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- Silver Investors: Pick Your Poison
- Propaganda and Rigged Markets
- Fear and Love Make Gold Strong
- Global Macro Notes: Pondering the High Cost of Food
- Trader alert: These stocks could get pummelled in a correction
- Chinese stocks are getting KILLED
- These "nightmare scenarios" could plunge the world into a new crisis
- Today's Wisdom by Richard Russell
- A Look At Markets
- Silver May Drop 20% as Coins Signal ‘Crowd’: Technical Analysis
- Brazil slams brakes to curb inflation, risking hot money tsunami
- JPMorgan et al Hammer the Silver Price Again
- A Beautiful Idea
- America's economic recovery
- Trading Comments, 20 January 2011 (posted 11h00 CET):
- Commentary and Update of 3 Currencies, US Dollar Index
- Panic Selling Hit SP500 Today and Silver Is Next!
- Gold "Readmitted as Prudent" Investment, Gains vs. Falling Dollar
- The Lost Swift Silver Mine
- Repealed
- Kitco Hong Kong Launches a Bullion Buy-back Service
- 12 Economic Collapse Scenarios That We Could Potentially See In 2011
- Big Tops
- GEAB N°51 is available! Systemic global crisis - 2011: The ruthless year, at the crossroads of three roads of global chaos
- Misconceptions About the Consumer’s Role in a US Recovery
- News Flash: Greenspan Says ‘Stocks Are Cheap’
- Metals Slump to 2-Month Lows as Dollar Rallies
- Gold, Silver ETF Holdings Fall Sharply
- China's Inflation Problem Looms Large
- Stick with Gold Juniors & Avoid Large Caps
- unbelievable movement of silver in comex vaults/high number of delivery notices/zero activity in gold:
- Why the Fed Creates So Much Money
- Gold Seeker Closing Report: Gold and Silver End Mixed
- Fitch Finds US Worst Of The AAA-Rated Best, Sees QE2 As Stoking Inflation Expectations
- SLV Metal Holdings Show Negative Money Flow
- Gold and Silvers Daily Review for January 19th, 2011
- Silver Up as US Mint Reports January Eagle Sales Reach Record High
- Fleckenstein on US Economic Policy
- SLV ETF Shows 4.9 Million Ounce Withdrawal
- Gold & Silver Find "Massive Demand" from Private Investors Even as Fund Managers Sell…
- Jan 17 1980 : Silver reaches its all time high - H.L. Hunt and the Circle K Cowboys
- The Sinking of QE II
- The More Americans That Go On Food Stamps The More Money JP Morgan Makes
| Silver Investors: Pick Your Poison Posted: 20 Jan 2011 03:49 AM PST For 10 years I've been hearing from the mainstream media, silver market analysts and even big time silver bugs the various reasons why Silver prices will NEVER skyrocket. There is always some GRAND REASON why my huge price projections of $7,000/oz for silver will never come true. It's gotten to the point that the BEST thing to do when one of these "oh-so-important" discoveries comes to light is to CLOSE YOUR EYES AND JUST KEEP BUYING SILVER! | ||
| Posted: 20 Jan 2011 03:28 AM PST To any who analyze our daily "news" (rather than simply absorbing it like a sponge), it has been obvious for quite some time that the information with which we are bombarded each morning is not "news to inform us", but rather disinformation to deceive us, and conceal the farcical rigging of global markets. Few days provide as stark an illustration of that disinformation campaign as today. Upon awaking and discovering that gold and silver had dropped a couple of percent overnight, I do what I always do. I immediately went to Kitco.com – for all of the anti-precious metals propaganda which would be put out to "explain" this move in markets. I was particularly well-rewarded today, as the gold bears at Kitco had furnished no less than four anti-gold headlines, telling all the sheep why gold and silver should be moving lower today. With two of those items focusing on the economic data out of China, I will take that as my cue that the China news is the principal "explanation"of the propagandists for the moves today in bullion markets. The "news" was that China's economic growth accelerated faster than expected by the "experts". What this directly implies is that China's demand for commodities (which includes gold and silver) will increase, the Chinese people will have more money in their wallets to buy these commodities, and this will increase inflationary pressures – making gold and silver much more attractive investments as hedges against that inflation. This is why virtually every time economic news of this nature comes out, gold and silver have been strongly higher on the day. What did the propagandists have to say to justify their "reasoning"? Because of increased inflationary pressures, they expect China's government to raise interest rates, which is (supposedly) "bearish" for commodities because demand will go down rather than up. Let's look at this analysis more closely. Unlike the interpretation I supplied (the usual interpretation of this data) where the "drivers" for higher commodity prices are direct, the interpretation supplied by the propagandists is not only indirect, but also built atop several assumptions. In other words, it's extremely speculative. First, what the propagandists are saying is that higher economic growth in China will cause increased demand for commodities and higher inflation (both very gold-bullish), but that China will react to this bullish development with a bearish response. Not only is that indirect reasoning, but it assumes that (automatically) China will respond by raising interest rates, when there are many arguments that they would not (see below). However, that immediately illustrates the second assumption here: that any response by China's government would negate the upward pressure on commodities (and gold and silver). In fact, we have two full years of empirical evidence which shows us commodity prices steadily rising despite weak demand from anemic Western economies – because the insane money-printing of Western bankers has meant that the speed with which they are destroying our currencies has overwhelmed all other economic fundamentals. Have these Western bankers shown the slightest inclination to curtail their reckless money-printing? Not at all. Ben Bernanke has repeated again and again that he planned on finishing his latest batch of Bernanke-bills (totaling $600 billion) irrespective of whether he sees stronger U.S. economic data. Meanwhile, "across the pond" in Europe, we see the Euro printing press being ratcheted-up to an almost Fed-like level. | ||
| Fear and Love Make Gold Strong Posted: 20 Jan 2011 01:31 AM PST | ||
| Global Macro Notes: Pondering the High Cost of Food Posted: 20 Jan 2011 12:19 AM PST
Next to guaranteed reelection, what is a politicians' fondest wish? Perhaps benign economic conditions — the ability to enjoy upturned economic indicators, positive sentiment, and increased feelings of voter satisfaction all at the same time. "A chicken in every pot." When fortunes are tied to the ballot box, this is what Washington wants. And it is what the Federal Reserve (with the help of China) appears to have delivered, for the investing classes at any rate: Unrelenting paper prosperity, in which an overall "crisis contained" attitude seeds complacency along with profits. In this world of levitating asset prices — never mind the possible correction brewing this week — what could derail the Fed's "higher market mandate?" Is there any factor that could rudely intrude and kill the dream of perpetual paper gains? Well, there's the rising cost of food, for one thing. (Energy too.)
Let's get rolling with two quotes, the first from Greenlight Capital's year-end letter:
And the second quote — while keeping the above in mind — is from our old friend Ludwig Von Mises:
One could further consider the Von Mises observation in light of feedback loops, stores of value, and Gresham's law (as we did some weeks ago). When paper money becomes "bad," there is little incentive to hold it relative to stores of value that are "good" (such as farmland). In Twelve Major Risks for 2011 we noted various possibilities of what could go wrong, one set of top down risks involving food inflation and civil unrest. But for the purpose of these notes, the food and energy question remains unique as a top down risk because it is potentially an internal creation — an undesired yet unavoidable side effect, born directly of a Fed-sponsored and Fed-engineered scenario. In sum, if we keep traipsing down the happy shiny non-withdrawn-stimulus path, we may reach a point where follow-on food and energy gains can no longer be civically tolerated from an end user standpoint. We note that this point would first be reached, and is in fact already being reached, in countries outside the United States. To those who wave off such pressures, a modest sampling of headlines:
China is clearly in the mix, with food costs at 40% of disposable income by various estimates. This is a real problem for a country with 20% of the global population, but only 6% of the farmable land (hat tip ZRH).
To clarify, we have never said that the dollar is a "zero," though overzealous dollar bears have implied it (which is why we make a tongue in cheek reference here). Nor have we ever entertained the surprisingly popular idea that the U.S. can go full-on "bankrupt." As the grain equation shows, the reason the U.S. cannot go bankrupt is not just because technical default is impossible, though it is – the U.S. can pay off its debts with a printing press – but also because of the positive side of the U.S. balance sheet, which includes being an agricultural powerhouse. In other words, we've got the food. Your currency doesn't go to zero when the world has to eat. The Saudi Arabia of grain has some clout. And so if China one day said, "Hey – we're going to sell all your bonds," and Uncle Sam replied "Hey okay, we're going to stop selling grain on world markets," guess who would win that little game of chicken? The U.S. would have a monetization mess to deal with — and an inflationary or even quasi-hyperinflationary currency episode — but Americans would still have food to eat. Meanwhile the cost of grains on world markets would quadruple or quintuple in price (due to withdrawal of U.S. supply), leading to riots in Chinese streets and burning pitchforks in Beijing, as domestic food bills went from 40% to triple digits, consuming local incomes twice and thrice over. Such a scenario would never play out, of course, any more than a full-blown nuclear exchange would. (But then anything's possible right?) Hypothetical point being though: When you are the world's bread basket, you have a fairly strong negotiating position as far as debt extremes go. (This isn't to say we are on the side of Keynesian free spenders who ignore the U.S. debt burden by the way. When it comes to the great debt debate we favor a hawkish stance, even though we recognize the technical truth behind the assertion that America "can't go broke" and consider the more extreme dollar armageddon scenarios far fetched. We are fiscal hawks because America, though possessing unassailable balance sheet advantages at the core, can certainly damage its economy to further great and terrible degree, and invite destructive inflation in doing so, through needless piling on of more unproductive spending in Washington. And as for the austerity "threat," politicians are great at giving lip service to austerity — a form of public pandering — but then spending like drunken sailors anyway.)  But back to the food problem… It's not just a global (i.e. non-U.S. domestic) issue, though it is very much that. Rising food costs, with unsustainable thresholds looming, are also a U.S. problem. And that's why we think viewpoints like the following are, well, either deluded or just plain nuts. Via Bloomberg:
As a former Federal Reserve official, one would guess Mr. Behravesh also agrees with Ben Bernanke's 60 Minutes assertion that he is "100% sure" inflation can be contained. (Just like subprime was contained. Right Ben?) "High commodity prices are the result of rising demand, not the cause of future economic weakness," adds cheerful economist Michael Darda in the same piece. ""Over the last decade, commodity prices and the U.S. stock market have usually moved together." This is a remarkably head-in-the-sand view in our humble opinion — never mind the amusing fact that "the last decade" has been one long unbroken chain of central bank manipulation, with Alan "The Maestro" Greenspan seamlessly passing the money-pumping baton to Bail 'Em Out Ben. Anyone who references "the last decade" as a reassuring stretch of monetary policy history perhaps needs their head examined. Putting aside the poor non-first-worlders who spend close to half their incomes on foodstuffs, the supposed saving grace of the U.S. economy is that food and energy represent a much smaller portion of total incomes — so we can safely ignore their impact longer, as stagnating wages and chronic unemployment do a bang-up job of repressing "core" inflation statistics. This little fudge allows the Fed to continue embracing its fiction that paper-stimulative policies that help the top 30% of households are helpful to the broad economy on the whole, even as those same cost-of-living inflating, middle-class-destroying policies make life an ever harder grind for the bottom 70% (who have no equity assets to speak of, still have to drive to work — assuming they have jobs – and are likely to buy generic cereal in bulk and generally throw nickels around like manhole covers). Then too there is sector and industry fallout, as the Wall Street Journal notes:
In the Mercenary portfolios and the Live Feed we have been happy to ride the long side of this unrelenting bull rally through areas like fertilizer, global infrastructure, solar, and global manufacturing. But we have also been looking hard for areas in which to add short bias to our net exposure, and one place we have succeeded is in restaurants. The challenge of rising input costs has made the restaurant space one of the few areas of the market not levitated by speculative euphoria — and we will be adding more short exposure as price action further confirms. (Side note: Merrill Lynch recently put out an industry-touting "buy the dips" report on restaurants, but we believe they are a day late and a dollar short — no pun intended, as Mother Merill tends to get clients "long and wrong" at highly inopportune times.) Another factor working against the favor of restaurants – and broader retail at this point – is not just a steady rise in food costs but an increase in the price of fuel, another area of concern where the Fed Chairman absolves himself:
