example, if the government were to pay people to dig holes and fill them back up again, why wouldn't that cause a two speed economy? One in the hole digging industry and one in private. Then again, there is already a two tier economy in that sense. Consider the difference between public sector average income and private sector average income. The difference can't all be because the public "servants" have to be compensated for living in Canberra. In America the difference is even more dramatic. But that is to be expected in a bastion of free markets... Adding a whole new dimension to the American situation is the "revelation" that "a one-parent family of three making $14,500 a year (minimum wage) has more disposable income than a family making $60,000 a year." And that excludes benefits from Supplemental Security Income disability checks." The details are quite remarkable. But the result isn't, especially if you visit the country. Follow the money We can't finish this weekend's DR without a discussion of the naked body scanners which are causing such uproar in the US. (They are on their way here too.) But rather than launching into the libertarian rant you expect, consider the economic argument. "Driving is much more dangerous than flying, as you are far more likely to be killed in an automobile accident mile-for-mile than you are in an airplane," says economist Steven Horwitz of St. Lawrence University. "The result will be that the new TSA procedures will kill more Americans on the highway." Yes, the law of unintended consequences strikes again. But it gets better. From The 5 Minute Forecast: "According to Congressman Ron Paul, the former Secretary of Homeland Security, Michael Chertoff, is making millions selling the backscatter X-ray scanners to his former agency. "Indeed, the week after the Christmas day "underbomber" incident, Chertoff was all over TV posing as an "expert," advocating that more scanners be installed at airports, but never disclosing that his firm consults for the companies that make the scanners. "Meanwhile, it turns out one of Chertoff's clients accompanied President Obama on his recent trip to India. He was one of several CEOs who tagged along to drum up $10 billion in Indian business for politically connected American companies. The laws of politics strike again. Self sustaining recovery Oh, by the way, all this is what the media classes as a "self sustaining recovery". Never mind the $600 billion set to ripple through the economy and government deficits set to hit ... oh never mind. Similar Posts: The Economic Recovery Flop The Irish Diaspora Debt Delenda Est Frontier Investing Irish Govt Pledges Bailout, Who's Next?

Happy Holidays? 28 Hard Questions It Would Be Great If We Could Get Some Real Answers To Posted: 26 Nov 2010 10:08 AM PST Over the coming weeks, Americans will be wishing each other "happy holidays" millions upon millions of times.  But are these really happy times?  Record numbers of Americans are going to be going hungry and cold this winter.  Millions upon millions of our fellow citizens would gladly give up all holiday celebrations in exchange for a decent job.  The vast majority of us have plenty of examples of horrible personal tragedy all around us this holiday season, and much of that tragedy has been brought on by the deteriorating economic conditions.  Meanwhile, we have a "control freak" government that wants to establish an even tighter grip over our lives and that now insists on either viewing our exposed bodies or groping our private areas before we can get on an airplane.  Once upon a time in America the holiday season was a time to rejoice because we lived in a prosperous land where liberty and freedom were respected, but today we live in a nation with a highly centralized economy dominated by a federal government that is becoming more "totalitarian" by the day. But we are told that centralized control by an overwhelmingly powerful national government is good in our case because "they" know what is best for us. Oh really?  They sure have done a great job "managing" our economic system, haven't they?  Unfortunately, it seems as though anything that the federal government takes control over just gets more messed up. The following are 28 hard questions that you should ask anyone who believes that having a highly centralized economy and a highly centralized government is good for us.... #1 Why is the U.S. government trying to put a choke hold on our food production system? S. 510, The Food Safety Modernization Act, is being called one of the most dangerous bills in American history.  This very vague and incredibly broad bill (which you can read here) will give the U.S. government unprecedented control over the growing, storing and sale of food in the United States. #2 Approximately 14.8 million Americans are unemployed this holiday season.  So why in the world is the "greatest economy on earth" not able to provide jobs for all of them? #3 Why are the U.S. and South Korea insisting on conducting 4 days of naval exercises in the Yellow Sea when tensions in the reason are at an all-time high and when a single mistake could spark an all-out war?  