Abandon Apple Ship? Ken Heebner Dumps Almost Entire Apple Stake

 

Nassim Taleb: "The Fed's Business Is Price Instability"

"Almost 3 million Americans, including 140,000 Floridians, are losing federal benefits."

140,000 Floridians losing federal unemployment benefits By Holly Gregory, Reporter
Last Updated: Thursday, November 11, 2010
TAMPA – Three federally funded unemployment programs are ending soon.
The programs are the additional compensation pay program, the emergency pay, and extended benefits.
Unless lawmakers intervene with another emergency package, the federal benefits will begin to expire starting Nov. 30 through Dec. 11.
Almost 3 million Americans, including 140,000 Floridians, are losing federal benefits.
For some people searching for work, these benefits are their last safety net.
It’s a position Camisha Kemp never expected to be in.
Earlier this year, the mother of four re-married. Her husband, Antoine, was working for the state. She was running an at-home-daycare. Then the bottom fell out.
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G-20 Worries About Everything But What It Should

Posted: Nov 12 2010     By: Greg Hunter      Post Edited: November 12, 2010 at 8:56 am
Filed under: USAWatchdog.com
Courtesy of Greg Hunter’s USAWatchdog.com
Dear CIGAs,
The G-20 kicked off in Seoul South Korea this week.  It seems to me everyone should be talking about the U.S. defaulting on its obligations by massive money printing.  Instead, the group of twenty finance ministers and central bankers from the most important industrialized and developing economies of the world has been sidetracked.  There is the threat of a North Korean attack on South Korea.  The Guardian UK reports, “The British delegation is taking seriously the potential threat of an attack on the G20 summit by North Korea, whose border is just 50 miles away from the gathering in Seoul.  A diplomat said: “There has been speculation that the North Koreans will attempt some kind of disruptive incursion into South Korea.” (Click here for the complete Guardian UK story.)
Then, there is the latest PIIGS (Portugal, Italy, Ireland, Greece and Spain) problem that has popped up.  It seems Ireland has the Group preoccupied with another bailout in the EU.  Reuters reports, “Ireland’s issues have moved to the forefront of currency concerns recently after taking a backseat to U.S. Federal Reserve policy for several weeks. Yields on 10-year Irish bonds rose well above 8 percent to a record high over comparable German debt, the euro zone’s standard.  Investors are worried Ireland would not be able to cut spending as planned and may require a bailout, with bond holders forced to absorb losses.” (Click here for the complete Reuters story.)
There is also talk of a looming trade war among the G-20.  The Associated Press reports, “A dispute over whether China and the United States are manipulating their currencies is threatening to resurrect destructive protectionist policies like those that worsened the Great Depression. The biggest fear is that trade barriers will send the global economy back into recession.  Hopes had been high that the Group of 20, which includes wealthy nations like Germany and the U.S. and rising giants like China, could be a forum to forge a lasting global economic recovery. Yet so far, G-20 countries haven’t agreed on an agenda, let alone solutions to the problems that divide them.” (Click here to read the complete AP story.)
Yes, a trade war could do great damage but, to me, that should take a back seat to what the Federal Reserve is doing by starting another round of quantitative easing (QE2).  The Fed is printing up a fresh $600 billion (for starters) and is on its way to turning the dollar into candy wrappers and toilet paper.  This is the currency that most of the world uses for international trade.  I cannot believe this is not the first item on the agenda of the top financial officials in the world!
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A Deeper Look Into Why QE Is Bad

Posted: Nov 11 2010     By: Dan Norcini      Post Edited: November 11, 2010 at 11:24 pm
Filed under: Trader Dan Norcini
Hello,
I would love if one of you gentleman could mention the following BusinessInsider article on QE on JSMineset.com and refute their sophisticated argument on why QE does not increase the money supply and is not bad. It is articles like these in the mainstream media that your readers should be able to respond to, so I (and I am sure many others) would much appreciate your expert insight into the author’s argument.
Thank you for all the great work you do,
CIGA Sim


CIGA Sim,
Obviously Chinese concerns over the Fed’s QE program are unfounded then according to this “logic”. Same goes for Brazil and its resentment at the soaring Real as the Dollar drops in value on the world foreign exchange markets. In other words, all the Central Banks of the East and the emerging markets have gotten it all wrong. There is no reason whatsoever for the Dollar to be falling. It is just ignorant foreign exchange market participants who need a good education and should have read this article first.
Here is the problem with his argument – it fails to consider the impact of QE on international capital flows. Capital will flow OUT of a country employing QE because its goal is to lower interest rates in an attempt to generate loan activity. Investment capital ALWAYS seeks a higher rate of return and will flow to nations with more vibrant economies with higher bond yields and more opportunities to secure capital gains. This flow has the effect of destroying demand for the currency undergoing QE and raising demand for the currency of other nations where higher rates of return can be secured.
As the domestic currency of the nation falls in value due to the slowdown in demand, the cost of many goods in that nation begin to rise for two reasons:
First – investors move to protect the value of their wealth and shelter it against the fall in the currency in which their holdings are denominated. That is what is currently happening with the commodity markets. Those things which will tend to retain their value are sought out and purchased.
Second – weakness in the currency leads to a rise in the price of all imported goods as it now requires additional units of that currency to secure the same amount of foreign goods.
These two items are where the inflationary effect of QE arises.
One other issue that this article fails to consider is the role of speculators. Any analysis of QE impact that does not take into account the speculator is deficient. This role is closely related to the fact that investors will look to protect their assets from a decline in the currency but it goes a step further. Speculators will look to profit from the weakness in the QE currency by using it to fund a “carry trade”. This involves borrowing that currency, because of the extremely low interest rates, and then leveraging that borrowed money into trades that allow for maximum gains. For example, if one can borrow $1 billion at 0.5% and then invest that into a trade that yields 2.0%, they have just secured a gain of 1.5%.
QE feeds the carry trade frenzy by guaranteeing that the funding currency will not rise in value, which if it did, would offset any potential gain made by the trade. It does this because the money borrowed is then sold or exchanged in order to allow the borrower to make the purchase of other assets which are denominated in a different currency. For example – those speculators who wish to buy Brazilian equities as part of their carry trade must first borrow the newly created dollars, then take those dollar and exchange or SELL them for reals which can then be used to buy the Brazilian equities. This tends to keep additional pressure on the funding currency because the additional supply being created eats through the demand. One has only to look back at the Japanese Yen chart from a few years ago to see how the carry trade can lower the value of a currency.
The carry trade then works to jam higher the price of those assets which are the recipients of leveraged buying which tends to feed into the inflationary impact of points one and two mentioned above.
Perversely enough, the effect of these rising prices on tangible assets, particularly food and energy, can have the effect of actually stalling economic growth since consumers in those nations are forced to deal with the effect of the weakening currency as they must now pay higher prices for the essentials of life and have less income left over for discretionary spending.
Hopefully, this will help you to understand why this course of action is so fraught with danger. I get the distinct impression from reading the article that all of the commotion in the markets is nothing but a mere tempest in a tea pot and all of us are worried for no reason whatsoever. Meanwhile, while we needn’t worry, the Dollar has dropped 12% in value since the summer of this year. The only thing that has kept it from collapsing further is that the Euro is not any better. Any wonder why gold is staying so strong?
Trader Dan



