Tuesday, August 31, 2010

IMF Eliminates Borrowing Cap On Rescue Facility In Anticipation Of Europe Crisis 2.0; US Prepares To Print Fresh Trillions In "Rescue" Linen

 Why US Treasury Notes Will Eventually Yield Nothing

Hyperinflation, Part II: What It Will Look Like

posted by Blogger at Jim Rogers Blog - 4 hours ago
As central banks continue to print money, it is vital that investors own real assets like silver, rice or natural gas, says Jim Rogers, chairman of Rogers Holdings. He speaks to CNBC's Maithreyi...

posted by Eric De Groot at Eric De Groot - 3 hours ago
Since local governments cannot devalue their currencies to pay for services they cannot afford, they must either receive "free" money from the federal government (which can print money) or drastically curt...

posted by Blogger at Marc Faber Blog - 17 hours ago
My biggest concern is that because of a weak economy, the budget and fiscal deficits will remain very high. With Mr Obama as President, there is a very good chance the deficit will go up and the government...

posted by Blogger at Jim Rogers Blog - 17 hours ago
With central banks flooding the world with money, the only place to invest right now is in real assets, whether it's in silver, or rice or natural gas. Paper money is not going to do it for you. in CNBC ...

The Federal Budget Deficit is going further and further out of control.

Record number in government anti-poverty programs By Richard Wolf, USA TODAY
WASHINGTON — Government anti-poverty programs that have grown to meet the needs of recession victims now serve a record one in six Americans and are continuing to expand.
More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That’s up at least 17% since the recession began in December 2007.
POLITICS: Welfare agencies boost voter rolls
"Virtually every Medicaid director in the country would say that their current enrollment is the highest on record," says Vernon Smith of Health Management Associates, which surveys states for Kaiser Family Foundation.
The program has grown even before the new health care law adds about 16 million people, beginning in 2014. That has strained doctors. "Private physicians are already indicating that they’re at their limit," says Dan Hawkins of the National Association of Community Health Centers.
More than 40 million people get food stamps, an increase of nearly 50% during the economic downturn, according to government data through May. The program has grown steadily for three years.

Click charts to enlarge today’s hourly action in Gold and the HUI with commentary from Trader Dan Norcini

Mike Mayo Tells Clients Numbers Out Of Citi Can Not Be Trusted


A Detailed Analysis At Projected Home Prices: A Look At Underlying Supply And Demand Forces


 Financial Crises Linked to Central Bank Stupidity

By: Richard Daughty, The Mogambo Guru - 31 August, 2010

It was an interesting psychological phenomenon when I read where Michael Kosares of USAGold.com wrote, “Private citizen, Alan Greenspan, could afford to be blunt,” but I interpreted it in my Mysterious Mogambo Mind (MMM) to mean, “Private citizen, Alan Greenspan, should be afforded a blunt instrument applied with extreme prejudice to his stupid head, over and over, as he is the moron that... Full Story

Ron Paul: Depression is coming...
... And it will be "devastating" if the Bush tax cuts aren't extended. 

Monday, August 30, 2010

Deflation Delusion Continues as Economies Trend Towards High Inflation

Policy Options Dwindle as Economic Fears Grow

Joel Skousen: Inflation: What it Takes to Get There

Investors Head for Bunkers, Driving Up 'Shelter Shares'. Here is key quote: "If it's the end of the world, what do you buy? Canned foods, guns and the generators," said Keith Springer, president of Capital Financial Advisory Services. "There are a huge number of people who feel this is the end of the world."

Posted: Aug 30 2010     By: Jim Sinclair      Post Edited: August 30, 2010 at 1:34 pm
Filed under: General Editorial
Dear CIGAs,
What Martin Armstrong offers you for free is amazing.
Knowledge of world economies is key to understanding your own economy and currency in this mirror image Forex market.
Click images to enlarge Martin Armstrong’s latest in PDF format

Posted: Aug 30 2010     By: Jim Sinclair      Post Edited: August 30, 2010 at 1:28 pm
Filed under: In The News

Jim Sinclair’s Commentary
The following is a rumor and must be read as such.
Stratfor is usually a good source.
What gets my attention is speculation on fear of the death penalty for owning US government bonds. That has to tell you something.

China: Rumors of the Central Bank Chief’s Defection August 30, 2010 | 1406 GMT
Rumors have circulated in China that People’s Bank of China (PBC) Gov. Zhou Xiaochuan may have left the country. The rumors appear to have started following reports on Aug. 28 which cited Ming Pao, a Hong Kong-based news agency, saying that because of an approximately $430 billion loss on U.S. Treasury bonds, the Chinese government may punish some individuals within the PBC, including Zhou. Although Ming Pao on Aug. 30 published a report on its website indicating that the prior report was fabricated by a mainland news site that had attributed the false information to Ming Pao, rumors of Zhou’s defection have spread around China intensively, and Zhou’s name has been blocked from Internet search engines in China.
STRATFOR has received no confirmation of the rumor, and reports by state-run Chinese media appeared to send strong indications that Zhou is in no trouble at the moment. However, the release of this rumor and its dispersion throughout the public is significant, particularly as the Communist Party of China (CPC) is preparing for a leadership transition in 2012.

Posted: Aug 30 2010     By: Jim Sinclair      Post Edited: August 30, 2010 at 4:34 pm
Filed under: Jim's Mailbox
In the early 1980s I wrote a book on the strategic metals and materials war. I owned a minor metals trading business in London at 116 Borough High Street.
I know this market better than most. This is HUGE. It can shut down the Western World high tech industry.
Backlash over China curb on metal exports CIGA Eric
Draconian describes one perspective. Strategic position or reposition describes another. It’s difficult to establish leverage in trade negotiations when huge structural deficits places hat during the Treasury auctions to the same nations setting the ‘unfavorable’ rules.
China’s draconian export curbs on rare earth minerals needed by the rest of the world for frontier technologies is escalating into a serious diplomatic and trade clash with the United States and other leading powers.
Source: telegraph.co.uk
Thanks Bob

Americans spend a bit more as economy limps along CIGA Eric
As I suggested in my commentary, If you don’t like the message conveyed by economic time series, revise it! , personal spending and consumption data, as well as many more economic series, are hardly worthy following due to constant revision and massaging techniques. Capital flows could care less about utopia theories based on biased and historically uncomparable economic times series.
Americans are spending a little more this summer, but hardly enough to rejuvenate the weakening economy.
What is needed is a bigger boost in salaries and more jobs. Economists don’t see either coming this year, which is why the economy is likely to limp along.
Source: news.yahoo.com

September Song 

A 20% rate hike for Health Insurance in California?

Bancor: The Name of the Global Currency that a Shocking IMF Report is Proposing

Bernanke Calls For Help to Revive The Stuttering US Economy

Stocks Drop as Investors Enter Week Cautiously

"America is the land which fought for freedom and then passed laws to get rid of it." - A. Neuman

Sunday, August 29, 2010

U.S. Heading for Currency Destruction Debt Default Great Depression

Commentary Jim Sinclair
The newest fallacy is that the Fed has no more tools left to use.
The Fed has an enormous tool box called “QE to Infinity.” Nothing restricts that creation of money out of thin air whatsoever, which in turn means Currency Induced Cost Push Inflation. That is the message of illustration 3 below.

"The Fall of our Nation." 

The Housing Collapse: We Ain't Seen Nuthin' Yet!

Roubini Says Q3 Growth in U.S. to Be `Well Below' 1%

Steve Forbes on Overseas Wars, the Coming Gold Standard and the Rise of 'Citizen Agitation'

Why We are Totally Finished.

Financial Expert Warns of Economic Collapse

Plunge in Home Sales Stoke Economy Fears

Existing-Home Sales Plunged in July.

Ambrose Evans-Pritchard: Fresh Flight to Swiss Franc as Europe's Bond Strains Return

Tarpley: China Buys Euros as Fear of World Depression Grows

Sen. Bennett: Trillions in Debt, Nothing to Show for It

Bob Chapman: The Economy When Debt is Everywhere

Obama Needs Your 401(k) to Balance His Budget

If after reading these stories...you think everything will be fine...then PLEASE seek professional help...
For everyone else...that doesn't have their head buried in the sand, please google Preparedness, and get to work...your burning daylight...Beans, bullets, band-aids and Bullion...

"Despair is most often the offspring of ill-preparedness." - Don Williams, Jr.

 Stock markets face a 'bloodbath', warns SocGen strategist Albert Edwards.


What the Double Dip Recession Will Look Like

'Jingle Mail': Developers Are Giving Up On Properties.


Waiting for the Other Shoe to Drop

Irish Debt Downgrade Raises Fear of International Deflation Spiral

Gold Demand Jumps by 36%

Why US Treasury Notes Will Eventually Yield Nothing

Dr. Gary North: The Myth of the Engineered Recession


US Said Preparing New Laws To Seize Americans Retirement Accounts




Chairman Of Joint Chiefs Of Staff Says National Debt Is Biggest Threat To National Security

Posted: Aug 28 2010     By: Jim Sinclair      Post Edited: August 28, 2010 at 10:06 pm
Filed under: In The News

Jim Sinclair’s Commentary
Our bullion delivery man, JB Slear, says:
"No Bank failures for this week… after all, can’t have a failure on Jackson hole day."

Jim Sinclair’s Commentary
Remember all the MOPE about Fed tests of reverse repos as a method of draining liquidity?
Draining liquidity was all the talk on F-TV with the herd of Talking Heads bobbing their heads in agreement without any doubt.
The Fed will tighten? What raving BS. Now is there any further question in your mind that as the Western World economy craters, QE to Infinity will balloon to new heights? It will and illustration number three is the means to Currency Induced Cost Push Inflation.
Have you fully protected yourself and the nearest, dearest? Gold at $1650 looks like a minimum projection.

Fed Ready to Dig Deeper to Aid Growth, Chief Says By SEWELL CHAN
Published: August 27, 2010

JACKSON HOLE, Wyo. — The Federal Reserve chairman, Ben S. Bernanke, signaled once again on Friday that the central bank was prepared to act if the economy continued to weaken, as yet another economic report confirmed that the recovery had slowed to a crawl.
Mr. Bernanke made clear that while the Fed could take various steps, including large purchases of government debt, “central bankers alone cannot solve the world’s economic problems.” Speaking at the Fed’s annual symposium here, he hinted broadly that political leaders had to take steps to tackle the deficit and the trade imbalance.
Hours before Mr. Bernanke spoke, the Commerce Department lowered its estimate of economic growth in the second quarter to an annual rate of 1.6 percent, after originally reporting last month that growth from April through June was 2.4 percent. Economists had been predicting a steeper decline, and stock prices rose after the markets opened.
While Mr. Bernanke announced no new steps that the Fed would take immediately, he said the central bank was determined to prevent the economy from slipping into a cycle of falling wages and prices, a situation he said he did not think was likely. Instead he predicted that growth would continue modestly in the second half of the year and pick up in 2011.
Mr. Bernanke said the Fed, having kept short-term interest rates at nearly zero since 2008, had essentially four options:

Posted: Aug 28 2010     By: Dan Norcini      Post Edited: August 28, 2010 at 4:04 pm
Filed under: Trader Dan Norcini
Dear Friends,
I have had a fair number of emails asking me to take a look at the internals of the silver market vis-à-vis the Commitment of Traders report after the explosive move that it underwent this past week. The big move began on Tuesday which is the cutoff day for this week’s COT report so we are able to see the state of the market through that date. However, this report will not catch what transpired on Wednesday through today. If you recall, silver tacked on quite a bit more upside since its move on Tuesday.
The only thing I can note at this point is that a bit of divergence occurred between the Swap Dealers and the Commercial Producer, User class. The general pattern in silver is that these two groups of traders tend to move in tandem, increasing their net short positions as the market rallies and decreasing it as the market moves lower. It is not an exact match but fairly reliable.
This week’s report does show a move by the Swap Dealers in the opposite direction of their fellow travelers. This class saw a significant amount of new buying in addition to short covering. One or even two weeks does not a trend make so it is too early to say anything definitive about it as of now but it should be noted that as of Tuesday they were net long.
Again, try not to read too much into things right now but let’s monitor developments again next week.
Concerning gold – nothing out of the ordinary as far as its COT report shows – managed money piled in on the long side while the Commercial Class and the Swap Dealers loaded up on the short side once again. Managed Money remains well shy of their all time peak of more than 238,000 net longs – they are currently at 202,000. There is lots of room for the funds to play should they choose to do so.
Click chart to enlarge in PDF format

Saturday, August 28, 2010

The trillion dollar bailout you didn’t hear about – Commercial real estate values plummet again yet banks hide losses.


