QE To Infinity – No Surprise There

Posted: Sep 21 2010     By: Dan Norcini      Post Edited: September 21, 2010 at 5:13 pm
Filed under: Trader Dan Norcini

Dear Friends,
The BIG, “no news” news of today was the release of the FOMC details concerning their view of the economy. At 1:15 PM, CST, the “news” broke that the Fed stands ready to provide further QE should the struggling economy encounter additional headwinds.
Both gold and silver shot up sharply higher and the dollar plummeted below support at the 81 level in the USDX, while the equity markets simultaneously jumped and the bond market surged.
I personally do not know why the reaction was so profound. After all, it is no surprise to any of the readers here at JSMineset that the Fed stands ready to engage in “QE to infinity” as Jim has been saying for longer than I can remember.
If you want to distill the essence of their press release, it is basically as follows:
The economy is flat and while it has not worsened, it is also lagging in key areas, notably employment, business spending and consumer spending. Inflation has all but disappeared freeing us from having the least bit of concern about rising interest rates. Bond speculators are therefore given notice that we will be undertaking additional Treasuries purchases should the need arise so please buy the long bond futures and aid us in our task of keeping a positive interest rate environment for the struggling real estate and housing markets, not to mention helping us keep interest payments on the out of control national debt at “reasonable” levels. We’ll print ‘em (Treasuries) and you buy ‘em. Help us out, please.
Gold was obviously not impressed with the implications of such shenanigans as it broke higher to a new record price notching a print above $1290 in the process. Such a policy is nothing more than a planned debauchery of the national currency. The Dollar imploded particularly against the Australian Dollar which notched a two year high. Even the Japanese yen refused to stay down, much to the dismay of the Japanese monetary authorities who no doubt are already making arrangements for their next foray into the market to beat it back down again.
The problem with all this funny money talk is that quite simply it underscores just how anemic the so-called, “recovery” is and how dependent it is upon the life support system of QE. Even as I pen this brief commentary, the S&P 500 has sunk into negative territory which is telling.
In my earlier comments on gold today I mentioned that we might see a setback from the capping effort at $1285 just like we experienced at the previous resistance level of $1260. For all that we know, that setback might well have already occurred and is now finished. Even the HUI moved back above the 500 level after dropping as low as 489. If it can finish strongly above this level, that would make two consecutive closes above a critical resistance level. Generally, from a technical analysis perspective, that is a bullish chart signal that an upside breakout has been accomplished. We’ll see how it closes today and how it fares tomorrow to get a better clue as to what is next. Overnight action in the gold will be revealing.
Fasten your seat belts – all the Fed has done by today’s announcement is inject more volatility into these already stupidly insane financial markets.
Click chart to open today’s US Dollar Index chart in PDF format with commentary from Trader Dan Norcini




Jim Sinclair’s Commentary
How can anyone question our position of QE to infinity?

Under QE to infinity the US dollar is trashed.

Under QE to infinity the gold price smashes through my estimate of $1650 made many years ago.

Under QE to infinity every mineable one million ounces of gold in the ground is worth one billion six hundred and fifty million dollars less the cost of extraction and processing.

Gold shares are going to take the lead in equities for a long time to come. The gold mining business is simply too profitable to be ignored.

Gold is going to a minimum of $1650 and all else is purely noise.

Noise does not make you money. Trading noise is for amateurs. Trading trends is for the professional. Ask Jesse Livermore, Ben Smith and Bert.

Fed Mulls Trillion-Dollar Policy Question Monday, 20 Sep 2010 | 1:56 PM ET
How much of a boost to the U.S. recovery could another trillion dollars or two buy?
That’s a tricky question for the Federal Reserve when it meets Tuesday to debate what would warrant pumping more money into the financial system.
To battle the financial crisis, the Fed bought $1.7 trillion of longer-term Treasury and mortgage-related bonds, supplementing its pledge to keep interest rates near zero for a long time.
All told, it helped stabilize a collapsing financial system and to avert what could have been a second Great Depression.
Now, faced with a 9.6 percent jobless rate and below-target inflation, Fed policymakers are trying to gauge how much they could achieve if they resume massive quantitative easing.
Few analysts expect the Fed to launch a new round of bond buying this week, and uncertainty over the impact of fresh moves may be a factor keeping the central bank on the sidelines.
More…

Dollar sinks and gold soars as Fed signals it wants to stoke inflation

 

Albert Edwards On Terminal Competitive Devaluation, The Nuclear Option, And How The Fed's Policies May Start An All Out War

 

That Rumbling Sound Is Dollar Giving Way
By: Rick Ackerman, Rick's Picks.