As the price of gasoline etc. hits consumers in the wallet and further increases transport costs, where are profit margins going to go? Where will reduced discretionary income flows go? To zoom back out to a broader scope, the problem with the recent bout of quiet euphoria as we see it stems from a couple of offhand points:
In sum, watch food prices… keep an eye on commodities in general… and keep Katastrophenhausse in mind as a counterweight to the "Bernanke Put." The Fed will be eating crow in the end. | ||
| Trader alert: These stocks could get pummelled in a correction Posted: 19 Jan 2011 11:50 PM PST From Bespoke Investment Group: The market finally experienced a 1% pullback today after going quite a while without one. Investors are already wondering if this is the start of a more significant correction. If it is, the stocks that ran up the most during the rally will likely experience the biggest declines. For those interested, below is a list of the 30 most overbought stocks in the S&P 500 at the moment. All of them are... Read full article (with chart)... More trading ideas: When this alarm goes off, it's time to get out of stocks Trader alert: Look for these clues that gold has bottomed Trader alert: Forget Apple... This tech giant just made an important breakout | ||
| Chinese stocks are getting KILLED Posted: 19 Jan 2011 11:49 PM PST From Bloomberg: China's economic growth accelerated to 9.8 percent as industrial production and retail sales picked up, sending stocks lower from Asia to Europe on concern Chinese policy makers will raise interest rates and stem the expansion. The expansion exceeded the 9.4 percent median estimate in a Bloomberg News survey of 22 economists and compared with a 9.6 percent annual gain in the previous three months, a statistics bureau report showed. Consumer-price inflation eased to 4.6 percent in December. Citigroup Inc. and Credit Suisse Group AG say inflation may peak at as much as 6 percent in the first half. "If the economy keeps growing at the current pace, inflation will remain alarming," said Liu Li-Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group Ltd. Beside raising lenders' reserve requirements, the central bank should boost benchmark rates, he said. China may also allow more gains in the yuan to contain consumer prices and ease trade tensions, a topic on the agenda of President Hu Jintao's meetings in the U.S. this week. In Tokyo, Japanese government minister Kaoru Yosano said his country was probably overtaken as the second-largest economy last year, after today's report showed China's gross domestic product totaled 39.8 trillion yuan ($6.04 trillion). The Shanghai Composite Index tumbled 2.9 percent to close at a four-month low. The MSCI Asia Pacific index lost 1.3 percent. On the Frankfurt Stock Exchange, the preferred shares of Volkswagen AG, the largest European carmaker in China, slid 5 percent as of 11 a.m. local time. Yuan Trading Non-deliverable yuan forwards traded at 6.4780, indicating that the currency may appreciate about 1.7 percent against the dollar in the next 12 months. China's economy expanded 10.3 percent in 2010, the fastest pace in three years, the statistics bureau report showed. That compared with growth of 9.2 percent in 2009. The nation's standing as the No. 2 economy may be confirmed on Feb. 14 when Japan reports gross domestic product for the fourth quarter. Bank of America-Merrill Lynch estimated today that, using average full-year exchange rates, China's GDP was about $380 billion bigger in 2010 than Japan's. December's inflation compared with November's 5.1 percent annual pace, which was the fastest in more than two years. The rate slowed largely because of a higher year-earlier base for comparison and may "spike" in January ahead of a Chinese New Year holiday, Merrill economist Lu Ting said. Commodity Costs For 2010 as a whole, consumer prices rose 3.3 percent, breaching a government target of 3 percent. A tighter monetary policy, abundant grain supplies, and industrial overcapacity will help to restrain price increases, statistics bureau head Ma Jiantang told reporters at a briefing in Beijing. At the same time, China can't be "relaxed" about inflation as labor and commodity costs rise, he said. Urban fixed-asset investment rose 24.5 percent in 2010 from a year earlier. Retail sales grew at an annual 19.1 percent in December, partly boosted by inflation, and industrial production rose 13.5 percent, the statistics bureau said. Producer prices jumped 5.9 percent. In nominal terms, the nation's gross domestic product is more than 100 times bigger than in 1978, when Communist Party leader Deng Xiaoping began rolling out free-market policies. While China outstripped Germany in 2007 and the U.K. and France in 2005, the economy remains less than half as big as that of the U.S. 'Abnormal' Lending Premier Wen Jiabao pledged this week to prevent "abnormal" loan growth amid concern that resurgent lending may add to excess money in the financial system, fueling asset bubbles, and inflation. China's foreign-exchange reserves jumped by a record $199 billion in the fourth quarter and new loans breached the government's target for 2010. Companies from Baoshan Iron & Steel Co. to Starbucks Corp. have raised prices. Policy makers' commitment to taming inflation means they risk "overshooting" and causing a slowdown that hampers the global recovery, Allen Sinai, president of Decision Economics in New York, said in an interview in Tokyo this week. The central bank will increase the key one-year lending rate to 6.81 percent from 5.81 percent this year and let the yuan gain about 6 percent against the dollar, Nomura Holdings Inc. estimated this week. Yuan Policy The Chinese currency traded at 6.5884 per dollar, after President Barack Obama said it remains undervalued. "There has been movement, but it has not been fast enough," Obama said yesterday. Chinese Commerce Minister Chen Deming said U.S. export controls and China's role in global manufacturing helped to explain the nations' trade imbalance. China aims to hold inflation at 4 percent for the full year, state television reported last month, citing the National Development and Reform Commission, the economic planning agency. Inflation of even that level is "serious" in China, according to Ma Jun, Deutsche Bank AG's chief China economist. "People are used to low inflation and high inflation will easily cause social discontent," he said, citing a 1.6 percent average annual rate for the 10 years through 2009. The central bank has raised reserve ratios for the largest banks to 19 percent, excluding any extra requirements for individual lenders. Still, local-currency lending has already exceeded 1 trillion yuan in the year to date, the 21st Century Business Herald reported, citing an unidentified person familiar with the matter. Lending was 481 billion yuan in December. The Shanghai Composite Index rose by the most in five weeks yesterday after speculation that the December inflation number had leaked and was 4.6 percent, the number announced today. – Li Yanping, Zheng Lifei. With assistance from Jay Wang, Sophie Leung, and Aki Ito. Editors: Paul Panckhurst, Ken McCallum. To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net; Zheng Lifei in Beijing at +86-10-6649-7560 or Lzheng32@bloomberg.net. To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net. More on China: China crisis watch: Benchmark stock index plunging... China could be flashing a HUGE warning for commodities A Chinese state newspaper just guaranteed gold will go higher | ||
| These "nightmare scenarios" could plunge the world into a new crisis Posted: 19 Jan 2011 11:41 PM PST From The Economic Collapse: What could cause an economic collapse in 2011? Well, unfortunately there are quite a few "nightmare scenarios" that could plunge the entire globe into another massive financial crisis. The United States, Japan, and most of the nations in Europe are absolutely drowning in debt. The Federal Reserve continues to play reckless games with the U.S. dollar. The price of oil is skyrocketing and the global price of food just hit a new record high. Food riots are already breaking out all over the world. Meanwhile, the rampant fraud and corruption going on in world financial markets is starting to be exposed and the whole house of cards could come crashing down at any time. ... So we had all better be getting prepared for hard times. The following are 12 economic collapse scenarios that we could potentially see in 2011... Read full article... More Cruxallaneous: Porter Stansberry: You must prepare for a crisis NOW Shocking admission from Tim Geithner: U.S. on the brink of catastrophic collapse A huge threat to your freedom is gathering strength (WARNING: extremely controversial post) | ||
| Today's Wisdom by Richard Russell Posted: 19 Jan 2011 10:36 PM PST Famed market analyst Richard Russell said this in 2001: A government will stoop to any depth to ensure its own existence. This includes lying, cynical propaganda, imprisoning people, raising taxes, sequestering private property including gold. The Constitution was created by the Founding Fathers to protect the people from the government. No wonder so many politicians [...] | ||
| Posted: 19 Jan 2011 08:40 PM PST A technical picture on leading markets from the most recent week ended. Dow Jones Industrial Average: Closed at 11787.38 +55.48 as stocks continue higher for the shorter term. Volume was 1 Billion today, about 105% of average as the markets finished higher going into a three day USA holiday weekend. Momentum is flat to up as price is above all moving averages and channel support lines. Bonds are in trouble again so money is moving toward the stock markets. The price of 11,750 is support and 11,800 is resistance. With four trading days next week, expect strong buying on these cycle conditions. S&P 100 Index: Closed at 582.32 +4.58 on 130% of volume signaling the big funds came in to buy larger companies firming the stock markets. Price is above all moving averages with support at 577 and resistance at 580-600. We are fairly confident that with a move like this on big stocks, the buying should continue heavily next week on the Tuesday open. This kind of upside pressure with cash flowing out of bonds into shares lends hard support to all stock markets. Watch for a run at 600-625 next week in this stock index. S&P 500 Index: Closed at 1293.24 +9.48 on 118% of normal volume. Momentum is flat to up and price is above all moving averages. Support is 1285 and resistance is 1300. Traders set the annual tone in the first two weeks of annual trading, say some experts. I think with bonds on the skids the money flow was strongly attracted to shares. With this kind of buying pressure on this big-boy trading index, we could be moving toward a blow-off top and a follow-on correction; delayed. In the shorter term, we see hard buying pressures escaping the credit markets and working strongly to earn trading income by the larger investment houses. Before this rally is over, we might even see 1325-1350 on the S&P 500. This kind of action is also somewhat related to expectations by traders of new inflation. Nasdaq 100 Index: Closed at 2323.43 +17.90 on 114% of normal volume. Previous hard support was 2250 but the 20-day average is now 2260, signaling there is stronger than normal power in the buyers. This is the leading index and on the shorter term momentum chart, the upside thrust for momentum is even stronger than the other indexes. Thus, the leader is saying more buying pressures ahead for the entire group. Next resistance is 2350 with support at 2300. We can expect this index to provide at least another 50 points, or more next week despite being holiday shortened. 30-Year Treasury Bonds: Closed at 120.91 -0.56 with a very negative looking chart. We had a full five wave correction on the daily chart with some actual buying on the good news that Portugal bonds were placed with the aid of Asian buyers. However, in later after hours trading, the bonds slipped beneath today's close by a full 1/4th percentage point with a last price of 120.00. The high today during the session was 122.02. With a two point drop in one trading range day, this does not bode well for the credit markets. New support is 119.50 with resistance on the current price at 120.00. Watch the major support at 118.50 next week. If this breaks we could go to 115.50 in a flash and this would roil all the markets. Gold: Closed at 1361.80 -12.50 with the February futures off -25.60 on 1361.40. Momentum has been slipping since last October and the chart pattern is a bearish parabolic top. Price has dropped under both the 20 and 50 day moving averages. The 200-day average is way back at 1280.03. We have twice touched futures inter-day lows of 1354. Our low base forecast remains at 1348.50 with another top analyst saying 1325 support on a lower Bollinger Band line. We have completed a three wave ABC correction but it appears this move is entering a full five way cycle. Thus, we have two more down waves in this pattern starting next Tuesday. While gold and the dollar sold off together with silver (not too normal) we think the credit market problems are to blame and this is going to continue. However, watch for a small rally in the precious metals after the last two selling waves are completed. We think this happens somewhere near the end of the month. Silver: Closed at 28.48 -0.28 with price moving into a selling 4-5 wave cycle. Momentum stayed flat and higher throughout October 1; moving into the first week of December. Gold's was more straight downhill in a gradual pattern over the months since October. Also, gold's price is under two moving averages and silver is only beneath one; the 20-day average at 29.24. As we have been reporting, the general silver trend is stronger than gold as of the past 120 days. Support is 28.00-28.48 near today's close. Resistance is 29.24 on the 20-day average. If silver can hold and support at 28.07 on the 50-day moving average next week that might be the new low. If that number is broken, I see 25.85-26.48. The 200-day average much lower main support is 22.99. We'll see next week if 28.07 can hang on and hold for new support. Gold & Silver Index XAU: Closed at 205.72 -3.02 on sliding momentum and a very important sell-off in the metal to shares ratio. With gold and silver selling in two more waves down, we think the next hard support for this index is 200.00 on price. Should this price breakdown, then we have 194.90 major support on the 200-day moving average. I forecast the XAU will sell to that price unless the metals can stop selling so hard and the other broader stock indexes continue with upside buying pressures. This is not panic time as the metals and their indexes remain in longer trend bull markets. U.S. Dollar Index: Closed at 79.10 -0.09 on gradually selling momentum but with price still in the sideways choppy trading channel we did forecast a few weeks ago. The dollar trading range is 79.00-81.00. It's been there since Thanksgiving. Resistance is the 50-day average at 79.77 and support is 79.00 at the trading channel base. Price is under all moving averages, which is bearish. The very important 200-day average is 80.38. If the dollar sells below 79.00 on major channel support, next we see 78.50-77.00. That is our forthcoming forecast price as the dollar's companion, and credit markets go weaker and break down. Crude Oil: Closed at 92.64 +0.61 on a breakout price. Resistance had been 92.50 with support the five day moving average of 91.74. Momentum had been flat and is now rising. After an ABC correction oil did not enter a five wave down like other commodities. Instead, it did a pivot reverse and began to rally hard in a new wave one up on a temporarily closed pipeline in Alaska and, pure inflation. That one wave up was huge rising from 88.50 to over 92.50. The size of this one wave is abnormal, which signals oil might be in for a very large move higher. Next week we'll see oil on 92.50 support and trying to rally toward 96.50 resistance. CRB Index : Closed at 333.06 +0.06 on supported momentum as price moves up in waves one and two. Oil is the driver here and price is above all moving averages. Support is the 20-day average at 327.54 and resistance is 335.00. Since oil is one-half the CRB, we think the index will be supported. If the other major markets within the group were in rallies we could be at 350 in a flash. However, they are not and these others are a drag on the CRB price. Look for a gradual move higher to 350 resistance next week. –Traderrog         This posting includes an audio/video/photo media file: Download Now | ||
| Silver May Drop 20% as Coins Signal ‘Crowd’: Technical Analysis Posted: 19 Jan 2011 08:28 PM PST Image:  Just as I was about to hit the 'send' button on this morning's column, reader Scott Pluschau sent me the follow Bloomberg piece that was posted at midnight last night...and I decided to stick it my column here, as it dovetails nicely with my last story of the day. The headline reads "Silver May Drop 20% as Coins Signal 'Crowd': Technical Analysis". If silver does fall 20%...then it will be JPMorgan's doing...and nothing to do with supply or demand. | ||
| Brazil slams brakes to curb inflation, risking hot money tsunami Posted: 19 Jan 2011 08:28 PM PST Image:  Roy's last story is a posting from very late last night in The Telegraph. It's an Ambrose Evans-Pritchard offering that's headlined "Brazil slams brakes to curb inflation, risking hot money tsunami". Brazil has raised interest rates sharply, following China, India and host of countries across the emerging world in acting to curb inflation and counter the flood of dollar liquidity from the US. It's worth reading...and the link is read more | ||
| JPMorgan et al Hammer the Silver Price Again Posted: 19 Jan 2011 08:28 PM PST Today, the Russia's central banks updates its gold reserves for December. Ireland's central bank creates €51 billion out of thin air. The world needs $100 trillion more credit. A beautiful idea...and much more. ¤ Yesterday in Gold and SilverWell, it's pretty obvious, at least to me...that neither gold nor silver was going to be allowed to go anywhere during the Wednesday trading day. The first clue to how the day was going to unfold, was what happened at the London open at precisely 8:00 a.m. GMT...3:00 a.m. Eastern...which I mentioned in my closing comments in yesterday's column. From that interim high, the gold price sagged about five bucks, with the interim low coming at the London a.m. gold fix at 10:30 local time. Then gold rallied a bit through the New York open, but at 9:05 a.m...it's high tick of the day at $1,380.40 spot...and for no reason I could see, gold got sold off $10 before trading sideways for the rest of the New York session.
Silver was really hot to trot yesterday...and was up about 65 cents by the same 9:05 a.m. Eastern time in New York...before an obvious not-for-profit seller hammered the price back to unchanged by 10:45 a.m. From there, the silver price drifted lower...and actually closed down eleven cents on the day. Silver's high was $19.51 spot. Yesterday's price move in silver, in technical parlance, is called a key reversal to the downside. But, there was nothing natural about it. This was entirely manufactured by one or more of the '4 or less' bullion banks. Free markets do not act like this. One can only imagine how high the silver price would have risen if it hadn't been for malignant New York bullion bank intervention.
The dollar continued its slide in early Far East trading, with its low of the day coming at 8:30 a.m. Eastern time...on the button. That was a decline of about 65 basis points...and, from that low, the dollar struggled back about 25 basis points...closing the trading day around 78.57. The gold price sort of followed the dollar...but that certainly doesn't explain the pounding that silver took between 9:40 and 10:45 a.m. in New York.
The gold stocks started in positive territory, because the real sell-off in gold and silver didn't really get going until 9:40 a.m. Eastern time. It only took about fourty minutes from the open for the HUI to dip into negative territory...and it stayed there for the rest of the day. Gold had a tiny rally that started at precisely 3:00 p.m...and the shares responded instantly, so the HUI did not close on its low of the day. It was only down 1.21%. Needless to say, the silver shares did not do well.
Yesterday's CME Delivery Report was not very exciting, as only 17 gold and 3 silver contracts were posted for delivery. Once again there were declines in both GLD and SLV. The GLD ETF shed another 175,661 ounces of gold...and the SLV ETF reported a 341,920 troy ounce withdrawal. After Tuesday's big sales report, the U.S. Mint had nothing to say for itself on Wednesday. There was decent activity over at the Comex-approved warehouses yesterday...and by the end of the day their silver stocks showed a small 51,976 ounce increase. The link to the action is here.
¤ Critical ReadsSubscribeDebt ceiling: Geithner won't let us defaultReader Scott Pluschau provides today's first story...and it's posted over at money.cnn.com. The headline reads "Debt ceiling: Geithner won't let us default". Scott was incensed at the contents of this piece...and had this to say about it: "This quote just makes me want to scream at the walls:Geithner is correct that the debt limit must increase. With monthly deficits running more than $100 billion, it's simply unthinkable that Congress could cut spending or increase revenue enough to avoid borrowing more. Hello, do they not realize the game is up when you have to borrow more in order to avoid default? What individual or corporation is going to think this is a good idea, and what bank would lend them the money? What is the sense in borrowing more, we are digging a deeper hole." [That's a big 10-4 good buddy! - Ed] It's worth the read...and the link is here.  The Eight States Running Out of HomebuyersScott's second offering today is this item posted over at finance.yahoo.com...and it's all about real estate. The headline reads "The Eight States Running Out of Homebuyers". The author writes that "The devastation in some regions will never be repaired. Parts of Oregon, Georgia and Arizona have become progressively more deserted. Since jobless rates may never recover, there is little reason to hope that the populations in these areas will ever rebound." It's a fairly long [and very depressing] read...and the link is here.  America's economic recoveryYesterday I posted a piece on gold by Alasdair Macleod. Today I have another short essay that's authored by him...and it's courtesy of Australian reader Wesley Legrand. It's posted over at Alasdair's website financeandeconomics.org...and the headline reads "America's economic recovery". The article starts off like this..."According to official statistics, there has been positive GDP growth for the five quarters to Q3 in 2010, averaging 2.9%. Unemployment, which we are told is a lagging indicator, hovers between nine and ten per cent, but according to some, is actually showing faint signs of improvement. These figures are so misleading that they are valueless, and one has the impression that the authorities' only hope is to bull them up and pray that a spark of confidence reignites true recovery." Not too many shades of gray in this piece...and the link is here.  Central Bank steps up its cash support to Irish banks financed by institution printing own moneyThe following story is one that I just didn't have room for in Tuesday's column, so here it is now...and it's courtesy of reader 'David in California'. It's a piece out of the Saturday edition of The Irish Independent...and is headlined "Central Bank steps up its cash support to Irish banks financed by institution printing own money". [€51 billion to be precise - Ed] Bill King of the King Report made this comment on the story..."we noted that the Bank of Ireland is now straight out printing money." Take the blue pill before you read this...and the link is here.  World needs $100 trillion more credit, says World Economic ForumHere's another story that you should read before the effects of that pill wear off. This was posted in The Telegraph late on Tuesday evening...and was sent to me by reader Richard Di Nucci. The headline reads "World needs $100 trillion more credit, says World Economic Forum". It's only five short paragraphs...and, as you read, if you start getting the feeling that you're not in Kansas anymore...you would be right about that. The link is here.  The World from Berlin: 'Obama Can Not Afford a Rift with China'Roy Stephens has three stories today. The first is this piece from the German website spiegel.de...and is headlined The World from Berlin: 'Obama Can Not Afford a Rift with China'. It will take you less than five minutes to run through this...and I feel that it's worth your while. The link is here.  Keeping the Euro: Merkel Rules Out Return to Deutsche MarkHere's Roy's second offering...and it's also a posting from over at spiegel.de. The headline reads "Keeping the Euro: Merkel Rules Out Return to Deutsche Mark". Chancellor Angela Merkel has categorically stated that Germany will not abandon the euro and reintroduce the deutsche mark. Her comments are intended to quell speculation that Germany's love of the common currency is flagging in the wake of expensive bailouts of troubled euro-zone members Greece and Ireland. It's a very short piece...and the link is here.  Brazil slams brakes to curb inflation, risking hot money tsunamiRoy's last story is a posting from very late last night in The Telegraph. It's an Ambrose Evans-Pritchard offering that's headlined "Brazil slams brakes to curb inflation, risking hot money tsunami". Brazil has raised interest rates sharply, following China, India and host of countries across the emerging world in acting to curb inflation and counter the flood of dollar liquidity from the US. It's worth reading...and the link is here. Posted: 19 Jan 2011 08:28 PM PST Link: Image:  Lastly today, is my only precious metals-related story...and it's one that was written several years back that started the rush into U.S. silver eagles, which has now become a sales phenomena. It was a piece written by silver analyst Ted Butler's mentor, Izzy Friedman back on December 4, 2007. As Ted points out..."If you check the U.S. | ||
| America's economic recovery Posted: 19 Jan 2011 08:28 PM PST Image:  Yesterday I posted a piece on gold by Alasdair Macleod. Today I have another short essay that's authored by him...and it's courtesy of Australian reader Wesley Legrand. It's posted over at Alasdair's website financeandeconomics.org...and the headline reads "America's economic recovery". The article starts off like this..."According to official statistics, there has been positive GDP growth for the five quarters to Q3 in 2010, averaging 2.9%. Unemployment, which we are told is a lagging indicator, hovers between nine and ten per cen | ||
| Trading Comments, 20 January 2011 (posted 11h00 CET): Posted: 19 Jan 2011 08:00 PM PST The precious metals are again testing support. Use this opportunity to re-load. Gold 1) The position bought at $1368.75 on the 18 January London PM fix was sold on January 20, 2011 at | ||
| Commentary and Update of 3 Currencies, US Dollar Index Posted: 19 Jan 2011 05:23 PM PST
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| Panic Selling Hit SP500 Today and Silver Is Next! Posted: 19 Jan 2011 05:16 PM PST | ||
| Gold "Readmitted as Prudent" Investment, Gains vs. Falling Dollar Posted: 19 Jan 2011 05:10 PM PST | ||
| Posted: 19 Jan 2011 04:30 PM PST | ||
| Posted: 19 Jan 2011 03:26 PM PST
Mercenary Links Roundup for Wednesday, Jan 19th (below the jump).
01-19 Wednesday
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| Kitco Hong Kong Launches a Bullion Buy-back Service Posted: 19 Jan 2011 01:08 PM PST http://www.kitco.com/pr/1037/article_12292010104026.pdf Kong, Thursday, December 9, 2010 — Kitco (H.K.) Metals Ltd. announced the launch of its new bullion buy‐back service today. The service sets Kitco on the path to becoming a fullspectrum precious metals dealer in the Asian market. It also provides a reliable selling option to investors. The general surge in commodity prices that has occurred in recent months has increased activity and interest in precious metals among retail and institutional investors alike. The bullion buyback service, a response to this development, enables Kitco's customers to easily and immediately liquidate their holdings to take advantage of favourable prices. Kitco's bullion buy‐back service, which will be rolled out in phases over the coming year, will eventually facilitate the sale of all bullion coins and bars. In the current first phase, Kitco buys back many types of gold, silver, platinum and palladium coins including Kitco Signature products and coins issued by government mints. Later, the service will be extended to bullion bars of most types. To sell bullion through Kitco's buy‐back service, customers must have an account with Kitco and must have purchased products from the company in the past. Kitco would then physically inspect the bullion and lock in a price based on the real‐time spot price prevalent at the time of the sale. Customers can opt to be paid by cheque, bank wire, account balance credit or cash (only up to HKD 15,000). Details about the bullion buy‐back service can be obtained by calling Kitco (H.K.) Metals Ltd. on (852) 2827‐7800. About Kitco | ||
| 12 Economic Collapse Scenarios That We Could Potentially See In 2011 Posted: 19 Jan 2011 12:17 PM PST 
So will it be soon? Let's hope not. Let's certainly hope that it does not happen in 2011. Many of us need more time to prepare. Most of our families and friends need more time to prepare. Once this thing implodes there isn't going to be an opportunity to have a "do over". We simply will not be able to put the toothpaste back into the tube again. So we had all better be getting prepared for hard times. The following are 12 economic collapse scenarios that we could potentially see in 2011.... #1 U.S. debt could become a massive crisis at any moment. China is saying all of the right things at the moment, but many analysts are openly worried about what could happen if China suddenly decides to start dumping all of the U.S. debt that they have accumulated. Right now about the only thing keeping U.S. government finances going is the ability to borrow gigantic amounts of money at extremely low interest rates. If anything upsets that paradigm, it could potentially have enormous consequences for the entire world financial system. #2 Speaking of threats to the global financial system, it turns out that "quantitative easing 2" has had the exact opposite effect that Ben Bernanke planned for it to have. Bernanke insisted that the main goal of QE2 was to lower interest rates, but instead all it has done is cause interest rates to go up substantially. If Bernanke this incompetent or is he trying to mess everything up on purpose? #3 The debt bubble that the entire global economy is based on could burst at any time and throw the whole planet into chaos. According to a new report from the World Economic Forum, the total amount of credit in the world increased from $57 trillion in 2000 to $109 trillion in 2009. The WEF says that now the world is going to need another $100 trillion in credit to support projected "economic growth" over the next decade. So is this how the new "global economy" works? We just keep doubling the total amount of debt every decade? #4 As the U.S. government and the Federal Reserve continue to pump massive amounts of new dollars into the system, the floor could fall out from underneath the U.S. dollar at any time. The truth is that we are already starting to see inflation really accelerate and everyone pretty much acknowledges that official U.S. governments figures for inflation are an absolute joke. According to one new study, the cost of college tuition has risen 286% over the last 20 years, and the cost of "hospital, nursing-home and adult-day-care services" rose 269% during those same two decades. All of this happened during a period of supposedly "low" inflation. So what are price increases going to look like when we actually have "high" inflation? #5 One of the primary drivers of global inflation during 2011 could be the price of oil. A large number of economists are now projecting that the price of oil could surge well past $100 dollars a barrel in 2011. If that happens, it is going to put significant pressure on the price of almost everything else in the entire global economy. In fact, as I have explained previously, the higher the price of oil goes, the faster the U.S. economy will decline. #6 Food inflation is already so bad in some areas of the globe that it is setting off massive food riots in nations such as Tunisia and Algeria. In fact, there have been reports of people setting themselves on fire all over the Middle East as a way to draw attention to how desperate they are. So what is going to happen if global food prices go up another 10 or 20 percent and food riots spread literally all over the globe during 2011? #7 There are persistent rumors that simply will not go away of massive physical gold and silver shortages. Demand for precious metals has never been higher. So what is going to happen when many investors begin to absolutely insist on physical delivery of their precious metals? What is going to happen when the fact that far, far, far more "paper gold" and "paper silver" has been sold than has ever actually physically existed in the history of the planet starts to come out? What would that do to the price of gold and silver? #8 The U.S. housing industry could plunge the U.S. economy into another recession at any time. The real estate market is absolutely flooded with homes and virtually nobody is buying. This massive oversupply of homes means that the construction of new homes has fallen off a cliff. In 2010, only 703,000 single family, multi-family and manufactured homes were completed. This was a new record low, and it was down 17% from the previous all-time record which had just been set in 2009. #9 A combination of extreme weather and disease could make this an absolutely brutal year for U.S. farmers. This winter we have already seen thousands of new cold weather and snowfall records set across the United States. Now there is some very disturbing news emerging out of Florida of an "incurable bacteria" that is ravaging citrus crops all over Florida. Is there a reason why so many bad things are happening all of a sudden? #10 The municipal bond crisis could go "supernova" at any time. Already, investors are bailing out of bonds at a frightening pace. State and local government debt is now sitting at an all-time high of 22 percent of U.S. GDP. According to Meredith Whitney, the municipal bond crisis that we are facing is a gigantic threat to our financial system....
Former Los Angeles mayor Richard Riordan is convinced that things are so bad that literally 90% of our states and cities could go bankrupt over the next five years.... #11 Of course on top of everything else, the quadrillion dollar derivatives bubble could burst at any time. Right now we are watching the greatest financial casino in the history of the globe spin around and around and around and everyone is hoping that at some point it doesn't stop. Today, most money on Wall Street is not made by investing in good business ideas. Rather, most money on Wall Street is now made by making the best bets. Unfortunately, at some point the casino is going to come crashing down and the game will be over. #12 The biggest wildcard of all is war. The Korean peninsula came closer to war in 2010 than it had in decades. The Middle East could literally explode at any time. We live in a world where a single weapon can take out an entire city in an instant. All it would take is a mid-size war or a couple of weapons of mass destruction to throw the entire global economy into absolute turmoil. Once again, let us hope that none of these economic collapse scenarios happens in 2011. However, we have got to realize that we can't keep dodging these bullets forever. As bad as 2010 was, the truth is that it went about as good as any of us could have hoped. Things are still pretty stable and times are still pretty good right now. But instead of using these times to "party", we should be using them to prepare. A really, really vicious economic storm is coming and it is going to be a complete and total nightmare. Get ready, hold on tight, and say your prayers. | ||
| Posted: 19 Jan 2011 11:54 AM PST Is the market beginning to top out? We think so. Last night, the S&P500 fell 1 per cent, although the large cap Dow Jones Industrials index only fell a few points. Nothing too dramatic, and certainly not enough to scare the permanently bullish, but it's probably a sign of things to come. As Dan wrote yesterday, QEII is beginning to sink. How do we know? It's a matter of probabilities. We can't seem to recall anytime in history where printing money created lasting benefits or wealth. So why should this time be different? Sure, there are a few major beneficiaries of QEII. Bankers. The world's central banks create money but private banks disburse it. As the newly created money washes through their computer screens, they take a portion for 'services rendered'. By the time those funds spread to the broader economy, it turns into inflation. Those furthest away from the source of money are the ones who pay for it. That's why you are seeing commodity prices, especially food prices, skyrocket. Inflation is becoming a problem across the emerging markets. Also, rising fuel prices are hitting consumers everywhere. Every extra dollar spent on fuel is one less dollar to save or spend. Check out the chart below. It shows the ishares MSCI emerging markets index. For all the bullishness about emerging markets, the index is no higher than it was in November. Following a correction, the index tried to move up through the old highs but has since fallen back again.