Wouldn't it be better to postpone these naval exercises until things have calmed down a bit? #4 What prompted Russia and China to suddenly decide to quit using the U.S. dollar and instead start using their own national currencies when trading with each other? #5 Why does it cost $181,757 per hour for Barack Obama to travel on Air Force One? #6 Are we still a "great nation" when so many of our citizens are going hungry?  According to a recent BBC report, 15% of all U.S. households experienced a shortage of food at some point during 2009.  One of our readers named Gary recently left a comment that indicated that he encountered a very big crowd during his recent visit to a local food pantry.... The line at the food pantry was very long. There are a lot of folks who have little food and no money. #7 If the U.S. economy is recovering, why were new home sales for October down 28.9 percent from a year ago and why were existing home sales for October down 25.9 percent over the previous year? #8 Why are there so many reports of unprofessional behavior by TSA agents?  For example, it is being reported that some TSA agents have specifically targeted attractive young women for "additional screening". #9 Why are U.S. home builders only selling one-fifth of the homes that they were selling during the "boom times" five years ago? #10 How did a man who had been convicted of misdemeanor harassment and stalking get hired to be a TSA agent?  Now it turns out he is being accused of abducting and sexually assaulting a woman.  These are the people who are supposed to be protecting us? #11 In the "wealthiest nation on earth", why are a record number of Americans going to be without heat this winter? According to the National Energy Assistance Directors' Association, more than 10 million U.S. households will not be able to afford to heat their homes this winter without assistance, which would be a new all-time record.  One of our readers named Elaine recently shared that she is one of those Americans that is going to be cold this winter.... It's starting to get cold here in the mountains. I'm unemployed, no heat, at risk for foreclosure, etc. Everyone is at risk for this, it's just that many of the muddleclass can't face it yet. For a lot of us, it's not cutting back on that bi-weekly latte that's going to help, it's cutting back on having electricity. Don't judge the poor until you've been here. #12 Why are Americans becoming so pessimistic about the future?  According to one recent poll, now only 51 percent of Americans believe that today's young people will have a better life than their parents did. #13 How did we ever get to the point as a nation where only 39 percent of likely voters believe that the U.S. government is operating within the limits established by the U.S. Constitution? #14 Why does the mainstream media largely ignore the fact that thousands of people are being slaughtered near the U.S. border with Mexico each year and a city just across the Mexican border is now being dubbed "the most dangerous place on earth"? #15 What does it say about American politics that the companies that produce the new naked body scanners have more than doubled their spending on political lobbying over the last five years? #16 Why is the Washington Post working so hard to defend the policies of the Federal Reserve? #17 Have we now gotten to the point where the financial condition of the U.S. government is so bad that it will be virtually impossible to ever have a balanced federal budget ever again? #18 Why aren't more Americans deeply concerned about the dozens of nasty diseases that they could catch from TSA agents if they don't change gloves between each groping? #19 Why are there 18 times as many banks on the FDIC "problem list" as there were just four years ago? #20 What does it say about the United States that now 39 percent of Americans believe that marriage is becoming obsolete? #21 How can anyone claim that the U.S. economy is turning around as long as the number of Americans on food stamps continues to set a new all-time record month after month? #22 As thousands of factories and millions of jobs continue to be shipped overseas, why does Barack Obama keep publicly proclaiming that globalism is so good for us? #23 Why aren't Homeland Security officials willing to consider changes to the new airport security procedures when many women are actually using the term "sexual assault" to describe their experiences with the new "enhanced pat downs"? #24 The median wealth of a U.S. Senator in 2009 was 2.38 million dollars.  So exactly what does that say about the health of our Republic? #25 Why have our leaders allowed U.S. strategic grain reserves to shrivel away to almost nothing? #26 In 2009, 54.9 million international tourists visited the United States, and those tourists spent approximately 93 billion dollars.  How far will those numbers drop once stories of TSA abuse circulate all over the globe? #27 If Congress does not authorize another emergency extension of long-term unemployment benefits, then what in the world are the 2 million Americans who are going to suddenly lose their checks going to do? #28 Are there still any areas left in the United States where liberty and freedom are respected, where taxes are low, where regulations are not suffocating, where the people are friendly and where Americans can be free to live an independent lifestyle?