The Elites Have Lost The Right to Rule

Banana Ben absolutely wants to do a massive QE2 program. The only thing holding him back is gold is near an all time high. What he wants is gold much lower and stocks much lower to give him cover... He is scared to do it here and he is right to be scared because such a reaction would be the end of the Fed right then and there. The Fed will be gone anyway within a few years in my opinion but it’s going to fight hard to survive and if you want to make money in this market you need to understand that. The most powerful institution in the world is fighting for its survival. Never forget that. So what is he going to do? I believe that the Fed and government are doing a lot more than people think to manipulate all markets behind the scenes. After all, they have publicly announced their manipulation in many other ways so does it make any sense whatsoever to assume they aren’t doing a plethora of other things behind the scenes? Of course not. I think that with the Fed in a bind they will accelerate and become ever more aggressive in behind the scenes games. This will make markets even more volatile and extraordinarily challenging. This is financial war make no mistake about it. The only way in my opinion to survive this is to buy all dips in precious metals, agriculture and oil. It is in these three areas that I expect to see the most price inflation as money eventually figures out the end game. The end game is more and more people will eventually wake up to the fact that the markets are a hologram put in front of you by the magicians at the Fed. That what constitutes real wealth in the years ahead will be owning food, energy and a means of exchange that will be accepted should a black market economy arise as it has in virtually all nations at one time or another throughout history. -
Michael Krieger 

Guest Post: Uncle Scam


Robert Shiller Says Double Dip Imminent


Rush Out and Buy Some Gold! Russia is Buying Gold!
By: Richard Daughty, The Mogambo Guru - 27 August, 2010

I remember the good old days of the Cold War when the Russians were humorless robots who could always manage to catch James Bond, a British secret agent better known by his “License to Kill” number: 007. Full Story

What will happen to Gold in a Double-Dip Recession?
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch - 27 August, 2010

Nearly all the commentary we have heard on this question says the same. “Yes, the prospects of a Double-Dip recession have increased but it remains unlikely that it will happen”. We feel that there may be just a hint of self-interest in these answers. Full Story

Cartel CRASH Consequences – Opportunities & Threats
By: Deepcaster - 27 August, 2010

Increasingly, Credible Evidence indicates that the International Banker Cartel* and Allies are about to suffer their First Significant Loss since President Andrew Jackson (“The Bank tried to destroy me, but I destroyed it first” – Ed. a Paraphrase) liquidated the Second National Bank of the United States in 1833. Full Story

Dow Faces Bouncy Ride to 5,000: Strategist

Global outlook casts shadow over Fed retreat.

Scarcity of Jobs Put More at Risk of Foreclosure

Market Indicators Point to New Danger

Bacon prices rise as hog supplies dwindle

Friday, August 27, 2010

Few May Imagine What Is Coming

A worthy read...

There seems to be a single constant in the financial world, and those who play. There are few if any perma-anythings, with most chasing the bull, or chasing the bear as a bear-bull in the moment. It looks like the last of the Perma for Life people are dying off as the last of the generation that endured the Great Depression find their rest in the soil.

The generation who made roads in the dirt, flew paper airplanes, and dreamed the impossible dream are now gray haired, and either broke or millionaires. There is little ground in between the extremes that was once a maxim 20-60-20 rich/middle class/poor. What seems to exist today is a younger generation with no imagination, incapable of taking a block of wood and shoving it around the dirt pile in dreams of logging trucks, and crawler tractors. Lost are the majority who created art, and music in its natural form. There are no lifelong collectors of anything, only a headlong rush from contemporary to abstract, and back in hyper-realism. Value is now replaced with greed, and get it now before the color fades. Bringing a face to this reality was a conversation with a PhD, retired, from NASA, who spoke to me about the fear in NASA that the upcoming generation’s imagination has been lulled to sleep by fast TV, fast girls, and constant bombardment of stimulation instead of self-generated creativity.

To a more direct point. Even the supposed perma-bears of today run helterskelter, seeking profit and gain first in that, and then in this, with no long-living devotion to any belief. Most current Bears do not care about fundamentals and history. None seem to care whether or not they are playing in a AntLion hole from which they will never escape. The greed of gaining the last drop of blood from the dying carcass of both bears and bulls is foremost on the heart of the young and younger. No person not directly from a Great Depression family is prepared for what will come. That means that unless your parents where born no later than 1920, you cannot have any basis to form an understanding for the potential pain of a real collapse. There are a few foreigners who understand, but I read nothing of what they may have to say.

‘They Won’t Let It Happen’

It can never happen…Bernanke will not let it happen…the Government is not going to . . .. they will take care of us…I’ll make so much in the crash it will not matter. . . I’ll be OK. Please add your own reassurance to the list, as there are many more excuses offered by temp-bearbulls. The pessimist rarely makes the big killing in the stock market like a tempbull will. Someone who experienced the Great Depression does not act like today’s tempbull. There is one great difference between the Great Depression and today where The People are concerned. Nearly everyone in 1920 knew how to take care of him or herself. They knew meat came from a cow, and milk did not come from a bottle. And yet today, the young cannot imagine a milk bottle delivered to the door by the milkman. Nor have they ever imagined a family coming together to butcher a steer and can the meat because there was no freezer.