With many emerging market economies attempting to fight inflation (if lamely, in some circumstances) it's hard to see how emerging markets can continue to move higher from here. What QEII gives with one hand it takes from the other. It's just that it gives to one segment of society and takes from another, which is what makes markets and capitalism so 'unfair'. QEII creates a false illusion of wealth and prosperity. But it's not sustainable. Most investors realise this, so they instead turn to speculation. They know there is a chance of making some short-term money. They think they will be able to get out before everyone else. We think the smart speculators are now beginning to get out. A top is forming. Soon, the dumb ones will follow en masse. Then we should see some fireworks. *** Eric Johnstone reports in today's SMH that Australia's big four banks will need to borrow more than $130bn in the next year to fund their loan books. The problem is that the cost of obtaining those funds is rising. The banks are now competing for capital with bankrupt governments. Markets are demanding a higher rate of interest to lend to these governments so in turn, the banks need to pay more. After many years of not caring, debt markets are starting to price risk sensibly (although the equity market couldn't care less at this point). This has important implications for the Australian banking sector and the economy. A higher cost of credit means we probably won't see a rebound in lending anytime soon. Banks won't expand their balance sheets, which means their share prices will stagnate. Even worse though, the higher cost of credit will hurt the property sector. Over the past decade, cheap and plentiful credit has propelled the property market higher and higher. Based on capital city prices, Australian residential property is one of the world's most expensive. But with credit now coming at a higher cost, you will see house prices begin to fall. Residex recently reported that Australian capital city house prices fell an average of 1.1% in December, with year on year gains of 5.1%. That annual gain is less than the cost of funding, so in real terms property investors are going backwards. Remember, property is a highly geared investment, so even small falls can have a major impact on investors' equity. This will put further pressure on the banks and balance sheets of a highly indebted household sector. The equity market is not the only asset class topping out. Residential property is joining in. Will there be a crash though? Maybe. But we think that will only happen if unemployment starts to rise. The two income household is one of the major drivers of property prices. As long as there is employment income to service debt, you probably won't see major price falls. But here's a twist. Australia's extremely low unemployment rate has come at the expense of declining productivity. We may be near full employment, but as a group we're becoming less productive. A big part of the reason for this is that Australia has overinvested in property, an unproductive asset. The balance sheets of the big four banks are overwhelmingly tilted towards residential property. As a percentage of Australian assets, the average is somewhere around 65 per cent. So the majority of money borrowed by banks (from you, the depositor, and overseas lenders) goes into housing. This does not increase our productive capacity. Along with the benefits of the China boom, this is why there is fear of a wages breakout in Australia. And this is why Glenn Stevens at the RBA still has his finger on the interest rate button despite numerous signs of a weak domestic economy. Wealth is many things but it's not higher asset prices pushed up by cheap credit. Tops are beginning to form. It's time to be conservative. Similar Posts: | ||
| Posted: 19 Jan 2011 11:04 AM PST This GEAB issue marks the fifth anniversary of the publication of the Global Europe Anticipation Bulletin. In January 2006, on the occasion of the first issue, the LEAP/E2020 team indicated that a period of four to seven years was opening up which would be characterized by the "Fall of the Dollar Wall", an event similar to the fall of the Berlin Wall which resulted, in the following years, in the collapse of the communist bloc then that of the USSR. Today, in this GEAB issue, which presents our thirty-two anticipations for 2011, we believe that the coming year will be a pivotal year in the roll out of this process between 2010 and 2013. It will be, in any case, a ruthless year because it will mark the entry into the terminal phase of the world before the crisis (1). Since September 2008, when the evidence of the global and systemic nature of the crisis became clear to all, the United States, and behind it the Western countries, were content with palliative measures that have merely hidden the undermining effects of the crisis on the foundations of the present-day international system. 2011 will, according to our team, mark the crucial moment when, on the one hand, these palliative measures see their anesthetic effect fade away whilst, in contrast, the consequences of systemic dislocation in recent years will dramatically surge to the forefront (2). In summary, 2011 will be marked by a series of violent shocks that will explode the faulty safety devices put in place since 2008 (3) and will carry off, one by one, the "pillars" on which the "Dollar Wall" has rested for decades. Only the countries, communities, organizations and individuals which, over the last three years, have actually undertaken to learn the lessons from the current crisis to distance themselves as quickly as possible from the pre-crisis patterns, values and behavior will get through this year unscathed; the others will be carried away in the procession of monetary, financial, economic, social and political difficulties that 2011 holds. Thus, as we believe that 2011 will, globally, be the most chaotic year since 2006, the date of the beginning of our work on the crisis, in this GEAB issue our team has focused on 32 anticipations for 2011, which also include a number of recommendations to deal with future shocks. Thus, this GEAB issue offers a kind of map forecasting financial, monetary, political, economic and social shocks for the next twelve months. If our team believes that 2011 will be the worst year since 2006, the beginning of our anticipation work on the systemic crisis, it's because it's at the crossroads of three paths to global chaos. Absent fundamental treatment of the causes of the crisis, since 2008 the world has only gone back to take a better jump forward. A bloodless international system The first path that the crisis can take to cause world chaos is simply a violent and unpredictable shock. The dilapidated state of the international system is now so advanced that its cohesion is at the mercy of any large-scale disaster (4). Just look at the inability of the international community to effectively help Haiti over the past year (5), the United States to rebuild New Orleans for six years, the United Nations to resolve the problems in Darfur, Côte d'Ivoire for a decade, the United States to progress peace in the Middle East, NATO to beat the Taliban in Afghanistan, the Security Council to control the Korean and Iranian issues, the West to stabilize Lebanon, the G20 to end the global crisis be it financial, food, economic, social, monetary, ... to see that over the whole range of climatic and humanitarian disasters, like economic and social crises, the international system is now powerless. In fact, since the mid-2000s at least, all the major global players, at their head of course the United States and its cortege of Western countries, do no more than give out information, or gesticulate. In reality, all bets are off: The crisis ball rolls and everyone holds their breath so it doesn't fall on their square. But gradually the increasing risks and issues of the crisis have changed the casino's roulette wheel into Russian roulette. For LEAP/E2020, the whole world has begun to play Russian roulette (6), or rather its 2011 version, "American Roulette" with five bullets in the barrel. Monthly progression of the FAO food index (2010) and the price of principal foodstuffs (2009/2010) (base 100: averaged over 2002-2004) - Source: FAO/Crikey, 01/2011 Soaring commodity prices (food, energy (7),...) should remind us of 2008 (8). It was indeed in the six months preceding Lehman Brothers and Wall Street's collapse that the previous episode of sharp increases in commodity prices was set. And the actual causes are the same as before: a flight from financial and monetary assets in favour of "concrete" investments. Last time the big players fled the mortgage market and everything that depended on it, as well as the U.S. Dollar; today they are fleeing all financial stocks, Treasury bonds (9) and other public debts. Therefore, we have to wait for a time between Spring and Autumn 2011 for the explosion of the quadruple bubble of Treasury bonds, public debt (10), bank balance sheets (11) and real estate (American, Chinese, British, Spanish,... and commercial (12)), all taking place against a backdrop of a heightened currency war (13). The inflation induced by US, British and Japanese Quantitative Easing and similar stimulus measures of the Europeans and Chinese will be one of the destabilizing factors in 2011 (14). We will come back to this in more detail in this issue. But what is now clear with respect to what is happening in Tunisia (15), is that this global context, especially the rise in food and energy prices, now leads on to radical social and political shocks (16). The other reality that the Tunisian case reveals is the impotence of the French, Italian or American "godfathers" to prevent the collapse of a "friendly regime" (17). Impotence of the major global geopolitical players And this impotence of the major global geopolitical players is the other path that the crisis can use to produce world chaos in 2011. In effect, one can place the major G20 powers in two groups whose only point in common is that they are unable to influence events decisively. On one side we haves a moribund West with, on the one hand, the United States, for whom 2011 will show that its leadership is no more than fiction (see this issue) and which is trying to freeze the entire international system in its configuration of the early 2000s (18), and on the other hand we have Euroland, "sovereign" in the pipeline, which is currently mainly focused on adapting to its new environment (19) and new status as an emerging geopolitical entity (20), and which, therefore, has neither the energy nor the vision necessary to influence world events (21). And on the other side are the BRIC countries (with China and Russia in particular) who are, at the moment, proving to be incapable of taking control of all or part of the international system and whose only action is therefore limited to quietly undermine what remains of the foundations of the pre-crisis order (22). Ultimately, impotence is widespread (23) at the international community level, increasing not only the risk of major shocks, but also the significance of the consequences of these shocks. The world of 2008 was taken by surprise by the violent impact of the crisis, but paradoxically the international system was better equipped to respond being organized around an undisputed leader (24). In 2011, this is no longer the case: not only is there no undisputed leader, but the system is bloodless as we have seen above. And the situation is aggravated further by the fact that the societies of many countries in the world are on the verge of socio-economic break-up. US petrol prices (2009-2011) - Source: GasBuddy, 01/2011 Societies on the edge of socio-economic break-up This is particularly the case in the United States and Europe where three years of crisis are beginning to weigh very heavily on the socio-economic and therefore political balance. US households, now insolvent in their tens of millions, oscillate between sustained poverty (25) and rage against the system. European citizens, trapped between unemployment and the dismantling of the welfare state (26), are starting to refuse to pay the bills for financial and budget crises and are beginning to look for culprits (banks, the Euro, government political parties…). But amongst the emerging powers too, the violent transition which constitutes the crisis is leading societies towards situations of break-up: in China, the need to control expanding financial bubbles is hampered by the desire to improve the lot of whole sectors of society such as the need for employment for tens of millions of casual workers; in Russia, the weakness of the social security system fits badly with the enrichment of the elite, just as in Algeria shaken by riots. In Turkey, Brazil and India, everywhere the rapid change these countries are seeing is triggering riots, protests and terrorist attacks. For reasons that are sometimes contradictory, growth for some, penury for others, across the globe our diverse societies tackle 2011 in a context of strong tensions and socio-economic break-up, which have the making of political time bombs. It's its position at the crossroads of three paths which thus makes 2011 a ruthless year. And ruthless it will be for the States (and local authorities) which have chosen not to draw hard conclusions from the three years of crisis which have gone before and / or who have contented themselves with cosmetic changes not altering their fundamental imbalances at all. It will also be so for businesses (and States (27)) who believed that the improvement in 2010 was a sign of a return to "normal" of the global economy. And finally it will be so for investors who have not understood that yesterday's investments (securities, currencies,...) couldn't be those of tomorrow (in any case for several years). History is usually a "good girl". She often gives a warning shot before sweeping away the past. This time, it gave the warning shot in 2008. We estimate that in 2011, it will do the sweeping. Only players who have undertaken, even painstakingly, even partially, to adapt to the new conditions generated by the crisis will be able to hang on; for the others, chaos is at the end of the road. ---------- Notes: (1) Or of the world that we have known since 1945 to repeat our 2006 description. (2) The recent decision by the US Department of Labor to extend the inclusion of the measure of long-term unemployment in the US employment statistics to five years instead of the maximum of two years until now, is a good indicator of the entry into a new stage of the crisis, a step that has seen the disappearance of the "practices" of the world before. As a matter of fact, the US government cites "the unprecedented rise" of long-term unemployment to justify this decision. Source: The Hill, 12/28/2010 (3) These measures (monetary, financial, economic, budgetary, strategic) are now closely linked. That's why they will be carried away in a series of successive shocks. (4) Source: The Independent, 01/13/2011 (5) It's even worse because it was international aid that brought cholera