Are There Still Differences Between the Great Powers? Posted: 26 Nov 2010 10:00 AM PST Vladimir Putin makes a currency swap deal with China and then heads to Germany to propose a vast, continent-wide European union. It is inevitable, he says. It is aimed at marginalizing the US dollar and giving the world a choice of what kind of currency to use. Putin speaks, even, of adopting the euro, while other Russian political leaders have spoken of creating a basket of currencies, akin to the IMF's suggested bancor.

Looking at Irish -- and Canadian -- Financials Posted: 26 Nov 2010 06:10 AM PST Chris Damas submits: Ireland is going to be a trigger for another stock market meltdown. Call this Euro Credit Panic, the sequel. With everyone effusing about great Black Friday retail sales and the stock market seemingly complacent, I get more worried about what is ahead. Complete Story »

Evaluating the Prospects of a Continued U.S. Dollar Rally Posted: 26 Nov 2010 04:54 AM PST Simit Patel submits: This is a holiday weekend in the U.S., so notable rallies are coming on "down time," so to speak. Nonetheless, the U.S. Dollar Index has soared past 80, and is now at 80.31. So is the rally for real? Will it go on? The technical and fundamental evidence for a rally against the euro is considerable. The chart below from my friend DREBG features a Gartley analysis, and projects the euro heading down considerably through the first quarter of 2011. USDJPY has recently bounced off its 15-year low, as the monthly chart below shows. I recently put on a long USDJPY for the InformedPoints central bank account, in addition to the existing GBPUSD and EURUSD short positions, as technical evidence of the USD strengthening. Even against emerging market economies that have only stated they will allow their currencies to appreciate (like the Singapore dollar, or SGD), the U.S. dollar has still been able to rally. The USDSGD chart below shows how the U.S. dollar has broken even the most generous bearish trendline, with Fibonacci levels still a ways off: Of course, the significance of a rally is most appreciated not when it can rally against one fiat central banker, but when it can rally against commodities and metals as well. As for commodities, the jury may still be out; oil has an upwards trendline, but could also be viewed to be in a range between 68 and 88. A break of the upwards trendline and a close below 80 may signal the dollar rally is for real, as indicated by this chart: As the dollar's strength is driven more by a lack of alternatives than by any economic justification, the rally in metals still appears to be quite strong. Below is a chart of silver. My friend tradermax has called for a move to $21.50 in silver, which would coincide with a Fibonacci zone and previous horizontal support. If the dollar's rally is truly for real, such a downward move in silver may be in the cards. Complete Story »

10 Reasons to Prefer U.S. Banks Over European Banks Posted: 26 Nov 2010 04:52 AM PST Cullen Roche submits: Some interesting and fairly contrarian comments from Andrew Garthwaite at Credit Suisse. Garthwaite makes the argument in favor of U.S. banks (over European banks) based on the following 10 points: Economic growth momentum is improving in the U.S. relative to Europe. The move in the spread between U.S. and German bond yields suggests the de-rating of U.S. banks relative to European banks is now complete We already have seen the bulk of the dollar weakness. U.S. banks have de-leveraged more than their European peers and have lower loan-to-deposit ratios. U.S. bankruptcies are set to fall significantly. Regulation risk is declining in the U.S. relative to Europe. We expect US banks to increase dividends beginning in 1Q 2011. Lending conditions are consistent with good loan growth next year. U.S. housing risk is overstated. Valuation is at a record low (the housing affordability index is at an all-time high). The fact that roughly 70% of the U.S. mortgage market owned or guaranteed by the government makes the banks less sensitive to further deterioration in the housing market. Consolidation potential – This is particularly likely amongst the smaller banks. Valuation looks attractive. PPP at 5.5x - 24% below the historical average of 7.4x (that discount increases to 40% if we assume more benign write-downs in line with IMF projections). Complete Story »