Jim Sinclair’s Commentary
Volcker won it all while Greenspan and Bernanke gave it all away.
The OTC derivative dealers gave us perma-poverty and an untouchable class of citizens..
 
U.S. Loses No. 1 to Brazil-China-India Market in Investor Poll By Mike Dorning – Sep 20, 2010 9:01 PM MT
The U.S. has fallen behind emerging markets in Brazil, China and India as the preferred place to invest, a Bloomberg survey shows, though the worlds largest economy still ranks highest of all major developed countries.
The U.S ranked first three months ago in the last quarterly Bloomberg Global Poll. Along with the slipping perceptions of the U.S. markets in the most recent survey, conducted Sept. 16-17, poll respondents say the Federal Reserve is likely to take further steps to try to bolster the economy.
In the September poll of 1,408 investors, analysts and traders who are Bloomberg subscribers, respondents rate the U.S. fourth for potential returns over the next year, behind Brazil and China, tied for first, and India, in third place.
The U.S. economic situation is obviously unsustainable, and the concerted attempt to suspend disbelief is playing increasingly poorly abroad, says poll respondent Eric Kraus, chief strategist for Otkritie Brokerage House in Moscow. One can delay, but no one can forestall the unwind of a multidecade credit bubble.
Economic reports released since the June poll show U.S. GDP growth slowed to 1.6 percent in the second quarter from 3.7 percent in the first quarter. In the final quarter of last year, GDP grew at a 5.0 percent annual rate.
More…




Jim Sinclair’s Commentary
Why foreclose on what you can neither value nor sell?
It was GMAC that provided most of the credit on cash for clunkers no matter what kind of foreign or domestic vehicle you bought.
This is not good for the financial health of GMAC.

Ally’s GMAC Mortgage Halts Home Evictions in 23 States By Denise Pellegrini – Sep 20, 2010 5:21 AM PT
Ally Financial Inc.’s GMAC Mortgage unit told brokers and agents to halt foreclosures on homeowners in 23 states including Florida, Connecticut and New York.
GMAC Mortgage may “need to take corrective action in connection with some foreclosures” in the affected states, according to a two-page memo dated Sept. 17 and obtained by Bloomberg News. Ally Financial spokesman James Olecki confirmed the contents of the memo. Brokers were told to stop evictions, cash-for-key transactions and lockouts, regardless of occupant type, with immediate effect, according to the document, addressed to GMAC preferred agents.
The company will also suspend sales of properties on which it has already foreclosed. The letter tells brokers to notify buyers that the company will extend the closing date on all sales by 30 days. Buyers will be able to cancel their agreement to purchase and get their deposit back, according to the letter.
GMAC Mortgage ranked fourth among U.S. home-loan originators in the first six months of this year, with $26 billion of mortgages, according to industry newsletter Inside Mortgage Finance. Wells Fargo & Co. ranked first, with $160 billion, and Citigroup Inc. was fifth, with $25 billion.
GMAC was created in 1919 to provide financing for buyers of General Motors Co.’s vehicles. GMAC converted into a bank holding company in 2008 as it received more than $17 billion of government funds during the financial crisis. It rebranded itself Ally Financial last year, and continues to offer auto loans and mortgages.
More…

 

Jim Sinclair’s Commentary
Thought from the interior bush of Africa:
The Irish bond auction found a good reception.  Sure it did. That reception is called the one trillion euro rescue fund.

Jim Sinclair’s Commentary
Please study this chart carefully before you buy the bull that the euro has more problems than the US dollar. That simply is not true.

 

Alasdair Macleod: Inflection point for gold and the price suppression scheme

Jim Sinclair’s Commentary
Yes this is bad but US citizens have no idea of how bad it really is. It is unfortunately thanks to one singular cause, the damn over the counter derivatives.

Wall Street being driven by blind greed changed a normal four year economic contraction into the disaster of a lifetime.

This is far from over.

For Sale: Welcome to United States of Tent Cities

Hourly Action In Gold From Trader Dan

Posted: Sep 21 2010     By: Dan Norcini      Post Edited: September 21, 2010 at 5:10 pm
Filed under: Trader Dan Norcini

Dear CIGAs,
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini