Weimar Hyperinflation...sooner then you think...

NIA Releases Food Price Estimates For A QE2 World: Bread To $23.05, Corn To $11.43, $62.21 For Sugar

 

Gonzalo Lira And The Boiling Frog: Effects Of QE2 On The Bottom 80% Of The U.S. Population

The Fractal Nature Of Markets

Posted: Nov 10 2010     By: Jim Sinclair      Post Edited: November 10, 2010 at 7:25 pm
Filed under: Martin Armstrong
Dear CIGAs,
This piece by martin Armstrong gives you a look into his mind, the history and a review of the Panic Cycle.
Click image to open in PDF format

In The News Today

Posted: Nov 10 2010     By: Jim Sinclair      Post Edited: November 10, 2010 at 7:23 pm
Filed under: In The News
Jim Sinclair’s Commentary
Do you recall all the battles that Gold had to fight when it first tried to take out $1000?
The following video seems to make fun of the bulls, myself included.
Now that gold is doing its usual round number battle at $1400, it might be fun to review it. You will love the ending.





Jim Sinclair’s Commentary
If you haven’t already, please subscribe to John’s work.

- Economic and Systemic-Stability Crises Continue
- Promised Fed Actions Pummel Dollar versus Major Currencies and Precious Metals, as Global Markets Anticipate Higher U.S. Inflation
- Fed Policies Will Trigger Inflation but Not Recovery
- Hyperinflationary Great Depression Looms, Irrespective of Shifting Political Environment
- September Trade Deficit Should Have Little Impact on GDP Revision
www.shadowstats.com

Market Commentary From Monty Guild

Posted: Nov 10 2010     By: Monty Guild      Post Edited: November 10, 2010 at 3:55 pm
Filed under: Guild Investment
Dear CIGAs,
Global Markets Up, Up, And Away
The world markets moved like Superman last week.  They lifted off and moved higher in a decisive manner.  In the ongoing contest between bulls and bears, the bulls have had the upper hand in many markets.  Wall Street also moved firmly into the bullish camp with U.S. stocks eclipsing their April 2010 peaks.  To us this means that the technical short-sellers who had been bearish on U.S. stocks and expecting a correction bought back their short positions and took their losses. 
Pullbacks will come, but the trend is up for: emerging markets in Asian and Latin American, commodities, including precious metals, base metals, oil, and foods.  This upward trend can also be seen in the strong Asian currencies and for U.S. stocks.
The trends are up for 3 reasons:

1. The U.S. Fed and other central banks are creating money.
2. The weak U.S. dollar is causing dollar holders to move into non-dollar assets.
3. Bond-holders who are worried about the low-yields are moving into stocks and commodities to improve their returns.

The Fed Fuels This Lift-Off
Rather than boring you by repeating our thesis that the Fed has no choice but to inflate, I will share an excerpt of an op-ed piece written by Federal Reserve Chairman Ben Bernanke.  The article was published the day after the Fed announced that they will be buying 600 billion dollars in treasuries over the coming months.  If anyone had any doubts that the Fed action is focused on increasing the price of assets like stocks, commodities, and in the long-term real estate, this op-ed piece should put those doubts to rest.
Mr. Bernanke begins the article by giving a history of the Fed intervention in 2008 to reduce short-term interest rates and to buy over $1 trillion in bonds and other assets.  He states, “These steps helped end the economic freefall and set the stage for a resumption of economic growth in 2009.”
The Fed has a dual mandate to promote a high level of employment and low stable inflation.  Bernanke goes on to say that unemployment is too high, and continues, saying: “Today, most measures of underlying inflation are running somewhat below 2% and a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run.  Although low inflation is generally good, inflation that is too low comprises risks to the economy—especially when the economy is struggling.  In the most extreme case, very low inflation can morph into deflation [falling prices and wages], which can contribute to long periods of economic stagnation.”
He goes on to point out that that spare capacity in the economy can be used to increase employment and growth, and that we should not worry about inflation being caused by these policies.
As our readers know, we believe that the Fed sees the potential for a Japanese type of long-term deflation in the U.S., and that they will do whatever they can to avoid such a politically unpalatable outcome.  Their strategy is to try and get confidence up, spending up and investing up.  Toward this end, they have been printing money, buying bonds and thus creating liquidity.  This liquidity has flowed and will continue to flow into U.S. and foreign stock markets (especially the fast growing markets of the emerging world), as well as commodities, and eventually real estate.
Many of you may remember my recent conversation with Jim Sinclair where we discussed the Fed’s expected action which has now taken place.  Jim pointed out that the Fed officials would continue and expand their campaign of talking up the expected inflation rate so that savers would see the need to become investors, investing in new company formation as well as increasing their stock, commodity and real estate purchases.
There Is No Doubt That Gold Has Plenty of Buyers
The three reasons for upward market trends listed above are part of the explanation for why gold has a large number of buyers; another part is that the world monetary system needs to be revamped.
Robert Zoellick, who has been the president of the World Bank since 2007 came out in the Financial Times and said that the new monetary system he envisioned should “involve the dollar, the euro, the yen, the pound, and a renminbi that moved toward internationalization…” Zoellick goes on to say, “the system should also consider employing gold as an international reference point of market expectations about inflation, deflation, and future currency values”.
In our opinion, Zoellick has part of the right idea…gold could and should be an excellent component of the system.  Zoellick understands that the world will have a hard time without a better monetary system, yet the new system (when such a system is implemented) must be based upon a reserve currency.  The parent country of that currency must have a conservatively managed, well-capitalized banking system, and prudent monetary and fiscal policies.  Ideally, they will employ some connection to gold in valuing their currency.
The U.S. dollar is the world’s reserve currency today.  A currency crisis exists because developed country bankers took on too much leverage and too much risk.  Further, U.S. and other developed country politicians have been employing irresponsible fiscal policies for decades.  Now, there is a debate about the monetary policy of many nations and we can expect this debate to get louder in January 2011.  In the meantime, we expect that demand for gold and other precious metals will continue to rise.
Summary and Recommendations
We still adhere to the same themes and investments that we have been discussing:
Investors should continue to hold gold for long-term investment.  We have been bullish on gold since June 25, 2002 when it was selling at about $325 per ounce.  In our opinion, it will move to $1,500 and then higher.  Traders should sell spikes and buy dips.  The appreciation in the price of gold since June 2002 has been about 330%.
Investors should continue to hold oil-related investments. There has been some recent oil-related news that has driven oil to over $87.00 per barrel.  A negative news event is that there will be an increasing supply from Iraq.  We have been bullish on oil since February 11, 2009, at which time oil was trading at $35.94 per barrel.  The price of oil since February 11, 2009 is up about 140%.
Currencies:  For long-term investment, we do not like the U.S. dollar, Japanese yen, British pound, or the euro.  As we mentioned in our September 14th letter, we like the Singapore, Thai, Canadian, Swiss, Brazilian, Chinese, and Australian currencies.  We would use any pull-backs in these currencies as an opportunity to establish long-term positions.  Since September 14, 2010, these currencies have appreciated versus the U.S. dollar by the following amount: Singapore dollar +3.3%, Thai baht +8.2%, Canadian dollar +2.0%, Swiss franc +2.9%, Brazilian Real +0.5%, Chinese Yuan +1.2%, and Australian dollar +6.7%
Investors should continue to hold shares of growing companies in India, China, Singapore, Malaysia, Thailand, Indonesia, Colombia, Chile, and Peru.  We have been recommending these markets in these commentaries since September 14, 2010, and we would use any pullbacks as an opportunity to add or initiate positions for long-term investors.  Stocks in these countries have appreciated in U.S. dollar terms by the following percentages since September 14, 2010:

Country	Stock Index Appreciation
Singapore	12.10%
Malaysia	4.70%
India	13.90%
China	18.40%
Indonesia	16.10%
Thailand	14.70%
Colombia	13.20%
Chile	8.10%
Peru	22.80%

We believe long-term investors should continue to hold food-related shares such as grains, wheat, corn, soybeans, and farm suppliers.  Since we said the grains had bottomed on December 31, 2008, these have all appreciated substantially.  We see more price rises ahead.  Since December 31, 2008 in the price of corn is up about 41%, wheat is up about 18%, and soybeans are up about 35%.
We believe U.S. stocks can rally further.  Our reason for becoming more bullish on U.S. stocks on September 9, 2010 is that over the longer term, liquidity formation through QE will create demand for many assets, including U.S. stocks.  In the short-term, U.S. stock market indices could pull back as the indices are near resistance areas.  Traders may want to take some profits, but stocks are assets that can grow, so liquidity finds its way into them.  Since September 9, 2010, the S&P 500 Index is up about 9.8%.
Thanks for listening.
Monty Guild and Tony Danaher
www.GuildInvestment.com