50% of the total gold reserve is in the hands ....... Posted: 26 Nov 2010 04:50 AM PST As Market Leader previously reported, a 24% increase in the value of gold didn't stop George Soros, John Paulson and Paul Touradji from buying it. According to the data provided by U.S. Securities and Exchange Commission (SEC), the biggest volumes of gold were bought by Soros Fund Management LLC, Paulson & Co. and Touradji Capital Management LP. The total volume of the precious metal owned by the 3 companies is 2088 tons, which is roughly equal to the volume produced by the USA in 10 years. And while the Fed Reserve and other central banks around the world have already poured into the global economy over $2 trillion, in their turn investors are getting more active in buying up the stable assets. At this point 50% of the total gold reserve is in the hands of private investors. Yet the volume of gold that is in free circulation significantly exceeds the one of reserves accumulated by numerous countries, except the USA, Germany, Italy and France. Michael Pento, chief economist for Euro Pacific Capital, says that those who get rid of gold make a big mistake. The uptrend will stop only when the real interest rates are of positive value, which in its turn will take place when the Fed Reserve stops emitting money in order to restrain the growth of the interest rates. In connection with that Goldman Sachs Group economists expect precious metals operations to bring the biggest profits next year. Since September 2007 the Federal Reserve has been reducing the interest rates while the credit markets have become more volatile (oscillating). Gold has gained 87% of its previous value. S&P500 has lost 21% (even taking into account the previous 23% upswing), which is ..... http://www.profi-forex.us/news/entry4000000492.html

The Gold Price Over Thanksgiving Posted: 26 Nov 2010 04:24 AM PST Tim Iacono submits: Well, so much for the theory that the gold price tends to go up over the Thanksgiving holiday, when traders in the US are away from their desks and the rest of the world is more likely to do more buying of the metal than selling. Complete Story »

Risk Aversion Leading to Weaker Commodities Posted: 26 Nov 2010 04:05 AM PST Proactive Investor submits: Commodities are seeing a negative finish to the week today, with volumes still thin following the Thanksgiving holiday in the US yesterday, and with weakness in the euro and risk aversion pressure prices. This follows ongoing concerns surrounding Eurozone peripheral debt spreading to the major EU economies, while the conflict in Korea showing no signs of easing. In turn, this has caused the dollar to strengthen as a safe haven, while commodities fail to gain a bid with the market risk off. Despite this push for safe havens, gold GLD is not seeing the strength it has earlier in the week, with traders decidedly not moving into the precious metal, in favour of the greenback and US Treasuries. Gold, particularly, is following the euro lower today, as concerns surrounding Eurozone peripheral country weakness lead the single currency lower. Complete Story »

Why the Government Hates Deflation Posted: 26 Nov 2010 03:00 AM PST Being the naturally cynical type of guy that you would expect from someone so angry, so depressed, so outraged, so paranoid and so "Howard Beale" ("I'm as mad as hell, and I'm not going to take this anymore!") as I am, people want to know "what is with" all of this "deflation" stuff that the Fed is worried about. Some of them write to me, some beginning, "Dear Mogambo" or, "Dear Moron." These are the ones I immediately delete without reading, as they did not have the proper opening salutation. On the other hand, if the email is properly addressed, I will immediately read it, such as this latest one here that correctly begins, "Dear Handsome And Wise Mogambo (HAWM), What is with all of this fear of deflation? It is being portrayed as a dread so fearful that the treacherous, foul Federal Reserve feels somehow justified in using monstrous monetary policy to target inflation in prices to be at least 2% per year, which is the most horrifically terrible thing that the treacherous, foul Fed could do except target 3% inflation in prices, which is the most horrifically terrible thing that the treacherous, foul Fed could so except target 4% inflation in prices, which is the most horrifically terrible thing that the treacherous, foul Fed could do except target 5% inflation in prices, a point at which I assume it is unnecessary to continue along this obvious and tedious continuum because you get the point by virtue of your being as smart as you are handsome and wise! (signed) A Fan Of The Mogambo (AFOTM)." Firstly, let me say that I am pleased to see