to the island, causing thousands of deaths. (6) Moreover Timothy Geithner, US Treasury Secretary, little known for his overactive imagination, has just indicated that "the US government could once again have to do exceptional things", referring to the bank bailout in 2008. Source: MarketWatch, 01/13/2011 (7) Moreover, India and Iran are in the course of establishing a system of exchange "gold for oil" to try and avoid supply disruptions. Source: Times of India, 01/08/2011 (8) In January 2011 the FAO food price index (at 215) has just exceeded its previous record set in May 2008 (at 214). (9) Wall Street banks are currently unloading their US Treasury bonds as fast as possible (unseen since 2004). Their official explanation is "the remarkable improvement in the US economy which no longer requires us to seek refuge in Treasury Bonds". Of course, you are free to believe it, like Bloomberg 's journalist on 01/10/2011. (10) Thus Euroland is already taking big steps forward along the path described in the GEAB N°50 with a discount in the case of refinancing the debts of a member state, whilst Japanese and US debt are now about to enter the storm. Sources: Bloomberg, 01/07/2011; Telegraph, 01/05/2011 (11) We believe that, in general, global banks' balance sheets contain at least 50% ghost assets which in the coming year will require to be discounted by between 20% to 40% due to the return of the global recession combined with austerity, the rise in defaults on household, business, community and state loans, currency wars and a pickup in the fall of real estate prices. The American, European, Chinese, Japanese and others "stress-tests" can still continue to try and reassure markets with "Care Bears" scenarios except that this year it's "Alien against Predator " which is on the banks' agenda. Source: Forbes, 01/12/2011 (12) Each of these real estate markets will fall sharply again in 2011 in the case of those which have already started falling in recent years, or in the case of China, which will begin its sharp deflation amid economic slowdown and monetary tightening. (13) The Japanese economy is, moreover, one of the first victims of this currency war, with 76% of the CEOs of 110 major Japanese companies surveyed by Kyodo News now reported being pessimistic about Japanese growth in 2011 following the rise in the yen. Source: JapanTimes, 01/04/2011 (14) Here are several instructive examples put together by the excellent John Rubino. Source: DollarCollapse, 01/08/2011 (15) By way of reminder, in the GEAB N°48 we had classified Tunisia in the category of countries "with significant risks" in 2011. (16) No doubt, moreover, that the Tunisian example is generating a round of reassessment amongst the rating agencies and the "experts in geopolitics", who, as usual, didn't see anything coming. The Tunisian case also illustrates the fact that it's now the satellite countries of the West in general and the US in particular, who are on the way to shocks in 2011 and in the years to come. And it confirms what we regularly repeat: a crisis accelerates all the historical processes. The Ben Ali regime, twenty-three years old, collapsed in a few weeks. When political obsolescence is involved everything changes quickly. Now it's all the pro-Western Arab regimes which are obsolete in the light of events in Tunisia. (17) No doubt this « Western godfather » paralysis will be carefully analyzed in Rabat, Cairo, Jeddah and Amman, for example. (18) A configuration that was all the more favorable because it was without a counterweight to their influence. (19) We will return in more detail in this GEAB issue, but seen from China we are not mistaken. Source: Xinhua, 01/02/2011 (20) Little by little Europeans are discovering that they are dependent on centres of power other than Washington. Beijing, Moscow, Brazilia, New Dehli,… Source: La Tribune, 01/05/2011; Libération, 12/24/2010; El Pais, 01/05/2011 (21) All Japan's energy is focused on its desperate attempt to resist the attraction of China. As for other Western countries, they are not able to significantly influence global trends. (22) The US Dollar's place in the global system is a part of these last foundations that the BRIC countries are actively eroding day after day. (23) As regards deficit, the US case is textbook. Beyond the speeches, everything continues as before the crisis with a deficit swelling exponentially. However, even the IMF is now ringing the alarm. Source: Reuters, 01/08/2011 (24) Moreover, even the Wall Street Journal on 01/12/2011, echoing the Davos Forum, is concerned over the lack of international coordination, which is in itself a major risk to the global economy. (25) Millions of Americans are discovering food banks for the first time in their lives, whilst in California, as in many other states, the education system is disintegrating fast. In Illinois, studies on the state deficit are now comparing it to the Titanic. 2010 broke the record for real estate foreclosures. Sources: Alternet, 12/27/2010; CNN, 01/08/2011; IGPA-Illinois, 01/2011; LADailyNews, 01/13/2011 (26) Ireland, which is facing, purely and simply, a reconstruction of its economy, is a good example of situations to come. But even Germany, with remarkable current economic results however can't escape this development as shown by the funding crisis for cultural activities. Whilst in the United Kingdom, millions of retirees are seeing their incomes cut for the third year running. Sources : Irish Times, 12/31/2010; Deutsche Welle, 01/03/2011; Telegraph, 01/13/2011 (27) In this regard, US leaders confirm that they are rushing straight into the wall of public debt, failing to anticipate the problems. Indeed, the recent statement by Ben Bernanke, the Fed chairman, that the Fed will not help the States (30% fall in 2009 tax revenues according to the Washington Post on 01/05/2011) and the cities collapsing under their debts, just as Congress decides to stop issuing "Build America Bonds" which enabled States to avoid bankruptcy these last few years, shows a Washington blindness only equal to that which Washington demonstrated in 2007/2008 in the face of the mounting consequences of the "subprime" crisis. Sources: Bloomberg, 01/07/2011; WashingtonBlog, 01/13/2011 Dimanche 16 Janvier 2011 http://www.leap2020.eu/geab-n-51-is-available-systemic-global-crisis-2011-the-ruthless-year-at-the-crossroads-of-three-roads-of-global-chaos_a5775.html  | ||
| Misconceptions About the Consumer’s Role in a US Recovery Posted: 19 Jan 2011 10:19 AM PST Have you been following the news, dear reader? Food prices are hitting record highs. Riots have broken out in Africa. Already, two governments have been toppled...in Tunisia alone. Nature seems to be giving us a warning. The thermometer in England hit a 100-year low in December. Airports were blocked by snow all across Europe. Florida, too, shivered in temperatures that hadn't been seen in generations. Floods in Australia were worse than any since the time of Noah. An area the size of France was said to be submerged. For a while, it looked like the whole continent might disappear beneath the water. And then...in America...birds fell from the skies. Whole flocks of them. In Europe too. Thousands of them. And little fishes beached themselves and died. Surely these are omens. The Second Coming is at hand! Or maybe not. Even the first coming was largely ignored until hundreds of years later. At the time, only a handful of people knew or cared that Jesus had been crucified. It was only much later that it became a big deal. That's the problem with history...it's very hard to see what's going on when you're in the middle of it. Still...you gotta guess... A study of tree rings tells us that periods of cold, drought and famine have often been accompanied by revolutions and war. People get hungry. Then they get mad. Then they get to work...attacking the system, whatever it is. Mass man is not a thinker. He is a reactor. He reacts to the weather...to prices...to the economy...to demagogues...and even to ideas. He accepted the system of modern social welfare economies because he was comfortable. But what will he do when the system is unable to make good on its promises? Our guess is that "the system" in the advanced countries is approaching its final stage... Why? It just can't pay. We like to read Francis Fukayama. Not because he is right about things, but because he is wrong in a big way... But so is just about everyone. Most economists see the financial problem in America as a typical recession caused by a lack of demand. If they could just figure out how to stimulate the consumer...everything would be okay. And most commentators see the political problem in simpleton's terms too. Like Krugman, they think the democrats are right and the republicans are wrong. Or like Boehner, they think the republicans are right and the democrats are wrong. And then, there are those who think that if the two major parties could just get together...they could sort things out. Uh uh. The real problem in Washington and the economy is deeper...it won't be fixed by bipartisan cooperation - because both parties are wrong. They have to be wrong. They have to respond to the marginal voter, who is a lunkhead. Nor will the economy recover by inducing the consumer to shop. American consumers already spend too much. They have a savings rate of just 5%...far too low to finance the kind of capital improvements the nation needs. Consumer demand needs to go down, not up. But getting back to Fukayama, this is the man who - in the dizzy days following the fall of the Berlin Wall - lost his balance completely. He wondered whether we had reached the "end of history." The idea was that history was the march of progress and that after the triumph of American capitalist democracy no more progress could be made. The idea was silly...but in a grand kind of way. Besides, the neo-cons loved it. It flattered them and vanity got the best of them. They figured they were the crown of creation; with their arrival on the political scene time could jolly well stop. Perfection had been attained. That was then. In the here and now, Dick Cheney should be afraid to travel outside the US (for fear he will be arrested for war crimes)...and Francis Fukayama is having second thoughts. The problem now, he says, is that the system in America has "ensured individual liberty and a vibrant private sector, but it has now become polarized and ideologically rigid. At present it shows little appetite for dealing with the long-term fiscal challenges the US faces." Little appetite? As near as we can tell, the politicos are on a hunger strike. There's no way they're going to take up the greasy issue of US finances. And more thoughts... Cut the fat? John Boehner just proposed that the feds roll back spending to the levels of 2008. What? He'll have to do a lot better than that. Federal spending was way out of line in 2008...and it had been out of line for many, many years. Here's a report from the Independent Institute: Runaway Federal Spending the Reality for Nearly a Decade
Hey... Wasn't George W. Bush in charge the whole time, from 2001 to 2008? Wasn't he a republican? Couldn't he have simply vetoed these spending bills? It was the biggest spending spree in US history. How many spending measures did George W. Bush veto? None that we remember. No amount of bi-partisan cooperation is going to really fix America's financial situation. Because both parties believe in the same model - spend, spend, spend...elect, elect, elect. It's the model of the 20th century social welfare state. The government promises to give voters more than they pay for. The voters pledge to keep toiling in massa's fields and vineyards, paying their mortgages and their taxes. And if called up, they're ready to sacrifice their lives to keep the system in business. (If asked, the typical US soldier will tell you that he risks his life to protect his family and his home. But the only war in which his home and his family were really under attack was the one launched by the US government against the southern states. It wasn't Kaiser Wilhelm or Emperor Hirohito who burned Atlanta. It was Abraham Lincoln.) More to come... *** Poor Silvio Berlusconi. The press is after him again...at least, that part of the press he doesn't own. He is one of the richest men in Italy... He is head of the Italian government.... He controls a vast media empire... And he is accused of having a whole harem of beautiful young women ready to sleep with him... ..Poor fellow! Regards, Bill Bonner. | ||
| News Flash: Greenspan Says ‘Stocks Are Cheap’ Posted: 19 Jan 2011 10:19 AM PST On January 7, 2011, Kelly Evans of The Wall Street Journal interviewed former Federal Reserve Chairman Alan Greenspan. He rooted for the stock market. Greenspan's circular logic was unenlightening: "Stocks are cheap if earnings are to continue higher." Taken as a whole, this does not mean much, akin to prophesizing: "The Red Sox will win if they score more runs than the Tigers." Greenspan's successful impoverishment of the American people often hinged on the suppression of his dependent clauses: "Stocks are cheap," was all we needed to know. Greenspan also revealed that the (purported) economic recovery is hostage to a bigger and better stock market bubble. He did not put it that way, of course. But interviewer Evans pestered the de-accessioned relic into a defense of the current Fed's market-rigging policy. The former central banker denied any such collusion, but did claim: "The stock market overall is the only type of stimulus that you can get into the economy that doesn't have any debt associated with it." There may never have been greater debt associated with the stock market than in 2011. That, after all, is how it stays up. Gluskin, Sheff economist David Rosenberg celebrated the New Year by publishing some unnerving charts. Margin debt at US broker/dealers has risen 24% over the past year. The hand wringing about atrophied bank lending is a narrow view. A broader investigation shows that commercial banks' trading assets surged $64 billion in December, 2010. UBS Prime Brokerage Services reported on January 12, 2011, that hedge funds have increased their leverage to within 10% of the peak in 2008. Since the bottom (when Lehman Brothers surrendered), gross leverage at hedge funds is up 43%. In other words, lending is up...but only the kind of lending that feeds speculation and boosts stock prices. A favorite destination for Fed-nourished re-leveraging is stock mutual funds and ETFs - they received $24 billion in net flows in December, 2010. This does not even account for the far greater leverage during buying sprees of S&P 500 futures contracts, the domain of the banks and hedge funds. The institutions have plenty at stake. They took the Fed at its word. "[H]igher stock prices will boost consumer wealth and help increase confidence," Fed Chairman, Ben Bernanke, declared two months ago. The Fed is doing its best to maintain institutional investor confidence by continuing its money-pumping program (QE2). The bulge-bracket brokers compensate for Federal Reserve lapses by raising S&P 500 futures prices when