I see no imagination in the pages, blogs, and opinions written by financial wizards, or the wizard bulls who are smarter than a non-emotional chartist who knows the pendulum slows, stops, and slowly speeds up to strike down everything past dead center. There is only one thing that cannot be taken from someone, and that is knowledge. And even here, I have seen hypothermia take my mind, my strength, and my soul into a black pit of nothingness. The majority of bulls and bears today have never experienced hypothermia. Nor have the wishy-washy bears seen $1 million on the books that they will never eat, that they cannot turn into warmth or food.

A Rosy Filter

I guess that unless one has seen the valuelessness of gold while you shiver your way into darkness, there just isn’t a perspective to create a reality. This is why I spoke of imagination and NASA as I wrote. The generation born into the Sixties has not experienced loss in any form. That generation is without understanding, or imagination to see through a mental filter created by pain and loss as past generations have. The 1960s filter of democracy is a rosy filter of much, more, and always more. Even in the annals of bear-market writers there exists temp-bearbulls looking to ride the next wave for an hour or a day.

Is it time for the Super Depression ? Probably, because the majority who have lived through that kind of pain are all dead and gone. Will the greedy temp-bearbulls get trampled? Yes ! But not before they see the millions they’ve won by trading correctly fail to provide them with anything of value. And what of us hard-currency nuts? You tell me! But Steve, you say: there are so many suffering without jobs today. True enough. But in 1934, there wasn’t any unemployment in the place where my dad pulled a crosscut saw for $1.00 pre thousand, part-time. (That’s about 50 cents a day, since there was someone on the other end of the saw). There weren’t any government handouts in Sutherland, where the mill ran one day a week, or one day a month, and where the women rejoiced in their diary: “The men worked today!” The more bears who think they are going to make a killing on the crash, the nearer we are to that crash.

I think Mr. Market is going to suck the blood out of nearly everyone — but especially from Bears who think Mr. Market is their friend in crushing the Bulls. Imagine “Value” and imagine what value really is in its most basic sense. I’d tell you what value is, but you either know, or will not listen to this ol’ radical gloom-and-doomer.

Source: rickackerman.com


Guest Post: Hyperinflation, Part II: What It Will Look Like


posted by Blogger at Jim Rogers Blog - 4 hours ago
We never got out of the first recession. If the U.S. and Europe continue to slow down, that’s going to affect everyone. Jim Rogers is an author, financial commentator and successful international investor...

Marc Faber: Exploding deficits will "doom" U.S. Treasurys
The 30-year party is over...

posted by Blogger at Marc Faber Blog - 3 hours ago
“I think that there isn’t much upside potential in Treasurys unless it’s for the short term. But if I look 10 years ahead, where do I want to have my money, then certainly not in US Treasuries” in CNBC M...

Banks back switch to China's renminbi for trade


There are no markets, just manipulations


Ron Paul: Get Rid of the Fed

WATCH Rep. Ron Paul explains why he is calling for an audit of the government's gold holdings and why the Federal Reserve should not exist.

Cancer & Desperation of QE2

Double dip, like hell! The bottom is going to fall out.
The smoke and mirrors modest upturn in economic statistics primarily due to the FASB capitulation in April of 2009 comes to an end as the Ski Jumper gets airtime.

Jim Sinclair

Housing is Dragging the Economy to Hell CIGA Eric
A little more than two months ago, banking analyst Meredith Whitney said on CNBC, “Unequivocally, I see a double-dip in housing. There’s no doubt about it . . . prices are going down again.”
Housing, an asset that depreciates over time, is a function of demographics, leverage, and access to credit (emphasis on access to credit in recent years). Once the credit machine shutdown in late 2008, housing began to revert to its unleveraged, supply and demand driven mean price. The virtuous cycle, positive reinforcing credit on the upside, had turned vicious by negatively reinforcing credit and home prices on the downside. I suggest that once currency devaluation is removed, no discernable “bounce” can be recognized from which a dip could materialize. The steep and largely uninterrupted down trend in the U.S. median home price (MHP) to gold since 2005 illustrates this point.
Source: usawatchdog.com


Jim Sinclair’s Commentary
Non-recourse loans? So without ethics, why not screw the lender?

Commercial Property Owners Choose to Default CIGA Eric
The banking system pressed hard for the new bankruptcy laws in 2005. Now those laws are biting them in the arse as more investors default and walk away. The commercial property investors are more professional, so they won’t waste time in doing so. For them it’s a good business decision. Rather than throw good money at a bad situation, they simply choose to walk away.
Like homeowners walking away from mortgaged houses that plummeted in value, some of the largest commercial-property owners are defaulting on debts and surrendering buildings worth less than their loans.
Source: online.wsj.com

Dear Eric,
This thing is going to unwind so fast that other than us here at JSMineset, no one will believe it.

Bullish Sentiment Plummets to Credit Crisis Low CIGA Eric
Following the herd is rarely profitable. The herd is bearish. Such readings tend to be associated with capitulation rather than an initiation of a trend.
The number of individual investors who have a bullish outlook on the stock market for the next six months plunged to 21 percent, from 30 percent last week, according to a widely followed sentiment survey.
What’s more, this is the lowest weekly reading from the American Association of Individual Investors since a March 2009 level of 19 percent, which occurred just before the S&P 500 collapsed to a 12-year low of 676.
American Association of Individual Investors Sentiment Survey: clip_image003

QE to infinity is, and will continue to occur. Gold will trade at $1650 and higher.
Jim Sinclair

Bernanke Signals Stepped-Up Efforts to Spur Economy By SEWELL CHAN
Published: August 27, 2010

JACKSON HOLE, Wyo. — The Federal Reserve chairman, Ben S. Bernanke, said Friday that the central bank was determined to prevent the economy from slipping into a cycle of falling prices, even as he emphasized that he believed growth would continue in the second half of the year, “albeit at a relatively modest pace.”
To help sustain the economy, Mr. Bernanke gave his strongest indication yet that the Fed was ready to resume its large purchases of longer-term debt if the economy worsened, a move that would add to the Fed’s already substantial holdings.
“We have come a long way, but there is still some way to travel,” Mr. Bernanke said.
“I believe that additional purchases of longer-term securities, should the F.O.M.C. choose to take them, would be effective in further easing financial conditions,” Mr. Bernanke told a Fed policy symposium here. He was referring to the Federal Open Market Committee, the panel that sets interest rates, which Mr. Bernanke leads; some members have expressed unease over the prospect of the Fed pursuing any further monetary accommodation.
“Central bankers alone cannot solve the world’s economic problems,” he said.

Posted: Aug 27 2010     By: Dan Norcini      Post Edited: August 27, 2010 at 3:30 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
The equity bulls were salivating over the prospect of watching another episode of “let’s take the shorts out and slaughter them all” as the world eagerly awaited the giving of the law from Mt. Jackson Hole. With claps of thunder in the background and with flashes of lightning interrupting his keen observations upon the state of the US economy, (some swear that they saw the angelic host), the prophet of Monetary religion sounded forth his prognostications and then looked upon his handiwork. He then saw that his work was good and sat down and rested on the seventh day.
Yessiree folks – Chairman Ben uttered his incantations making all well with the turbulent world and bringing light and order to darkness and chaos. I do not know about you, but I feel so much better today after Ben told us all that he is going to make sure that the recovery is safeguarded from harm. When you combine that with news that instead of the economy slowing from a growth rate of 2.4% down to 1.3% as expected, it only slowed down to a 1.6% growth rate, well, it just doesn’t get any better does it?
I mean, the first thing I immediately thought of is, “Why don’t I rush out and buy lots of copper because things are really getting better in a hurry”. Already forgotten are the abysmal housing stats of less than a week and the further rise in foreclosures and delinguencies, not to mention the clogged condition of the bankruptcy courts. Chairman Ben has whisked all of that out of the minds of investors with one mere pronouncement.
The fact that it has taken gazillions of conjured-into-existence-out-of-no-where dollars (some call that stimulus) to produce this pitiful growth rate number for the quarter, seems to have escaped the attention of the equity perma bulls who have yet to come to grips with the consequences of all of this. My own view is that it should be a relatively easy matter to get that growth rate up to double the figure given us. All we would need to do to get to 3.2% growth rate is to print twice the number of Dollars and double the rate of government indebtedness. That should be good for another 100 point rally in the Dow. If anyone knows the number that comes after quadrillion, please send that on to Ben and company. They are going to more than likely be needing it.
Seriously, it is hard to hide my contempt of this disgusting scene. This band of fools somehow believes that prosperity can be created by printing money without any consequences whatsoever. The US is sinking under a mountain of indebtedness and the Fed chairman tells us that it stands ready to engage in even more QE should the need arise. Flash to Ben – the need shall arise. China is already balking at buying US debt meaning you are going to have to buy it all yourself Ben.
What we are witnessing is the death throes of a debt-based monetary system of which those presiding over it apparently have come to believe their own delusions. The US public is learning what our grandfathers learned as a result of the Great Depression – Debt is something to be avoided – not heaped up and accumulated. That the borrower becomes the lender’s slave and that living beyond ones own means is inherently foolish and dangerous. That saddling one’s children and grandchildren with a debt burden that they did not create is immoral and wicked. Yet, all of this is lost upon the monetary lords who have their noses so close to the ground sniffing out the scent that they cannot see the path ahead leads off the edge of an abyss from which there is no escape. Or perhaps they do see and are attempting to secure their own parachutes before leading the rest of the masses over the edge.
I repeat – if lasting prosperity could be created by printing money and giving it away, previous generations that were wiser and more frugal than ours would long ago have stumbled upon this axiom.
That brings us to the war on gold. I am still amazed that after all these years and notwithstanding all the evidence to the contrary, there are still those obtuse enough to insist that there are no official sector attempts to manage or stem the rise in the price of gold. Gold is the only currency that these debasement thieves cannot pollute by conjuring more of it into existence. It rises when distrust of paper currencies is high and confidence in the ability of those who supposedly manage monetary affairs wanes. Thus it is and always will be in direct competition with unbacked fiat currencies.
Our money masters hate the yellow metal because its rise mocks their absurd assertions and debunks their claims of being able to “manage the economy”. It strikes, dagger-like, at the very hubris of these elitists who think that they are wiser than the collective judgment of the entire market, they alone possessing such keen insight into the nature of these matters that we should entrust our financial health to their hands. Imagine the conceit of a few men who think that by pulling on this lever or pushing on this button, that they can assure continuous prosperity and lasting wealth for all. Every generation considers itself wiser than the previous one which is why history does indeed repeat itself. Arrogant men never learn for they lack the one thing essential to make one truly wise – the ability to admit that we do not know all things nor that we mere mortals can always fix what ails us.
Back to the charts however – gold is being capped by its enemies near $1,245 in order to prevent an upside breakout and subsequent run to the lifetime high. Short term oriented traders saw that it could not pass through this level and decided to sell out. Dip buyers who have a longer term perspective, came in however and appear to be active today preventing much in the way of downside movement.
The weekly close was positive but I would have liked to have seen it close over $1,245 to set up more buying enthusiasm for next week. As noted on today’s chart, this week was the 4th consecutive week in which gold closed higher.
From a seasonal perspective, gold has turned higher right on schedule and if history is any guide, the odds favor a move higher into the 4th quarter from here. Keep in mind that even on a seasonal trade, the market never goes straight up. We are talking about the tendency or trend to rise from this point. What gives rise to the seasonal pattern is jewelry buying as the Christmas and other various holidays season approaches. That is an extra source of demand that generally is fairly reliable. It should be noted however that it is not jewelry demand that is driving the price of gold; it is investment demand. The jewelry demand is just an extra kicker.
Silver had quite a day today careening quite wildly as it soared to $19.34 and then faded back to unchanged. I suspect some of the longs who had some very nice paper profits decided to ring the cash register and go home for the week feeling pretty good about themselves. Bulls make money; Bears make money but Pigs get slaughtered. Morgan probably showed up above $19.20 anyhow. Even at that, it is very impressive at how shallow yesterday’s dip lower was and how short-lived it was.
We’ll see what kind of light this week’s COT reports will shine on the goings on in both pits. If I note anything of significance, I will post something up. The moves in silver in particular over the past three days unfortunately are not going to be detailed internally in this report but we will catch Tuesday’s action and that might provide a clue as to what occurred in there the remainder of this week.
The HUI, while not showing quite the gains of the broader S&P 500, is slightly higher today. Bulls are fighting to close the index above 480 which would be quite a technically impressive feat. Should they be able to hold their ground, such a close today would set up a strong possibility of a run towards 500 next week. It all depends on just where this thing closes this afternoon. A drop back down towards 470 would embolden share shorts who would try to take them lower in the early part of next week. A strong push past 480 gives the bull the clear advantage heading into the same time frame. The battle is joined.
Bonds got the snot beat out of them today as the steepeners were put back on with flatteners getting forced out. Judging from the ferocity of the downdraft, it looks like too many got caught leaning too heavily on one side of the market and were snared. Someone made one helluva lot of money today in the bonds if they decided to sell when Bernanke decided to start yakking. Even with the strong move lower, the bonds remain in an uptrend. We will see how they fare if and when they approach the 20 day moving average near 131^31.
The highest monthly close in the bonds was 138^02 back in December 2008. They spiked about one point shy of this at 136^31 this week but ran out of momentum. This area seems to be offering significant resistance. I shudder to think of the implications for all of us should it have given way. AS it is, bond bulls now have to take this level out in convincing fashion to continue the relentless rise in this market. Next week, and in particular next month, are going to be key to the future direction of this pit.
Once again the Dow mystically moved back above the 10,000 level. It seems that level has now become somewhat of a national security matter.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