that fawning and groveling has not gone completely out of style, and let me say that that obvious, sniveling, servile and undeserved flattery is always appreciated. My pervasive bad mood got the better of me, however, and my answer was, "Dear AFOTM, Deflation is a fall in the money supply. Thanks for asking me instead of looking it up, you moron! –Mogambo" Well, AFOTM immediately wrote back, using our sudden familiarity to eliminate the use of an unctuous salutation, saying, "Screw you moron! (signed) Former Fan (FF)." Former fan! I viciously think to myself, "Two can play at this game!" and replied, "Dear FF, you treacherous little backstabbing moron, Deflation is a fall in the money supply, but it is always associated with falling asset prices, which is why that is also called deflation, too, which is when a lesser total money has to be spread among the same (in the short run) amount of actual assets, which means that the pro-rata money available for each asset goes down, which makes some prices go down, which hands losses to the owners of the assets, which they don't like, which are thankfully netted against gains when paying taxes, which means less tax revenue to the government, which the government doesn't like!" Helpfully, I did not expand into bogus mathematical terms, which is that the ratio of Money Supply to Actual Assets (MS/AA) obviously goes down when the Money Supply goes down, which it can do for a variety of reasons, one of which is when any creditor has to take a loss, because fiat money is created by a bank at the instant that someone borrows money from a bank. Therefore, then, money also literally disappears when the debt, underlying the fiat money, disappears when being defaulted upon because the guy who owes the money to the bank decided to default, jumped into his snazzy new car in the middle of the night and headed out of town and across state lines to start a new life, in a new place, with a new name, and an even snazzier, newer car. Of course, unless you are a dealer of snazzy new cars, it is worse than this, as the losses are not constrained to being one-to-one with the number of dollars created! Oh, no! Losses are in huge multiples of the original money created, thanks to the outrageously out-of-control fractional-reserves insanity in the banks that the Federal Reserve, under the horrid Alan Greenspan, was allowing and abetting, and the huge financial spider web of derivatives so that we could have a gigantic stock market bubble, and a bond bubble, and a derivatives bubble, and a housing bubble, and huge, cancerous bubble in the growth of government, which is not to even mention a whole asset-management/retirement-account industry of such greed and corrupted ethics that it makes 40% of all the profits of America, and for doing very, very little except enriching itself, its friends and Congressional lapdogs. It got so bad around the end of the housing bubble that that changes in bank reserves were, literally, zero, as nothing was held against the banks literally lending out as much new money as they wanted, whether they had additional deposits or not! Infinite leverage! It's not quite that way now, although bank reserves are still a piddly $68 billion, while the M2 money supply is up over $400 billion, to $8.76 trillion, from this time last year, which is an increase of about 4%. And the Fed is already launching QE2 to create another $600 billion ($1.2 trillion annualized) so that the federal government can deficit-spend it in the next six months! I howl – Ahhooooohhh! – in outrage! Hooper and Bandit, two animated characters at thewallstreetshuffle.com who do a very good job of discussing Austrian economics, note that "When the Fed finishes buying the $600 billion of US Treasuries and other debt, that they will be the largest single holder of US treasury debt in the world." Wow! Wow and yikes! They sum it up as, "This is just plain and simple gross monetization of our federal debt," and that "the result will be a 'financial Chernobyl' with dollars spreading like radiation around the world." Dollars as radioactive death is an interesting metaphor, and should be alarming to those who hold dollars, but not to those buying gold, silver and oil as ways to save themselves against the predations of the Federal Reserve and the government. To the buyers of gold, silver and oil, "dollars as radioactive death" means, "Whee! This investing stuff is easy!" The Mogambo Guru for The Daily Reckoning Why the Government Hates Deflation 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."

Video - The Day the Dollar died Posted: 26 Nov 2010 12:24 AM PST The first 12 hours of a U.S. dollar collapse and a very vivid illustration of LEAP's 2006 scenario about the fall of the "Dollar Wall"... Watch

Gold on Verge of Major Decline; Commodity Currencies Warn of Trend Shift Posted: 26 Nov 2010 12:11 AM PST Gold on Verge of Major Decline; Commodity Currencies Warn of Trend Shift Friday, November 26, 2010 by Joel Kruger of DailyFX Despite the lightened holiday trade, we have seen a number of significant developments over the past few hours which could serve as a catalyst for a major shift in the construct of the markets… FUNDYS The US Dollar has been well bid over the past several weeks and we are now nearing the point at which we will soon find out if the rally in the Greenback has been more of a corrective rally within a broader USD downtrend, or if the Buck is attempting to mount a significant longer-term across the board appreciation. Despite the lightened holiday trade, markets have been quite busy over the past several hours with a number of key developments influencing price action and weighing on sentiment. These developments would certainly support the argument for more significant USD gains over the medium-term. Relative Performance Versus USD Friday (As of 9:05GMT) 1. SWISSIE-0.15% 2. STERLING -0.35% 3. YEN-0.37% 4. CAD-0.52% 5. KIWI-0.54% 6. EURO-0.82% 7. AUSSIE-1.26% Pressures in the Eurozone have been mounting and the threat and fear of contagion is still very much alive with many now focusing on today's Irish Donegal by-election which could compromise the passing of the Irish bailout. Additionally, we have been seeing some more negative press out of the peripherals, with a Bloomberg article warning that foreclosed homes in Spain may triple next year as new accounting rules force local banks to rid themselves of depreciating assets more quickly. To add more fuel to the fire, geopolitical risks have also not faded with North Korea on the wires saying that the US and South Korea are inching North Korea to the brink of war. All of these developments have helped to extend broad based USD gains in recent trade, with the risk negative sentiment benefiting the safe haven Greenback. We had seen some short-lived attempts at currency buying following some hawkish talk from ECB Liikanen, while model funds also helped to inject some bids in the Euro as it tested major trend-line support by 1.3250, but given the intensity of recent moves, the efforts proved to be fleeting. While the lower yielding safe haven US Dollar finds bids on the back of the risk liquidation, the highest yielding major currency has come under intense pressure on Friday with some local developments helping to fuel additional relative weakness in the Australian Dollar. RBA Governor Stevens has caught the markets off guard after sounding surprisingly dovish in front of a Parliamentary economic committee earlier today. Stevens has said that rate setting is now "appropriate" and with global growth expected to moderate next year, he anticipates a decline in key resource prices. The central bank governor went as far to even say that current policy was a little tighter than average and that rates would not be moving for "quite some time." This is a significant departure from the hawkish rhetoric that we usually hear from the central bank governor and should be taken as a clear sign that the threat of a slowdown in the Australian economy is becoming very real. We have been warning of this for some time now and are pleased to see that the central bank is starting to acknowledge the same red flags that we are. Additionally, recent steps by China to tighten policy and curb growth should be influencing the more dovish outlook from Stevens who is very aware of just how much of an impact a cooling off in China will have on the local economy. The Australian Dollar has served as a proxy for the risk trade and any appreciation in the currency has been reflective of a risk positive sentiment in the markets. Surely, a beleaguered Eurozone economy, rising geopolitical threats, and a cooling off in China should then weigh quite heavily on the Australian Dollar going forward, especially now that the prospect for additional rate rises have diminished. This exposes the Australian Dollar to some major weakness over the medium and longer-term and we would also contend, by extension of this fact, that the anticipated weakness in the antipodean currency might act as a leading indicator for some future weakness in commodity prices, with a specific reference to gold. We contend that the yellow metal has put in a meaningful high and is currently in the process of carving out a major top. Technically, we have been anticipating such a shift in the market and would present three charts which we believe make the argument for a pullback in gold prices all the more compelling. Clearly the foundation of this argument is also based on the assumption that currency markets are a leading indicator for all other asset classes. The Aud/Cad cross which is a pure commodity cross currency has been the first to roll over and confirm the formation of a major head & shoulders topping pattern. It would make sense that this cross would be the first to trigger such a pattern as it would be the most sensitive to shifts in the outlook for commodities given that it is a pure play commodity cross. We would liken the cross to a shorter-term moving average that is warning the markets of a potential shift in the broader trend. In the chart above we can clearly see the trigger of the major topping formation in Aud/Cad. The second chart we present is what we would liken to a more medium-term moving average. This chart is the Aud/Usd chart (above) which also shows the formation of a major head & shoulders top. However, in this case, the formation is only just now testing the neckline and has yet to trigger. But based on our argument that the