Hourly Action In Gold From Trader Dan

Posted: Nov 10 2010     By: Dan Norcini      Post Edited: November 10, 2010 at 2:22 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
Two significant developments occurred in today’s trading session which bear mentioning as both have important repercussions for the future.
The first is the clear breakout above $87 in the crude oil market which is heralding a further rise in the cost of crude and with it, all of the liquid energies including gasoline and heating oil. The catalyst was a report showing a drawdown in the amount of crude in storage. Needless to say, this is not welcome news to cash strapped US consumers who are already feeling the affects of higher food costs. Now into this sordid mix comes higher energy costs. Food and energy – what are more essential than these? Nothing!
The second is further downside follow through in the long bond after it breached an important chart support level in yesterday’s trading session. There are so many false breakouts and breakdowns in today’s markets on account of the algos that I am becoming a bit more conservative when reading the price charts but the lack of additional buying in the bonds even in the face of a weaker equity market is ominous. It seems to me that this market, which had been supported only by the Fed’s QE buys is now discounting those buys and has shifted its focus to the sheer volume of supply which is hitting the market. In other words, bond traders are discounting the price of bonds to reflect the fact that demand is not going to keep up with supply at current levels of interest rates. Bond traders are in effect signaling a return to inflation on the long end of the curve as the effect of the QE impacts the economy at large. So far the decline has been rather orderly so we are not looking at a rout or a sharp spike in long term rates, but it could very well be that the days of low long term interest rates are behind us. I still want to see how this market closes out the week however before becoming too dogmatic on things. I have been tripped up too often with these things to get overconfident.
Gold and silver are today feeling the after affects of the margin rate hike in silver. Combine that with a pop in the Dollar and a general wave of commodity selling, and the hit to silver in particular has been quite dramatic. It is currently down over 6%. Oddly enough, even with a downdraft of this extent, its chart does not look all that bad as the uptrend is still intact. If it can close out the week this Friday above 26.75, it will have dodged a bullet. If not, look for further downside with a move down towards $25 very possible, where it should garner buying support if the uptrend is to stay healthy.
Gold’s ability to recapture $1,400 in the face of the rout in silver is very impressive. It seems to me that a goodly number of long silver/short gold spreads are being lifted today. That is part of the reason gold is holding up so much better than silver. Silver had been leading to the upside and now it is leading to the downside. Gold is also responding to woes in Ireland as investors in Europe are driving the price of gold above the €1010 level priced in Euros. In short, although the yellow metal is weaker, it is holding together quite well thus far.
Incidentally, gold just missed setting a new all time high when priced in terms of the Japanese Yen at today’s London PM fix.
Downside chart support in gold was touched earlier in the session where buyers came in and brought it off that level. That serves to validate the levels shown on the chart which are marked in red. The ideal price action would now be not a sharp spike back up in price but rather a sideways period of consolidation to allow end users to become acclimated to the higher cost. Sharp run ups in price tend to put the damper on the physical market overseas whereas a climb, followed by a drop in the level of excitement and some price stability gives buyers the courage to step in once they see that prices are now at a new and higher sustainable level and not just the result of a wave of speculative hot money flows which can dissipate all too quickly.
The Dollar is reaping the rewards of the crisis involving Ireland’s debt. That brought some rather intense selling into the Euro but I find it telling that once the Dollar pushed towards the chart resistance levels near 78.50 on the USDX, it could not hold its gains. The fact is all of the paper currencies are under stress and that is why gold will continue to perform well and will be supported on price dips.
The HUI is showing remarkable strength which is interesting. I think some of what we are seeing there is those ratio spread trades being unwound. That involves buying the shares and selling the bullion. I view that as a good herald as if this is the case, it indicates that the hedge fund crowd is throwing in the towel and abandoning that strategy. We’ll see. Either way, it is difficult to see much more in the way of enduring selling pressure in the metals themselves if the HUI stays strong. Silver is a money game right now so try not to read too much into the chart action as it will take some time for the margin hikes to weed out the weak-handed long side specs.
Cotton has been all over the place today nearly hitting limit up in overnight trade in Asia, then getting whacked and moving almost limit down, then rebounding over $10 and then dropping almost limit down again. Right now it is down but above any limit move. I keep seeing signs in the department stores being changed every 30 minutes to reflect the change in the cost of a pair of cotton socks or T-shirts. Pity the poor clerk who has to keep running in and out of the storage section! Seriously, cotton is evidencing the same kind of wild volatility that silver is experiencing. Ditto goes for sugar which has been all over the place today. The fact is hot money is sloshing all over the globe and moving in and out of markets in huge quantities making trading extremely dangerous for all but the most fleet of foot or the most experienced. Be careful; be very careful out there if you are trading. Scaling down in size is not a bad option as you can still make a great deal of money if you are right in your trades with a small position but at least you can survive if some of them go bad. A large number of hedge funds are not going to survive this period in the markets as these types of extreme ranges in price are going to claim a significant number of them. You can carve that in stone. It is not a zero sum game for no reason.
The grains are seeing weakness today but the fundamentals in there are so strong that it is difficult to see them staying down for any length of time. Food is not going to get cheaper, even if we get a few down days in the commodity markets. The genie is out of the inflation bottle and it is too late to put him back in.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

Jim’s Mailbox

Posted: Nov 10 2010     By: Jim Sinclair      Post Edited: November 10, 2010 at 4:09 pm
Filed under: Jim's Mailbox
Deep Pockets Are Looking at Natural Gas CIGA Eric
Deep pockets are beginning to acquire into the fear. Connected money, which is long-term orientated, has been increasing leveraged long positions into weakness for months. Expect them to push retail money into a short-side capitulation soon. See charts below.
Statistically concentrated markets tend to foreshadow trend changes. Waiting for the right setup, though, will require discipline and patience.
Natural Gas ETF and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:
Natural Gas ETF and the Non-reportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:
Headline: Chevron to Buy Atlas in Race for Natural Gas
Chevron became the latest energy company to set its sights on unconventional natural gas exploration, announcing on Tuesday that it had reached an agreement to acquire Atlas Energy
Source: dealbook.nytimes.com
More…

Jim Sinclair’s Commentary
A major point in the long weather cycle occurs in 2011.
Food price fears as US warns on crop yields CIGA Eric
Demand is soaring and crop yields are shrinking. This alone will send agricultural prices higher. Now, add aggressive currency devaluation into the mix to better understand the direction of capital flows. The phrase "bring the pain" will soon redefine the grocery checkout experience.
"The combined production shortfalls and dramatic potential stock drawdowns mean a much tighter supply picture than just a few months ago," the agency said in a separate grains report.
Benchmark Chicago corn futures soared above $6 a bushel for the first time since August 2008, before ending lower. Soybeans rose 4.3 per cent and New York cotton futures posted a record above $1.51 a pound. The price rises have revived fears of a repeat of the global food crisis of 2007-08.
Source: edition.cnn.com
More…

Dear Eric,
The 30 year US bond is dead. Sell the rises and cover with a profit of 100 to 200 points.
Start with the 90 day 130 puts. Under 124 on the 30 year bond continuous chart, and the bears own that market.
Regards,
Jim
Eric,
Talk about a case of double speak. First they tell us that they are deliberately attempting to induce inflation for falling prices are not supposedly consistent with their mandate. Then they turn around and tell us that they are not.
These men are conscienceless cretans…
And to think the future welfare of the Dollar has been entrusted to these charlatans…
Trader Dan
Treasury 30-Year Bonds Advance as Fisher Says Fed Doesn’t Want Inflation CIGA Eric
Quantitative easing – pumping money into the economy causes inflation for anyone still impressionable enough to follow ‘official’ words rather than action. If you double the money supply in the game of Monopoly and allow free markets (opening bidding) to set the price of properties, you’ll notice that Boardwalk sells for a lot more than $500. Of course, the rising price of Boardwalk wouldn’t be considered inflation if you were playing against the Bureau of Labor and Statistics (BLS). They would calmly suggest that owner’s equivalent rent rather than market prices contribute to board game’s CPI.
Treasuries rose, climbing back from their steepest loss in two months, as Federal Reserve Bank of Dallas President Richard Fisher said policy makers don’t want inflation as they pump money into the economy.
Fisher’s comments spurred speculation demand will increase today when the U.S. sells $16 billion of 30-year debt, those securities most sensitive to costs in the economy, after bidding waned at a 10-year auction yesterday. The extra yield the long bonds offer over 10-year notes closed at a record 1.59 percentage points yesterday, which will help attract investors, according to Barclays Capital Inc.
Source: finance.yahoo.com
More…