Silver holds the 38 dollar level/Lousy economic news emanating out of the usa

Harvey Organ, Tuesday, May 31, 2011

Silver holds the 38 dollar level/Lousy economic news emanating out of the usa

 

 

Theatrical Vote To Raise Debt Ceiling By $2.4 Trillion Begins; Does Not Pass 

Update: As expected, debt ceiling does not pass.  Final vote:

• Nay (Republicans 236, Democrats 82), total: 318
• Yea (Republicans 0, Democrats 97), total: 97
• Not Voting (Republicans 3; Democrats 6); 9

As we reported first today, any minute now the Congress will pretend to vote on HR1954, a clean debt ceiling increase of $2.4 trillion to $16.7 trillion. This will not pass. Why Congress is doing this bullshit, and why the US debt ceiling is now nothing but a farce, is a question voters should ask themselves next time they vote for their representatives. Watch the tragicomedy live at C-Span below.

 

 

In The News Today

May 31, 2011, at 1:14 pm
by Jim Sinclair

Jim Sinclair’s Commentary

When MOPE kills.

Fukushima Risks Chernobyl ‘Dead Zone’ as Radiation Soars  By Yuriy Humber and Stuart Biggs
May 30 (Bloomberg) — Radioactive soil in pockets of areas near Japan’s crippled nuclear plant have reached the same level as Chernobyl, where a “dead zone” remains 25 years after the reactor in the former Soviet Union exploded.
Soil samples in areas outside the 20-kilometer (12 miles) exclusion zone around the Fukushima plant measured more than 1.48 million becquerels a square meter, the standard used for evacuating residents after the Chernobyl accident, Tomio Kawata, a fellow at the Nuclear Waste Management Organization of Japan, said in a research report published May 24 and given to the government.
Radiation from the plant has spread over 600 square kilometers (230 square miles), according to the report. The extent of contamination shows the government must move fast to avoid the same future for the area around Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant as Chernobyl, scientists said. Technology has improved since the 1980s, meaning soil can be decontaminated with chemicals or by planting crops to absorb radioactive materials, allowing residents to return.
“We need to finish this treatment as quickly as possible, within three years at most,” Tetsuo Iguchi, a specialist in isotope analysis and radiation detection at Nagoya University in central Japan, said in a telephone interview. “If we take longer, people will give up on returning to their homes.”
More…





Jim Sinclair’s Commentary

Ever get the feeling that contacts have weakened and it is pile on time?

New York Fed Investigates Goldman Loan Division By MICHAEL J. DE LA MERCED and BEN PROTESS
The Federal Reserve Bank of New York has begun an investigation into the mortgage-servicing arm of Goldman Sachs, looking at whether it systematically rejected borrowers’ efforts to lower their loan payments through government programs.
The inquiry by the New York Fed arose from a letter sent by an anonymous employee, who accused the Goldman unit, Litton Loan, of denying loans without properly reviewing applications.
The letter was brought to the Fed’s attention by The Financial Times after it received the tip.
“We are in possession of the letter and are conducting an inquiry,” a spokesman for the New York Fed said in a statement.
A Goldman spokesman declined to comment.
According to The Financial Times, the anonymous whistle-blower said he had examined loans that qualified for government modifications but were consistently denied.
The accusation against Litton is the latest headache for the unit, which Goldman is seeking to sell.
More…

Murray Pollitt: Electronic wheelbarrows

 

Gold and silver seen forming bullish divergences

 

GoldMoney interview: Egon von Greyerz on gold's return as currency

 

Tungsten-stuffed gold story delights inflation-wracked Vietnam government

 

Here Is Your Chance To Demand Answers From The Fed's General Counsel, Scott Alvarez 

Submitted by Tyler Durden on 05/31/2011 17:01 -0400

For all Zero Hedge readers who have long waited for their chance to ask Mr. Scott Alvarez of "Have The Federal Reserve Or Prime Brokers Ever Tried To Manipulate The Stock Market?" fame a question about life, the universe or why the CME decides to hike ES margins in an environment of rising realized vol, here it is. Tomorrow, at 2PM, Ron Paul will lead a hearing by the Financial Services Committee, which will luckily be carried by C-SPAN meaning one will be actually able to hear the dialog (alas, the House continues to believe that investing in microphones for their internal webcasts is a bad idea), titled: "Federal Reserve Lending Disclosure: FOIA, Dodd-Frank, and the Data Dump." The witnesses will be Mr. Thomas C. Baxter, Jr., General Counsel, Federal Reserve Bank of New York, and the one and only Scott G. Alvarez, General Counsel, Board of Governors of the Federal Reserve System. While the usual heeming and hawing will follow each and every question, what is unique about this session is that the FSC actually allows anyone to submit questions for the honorable lawyers. The link to submit questions is here: we urge Zero Hedge readers to take advantage of this opportunity and have Mr. Paul read their questions to the two general counsels, even if no legible answers will be (ever) forthcoming.

 

 

 

Belarus Hyperinflation Prompts Government To Freeze Food Prices 

So we move from one probably hyperinflation to another, quite factual one. As we disclosed last week, following its massive and surprising currency devaluation, Belarus has promptly plunged into hyperinflationary hell. The government, scrambling to avoid public unrest, which would likely promptly devolve into revolution and civil war, has just now decided to take reactive price freezing "measures" which will do absolutely nothing but accelerate the immediate destocking of anything and everything still available for purchase. From The Moscow Times: "Belarus on Tuesday froze prices on a number of foodstuffs as analysts warned that the former Soviet republic could descend into economic chaos and an IMF mission headed to Minsk to assess the situation." Ah, good old price controls. Failure is imminent, following which Belarus will introduce a mandatory coupon-based purchasing system now that the currency is for all intents and purposes worthless. Incidentally, those who still hold precious metals have the upper hand in determining what these are exchanged for and at what conversion ratios.

Charting The Non-Linearity Of Hyperinflation, And Predicting America's Future Courtesy Of Ancient History

Submitted by Tyler Durden on 05/31/2011 11:11 -0400

A few weeks ago we presented a chart from SocGen's Dylan Grice, which promptly went viral, indicating the ongoing dilution in the Roman silver denarius over the span of two centuries. The comparisons to the purchasing power of the dollar since the inception of the Fed were missed by precisely nobody. Yet one thing that was missing was charting the corresponding reaction in price levels for a key prevailing staple commodity, namely wheat, which was to antiquity what oil is to the world today. Well, courtesy of Paul Mylchreest's latest must read Thunderroad report, prepare to be stunned by another "comparative" chart which does an admirable job at predicting the future courtesy of the past, and which is about to go viral all over again...