pure play Aud/Cad commodity cross is a leading indicator, we would then expect to see this H&S topping formation soon trigger to open the door for a major drop here as well. Finally, we take a look at what we would liken to the longer-term moving average and the critical indicator to officially confirm a major shift in the trend. This is the actual commodity itself. A closer look at the gold chart (above) shows the same formation of a head & shoulders top, only at an even earlier stage in its development, with the market only just now carving the right shoulder. But if we are to use the Aud/Cad and Aud/Usd charts as evidence, the argument for an eventual trigger of a major top in gold prices becomes very compelling. This is significant, as a shift in the outlook for gold could have a material influence in the direction and sentiment in the broader global macro markets. Gold has been one of the most, if not the most reliable asset classes over the past several years, with the commodity managing to find demand both in risk positive (growth and demand for commodities) and risk negative environments (hedge against inflation). As such, a shift in the overall trend in the commodity could open the door for a major shift in the construct and dynamic of the broader markets. If global growth prospects diminish and there is no longer demand for the commodity on that front, and if market participants no longer see demand for the metal as a hedge against inflation, then we could see a more significant rally in another market….that being the US Dollar. It will certainly be interesting to see how this plays out, but technical studies are definitely warning of a major fundamental change. As far as the Greenback is concerned, we are in the camp that holds a longer-term bullish outlook for the US Dollar irrespective of current Fed policy and structural deficiencies in the US economy. After all, in currencies, it is all about relativity. You don't have to be perfect to stand at the top…..you simply have to be better than all the rest. GRAPHIC REWIND TECHS EUR/USD: We have finally reached a critical inflection point, with the market now testing some major rising trend-line support off of the 2010 lows, which comes in by 1.3250. A sustained break below 1.3250 over the coming days will suggest that the market has broken a major uptrend and is on the verge of a material shift in the structure favoring additional USD gains, while inability to establish below 1.3250 will keep the bullish trend intact. Daily studies certainly show room for additional declines from here, so we would not at all be surprised to see a sustained break below the trend-line. Next key support comes in by the 200-Day SMA at 1.3130, with the 50% fib retrace off of the 2010 low-high move just below at 1.3085. Look for any inter-day rallies to be well capped around 1.3500, with only a break back above 1.3635 to really give reason for concern. USD/JPY: Although the market is locked in a broader downtrend, there are definitely clear signs emerging that we could finally be on the verge of a major shift in the structure. The price has not managed a close above the daily Ichimoku cloud since May, and the latest break back above the cloud suggests that we are in fact in the process of undergoing a shift in the trend. However, the market is only just now breaking above the cloud, and with the 100-Day SMA (84.10) still capping gains, we would recommend waiting for a clearer and sustained break above these 2 indicators for official bullish confirmation. On the other hand, the bottom of the cloud currently comes in by the 82.00 figure and a close back below here would be required to signal bearish resumption. As such, we are now in a wait and see period and will stand aside to let things play out. It is worth noting that longer-term studies are quite stretched with the market by cyclical lows, and as such, our core bias and outlook for the pair is constructive. GBP/USD: A rising trend-line off of the yearly lows has now been convincingly broken to the downside, and the risks from here are for deeper setbacks towards 1.5300 over the coming days. Initial support comes in by 1.5650 and a break and close below this level should help to confirm bearish bias and accelerate declines. Ultimately, only back above 1.6300 would compromise medium-term structure and give reason for concern. Look for inter-day rallies to be well capped ahead of 1.6000. USD/CHF: We contend that the market is in the process of carving a material base by 0.9460, and any setbacks should be very well supported in favor of a sustained recovery. A fresh higher low has now been confirmed by 0.9550 following the latest break back above 0.9975, and the market should now accelerate beyond parity towards our next key topside objective in the 1.0280-1.0500 area over the coming sessions. The 1,0280 resistance represents the highs from September, while 1.0500 is the 200-Day SMA. Any intraday setbacks are expected to be well supported ahead of 0.9700. FLOWS Some model funds on the bid in Eur/Usd by 1.3250 trend-line support; other looking to sell clear break below; Middle Eastern and French names also on the bid; Offers now seen into the 1.3350-1.3400 area. UK clearer on the bid in Eur/Aud; Korean names buying Aud/Usd on dips. Offers in Usd/Jpy above 84.00. Leveraged accounts selling Aussie, Kiwi and Cad. Major US based currency fund buying USDs across the board. Written by Joel Kruger, Technical Currency Strategist for DailyFX.com If you wish to receive Joel's reports in a more timely fashion, email jskruger@fxcm.com and your name will be added to the distribution list. If you wish to discuss this or any other topic feel free to visit our Forum Page. http://insidefutures.com/article/190...d%20Shift.html

You are subscribed to email updates from Gold World News Flash 2 To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google Inc., 20 West Kinzie, Chicago IL USA 60610