"Every government degenerates when trusted to the rulers of the people alone. The people themselves are its only safe depositories." - Thomas Jefferson

Thursday, August 26, 2010

Citi Says QE2 Would Be End-Game For The USD


Greenspan when Chairman confirmed MOPE (Management of Perspective Economic) as the present school of economic thought and application. Now Bernanke is making the same confirmation.
There comes a time when smoke and mirrors fall flat on their ass. This is the time as we are headed to a double dip with the double being the dip of a lifetime.
The result will without any doubt be "Currency Induced Cost Push Inflation." The problem is that so very few have a clue what that is, yet the fate of nations hangs on the correct understanding.
Bernanke’s top tool now may be power of persuasion CIGA Eric
The power of persuasion – spin, MOPE, propaganda, etc has been a critical tool since humans learned to talk within the context of centralized control. The fact that the media has chosen to recognize it at this point in the cycle reflects the growing fragility of the economic backdrop.
That’s the test facing Fed Chairman Ben Bernanke as he addresses a conference Friday in Jackson Hole, Wyo. Without any easy options left, Bernanke must try to prevent another recession by persuading people and businesses to feel confident enough about the future to spend more today.
Source: finance.yahoo.com

How Hyperinflation Will Happen.

Fed Completes Monetization Of $1.415 Trillion In Treasurys, Morgan Stanley's Prediction Of Issue "In Play" Spot On Again


Albert Edwards: "We Are Returning To 450 On The S&P"

"Enron accounting" Has Bankrupted America; U.S. Deficit Really $202 Trillion Kotlikoff Says

Hussman Funds - Weekly Market Comment: Why Quantitative Easing is Likely to Trigger a Collapse of the U.S. Dollar

Low Pension Return May Soak New York Taxpayers

Investors Have Withdrawn a Staggering $33.12 Billion from Mutual Funds in 2010

Ambrose Evans-Pritchard: Spain Uses Social Security to Prop Up Bond Market

Jim Sinclair’s Commentary
Now tell me this chart does not look like our illustration number one, a ski jump.
How about housing’s first breakdown of strong support?
Failure to return to the support and through it is downright SCARY.
Jim Sinclair’s Commentary
The reason for this is the quiet disaster. The major losses in retirement program investments is twofold:

1. The legal liability that the managers of pension funds absolutely have as compared to your average whacked hedgie.
2. The fact that for decades pension funds have been Wall Street’s circular file for junk.

Illinois Teachers’ Retirement System selling off $3B to cover benefits By: Barry B. Burr August 24, 2010
(Crain’s) — Illinois Teachers’ Retirement System, Springfield, plans to sell $3 billion in investments, or about 10% of its $33.1 billion in assets, in the current fiscal year to pay pension benefits, according to Dave Urbanek, public information officer.
The system is the fifth Illinois statewide defined benefit plan to sell off investments this fiscal year to pay benefits.
Illinois State Universities Retirement System, Champaign, expects to sell $1.2 billion in investments from its $12.2 billion defined benefit fund this fiscal year to raise liquidity to pay benefits to participants.
The Illinois State Board of Investment, Chicago, could sell $840 million investments from its $9.9 billion fund to pay benefits of the Illinois State Employees’ Retirement System, Illinois Judges’ Retirement System and Illinois General Assembly Retirement System. ISBI oversees the investments of the three systems.
The liquidity stress from the investment sales at the five plans could force each of them to restructure their strategic asset allocations, terminate investment managers and search for new managers.

Jim Sinclair’s Commentary
Gold has ethics for one major reason: because there is no liabilities attached to gold as there are to all Fiat currencies in one degree or another.

The Ethics of Gold Tuesday, 24 August 2010  at  11:14, By Ron Robins, Founder & Analyst – Investing for the Soul
The rising price of gold stands as the ethical barometer of the mismanagement of our fiscal, monetary, and currency systems. Gold is in the early stages of re-asserting its historic role of helping to bring order to monetary and currency chaos. Its price has risen more than fourfold over the past ten years as a result of investors anticipating the predictable financial and currency chaos we have today—and what is likely yet to come.
The central banks and government treasuries, particularly those of the US, Europe, and Japan, have been weakened and our trust in them eroded. For decades they assured us that only they and their paper currencies and fractional reserve banking systems can keep our economies growing forever. They are now failing for all to see. And before the ships of state sink and economies further submerge they bail out their banking friends.
The monetary and currency systems and organisations responsible for them are deteriorating because they essentially lack an ethical standard. That is not to say that most individuals in these organisations are unethical. It is that as organizations they implemented policies over the past several decades that knowingly—or they should have known—would eventually lead to great financial and economic hardship.
One such policy was the encouragement of debt creation way beyond income or economic growth. When this policy failed, it led to tens of millions of people losing their jobs globally, millions losing their homes, and retirees in developed countries losing their savings as interest rates were reduced to near zero. It is in this sense that these organizations were, and are, without an ethical standard.
To rise to the top among many of these banking and financial organizations, requires not only brilliance, but usually subservience to base instinctual values of status and greed.