the market flags. It is this symbiotic relationship that lies beneath Greenspan's confident stock market forecast, an inevitable conclusion after listening to his other reasons to buy stocks, all of which are often associated with an impending crash: GREENSPAN: "We've had an extraordinary rise in profit margins. This is coming to an end." That may seem to contradict the rationale for his "stocks are cheap" analysis, and it does. Greenspan was never a model of cogency. The following exchange was of the same quality: GREENSPAN: "[W]e are going on the assumption that long-term interest rates will stay down. We don't know that...We are in the position we were in 1979....There were no inflation fears, then, within three to four months, we went up 400 basis points [i.e., 4 percent]. EVANS: "Do you think something like that could happen again?" GREENSPAN: "I think it's a danger." Inflation had been 12% in 1974 and 9% in 1978, so the leap to 13% inflation in 1979 was not difficult to imagine, except, apparently, to the man who had led the President's Counsel of Economic Advisers from September, 1974 to January, 1977 - one Mr. Alan Greenspan. Interest rates could very well jump 4%, but, this time it could take only 15 seconds. The government-sanctioned machinery that now nourishes the stock, bond, commodity, futures, foreign exchange, and executive- pay markets is even more susceptible to a miscue than the old "Greenspan Put" - that invisible implied guarantee that the Fed would never allow the NASDAQ to fall below 5,000. (That great unwinding receives its due in Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession.) Should interest rates revert to a proper (i.e., higher) level, it may take an additional 15 seconds for the stock market to revert to a lower level. It is no wonder that after the interview, Business Insider choose as its headline: "Alan Greenspan Sees a Huge Chance of a Bond Collapse, While Lashing Out at His Critics." As to the second half of Business Insider's headline, the incoherent scolding of his critics was pathetic. The less said about it the better. Regards, Frederick J. Sheehan, Editor's Notes: Frederick Sheehan is author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession and co-author of Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve. He was also a director at John Hancock Financial Services where he wrote the Market Outlook and Market Review. He contributes to the Gloom, Boom & Doom Report, Whiskey & Gunpowder, and the Prudent Bear, among others. He also advises an investment firm and a non-profit foundation. Sheehan is a CFA and graduate of Columbia Business School. Similar Posts: | ||
| Metals Slump to 2-Month Lows as Dollar Rallies Posted: 19 Jan 2011 10:00 AM PST Gold and silver prices both fell hard in London and early New York trading on Thursday, extending this month's 4% and 10% drops as world stock markets fell and the US dollar rose. | ||
| Gold, Silver ETF Holdings Fall Sharply Posted: 19 Jan 2011 10:00 AM PST Gold holings tumbled over 300,000 troy ounces on Wednesday to 66.5 million, or 1.5 million troy ounces below the record set in December. Silver holdings fell 5 million troy ounces to 474 million, almost twelve million below the record. | ||
| China's Inflation Problem Looms Large Posted: 19 Jan 2011 10:00 AM PST The global economy has become so unbalanced that even government ministers who would normally have trouble explaining supply or demand clearly recognize that something has to give. To a very large extent the distortions are caused by China's long-standing policy of pegging its currency, the yuan, to the U.S. dollar. But as China's economy gains strength, and the American economy weakens, the cost and difficulty of maintaining the peg become ever greater, and eventually outweigh the benefits that | ||
| Stick with Gold Juniors & Avoid Large Caps Posted: 19 Jan 2011 10:00 AM PST Just to stay in business, gold companies have to consistently find new deposits, mine those deposits and add to reserves. The larger a company is, the more difficult it is to do these things. A junior company can grow by building a few small mines. | ||
| Posted: 19 Jan 2011 09:08 AM PST | ||
| Why the Fed Creates So Much Money Posted: 19 Jan 2011 09:00 AM PST One of the reasons behind the Federal Reserve creating so many trillions and trillions of dollars in new money is so the stock market will go up so that more taxes will be collected, and the bond market will go up so that more taxes will be collected (and less interest paid by issuers, too!), and the housing market will go up so that more taxes will be collected, and prices of everything will go up so that more taxes will be collected, so that massive, backbreaking, bankrupting deficit-spending by the government can continue going up. The astute Junior Mogambo Ranger (JMR) senses, as do I, an ominous theme in there somewhere, although any snap judgment may be hasty, as it is entirely possible that an alternative reason for the Federal Reserve creating so much money is that the Federal Reserve is, in a word, evil. Or perhaps the Federal Reserve is filled with robots under the control of beings from outer space. Creatures from another planet are "softening us up" before their main battle forces get into their flying saucers and come eat us, enslave us, or (as seems to be their usual practice) probe our orifices. So far, there is nothing about "monsters from outer space" at zerohedge.com, although you will notice that I said "so far." But I did see at zerohedge.com that Tyler Durden quotes SocGen's Albert Edwards as saying, "I would suggest that although GDP growth may be more closely related to the absolute growth of the working population, asset price inflation may be more closely related to the proportion of workers in the general population." Of course, speaking as I do as a guy who invests solely to make a lot of money fast with minimal work, I have no idea what this would mean, or why I would even mention it at all, except as a question on the mid-term exam, such as: Question #1: "GDP growth is to absolute growth of the working population as asset price inflation is to (blank)." The exact answer is, of course, "proportion of workers in the population," but I will also accept "We're freaking doomed!" or anything along the lines of, "The damned Federal Reserve creating So Freaking Much Money (SFMM) that the prices of a lot of things will increase." I will also accept the answers, "The evil Federal Reserve destroying us," "The loathsome neo-Keynesian econometric idiot-savants at the Federal Reserve are ruining the value of the dollar," or anything that suggests that instead of taking some stupid test, they should be out buying gold, silver and oil with a frantic, manic hyperactivity as desperate protection against the catastrophic inflation in prices that will result from the Federal Reserve creating so monstrously much money. But I soon saw that I was wrong in interpreting the importance of this interesting face, being blinded by my impatient greed, thus being so shortsighted that I missed the long-term implications of things, in a kind of "tendency" and "gravity" and "inevitability" kind of way. He explains, "If that is the case, as the former baby-boomers start to retire, this burgeoning cohort will tend to liquidate assets. This only exacerbates the secular bear market for property prices (which have already begun to decline again), as well as the equity market." Hmmm! Fewer buyers, more sellers? It is the old supply/demand dynamic, and it's pointing to lower prices, but – and probably very importantly! – curiously being offset by the Federal Reserve creating so much new money, to monetize so much new debt, so that all of this sheer, overwhelming tonnage of new money has to end up somewhere, and the stock, bond and derivatives markets are the only things which can absorb So Freaking Much Money (SFMM). In practice, Mr. Edwards says, "This means that Bernanke for all his efforts may not be able to prevent the secular valuation bear market fully playing out until rock bottom valuations are reached." Mr. Durden says, "oops." I, on the other hand, say, "Whee!" because at stock market bottoms, one ounce of gold is about all it takes to buy the Dow, or buy the S&P500, or a few ounces for houses, or cars, or anything you can name, all because of the incredible rise in the price of gold, all because of the incredible rise in inflation, all because of the incredible rise in the money supply, all because of the evil Federal Reserve creating so incredibly much more and more money. And with gold and silver still hovering incredibly at these low, low, bargain-basement prices, at the same time as so incredibly, outrageously much money is being created by the Federal Reserve and spent by the odious Obama administration, buying gold and silver is so glaringly obvious and childishly simple that you can't help saying, "Whee! This investing stuff is easy!" The Mogambo Guru Why the Fed Creates So Much Money 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." | ||
| Gold Seeker Closing Report: Gold and Silver End Mixed Posted: 19 Jan 2011 07:25 AM PST Gold climbed $10.79 to $1378.99 by about 9AM EST before it fell back to almost unchanged at $1368.35 in late morning New York trade, but it then bounced back higher into the close and ended with a gain of 0.2%. Silver rose $0.60 to $29.49 in early New York trade, but it then fell back off for most of the rest of the day and ended near its late session low of $28.735 with a loss of 0.24%. | ||
| Fitch Finds US Worst Of The AAA-Rated Best, Sees QE2 As Stoking Inflation Expectations Posted: 19 Jan 2011 06:29 AM PST Since by now it is all too clear that none of the rating agencies will dare to downgrade the US until well after its creditors realize they have all been taken for the proverbial ride, and even longer after the Fed owns a vast majority of US treasury bonds, which according to CNBC is great, but according to Weimar Germany is sucky to quite sucky, one is forced to pay attention to the fine print and carefully worded nuances in all public statements to see just how they really feel. Today provided just such an opportunity. According to Market News, "Fitch Ratings Wednesday said it believes "the U.S. fiscal metrics will be the worst of any 'AAA'-rated sovereign," due to the higher-than-expected deficits and debt levels expected following the extension of the Bush era tax cuts." That's about as diplomatic as it gets without getting (nearly) fired for telling the truth (see NJ governor Christie). The punchline: "Absent a credible plan, the rating on the U.S. federal government will come under pressure." Too bad the US has not had a credible plan for about 30 years now aside from "…print?" More from Market News:
Huh? Challenges? Have these people heard about the Chairman put? Also what is this BS about inflation and QE2? Don't they understand that inflation is only there (and it is 100% contained) because it is an indication of the deflation that would have been there had QE not been enacted… or something just as schizophrenic. Unfortunately for Fitch, their analysts appear to have also not read the World Economic Forum's massive report which states that unless the world doubles it net leverage in 9 years, we can call it a day. And how on earth can the world double its leverage unless the US continues to monetize between $5-10 billion in debt all day every day. Which is why we urge you to ignore this blasphemy, and keep buying every fucking Russell 2000 dip: after all that is the only indicator His Chairmanness cares about.
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| SLV Metal Holdings Show Negative Money Flow Posted: 19 Jan 2011 05:21 AM PST But not as much as some had expected. Precious metals continue to do more of a consolidation than the more vigorous January correction investors and portfolio managers seemed poised for. As expected, we continue to see negative money flow from the largest bullion ETFs as selling pressure for them has been somewhat higher than buying pressure in the new year. As we write this late Wednesday morning gold is meandering in the $1,370s and silver is flirting with, but having some difficulty holding USD $29. We certainly cannot say that the precious metals are trading in either direction with conviction. The "bias" in the trading still seems to us to be more toward the downside than the opposite, and the negative money flow (more selling pressure than buying pressure) in the ETFs is a sign that at least some wealth is rotating out of precious metals, particularly in gold. But, with some of our indicators simply refusing to "answer" the moves lower in gold and silver or answering the more-than-modest amount of negative money flow we have witnessed so far... | ||
| Gold and Silvers Daily Review for January 19th, 2011 Posted: 19 Jan 2011 05:17 AM PST | ||
| Silver Up as US Mint Reports January Eagle Sales Reach Record High Posted: 19 Jan 2011 05:10 AM PST | ||
| Fleckenstein on US Economic Policy Posted: 18 Jan 2011 11:53 PM PST Bill Fleckenstein reflects on the madness that represents US economic policy. In a podcast Mr. Fleckenstein expects the dollar to be the fiat currency that wins the race to the bottom. The podcast is available at Zerohedge where Fleckensteins main points are summarized: The culture of the Fed reinforces a belief in its infallibility. That [...] | ||
| SLV ETF Shows 4.9 Million Ounce Withdrawal Posted: 18 Jan 2011 09:46 PM PST U.S. Mint reports selling 4,588,000 silver eagles so far in January. There's No Substitute for Gold as the World Order Changes. States Warned of $2 Trillion Pensions Shortfall....and much more. ¤ Yesterday in Gold and SilverGold rose quietly all through Far East and early London trading yesterday...and about twenty minutes before the Comex opened, a more substantial rally began that ran into some serious resistance as it approached its 50-day moving average. Gold's high tick of the day [$1,377.40 spot] came about 8:50 a.m. Eastern time...and got sold down pretty quick before slowly declining for the rest of the New York trading session...but finished up about six bucks on the day.
Silver didn't do a lot until around 10:00 a.m. Hong Kong time, when a smallish rally began. This rally picked up a head of steam very shortly after London opened for trading...as silver tacked on another 30 cents in short order and...except for its high price tick [$29.08 spot] at 10:20 a.m. in New York...not much happened to the silver price for the rest of Tuesday's trading day.
The dollar peaked early in the morning in Far East trading on Tuesday...and by 9:30 a.m. in London, the world's reserve currency was down about 75 basis points. It's absolute low [78.66] came shortly before 10:00 a.m. in New York before rallying a bit into the close. But it still closed below 79 cents. For a change, there actually was some co-relation between the dollar and the gold price yesterday.
The gold stocks gapped up...and then hardly changed from the opening bell to the closing bell. The HUI was up 1.52% for the day. Most [but by no means all] of the silver stocks did quite a bit better than that.