An Anti-Correlated Take On Corporate Profits And Dollar Destruction 

Submitted by Tyler Durden on 05/31/2011 14:51 -0400

One of the more interesting correlations (not causations) to have emerged following the surge in corporate profit margins is that of the inverse relationship between now record corporate profit margins, and net exports & services originating from the US. While we certainly will not imply one is a cause of the other or vice versa, we would be remiss to not point out the irony of what would happen should this correlation preserve itself in an environment in which US exports end up being curbed due to a surge in the US dollar once the frailty of the Eurozone no longer allows the EUR to appreciate on desperate one-time (if recurring) rescue measures. And with China largely ignoring US demands to revalue its currency and import more US goods and services (no laughing), is it safe to say that this chart is the one most direct confirmation that the weak dollar policy adopted by the Fed has had it most proximal impact nowhere else than on surging corporate profit levels (and Wall Street bonuses of course). 

 

 

 

 

 

JP Morgan On QE 3: "No Way, Jose" 

Submitted by Tyler Durden on 05/31/2011 13:41 -0400

Just out from the only economist at JP Morgan who is even remotely credible, Michael Ferolli, responding to the question if QE 3 is coming. "Our answer is: no. We think it is very, very unlikely. In a nutshell, we don't think the inflation or inflation expectations data are near the point where the Fed would consider further large-scale asset purchases, and even if the inflation data were to start to move in that direction the potential political fall-out is so great that the Fed would be extremely reluctant to purchase more assets....The recent economic activity data has been decidedly disappointing. By some broad measures such as GDP, it could well be the case that the first half of this year will look even worse than the second and third quarters of last year -- the quarters leading up to the FOMC's decision to purchases another $600 billion of assets. While the growth data may look similar, a crucial difference thus far has been inflation...Even if we are wrong on a second half rebound, we still believe the political hurdle for further asset purchases is tremendously high. The backlash from Capitol Hill after last Fall's decision probably took the Fed off-guard, and the political impact was not a prominent factor debated in the lead-up to the November decision....As such, it appears that without taking significant political risks there is little the Fed is able to do to support the recovery if growth fails to rebound as anticipated next quarter." So... everyone feel convinced now? 

 

 

 

 

Jim Grant And James Turk Discuss The Endgame Of The Keynesian Experiment 

Two of our preferred commentators, Jim Grant, of Grant's Interest Rate Observer, and James Turk, of the GoldMoney Foundation, sat down earlier today to discuss the history and mission of the Fed, how mission creep has taken it wildly beyond its initial purpose into the territory of QE, ZIRP and other fiat currency experiments. While not breaking ground on any notably new concepts, they talk about "who benefit from zero interest rates and how savers are penalized by this easy money policy. They explain that the US have been off the gold standard since 1913, Bretton Woods being only a shadow of the classical gold standard." The two also discuss the fiscal profligacy of the US government. Alas, they conclude that every paper currency in history has eventually gone to zero (see earlier piece on Roman hyperinflation). James and Jim also talk about ZIRP and the absence of the bond vigilantes after over 30 years of bull market in bonds. How traders no longer care about fundamentals, like balance sheets, but rather focus on very short time horizons and the spreads between funding costs and yields. How this situation is unsustainable. They see gold still as a very under-owned, misunderstood and marginal asset still shunned by institutional investors, with a few notable exceptions which indicate that the tide could be turning. They see a gold standard in the future, although timing is always uncertain. At the end they talk about the history of US post civil war specie resumption and parallels to a return to the gold standard in the future. 

 

 

 

 

In Preparation Of The Fed's Last Doubling Down: David Rosenberg Believes QE3 Will Be Nothing Short Of "Operation Twist 2" 

It is no secret that to a deflationist like David Rosenberg bond yields have to go lower... Much lower. With the 10 Year flirting with a 2 handle one would think he would be content. Alas no. In fact, as he suggests in his piece from today, Rosie is convinced that the next iteration of QE will be nothing short of a redux of the 1961 initiative to kill the then gold exodus known as "Operation Twist" (recently dissected by the San Fran Fed). Incidentally it was the same Fed that compared QE2 to Operation Twist. It is only logical that Rosie would then suggest that QE3 would be nothing short of a complete clearing of the 10 Year bond in the market via the Fed in order to anchor expectations that the 10 Year rate would never go up (or reasonably "never") in the biggest gamble of all: that the Fed will attempt to both control its balance sheet and target Long-Term interest rates, a mission doomed to fail...But not like that will prevent the Fed from setting off on such a mission, especially following today's official confirmation of the Housing Double Dip (someone page Jim Cramer). As Rosie says: "Now it is doubtful that the Fed would ever target the long bond. In fact, the Fed may even want it to be higher in yield to ease the pressure on radically underfunded pension funds. While the Fed can either target its balance sheet, which it has been doing with these QE measures, or target interest rates, it cannot do both at the same time. So the next 'QE' will not be called 'QE' but rather something else — maybe Operation Twist 2 (OT2 — you heard it here first). The Fed would buy up all the 10-year notes needed to clear the market at the target "price" (yield). So depending on supply conditions and demand from the private sector, the Fed would basically lose control of its balance sheet, but if in return this policy is the one that blazes the trail for a turnaround in the housing sector and a durable revival in the economy, so be it." And keeping in mind that the true unspoken reason for Operation Twist 1 was to terminate the outflow of gold from the US to foreign bank vaults, we find ourselves agreeing with Rosie that an insane idea such as OT2 is precisely what the Fed would do to avoid a recurrence of the 1961 gold exodus (and attempt to give housing one last failed boost). As many birds would be killed with one stone, the only downside, that of a complete balance sheet implosion following OT2, certainly seems quite acceptable to a central bank now officially run by sociopaths.

Oil Is Now Leaking In Sea Near Fukushima 

Submitted by Tyler Durden on 05/31/2011 12:53 -0400

Just because mega-radioactive water leakage was not enough. From Xinhua: "Operator of the troubled Fukushima No. 1 nuclear power plant found that oil has been leaking into the sea close to the facility, the Kyodo News reported Tuesday. The operator Tokyo Electric Power Co. (TEPCO) said the oil leaks were possibly from nearby oil tanks that may have been damaged in the March earthquake and tsunami, and it would set up oil fences to prevent the liquid from pouring into the Pacific Ocean." Oh, but they only discovered this now? Odd how it took nearly 3 months for those oil tanks to rupture and start spilling into the water. So in other words, not only is Godzilla coming, he will be more greased up than the Situation.