Dear Eric,
Recession risk or the bottom will drop out? You are being too gentlemanly.
U.S. Economy: Durables, Housing Signal Recession Risk CIGA Eric
Both CPI and gold-adjusted business core spend (new orders of durable goods ex. defense and aircraft) time series are rolling over. Gold adjusted business core spending, a better reflection real of business activity, has not recorded positive year-over-year growth since 2007. This throws cold water on the heavily MOPE’d economic recovery of 2009-2010.
Real Business Core Capital Spending: Real or CPI-Adjusted New Orders of Durable Goods ex. defense and aircraft (RBCCS) and YOY Change: clip_image001
Gold-Adjusted New Orders of Durable Goods ex. defense and aircraft (BCCSGLDR) and YOY Change: clip_image002
Orders for durable goods in the U.S. increased less than forecast in July and sales of new homes unexpectedly dropped, increasing the risk of a renewed recession in the world’s largest economy.
Bookings for goods made to last at least three years rose 0.3 percent, figures from the Commerce Department showed today in Washington. Excluding transportation equipment, demand fell by the most in more than a year. Purchases of new dwellings fell 12 percent to an annual pace of 276,000, the weakest since data began in 1963, figures from the same agency showed.
Source: businessweek.com

Posted: Aug 26 2010     By: Dan Norcini      Post Edited: August 26, 2010 at 2:14 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
It is generally not a good sign when a market moves lower after failing to sustain its gains on the release of “friendly” news. Such has been the case so far today with the S&P 500 as it popped higher when the unemployment numbers came in a bit less than the market had been anticipating. The bump higher attracted sellers instead which is most disconcerting if you happen to be a bull. It is early in the day yet as I write this so the longs can still turn it around but for now you can see the “risk” trades that were put on earlier coming right back off.
The Euro has lost a half a cent against the Dollar as the equity markets have faded off their best levels with the Yen moving a tad higher as once again, both it and the Dollar receive money flows whenever investors become nervous. Speaking of nervous, Forex traders are becoming increasingly worried that the Bank of Japan is getting ready to foray forth and inflict a dose of punishment upon the brazen speculators who have dared to bid the Yen higher. They apparently are getting ticked off that the stronger Yen is crimping their all-important export market as Japanese made products are losing competitiveness. Chatter is that the Japanese monetary lords will engage in a round of intervention and begin selling the yen combined with another dose of QE. We shall see but experience has taught me, all too painfully I might add, that once the Finance Ministry and/or the Bank of Japan begins expressing strong displeasure over the level of their yen, it is not the better part of wisdom to become too cocky or get too aggressive. That perhaps more than anything is keeping the Yen from moving sharply higher for the immediate future although you might see some of the bigger hedgies actually try to push their luck to see exactly what level will bring a potential response. In effect, players have been known to keep prodding until they get the intervention to see where the ceiling is for the short term. They can then buy on dips and sell the ceiling with the knowledge that the lords in Japan are pleased. Problem is that one never knows when the Japanese authorities will decide to play a few mind games and keep selling yen!  Ouch….
I said all that to say that since the Yen has a fairly large weighting in the basket of currencies that make up the USDX, it movements are significant in attempting to ascertain where the Dollar is headed. With the current mindset being one of rushing into the Yen whenever there is an aversion to risk, the effect is to stem somewhat the corresponding rise in the Dollar on such occasions. Were it not for the Yen, the Dollar would respond more strongly to the rush into safe haven play. If the Japanese monetary authorities set a distinct line in the sand for their currency, it could be that any further risk aversion trades would see a much stronger rally in the Dollar.
The effect of the strong yen has been to mute somewhat the performance of gold when priced in Yen terms. Gold continues to remain very strong in terms of the European currencies, and the Canadian Dollar as well but has underperformed when viewed through the prism of the Yen price.
Open interest increased yesterday in both gold and silver but not to the extent I would have expected in silver given the magnitude of its recent rise. That tells me that whomever it is that has emerged in the West to challenge the perma shorts in that pit, they are being successful in squeezing some of their weaker cousins out of the market. I wish that this week’s CFTC today which will be released on Friday would have included yesterday’s positions as well as Tuesday’s to give us a more complete picture of who got forced out. What I am going to be looking at is the positions of the strong-handed shorts in that market. If we are going to see a legitimate commercial signal failure, it will show up here first. My own view at this point is that it is going to take a much stronger push on the part of the longs to get the Morgans of the world to run. The ones that are more than likely running right now are the funds on the short side and some of the CTA’s and other larger reportables. That is just a guess and I could be wrong but until tomorrow, all of us are guessing!
It looks as if some of the longs could not resist the urge to ring the cash register after price stalled out above $19. We will watch to see where chart support develops.
Open interest increases in gold signify that managed money continues to move into the metal. At 565,000 it is well off the record peak above 605,000. With price a mere $20 off its all time nominal high, it would be a relatively easy feat for the big funds to take it through that level. Question is are they ready to do so yet? Pit locals and other assorted option sellers are attempting to ply their craft of screwing the option buyers, which is the norm for the Comex crowd. Nothing like legalized theft. Gotta keep the exchange members employed. Then again, why else does anyone in their right mind pay those kinds of prices for a seat on the exchange? Answer – they get to regularly milk the public with a wink and a nod of the overseers.
Today’s high confirms the selling resistance shown on the daily chart. We watch now to see where buyers emerge.
Gold shares are unusually strong today given the weakness in gold today. It is however having difficulty near the 480 level, which as one can see from an examination of that chart, a region where sellers have surfaced in the past. If the share bulls can force this index up through 480 and hold it there on two consecutive closes, they have a clear shot at 495 – 500.
Bonds continue their relentless march north. There still is no sign of a technical top in that market although it is losing some upside momentum as it nears 137.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

Wednesday, August 25, 2010

The political and economic environment is unfolding much as we discussed several months ago. Markets are being socialized and the government/central bank policies are meeting the problem of too much debt with more debt. But investors are beginning to see risk in a different light: The only "growth" is from stimulus, and how long can that last?... We're all racing to the bottom. There will be no winners, only non-losers as the government "spreads the pain." The non-losers will be those who have prepared: no or little debt and some savings for a rainy day (or decade). This was my only real advice for years.