Yesterday's CME Delivery Report showed that 59 gold and 66 silver contracts were posted for delivery on Thursday. JPMorgan was basically the only issuer in both metals...and the Bank of Nova Scotia was the big stopper in gold...with Prudential the big stopper in silver. The link to the action is here. The GLD ETF continued its almost unrelenting decline, shedding another 78,072 ounces yesterday. But, over at the SLV ETF, an eye-watering 4,494,034 troy ounces were withdrawn. That's pretty close to being a one-day record withdrawal from SLV. Considering the price action in the last few days, it's obvious that someone desperately needed the silver they had stored there...and withdrew it. Or they purchased the shares...and immediately withdrew what they just bought...leaving Blackrock with the problem of replacing it. As astonishing as that SLV withdrawal was...the U.S. Mint had a little surprise for us yesterday as well Their sales report showed that they sold another 12,500 ounces of gold eagles, along with a gargantuan 1,181,000 silver eagles. Month-to-date, the U.S. Mint has sold 75,500 ounces of gold eagles...and 4,588,000 silver eagles. This is a one month record for silver eagles sales...and I've seen full years go by when they didn't sell that many eagles...and 1996 comes to mind when only 3,466,000 were sold in the entire year. Those eagles are selling for a very healthy premium to spot. Also of note is the gold/silver eagle sales ratio. Silver eagles are outselling gold eagles 367 to 1. My bullion dealer's gold/silver sales ratio is around 1,000 to 1. One has to wonder how much longer it will be before investment demand absolutely buries the '8 or less' traders. I make it an absolute unshakeable rule that I buy some silver bullion every month without fail. Like the headline of my column said yesterday..."Sell gold, buy silver". It was a busy day over at the Comex-approved depositories. All four warehouses saw action...and by the end of the day on Friday...their collective silver inventories had declined a smallish 46,643 ounces. The link to all the action is here.
¤ Critical ReadsSubscribeUS Mint Reports January Silver Sales Hit 26 Year HighI was hoping that I would have a reasonable number of stories today. That has turned out not to be the case...as I have a lot. Over at zerohedge.com, they were quick out of the chute with the silver eagle story...and reader 'David in California' was kind enough to share it with us. The headline reads "US Mint Reports January Silver Sales Hit 26 Year High". Besides the silver eagle story, there is a lot of other interesting material in it as well. I just want to remind you one more time that 1,696,000 of those silver eagle sales were reported on January 3rd...the first working day of the year. It's still my opinion that those sales should have been reported in December. The link to the story is here.  States Warned of $2 Trillion Pensions ShortfallThis next story is courtesy of reader Scott Pluschau. It's a story from the Financial Times that has been reprinted at cnbc.com. The headline is no surprise to me...and reads "States Warned of $2 Trillion Pensions Shortfall". It's short...and ugly...and the link is here.  Brain Drain: Most College Students Learn Next to Nothing, New Study SaysThe next item for your reading pleasure is courtesy of Casey Research's own Jeff Clark. The headline reads "Brain Drain: Most College Students Learn Next to Nothing, New Study Says". It's a short story that's posted over at finance.yahoo.com, along with a video clip that runs a bit longer than that...and the link is here.  Insider Selling To Buying Ratio: DIV/0, As No Insiders Bought Any Stock In Prior WeekHere's another zerohedge.com story that's courtesy of reader 'David in California'. This one shouldn't come as much surprise, either. The headline reads "Insider Selling To Buying Ratio: DIV/0, As No Insiders Bought Any Stock In Prior Week". According to Bloomberg, in the week ended January 14th, S&P 500 insiders sold $163 million worth of stock in 54 separate transactions. They bought exactly $0. It's a 30-second read...along with a list of the 54 transactions...and the link is here.  Bumpiness Is A MessageFor all of you that are students of technical analysis, here's a piece sent to me by reader "Dharma". It's a short article posted over at decision point.com. The headline reads "Bumpiness Is A Message". As author Tom McClellan says..."Taking the Price Oscillator up to a very high level, or down to a very low level, merits a corrective move to get back to neutral. That's what the Price Oscillator decline since October has been about. The fact that the move up was smooth is a message of power for the bulls. The fact that the Price Oscillator's move down is bumpy is a message of weakness and tentativeness for the bears. The conclusion offered by these two messages is that the gold bulls are the ones really in charge, and that we just have to wait for the corrective period to run its course before that power can be observed in a further up move." I'm not a big fan of trying to do TA on a rigged market like gold and silver. But, having said that, this report and the chart are well worth your time...and the link is here.  U.S. National Debt from 1940 to PresentHere's a graph of great interest...and importance. Australian reader Wesley Legrand was kind enough to send it along...and it's well worth looking at, as it's another chart that doesn't need any verbal elaboration from anyone. The title says it all..."U.S. National Debt from 1940 to Present". The year 1971 is pretty easy to pick out...as that was the year that Nixon pulled the pin on the gold standard.
 Inflation picks up at British factoriesHere are a couple of stories that I pilfered from yesterday's King Report. Both have to do with inflation in Britain...and, by extension, every nation on earth. The first is from The Telegraph...and is headlined "Inflation picks up at British factories". The costs of raw materials at British factories rose at the fastest rate in eight months in December, posing a headache for policymakers tasked with keeping inflation under control. James Turk has a 'red alert' flag out for hyperinflation in Britain as well. The link to the story is here.  Inflation, the old enemy, is back. But this is no time to be frightenedThe second story on British inflation comes out of the Sunday edition of The Guardian...and the headline reads "Inflation, the old enemy, is back. But this is no time to be frightened"..."Tuesday will bring more gloomy economic news in the wake of rising petrol, energy and food prices. The Bank of England will be under pressure to act to curb inflation; but some beli | ||
| Gold & Silver Find "Massive Demand" from Private Investors Even as Fund Managers Sell… Posted: 18 Jan 2011 04:40 PM PST | ||
| Jan 17 1980 : Silver reaches its all time high - H.L. Hunt and the Circle K Cowboys Posted: 18 Jan 2011 04:30 PM PST
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| Posted: 18 Jan 2011 04:08 PM PST --If Australia has always reminded you of the Catskill Mountains, tea at Tavern on the Green in Central Park, and the frozen vistas of Lake Erie as seen from the shores of the great city of Buffalo, now you know why. --It's because Australia is the New York of America. Or is it that New York is the Australia of North America? --Okay, maybe the cool map by the Economist that compares U.S. states to various nations around the world is conceptually flawed. The map tries to match a state, as measured by GDP, with a country that has a similar GDP. The State of New York has a GDP of just over US$ 1 trillion. The country of Australia has a GDP of just under US$1 trillion. --If Australia were a U.S. State, then it would have the third-largest economy in America, behind Texas and California. But while California has agriculture and tourism and Hollywood...and while Texas has oil, and energy, and the Dallas Cowboys...and while New York has Goldman Sachs, and the Brooklyn Bridge and Broadway...Australia has it all. --Australia produces energy (LNG, uranium, and thermal coal) and food (wheat, rice, and beef) and finance (the Big Four Banks, AMP and Macquarie Bank). New York has the Jets. But Australia has the North Melbourne Kangaroos. New York has the Yankees. But Australia has won the last three Cricket World Cups (truly a world tournament...in the places where people actually play cricket). --What is the point of this comparison? Australia and New York are alike in GDP but different in many other ways. The only important question for 2011 is will anyone anywhere be spared from wealth destruction as the era of Quantitative Easing implodes before your eyes. --And implode before your eyes it is doing! Exhibit A is the fact that Irish Central Bank is printing money it doesn't have to make loans that are secured by collateral that Irish lenders no longer possess. Irish borrowers can't get money from the European Central Bank without collateral. So they're getting it from the only place left, the nowhere land that is the nursery of fiat money. --If you read the story we've linked to at the Telegraph you'll reach the same conclusion we reached this morning: Europe's debt problems will result in either default or increasingly absurd (and counterfeit) operations by Europe's central banks (which were supposed to have surrendered monetary policy to the ECB upon monetary union). --How can a currency retain integrity when anyone can get permission to print more of it when times get tough? This is surely a sign that at some level, the Global Financial Crisis that began in 2007 is about to resume again. For 29 months the central bankers of the world have managed to prevent a reckoning with more loans secured by more questionable collateral. Is financial entropy beginning to reassert itself? --One sure sign that the crisis in paper money is at a new stage is that food prices are rising even in places where there's a lot of food. Sovereign Man Simon Black reports that, "the prices of staple foods in Laos, including rice, have soared in recent months, and that the Laotian government is now under intense pressure to 'do something' about it." --And of course it's not just food prices that are rising because of inflationist central bank policies. Fuel prices are rising too. Bloomberg reports that, "Power station coal prices rose for a seventh week to a more than two-year high and steelmaking coal gained 5.7 percent after heavy rain and flooding curbed output in Australia, the world's biggest exporter of the fuel." --There's no doubt that limited supply is a factor in rising coal prices. But oil prices are on the up and up too. All of these commodities have one thing in common: they are priced in U.S. dollars. And like the Euro, the dollar is the badly managed currency of head-in-the-sand counterfeiters who are running out of ideas and credibility. --This is an open secret. Russia and China were sellers of U.S. government bonds in November, according to the Financial Times. Russia has energy. China has a huge war chest of foreign exchange reserves. Both must be looking at the world and wondering why they have so many liabilities backed by bankrupt government. --Luckily, Australia is not a U.S. state in need of a bailout by a U.S. government that doesn't have the money for it. But if rising food and fuel prices around the world mean that the era of quantitative easing is about to go up in flames, it will affect Australians as much as it affects everyone else in the world. | ||
| The More Americans That Go On Food Stamps The More Money JP Morgan Makes Posted: 18 Jan 2011 03:30 PM PST 
There are just some things that are a little too "creepy" to be "outsourced" to private corporations. The JP Morgan executive in the interview below does his best to put a positive spin on all this, but it just seems really unsavory for a big Wall Street bank to be making so much money off of the suffering of tens of millions of Americans.... So if unemployment goes down will this ruin JP Morgan's food stamp business? Well, apparently not. In the interview Paton says that 40% of food stamp recipients are currently working, and he seems convinced that there could be further "growth" in that segment. So is this what America is turning into? A place where tens of millions of the unemployed and the working poor crawl over to Wal-Mart and the dollar store every month to use the food stamp debit cards provided to them by JP Morgan? It turns out that JP Morgan also provides child support debit cards in 15 U.S. states and they also provide unemployment insurance benefit debit cards in seven states. Apparently states have found that they can save millions of dollars by "outsourcing" the provision of these benefits to big financial firms like JP Morgan. So what happens if you have a problem with your food stamp debit card? Well, you call up a JP Morgan service center. When you do this, there is a very good chance that you are going to be helped by a JP Morgan call center employee in India. That's right - it turns out that JP Morgan is saving money by "outsourcing" food stamp customer service calls to India. When ABC News asked JP Morgan about this, the company would not tell ABC News which states have customer service calls sent to India and which states have them handled inside the United States....
JP Morgan has been moving some of these call center jobs back inside the United States due to political pressure, but this whole situation is a really good example of what the "global economy" is doing to middle class Americans. Just try to imagine the irony - a formerly middle class American that has lost a job to outsourcing calls up to get help with food stamp benefits only to be answered by a call center employee in India. Welcome to the global economy, eh? But wait, there is more. It has just been announced that JP Morgan has admitted that they wrongly foreclosed on over a dozen military families and that they have been overcharging "thousands" of other military families on their mortgages. Ouch. It is a really bad public relations move to mess with military families. Is anyone over at JP Morgan even paying attention? JP Morgan has also been one of the primary financial institutions involved in the foreclosure "robo-signing" scandal. They just seem to be having all kinds of problems lately. But they are not alone. The truth is that we have gotten to the point where big Wall Street banks such as JP Morgan, Goldman Sachs, Citibank and Morgan Stanley just have way, way too much power. The biggest Wall Street financial institutions had no trouble begging for bailouts from the U.S. government during the financial crisis, but when the American people have needed a little grace and mercy from them they have been less than helpful. So what do you think about how the big Wall Street banks have been behaving? Feel free to post a comment with your opinion below.... |
And speaking of China and grain costs, this brings up a tangentially related question. How can the dollar go to zero when America is the world's leading grain exporter?
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