 

 

 

 

 

 

Dollar And Yen Fall - Moody’s Warns Of Japan Downgrade & UN Warns of Risk Of “Collapse” Of Dollar 

Submitted by Tyler Durden on 05/31/2011 07:01 -0400

The euro climbed to a three-week high versus the dollar on speculation Germany and other European nations may pledge more funds to bankrupt Greece and favourable German economic data. This is more a reflection of dollar weakness rather than any great confidence in the euro. The euro at €1,068/oz remains under pressure versus gold and is less than 2% from record nominal highs at €1,088/oz. While the focus, has of late, been on the increasingly ‘unsingle’ single currency, news overnight shows how there are also substantial risks posed to the yen. Moody’s have warned that they may have to downgrade Japan and have warned of a “tipping point” which may lead to a government funding crisis for heavily indebted Japan. The United Nations warned on Wednesday of a possible crisis of confidence in, and even a "collapse" of, the U.S. dollar if its value against other currencies continued to decline. The UN’s mid-year review of the world economy did not get covered widely. The UN economic division said that a crisis of confidence in the dollar, stemming from the falling value of foreign dollar holdings, would imperil the global financial system. This trend, it said, had recently been driven in part by interest rate differentials between the U.S. and other major economies (see table above) and growing concern about the sustainability of the U.S. public debt, half of which is held by foreigners including the Chinese government. 

 

 

 

 

More "Change You Can Believe In"...

Time To Celebrate The Recovery: Food Stamp Usage Hits Fresh Record 

That average monthly benefit of $133.24 for 44.199 million people will help with the purchase of one third of a very edible iPad. Food stamp participation chart presented without further commentary. 

 

 

 

 

 

 

April Japanese Car Exports Collapse, Down 68% 

Concurrent with last night's Moody's reminder that it is about to downgrade the Japanese economy, which we have long been claiming is the marginal global economic wildcard, we get an exportindustry update from the Japan Automobile Manufacturers Association. In short: April car exports were an unprecedented disaster, with the average exporter seeing a 68% drop Y/Y, with some, such as Toyota plunging from 150,118 to only 31,025 cars in April 2011. And while this would be the ideal environment for US carmakers to grab market share, the fact that many are missing critial Made in Japan components in their supply chain means that there is a broad based supply drop. Which is why tomorrow's update of GM's recent channel stuffing practice will be observed with such interest: if the firm reports yet another increase in the cars parked with dealers, then something in the US carmaking space is seriously wrong two months after this Japanese car export free fall. 

 

 

 

 

 

Citi On The "Disastrous" USD Implications From A Debt Ceiling Breach 

Submitted by Tyler Durden on 05/31/2011 07:53 -0400

Much has been speculated about what the possible impact on the fixed income market may be if the debt ceiling is breached. Few, however, have wondered about the impact of what the lack of a debt ceiling resolution would be on a market that one could argue is even more important: FX. Citi's chief currency strategist Stephen Englander takes a preliminary look at the implications of what this would look like. Englander admits that "a breach of the credit ceiling is priced in neither fixed income nor FX markets to any significant degree now", and proceeds to speculated that it is foreign exposure (recall that China has over $4 trillion in foreign financial assets) that would be most impacted by such an adverse development. To wit: "Our expectation is that the FX reaction to a debt ceiling breach would be sharper and probably more permanent that the FI reaction, because unhedged foreign investors will see another layer of risk that can not be 'fixed' in the way that cash flows from Treasuries can. The FX market reaction may not be catastrophic, given the limit to the fixed income damage that is likely to be permitted to emerge, but it would legitimately tax foreign investor patience and lead to further USD dumping whenever the opportunity arises." Bottom line: the race to the garbage bottom between the USD, EUR and JPY continues in earnest, with nobody yet a solid favorite to win, er, lose first.

Record Chinese Drought Leads To "Crazy" Food Prices 

Submitted by Tyler Durden on 05/31/2011 08:13 -0400

The PBoC may be guilty of many things, but manipulating the weather is not one of them. Yet it is precisely this that is causing the latest surge in various food prices in the mainland, and which will likely force the Chinese central bank to accelerate its tightening regime even more than before. For once the weather can be blamed, only this time, due to an already redhot inflationary indicator, it will have a far broader impact on both domestic and global monetary policy. China Daily reports: "The impacts of China's worst drought in 50 years have been served up on the nation's dining tables as the price of rice and vegetables from drought-hit provinces have skyrocketed. The average price of staple foods in 50 cities has increased significantly, and the price of some leaf vegetables has jumped 16 percent in one month, according to data from the National Bureau of Statistics....I didn't buy many leaf vegetables in the last week because the price is getting crazy," said Zhang Weirong, a 67-year-old Shanghai resident." We wish the PBoC the best of luck as it now has to use its futile monetary instruments to neutralize the lack of rain. With the Dragon Boat Festival hoiday between June 4 and 6, we now expect another interest rate hike to be announced in less than a week, in keeping with the central bank's practice of intervening monetarily during major domestic and international holidays.

Debt Ceiling Tragicomedy Resumes: On Today's Symbolic, And Doomed, $2.4 Trillion Debt Ceiling Vote 

Submitted by Tyler Durden on 05/31/2011 08:31 -0400

Today at 7:00 pm the House will hold a very symbolic vote on a $2.4 trillion debt ceiling increase. Symbolic because it is doomed from the beginning as every single republican will vote no. So why is it held? Supposedly it is to rekindle popular interest in the debt ceiling drama following several weeks of commercial interruptions (i.e., heavy lobbying), and to remind the public that America is still a "democracy." Below is Goldman's Alec Phillips with more: 

 

 

 

 

 

Irate Germany Summons Iranian Ambassador After Angela Merkel Plane Denied Access Over Iran Airspace For Two Hours 

It appears that even a Stuxnet-crippled Iran can strike back. As the WSJ reports, "Germany summoned the Iranian ambassador in Berlin Tuesday after Iran temporarily blocked a plane carrying German Chancellor Angela Merkel from entering its airspace" in what has the making of a major diplomatic scandal. Merkel, along with a large German delegation was en route to India for an official visit, and had expected to get an uncontested green light to fly in Tehran-controlled skies, when the permission was granted... for over two hours. NDTV has more: "In an incident that could have serious diplomatic consequences, Iran temporarily refused to allow German Chancellor Angela Merkel's plane to enter its airspace on Tuesday. The plane reportedly had to circle over Turkey for two hours before being given permission to enter. The government aircraft was denied overflight rights in the early hours of Tuesday. The exact reason for the denial of overflight rights is unclear. But before the plane left Berlin on Monday evening, it was reportedly given permission by Iranian authorities. Germany along with the US and its other allies in NATO has long been at loggerheads with Iran essentially over its nuclear arms policy and alleged support to terror." Who could have possibly conceived that a country ostracized by the global community can possibly strike back. All we can say is that Air Force One better fly the friendly skies when it travels over the Middle East going forward or else it may be forced to discover just how efficient its flare and chaff Electronic Counter Measures truly are...

Case Shiller Prolapse Hits New Lows As 20 City Composite Plunges Again, Below Consensus Of -0.2%, "New Recession Low" Plumbed 

Submitted by Tyler Durden on 05/31/2011 09:11 -0400

Despite Goldman's expectations of a +0.1% sequential move, and the broader economic lemming consensus of a modest -0.2% drop, the just released March Case Shiller housing data confirmed there is no end in sight for the housing double (or triple, or quadruple, or who cares: take out the Fed's $2.7 trillion and housing really has been in a non-stop plunge for 3 years now), missing expectations and printing at -0.23%. In addition the February data was revised even lower from -0.18% to -0.25% (expect failed career economists at Goldman and elsewhere to disclose this as a huge positive as it is really an increase). The Composite 20 dropped -3.61% on expectations of -3.4%. The press release says it all: "This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels." Cue QE3, 4, and so forth through QE 666, at which point we may see in uptick in worthless Bernankebux. And as we predicted earlier, bizarro day, with futures about to hit 3 year highs, now reigns supreme.

The Tide Turns: SAC Gets Redemption Request From Major Investor 

Submitted by Tyler Durden on 05/31/2011 09:27 -0400

The days of SAC's 3 and 50 fee structure appear to be rapidly coming to a close (as well as possibly the front doors to 72 Cummings Point road). In what is certainly a harbinger of capital flows from (instead of to for the first time in decades) the legendary and now infamous hedge fund, Institution Investor reports that "at least one well known investor in hedge funds has confirmed that he has requested to redeem his investment in SAC in light of recent reports of probes into the Greenwich, Connecticut-based firm. The investor, who requested anonymity, does emphasize that SAC “has the number one compliance department in the industry.” Nonetheless, recent reports swirling around the firm have led him to request to pull out his clients’ money. “We don’t want to be fickle,” says the manager. “We hate doing this. But, the government seems so intent now in getting them and there are additional SAC-related characters tainted. Some dealt with the same stocks at SAC." And so the expert network insider trading ring, first exposed by Zero Hedge nearly 2 years ago (on Part 1, Part 2 and Part 3) may claim its biggest victim, even in the absence of any criminal or civil charges against company executives: the last thing FOFs and LPs hate is uncertainty, and there is nothing like headline uncertainty that today, in one week, or one year, their capital may be permanently frozen courtesy of a few men in gray suits and a search warrant, which not even the best paid Gerson Lehrman consultant could have foreseen.

Chicago PMI Plummets From 67.6 To 56.6, Biggest Monthly Drop Since Lehman Bankruptcy 

The May Chicago PMI is out and contrary to the herd of clueless Wall Street idiots, better known in polite circles as economists, it came at 56.6 on expectations of 62.0, a collapse drop from the 67.6 before. This is the worst monthly drop since the economy imploded back in October 2008, and the second largest two month drop since 1980! A quick look at the New Orders index indicates it was the lowest since September 2009. But the good news: the economy is still in expansion... for about 1 more month.  The release says it all: "NEW ORDERS and PRODUCTION posted their largest declines in several years...but remained positive" and "INVENTORIES accelerated buildup" - thank god for artificial economic expansion. And from the respondents: "Fuel cost are going to have a major impact on business activity in a negative way that will slow recovery to a crawl." Uh, what recovery? Just you wait until QE3 is announced in 3 months. And elsewhere, the May consumer confidence completed the trifecta of bad news, coming at 60.8 on expectations of 65.4, and down from 66.6.

Remember That Greek Bailout Rumor... 

Submitted by Tyler Durden on 05/31/2011 10:20 -0400

GERMAN FDP PARLIAMENT MEMBER SCHAEFFLER TELLS PAPER GREECE SHOULD LEAVE EURO ZONE (RTRS)
Next time, our advice: get confirmation

 

Germany Humiliates Itself By Conceding To A Second Greek Bailout, EUR Predictably Jumps Briefly 

Submitted by Tyler Durden on 05/30/2011 20:17 -0400

Like clockwork, hours before the US market reopens, we get another Greece bailout. Since last week's Chinese white knight "rescue" of Portugal helped the EUR for about 18 hours, it is now time to get the biggest guns possible out: the WSJ reports that Germany, contrary to populist demand which has indicated that another German bailout of Greece would mean the end of Angela Merkel, has decided to allow Greek bailout round two to proceed. Per the WSJ: "Germany is considering dropping its push for an early rescheduling of Greek bonds in order to facilitate a new package of aid loans for Greece, according to people familiar with the matter.Berlin's concession that it must lend Greece more money, even without burden-sharing by bondholders in the short term, would help Europe overcome its impasse over Greece's funding needs before the indebted country runs out of cash in mid-July." The end result: the EURUSD surged by 70 pips from the closing print of 1.4270 to a high of 1.4350, although the half life of even that innuendo appears to have peaked and the pair is now on the way down, as it does absolutely nothing, except to destroy any credibility Merkel may have had, to resolve the impasse which is that, well, Greece is bankrupt.

Futures Surge On Greek Bailout Report 

Submitted by Tyler Durden on 05/30/2011 20:43 -0400

Following the previously reported news that Germany is sacrificing its political leadership to bailout its banks, futures are currently ripping. As the chart below indicates, ES is surging right now, even as the broader risk basket is left far behind, since the markt realizes the "Brian Sack" pod at Citadel will be double taxpayers doubletime. 

 

 

 

 

Qaddafi's Army Suffers Mass Exodus

 

USPS warns of default on retiree benefits.

 

 

 

US Consumers in Spending Retreat



20 Questions to Ask Anyone Foolish Enough to Believe the Economic Crisis is Over



Second Biggest Weekly Drop Ever in Treasurys Held in the Fed's Custodial Account as Foreigners Dump



Why Gold is Going Higher 




 

Mark Mobius Echoes Carl Icahn: "There Is Definitely Going To Be Another Financial Crisis" 

In an almost verbatim repeat of Carl Icahn's words of caution which we noted yesterday, Templeton's legendary chairman Mark Mobius said that "another financial crisis is inevitable because the causes of the previous one haven’t been resolved" during a luncheon (menu included herb crusted chicken breast with cheese and tomato sauce, mashed potato and green vegetables, seasonal salad) at the Foreign Correspondents’ Club of Japan in Tokyo. Bloomberg reports: "There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan in Tokyo today in response to a question about price swings. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes." Unlike Icahn, Mobius stopped short of calling for a return to Glass-Stegall and a repeal of the abominable Gramm-Leach-Bliley which unleashed the era of zero margin derivatives and financial system neutron bombs. On the other hand, it is nice of Messrs Icahn and Mobius to speak up now, two years after the ongoing systemic instability transferred $3.5 trillion in capital from current and future taxpayer generations to the present financial elite. We do, however, forgive them because in their better late than never contrition, they join the likes of Zero Hedge who since January of 2009 have warned, over and over, that nothing in the structure of capital markets has changed, and that the market could any day open not only bidless, but broken beyond even Brian Sack-ian band aid repair.

In Violation Of UN Resolution, Western "Boots" Are Now On The Libyan Ground 

Submitted by Tyler Durden on 05/30/2011 17:29 -0400

In a TV slip caught by Al Jazeera, yet another Zero Hedge prediction has been confirmed: namely that it was only a matter of time before NATO "boots on the ground" would promptly replace the CIA's "sandals on the ground" in a fully Western-backed land invastion of Libya. Since it is too early to predict the nationality of the armed invaders, we will assume they are British as Al Jazeera speculates, because otherwise Congress is about to find itself in an unprecedented scandal for completely ignoring its duty to impose the War Powers Act, which in turn would mean that the President now has a unilateral right to enforce the invasion of any country he so chooses. We will leave the bitter implications of what this could mean, as America celebrates, and remembers the lives of so many who died for this once great country, to others. 

 

 

EU Debt Contamination Deepens In Greece, Portugal And Ireland - Gold Just 2% From Record Nominal High 

Submitted by Tyler Durden on 05/30/2011 08:00 -0400

Gold and silver are flat in US dollars but higher in euros this morning. Trade is thin with the UK and US markets closed for spring holidays. Gold and silver were 1.75% and 8% higher last week and the precious metals and especially gold appear to be on solid footing due to the continuing debt crisis in Europe and concerns about a slowdown in the US and global economy. Despite gold being only some 2% away from the record nominal highs seen at the end of April ($1,563.70/oz), sentiment remains lackluster at best with little or no coverage of gold in the international financial press and media over the weekend. In the last two weeks we have experienced a lot of sell orders and the ratio of sell to buy orders has been the highest since our foundation in 2003. Value buyers emerged last week but much of the buying was by existing clients adding to their holdings. The threat of sovereign default and contagion increases by the day. 

 

 

 

 

EU Holds Unannounced Emergency Talks With Greece Over Weekend To Draft Second Bailout As Two Year Greek Bonds Pass 26% 

Submitted by Tyler Durden on 05/30/2011 08:35 -0400

Another weekend, another secret, and failed, meeting between the EU and Greece to find a bailout solution that simply does not exist. Reuters reports that while America was out camping, barbecuing and all around vacationing, the European Union was feverishly working on a second bailout package, holding another round of emergency talks with the Greek government, to prevent a June 29 default by Greece when money runs out. Alas, it is now too late: with austerity protests now a daily event, the political opposition has the upper hand and it seems that Greece's conservative opposition has demanded lower taxes as a condition for reaching a political consensus with the Socialist government on further austerity measures, a move which Brussels would not agree to, since unlike in America, cutting revenues does not lead to an reduction in the deficit, and anyone with a 2nd grader's education is aware of it. Punctuating that Europe's idealist unitary vision is about to be torn to shreds, even as the US and UK are out for the day, is the Greek 10-year Bund spread which rose by 20 basis points to 1,387 while two-year yields were up 58 bps to 26.23%. 

 

 

 

 

 

China SAFE Reports Monetary Gold Holdings Increased By $11 Billion, Or 30%, In 2010, As Gross Foreign Financial Assets Pass $4 Trillion 

Submitted by Tyler Durden on 05/30/2011 09:09 -0400

China's State Administration of Foreign Exchange (SAFE) has released its breakdown of 2010 international investments. In summary: financial assets abroad rose 19% last year to $4.126 trillion from $3.457 trillion. That includes the country's $2.914 trillion of foreign reserves at the end of 2010 as well as other assets such as direct investments, securities, and gold. As for gold, it increased by $11 billion from $37.1 billion to $48.1 billion, or a 29.6% increase (it is unclear if this number is at a fixed gold price or accounts for MTM). On the liabilities side, which increased from $1.946 trillion to $2.335 trillion, the biggest change was as a result of a surge in Foreign Direct Investment into China which increased by $162 billion to $1.476 trillion. Netting liabilities against assets leads to a net position of $1.79 trillion in external net assets.

CIA Warns Of A Greek Military Coup, Rebellion, If Austerity Intensifies 

Submitted by Tyler Durden on 05/30/2011 10:30 -0400

Turkish daily Hurriyet, which paraphrases German Bild, which in turn references a CIA report, warns that Greece could face a military coup if the "tough austerity measures and the dire situation" escalate any further. On the other hand, one can avoid this belabored hypertextual chain and simply look at what happens practically every day on Syntagma square where yet again we are witnessing record numbers of people protest against what everyone now realizes is a dead end regime (luckily, in a peaceful manner, for now). More Captain Obviousness (thank you Grant Williams) from Hurriyet: "According to the CIA report, ongoing street protests in crisis-hit Greece could turn into escalated violence and a rebellion and the Greek government could lose control, said Bild. The newspaper said the CIA report talks of a possible military coup if the situation becomes more serious and uncontrolled." Luckily, following last year's Athens mob-inspired flash crash, and 2011's MENA revolutions, the market is rather desensitized to this sort of thing, and nothing short of fat-finger driven invasion of Greece by Turkey, in its humanitarian bid to reestablish the Ottoman Empire 2.0, could dent the /ES or EURUSD by more than 0.01%.

Following Milan Election Loss, Failed Berlusconi "Referendum" Sets Stage For Early Italy Elections 

Submitted by Tyler Durden on 05/30/2011 12:51 -0400

Following electoral upheavals in Portugal, Germany and Finland, it is time to add Italy to the list, after Silvio Berlusconi's center-right coalition appears to have lost the critical election in Italy's financial capital, Milan, which also happens to be the center of the Bunga Bunga man's business and media empire. And while the mayoral election is merely symbolic for now, its outcome has substantial consequences for Italian governance (and thus stability): "With most votes already counted, leftist Giuliano Pisapia was set to capture Milan city hall with some 55 percent of the vote against around 46 percent for outgoing center-right mayor Letizia Moratti. The local elections were seen as a referendum on the billionaire prime minister. "This is the first defeat for Berlusconi's center-right coalition since they came back to power, and it sends a clear signal of voters' disillusionment," said Maurizio Pessato of pollsters SWG. "These results make early elections more likely, possibly next year, and I don't see any chance of meaningful economic reforms being implemented by a lame duck government." As is by now known, while Spain has recently reentered the bond vigilante's scope after its bonds have continued to traded near record highs, Italy has so far been spared. That will change soon: "Italy is the only euro zone economy in which, taking account of inflation, citizens are poorer on average than they were 10 years ago. Berlusconi's government last month cut its growth forecast for this year to 1.1 percent from 1.3 percent and cut next year's outlook to 1.3 percent from 2.0 percent. S&P's lowered its credit outlook on Italy this month due to its weak growth and failure to adopt reforms, although worries of an immediate impact on the markets eased after the Treasury sold long-term bonds near the top of its target range Monday." Will this be the catalyst that is seen as "change" to the status quo by enough bond holders that Italy becomes that last peripheral European domino to fall?

Four Catalysts Needed For The Industrial Commodities Rally To Resume 

The recent sluggishness in equity markets has certainly affected industrial commodities over the past few months, if not gold, which as pointed out earlier is just 2% below its nominal highs and rising despite the 4th margin hike on the Shanghai Gold Exchange overnight - once again gold is seen at the apex of the fiat currency replacement pyramid. So what could cause a rally in industrial commodities in the near term? Sean Corrigan lists the four key catalysts, whose occurrence listed in order of probability, could rekindle the recently faltering rally. 

 

 

 

 

 

Same Time, Same Channel, Same Protest: Live Feed From Downtown Athens 

It seems like it was just yesterday (and the day before, and the day before that) that we linked to the live feed from Athens' Syntagma square. Oh yes it was. Having narrowly avoided the midday sun, another balmy evening sees the exodus of tens of thousands of Greeks to the front patio of the parliament, where they will now chant in protest of a minimum retirement age of 58 for a few hours, go back to work tomorrow, then repeat the whole spectacle all over again. And while not so desperate Atheneian housewives bang on pots and pans, the Santorini-for-Ibiza-for-confetti asset swap is currently being finalized. 

 

 

 

 

 

Despite Preemptive Gold Margin Hike In Shanghai, Gold Is Poised To Close May Near Record On Sovereign Risk Worries 

Submitted by Tyler Durden on 05/30/2011 15:50 -0400

After a near epic margin driven collapse in silver, which appears to have been largely forgotten as the metal has resumed it upward climb, it is gold which has once again regained the crown in the fiat substitute race. As Reuters reports: "The speculators are coming back, mainly driven by the European debt crisis," said a Singapore-based trader. "Gold is likely to slowly move up during the summer unless we see big headlines, such as the U.S. raising interest rates earlier than expected." Of course, where some see "speculators" others see rational investors who are already discounting the inevitable next step by the central planner cartel, which forced to deal with a slowing economy will have no choice but to inflate the global adjusted monetary base (and dilute outstanding fiat) by another several hundred billion. Elsewhere, in preparation for another gold breakout, the Shanghai Gold Exchange hiked gold and silver margins once again, this time preemptively. "The Shanghai Gold Exchange said on Monday it will raise margin requirements on gold forward contracts to 12 percent from 10 percent from the June 2 settlement, a move to help ward off excessive volatility in global markets during the Dragon Boat Festival holiday on June 6. The bourse will also hike silver forward contracts to 17 percent from 15 percent. It will also set gold daily trade limits to 9 percent and silver at 12 percent from June 3." Still, the gold fixing at the close of NYMEX trading was $1,539.1, $30 away from all time nominal highs. Incidentally, would it be too much to ask of the exchanges to provide the general public with just what the formula is that they use to make their margin hike (and, reduction) decisions? They would be amazed how quickly any allegations of collusion with the administration would disappear if only a little transparency was introduced to the "system."

Got Gold And Silver??? 

 

Jim Sinclair’s Commentary

Any way they can get it. The more gold mining entities the Chinese own, the less gold that will come to market.


China National Gold Seeks Africa Investment as Bullion Trades Near Record By Bloomberg News – May 29, 2011 8:02 PM MT
China National Gold Group Corp., the state-owned company that controls the nation’s largest gold deposits, wants to invest in projects in Africa as it expects bullion to trade near record levels for the next three years.
“We aim at large-scale mines with good potential in countries that have close ties with China and domestic stability,” President Sun Zhaoxue, 48, said in an interview in Shanghai. “Gold prices will foreseeably fluctuate at historically high levels for another three years.”
Gold jumped to a record $1,577.57 an ounce this month, helping make this year among the busiest for gold deals since 2006. Citic Group, China’s biggest state-owned investment company, and partners agreed this month to buy Gold One International Ltd. for about A$444 million ($469 million) to gain assets in South Africa.
The value of announced gold deals so far this year stands at $16.8 billion, more than the totals for the entire year in 2009 and 2008, according to data compiled by Bloomberg.
China National, owner of the Yangshan deposit in Gansu province, may also invest in Southeast Asia and Central Asia, Sun said. It currently doesn’t operate any mines outside China.
The company is also reviving mines that were uneconomical in China’s western provinces as record prices make it profitable to mine them, Sun said, adding that it’s also increasingly exploiting lower grade deposits near existing mines because of higher prices.
More…

Chinese USD Diversification Continues: First Euro Bonds, Now JGBs 

Submitted by Tyler Durden on 05/29/2011 21:19 -0400

Even as the peanut gallery debates whether or not the dollar is the reserve currency of choice for the world, China continues to diversify away from the USD. After last week's news that Beijing had not had enough of Portuguese bonds, in a repeat of the same scenario from January 2011, and was preparing to bid up Eurozone bonds across the curve (aka double down) we now learn that China, or rather third-party London-domiciled banks doing its bidding, is now the actor behind "massive Japanese bond buying" seen over the past month. Per Reuters: "Foreign investors have flocked to Japanese government bonds in the past five weeks, finance ministry data shows and market sources say China was among the main buyers, although a large part of buying was made through banks in London." That said, even Reuters appears unable to get its story straight: "Foreigners bought a net 4.696 trillion yen ($57.7 billion) of Japanese bonds in the five weeks to May 20, a record amount of purchases for any five consecutive weeks since data began to be compiled in its current form in 2005. One source said China appears to be buying the four to five-year sector after having sold a large amount of short-term bills earlier in the month. But other sources said foreign investors, including China, were buying long-dated bonds with less than one year left to maturity, effectively the same as buying short-term bills." Wherever in the curve China is focusing, the fact that it continues to actively buy JGBs after 5 consecutive months of declines in its UST purchases (coupled with the news broken by Zero Hedge that Fed custodial accounts of foreign UST holdings suffered the largest one week drop in almost 4 years) is sending a very clear political message to the US. One that certainly got some airplay when the Treasury once again declined to brand China an FX manipulator, despite rhetoric out of very brave Geithner at the first possible opportunity this week, that China is precisely that.

Dear Readers,


I would like to Thank Timothy from Arkansas,  for making a Very Generous Donation.

The Greek "Ultimatum": Bailout (For The Bankers) And (Loss Of) Sovereignty 

Submitted by Tyler Durden on 05/29/2011 19:19 -0400

So after one year of beating around the bush, it is finally made clear that, as many were expecting all along, the ultimate goal of the Greek "bailouts" is nothing short of the state's (partial for now) annexation by Europe. According to an FT breaking news article, "European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens. People involved in the talks said the package would also include incentives for private holders of Greek debt voluntarily to extend Athens’ repayment schedule, as well as another round of austerity measures." Thus Greece is faced with the banker win-win choice, of not only abandoning sovereignty, a first in modern "democratic" history, in the pursuit of "Greek" policies that are beneficial for Europe, or not get a bailout, which would only serve to prevent senior bondholder impairments. How could Greek leaders and its population possibly not accept such an attractive option which either leaves the country as another Olli Rehn protectorate, or forces it to not bailout Europe's overleveraged banker class. In essence Europe is now convinced, just like Hank Paulson was on September 14, 2008, that the downstream effects from letting Greece implode are manageable. But the key development is that the Greek bankruptcy, which from the beginning, and as Peter Tchir's note below demonstrates, was always simply a Greek choice, was just made that much easier.

Price Controls Are Historically Disastrous

May 29, 2011, at 11:41 am
by Jim Sinclair

Dear CIGAs,

Price controls historically are a disaster being discussed among adults

This is nonsense beyond stupidity.

Controls are artificial, meaning they have never worked in economic history as a method of trying to correct price problems caused by the planners themselves.

The dislocation that will be cause scarcities will wreak havoc on industrial and private consumers.

The plotters that got us into this problem could do anything, but like every exercise of controls in history, the economic dislocation caused by sophomoric attempts at price controls is biblical.

Anyone ever positively discussing this is a world class idiot.

Brazil, Argentina oppose commodity price control Updated Sunday, February 13, 2011 11:00 pm TWN, AFP
SAO PAULO — Brazil and Argentina came out Friday against a French proposal to be put to the G-20 to regulate commodity prices whose recent rises are blamed for a spike in food costs.
“We have similar positions” on that and other issues, Brazilian Finance Minister Guido Mantega said in a joint media conference with his Argentine counterpart, Amado Boudou, in Sao Paulo.
“If there’s one thing that has to be done, it’s encourage growth and production and not hinder it,” he said.
Boudou said the two countries, both major commodity exporters, would present the united front in a G-20 finance meeting in Paris next Friday and Saturday.
France has said it plans to use its chair of the G-20 group of big developed and developing nations to push for commodity price regulation in a bid to block what it saw a speculation in the market of food crops such as grain and cereals.
More…

In The News Today

May 29, 2011, at 11:36 am
by Jim Sinclair

Dear CIGAs,
Do you have your gold investment position intact... and free from the harm of the gold price top callers?
(ED note...to this I'll add Silver).






Jim Sinclair’s Commentary

When will they ever learn? They use a weapon of mass financial destruction, a credit default swap (CDS) OTC derivative, to rate creditworthiness.
This is madness!

Goldman Is Now A Bigger Credit Risk Than Citigroup

Jim’s Mailbox

May 29, 2011, at 11:34 am
by Jim Sinclair in the category Jim's Mailbox |  Print This Post |  Email This Post

Dear LT,
The G20 has been talking of price controls. This only leads to scarcity. These idiots have not read any economic history. They must want to starve people to death or manipulate markets in the face of QE to infinity!
Best,
CIGA BT
BT,
Price controls cannot work, even in the short term control sense, in a global market.
Jim


S. Korea to join G20 commodity price control scheme
SEOUL, Feb. 23 (Yonhap) — South Korea will actively participate in the Group of 20′s efforts to control sharp price hikes in key commodities that have a direct bearing on economic growth and inflation, the government said Wednesday.
The finance ministry said playing a role in the G20 arrangement could allow Seoul to work with other countries to better cope with a rise in energy, grain and other commodity prices caused by supply and demand imbalances, and competition to secure adequate reserves.
More…

Europe Goes From Worse To Horrible: Ireland Broker Than Expected, Greece Mulls Splitting Up Into "Good" And "Bad" Greece 

Submitted by Tyler Durden on 05/29/2011 11:41 -0400

Greece hasn't even filed for bankruptcy yet and the "unexpected" consequences are already coming. In comments to The Sunday Times newspaper, Irish Transport Minister Leo Varadkar said the country will likely need another "unexpected" loan from the troica, after he became the first cabinet member to cast doubt in public on Ireland's ability to raise cash. In other words once on the temporary bailout wagon, always on the temporary bailout gain. Reuters reports: "I think it's very unlikely we'll be able to go back next year. I think it might take a bit longer ... 2013 might be possible but who knows?" Varadkar was quoted as saying. "It would mean a second program (of loans from the EU/IMF)," he said. "Either an extension of the existing program or a second program. I think that would generally be most people's view." We wonder how German taxpayers will fell now that they realize they have not one, not two, but three (and soon 5 or more) heroin addicts they need to clean, wash, scrub, and feed on a monthly basis (with their, and US money, but Americans continue to not care that the biggest source of capital for the IMF is them). And speaking of ground zero, Greece is now scrambling after the Independent said that even Sarkozy is now prepared to let the Greek chips falls where they may. Following earlier news that the troika believes that the privatization plan it itself set up is not ambitious enough, Greece which now realizes that Germany, the EU, IMF, and Franch all are prepared to let it go, the country is now coming up with last ditch ideas faster than a speeding bullet: according to Reuters: "A Greek paper reported on Sunday that the government was considering setting up a Spanish-style "bad bank" to clean up its lenders' accounts from "toxic" Greek bonds and make them more attractive to potential buyers." Of course since it is toxic Greek sovereign bonds we are talking about, this implies that the country will somehow be split into a "good" and "bad" version of itself. And who thought financial innovation only comes out of the US.

100,000 Protesting In Athens Right Now 

Submitted by Tyler Durden on 05/29/2011 16:33 -0400

The first confirmation of protests expected to sweep across Europe tonight from Greece to Spain, France and Italy comes from Syntagma square where up to 100,000 people are protesting at this moment. Ekathimerini reports: "Greeks inspired by the Spanish “Indignant” or “Indignados” movement held their largest protest so far in Athens on Sunday, which some estimates put as high as 100,000 people, although a more accurate assesment seemed to be that those taking part exceeded 30,000. No official figure was given for the number of people packing into Syntagma Square in front of Parliament but it was clear that the protest was by far the largest since the movement began on Wednesday." For now the Greek protest is peaceful, but with the US on vacation, and the EURUSD about to be very volatile, we urge readers to follow the real time update at the following live webcast. 

Three Trillion Dollars Later: Charting A Recovery Only Failed Fiscal And Monetary Policy Can Buy 

Submitted by Tyler Durden on 05/29/2011 14:43 -0400

Another indicator of what the US "recovery" looks like come courtesy of the Chicago Fed National Activity Index. As can be seen in the chart below, one can only wonder just what recovery the US would have if it did not spend $3 trillion to kickstart the virtuous (or better make that virtual) economic cycle when it did. And by the looks of facts (and not Tim Geithner spin), the downward inflection point has now arrived. Next up: another $1-1.5 trillion in monetary stimulus, although admittedly in a form that may be slightly different from the LSAPs we have all grown used to love and expect each and every day at 11:00 am EST.