A Deep Dive Into The Mechanics Of A QE Transaction The Pragmatic Capitalist | Nov. 9, 2010, 2:41 PM
Some people want you to believe that the Fed just injected the economy and stock market full of money that will now result in an economic boom and much higher prices in most assets.  That’s simply not true.  Here’s the actual mechanics behind QE.
Before we begin, it’s important that investors understand exactly what “cash” is.  “Cash” is simply a very liquid liability of the U.S. government.   You can call it “cash”, Federal Reserve notes, whatever.  But it is a liability of the U.S. government.  Just like a 13 week treasury bill.  What is the major distinction between “cash” and bills?  Just the duration and amount of interest the two pay.  Think of one like a checking account and the other like a savings account.
This is a crucial point that I think a lot of us are having trouble wrapping our heads around. In school we are taught that “cash” is its own unique asset class. But that’s not really true. “Cash” as it sits in your bank account is really just a very very liquid government liability. What is the difference between your checking and savings account? Do you classify them both as “cash”? Do you consider your savings accounts a slightly less liquid interest bearing form of the same thing a checking account is?
What is a treasury note account? It is a savings account with the government. So now you have to ask yourself why you think cash is so much different than a treasury note?  What is the difference between your ETrade cash earning 0.1% and that t note earning 0.2%? NOTHING except the interest rate and the duration.  You can’t use your 13 week bill to pay your taxes tomorrow, but that doesn’t mean it isn’t a slightly less liquid form of the exact same thing that we all refer to as “cash”.  They are both govt liabilities and assets of yours.
When you own a t note you really just traded your “cash” for a slightly less liquid form of the same exact thing.  If the Fed buys those t notes from you they give you back your cash minus the interest rate. That’s all there is to it. No change in the money supply. No change in anything except the rate of interest you were earning.  If the government removes t notes then all they’re doing is altering the term structure of their liabilities.   They’re not changing the AMOUNT of liabilities.
The other day, Ben Bernanke explained that he is not adding any new cash to the system via QE:
“Now, what these reserves are is essentially deposits that commercial banks hold with the Fed, so sometimes you hear the Fed is printing money, that’s not really happening, the amount of cash in circulation is not changing. What’s happening is that banks are holding more and more reserves with the Fed.”
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Jim’s Mailbox

Posted: Nov 12 2010     By: Jim Sinclair      Post Edited: November 12, 2010 at 11:43 am
Filed under: Jim's Mailbox


Jim,
All of the selling we are seeing across the entirety of the commodity complex is related to the news that China is hiking rates again. The fear is that this will cause a slowdown in the Chinese economy which will negatively impact demand for commodities across the board.
I am seeing every single commodity being sold regardless of any current fundamentals. It is even showing up in the soybean and corn markets which have very strong fundamentals. In other words, it is purely a function of hedge fund algorithms being tripped to sell because some downside technical levels have been violated.
The fact that it is occurring even with the Dollar showing weakness tells me that it is a pure money game right now so fundamentals are taking a back seat to the flow of money out of commodities today.
Gold would have to get down below $1,345 and stay there to give me any reason for concern on the charts. Even at that, it would still be okay although the chart picture would be a bit less positive. Only two closes below $1,320 would turn the chart bearish.
Best wishes from your pal,
Trader Dan



Dear Jim,
In spite of G20 I find it hard to understand why gold is falling hard while QE2 is being ignited and EU problems are all over the place. What am I missing in this picture?
Respectfully yours,
CIGA Virgílio

Dear Virgilio,
1. Chinese price controls discussion.
2. Brazilian discussion of currency controls.
3. The general commodity market is bearish today.
4. All these items are being taken advantage of by flash commodity trading and gold banks.
All of this is temporary, but from now on all gold moves will come with unprecedented volatility.
All the best,
Jim


Gold Is the World’s Premier Currency CIGA Eric
Eric, I don’t have the technical skills to prove that We have a de-coupling taking place in Our precious metals from the ‘not so almighty" dollar is this indeed what We are witnessing, sure would appear that these last few days the case could be made, imagine that perhaps the light of day when another short squeeze failed to work this time.
Bob C
Fort Myers 

Gold is the world’s permier currency, but don’t expect many to officially recognize it as such.
While the inverse correlation of the US dollar, gold, and stocks is still present, it has "loosened" against gold. That is, rallies in the U.S. dollar no longer create as large of a downside reaction in gold. This loosening will continue as long as confidence in paper continues to deteriorate at an accelerating rate. The relative direction in the U.S. dollar, gold, and stocks can be view in the chart below.
U.S. Dollar Index, Gold London PM Fixed, and S&P 500:
A better indication of the decoupling of gold from fiat will be revealed by a higher order (parabolic) trend acceleration of gold priced in major currencies. This trend, which has already started, will intensify once the upper trading channel (2001) is broken to the upside.
Gold London PM Fixed and U.S. Dollar Major Currencies Index Ratio:
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