This Economy is Ripping the Dignity of Millions of Americans to Shreds

World Stocks Slide on Economic Worries

Interest rates 'may reach 8% by 2012' adding £900 to the average mortgage as economists warn of need to curb 'runaway inflation'.

Jim Sinclair’s Commentary
Governments DO NOT default, they reschedule and declare that a solution. Problem solved.
Of course that is BS, but it takes awhile for the market to figure it out.

Morgan Stanley Says Government Defaults Inevitable By Matthew Brown – Aug 25, 2010 12:10 PM MT
Investors face defaults on government bonds given the burden of aging populations and the difficulty of increasing tax revenue, according to a Morgan Stanley executive director.
“Governments will impose a loss on some of their stakeholders,” Arnaud Mares in the firm’s London office wrote in a research report today. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” The sovereign-debt crisis is global “and it is not over,” he wrote.
Rather than miss principal and interest payments, governments may choose a “soft” default in which they pay back debts with devalued currencies resulting from faster inflation or force creditors to take lower returns, Mares said in an interview.
Borrowing costs for so-called peripheral euro-region nations from Greece to Ireland surged today, resuming their ascent on concern that governments won’t be able to cut their budget deficits. Standard & Poor’s lowered Ireland’s credit rating yesterday on the rising cost of supporting nationalized banks.
Population trends may be a better predictor of the ability to meet obligations rather than debt as a percentage of gross domestic product, which doesn’t reflect governments’ available revenue and is “backward-looking,” Mares wrote.

Jim Sinclair’s Commentary
Intellectual giants and floor traders rarely go together. Floor traders and callused knuckles is a commonality.
There is one exception, maybe the only, and that is my dear friend and former partner Yra Harris.
Listen carefully, he knows what is coming.
Notes From Underground: CNBC-CME trader sounds off August 25, 2010 at 9:19 am


Dear CIGAs,
When reading Yra’s article, remember that he is not in the Bubble Camp, he is a floor trader who has profited and survived by never standing in front of a locomotive.
The day a bubble is a bubble is the day after it gets pricked. True bubbles are always identified in hindsight.
Jim Sinclair

Treasuries – The New and Improved Toxic Asset? CIGA Eric
Treasuries are now the New and Improved Toxic Asset. Everyone knows that they are overvalued, everyone knows their yields are absurd—yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is.

The only opinion that matters is the market. The secular trends in the bond market suggest two things: (1) While the nominal (U.S. dollar)trend in bonds remains intact, it serves as a poor "canary in the coal" mine because of the devaluation bias (see chart below):
Long-Term U.S. Government Bonds Total Return Index (LTGBTRI): clip_image001[1]
(2) When the devaluation bias is removed, the secular trend in the bond market changes from up to down. Clearly, the canary in the coal mine died in 2001 – a long time ago.
Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) to Gold Ratio: clip_image002[1]
Do not let consensus opinion – "what should be" cloud your perception of reality. As I have said many times before, follow the money.
The flow of capital has already begun its transition from the public to private sector (see chart below). This transition will be manifested into market trends (capital flows) yet to be recognized by the collective vision of consensus opinion.
Long-Term U.S. Corporate Bonds Total Return Index (LTCBTRI) to Long-Term U.S. Government Bonds Total Return Index (LTGBTRI): clip_image003


Silver Has Jumped The Creek CIGA Eric
Silver will lead another liquidity blast. This is illustrated by the gold to silver ratio (GSR).
In early August I suggested that,
While the ratio remains above June 2009 swing low, today’s technical suggest that another wave of currency debasement lurks just around the corner.
Today’s price and volume action suggest that silver has "jumped the creek" above near-term resistance. This has increased the pull of the May-June highs.
Silver ETF (SLV): clip_image004

‘Quantitative Easing’: What Does It Really Mean for Investors? CIGA Eric
Don’t make things more complex than they have to be. What does it mean?
Devaluation of paper money, particularly the senior currency in which the majority of debt was issued (U.S. dollar)
  • Reduction in the general standard of living
  • Ongoing default of debt through inflation
  • Rising price of gold and silver relative to fiat.
Gold, London P.M. Fixed clip_image001

Silver, London P.M. Fixed clip_image002
Investors queasy over whether there’s anything that can be done to boost the flagging US economy could get a trillion-dollar answer this week from the Federal Reserve.
When officials from the central bank emerge from this week’s Jackson Hole, Wyo., retreat, they will likely disclose the latest in the arsenal of so-called "quantitative easing" measures.
Source: cnbc.com

Posted: Aug 25 2010     By: Dan Norcini      Post Edited: August 25, 2010 at 2:18 pm
Filed under: Trader Dan Norcini
Dear Friends,
Something extraordinary is obviously occurring in silver as it continues to shrug off any selling pressure that has normally been tied to the “risk aversion” trade. This is the second day in a row in which it has moved sharply higher blowing through chart resistance levels with ease and forcing a huge deal of pain for the shorts.
I cannot say with certainty what is occurring but it appears that one or more big players is challenging the perma shorts in this pit and is evidently doing so with great success thus far.
Silver is actually pulling gold higher in spite of the obvious capping that is occurring by the bullion banks above the $1,240 level.
Click chart to enlarge in PDF format