Guest Post: Dollar Got Me Down: A Down Dollar Roadmap 

Submitted by Tyler Durden on 05/29/2011 14:33 -0400

All the talk about a dollar currency crisis is getting ahead of itself. Quoting Mises won’t make it happen overnight. It takes years, even decades for a reserve currency to dissipate. Instead of wholesale collapse, the most likely outcome is a steady decline in the dollar over an extended period of time. Of course there is a tail possibility of a collapse, and that is why hedges exist. But the high likelihood trend is persistent policy action to drive the dollar lower with respect the United States trading partners’ currencies, combined with a decline in the dollar’s use as a vehicle currency. This means serious dollar weakness for the next three years (or more), but not collapse. 

Carl Icahn Confesses That The "System Is Not Working Properly", Warns Of Another "Major Problem" Coming 

Submitted by Tyler Durden on 05/29/2011 13:54 -0400

Confirming our ongoing observations that the pursuit of leveraged beta is the only game in town ("Levered Beta Uber Alles: NYSE Borse Margin Debt Jumps To Three Year Highs, Investor Net Worth Remains At Record Lows") is this surprising confession by hedge fund titan Carl Icahn, who not only warns that the levels of leverage achieved in the current centrally planned regime is as bad as it ever was, and that some form of Glass-Steagall should return, but that, stated simply, the entire "system is not working properly." His warning, stated in a very politically correct fashion, is that "there could be another major problem" either next week, or next year. Which is not surprising: after all not only has anything changed, but the very same drivers of risk that nearly crashed capitalism in Q3 2008, are back and arguably stronger than ever. That the Fed is the last recourse mechanism preventing an all out systemic wipe out probably should not be a source of comfort to anyone. In the end, the Fed, as any other authoritarian institution promoting central planning, will always lose.

Brian Sack And The Robots Claim Another Market Neutral Victim As The Market Continues To Reward Only Failure 

Submitted by Tyler Durden on 05/29/2011 13:04 -0400

While it may not be Duquesne or Shumway or even Icahn, it is merely the latest in a string of hedge fund closures, in this case market neutral, thus without a long or short bias, that was just put ouf of business by the ongoing streak of market surreality courtesy of $5+ billion in daily average POMOs, and the complete dominance of momentum driven, algo sponsored and robot implemented market strategies. The pioneer James Advantage Market Neutral Fund is now closing. "We have some important news to pass along on the James Advantage Market Neutral Fund (JAMNX). We have decided to close the Fund before June 30, 2011. While it was one of the first Market Neutral mutual funds to come out in 1998, times have changed and the investment approach has not been accomplishing what we originally intended." Chalk one for robot assisted central planning. And confirming that the "market" no longer rewards "quality" companies and merely encourages failure (thank you Uncle Fed) are the latest observations from Barclays's Matt Rothman: "Despite the retrenchment last week, in quant land the euphoria gripping the market has manifested itself in a continuing struggle for High Quality companies. Our long/short Quality index last month turned in notable underperformance, returning -1.64%. As this index generally runs at approximately 1/3rd the volatility of broader market indices such as the SPX, this underperformance is eye-opening to us. We were hoping that earnings season and the ensuing news by just a few companies might have been responsible for the strong underperformance of Quality – that it was a few outlier stocks, a few big names that drove our index down. Unfortunately, this is not the case. Quality as style just failed...This is the second worst monthly stock picking performance for Quality since we launched our model in July 2007... To see large stable companies, with solid profit margins, strong balance sheets and repeatable earnings underperform in this manner month after month now is distressing." Someone please inform the Chairsatan that he has flipped the core premise of the stock market 180 degrees upside down...

Guest Post: Change In Corporate Profits Leads To Market Movements 

Submitted by Tyler Durden on 05/29/2011 12:25 -0400

Lately analysts have been stumbling all over themselves to raise estimates for earnings growth over the coming quarters based on recent earnings announcements by various companies. However, one of the things that should be paid attention to, besides rising input prices and weakening economic variables, is the Year Over Year Change (YOY %) in corporate profit margins...The evidence is mounting that corporate profits are under attack due to rising input costs through high commodity prices, weakening support from the consumer and an overall weakening state of manufacturing and employment completing the feedback loop into the domestic economy. While economists are still predicting just a slowdown in the economy before a reacceleration - my thoughts, as stated before, is that we will either see close to zero economic growth by the end of the summer or QE 3. 

 

Currency Devaluation in Belarus Causes a Run on Toilet Paper

In The News Today

May 28, 2011, at 7:39 pm
by Jim Sinclair

Jim Sinclair’s Commentary

Here is the rock and the hard place where in the writer thinks the hard place would be better and writes an anti QE article. What the writer does not realize is the biblical size of the inflationary depression that would result from not applying QE to infinity.

The rock is currency induced cost push inflation. Simply stated, we are screwed.

UN sees risk of crisis of confidence in U.S. dollar May 25, 2011 2:17 PM ET | Last Updated: May 26, 2011 8:15 AM ET
By Patrick Worsnip

UNITED NATIONS The United Nations warned on Wednesday of a possible crisis of confidence in, and even a collapse of, the U.S. dollar if its value against other currencies continued to decline.
In a mid-year review of the world economy, the UN economic division said such a development, stemming from the falling value of foreign dollar holdings, would imperil the global financial system.
The report, an update of the UN World Economic Situation and Prospects 2011 report first issued in December, noted that the dollar exchange rate against a basket of other key currencies had reached its lowest level since the 1970s.
This trend, it said, had recently been driven in part by interest rate differentials between the United States and other major economies and growing concern about the sustainability of the U.S. public debt, half of which is held by foreigners.
As a result, further (expected) losses of the book value of the vast foreign reserve holdings could trigger a crisis of confidence in the reserve currency, which would put the entire global financial system at risk, it said.
The 17-page report referred at another point to the still looming risk of a collapse of the United States dollar.
More…

S&P 400 - The Technical Case 

Submitted by Tyler Durden on 05/28/2011 17:15 -0400

While we have recently seen various fundamentally driven predictions for the S&P going back to its 1994 level of ~400 (most recently from Albert Edwards and Russell Napier), few charts predict a comparable major retracement in the key equity index. And while it is not quite a variant of the Kondratieff Wave chart familiar to most, this chart courtesy of Sean Corrigan shows the historical 33 year peak to trough frequency of the S&P, emphasizing the cyclical periodicity observed in market cycles. The chart predicts the next 33 year low to occur some time in late 2015, taking the S&P to the proverbial 400 level. As Corrigan observes: "A third, post-94 Bubble-era decline of -50% would unwind all of that move and half the log rise of the Great Bull Market (something the '49-'68 move did) and return to both the mid-1960's highs and Fib retrace the whole post - WWII move. Doing this by late 2015 would preserve the 33 year span."

King World News has weekly metals review and McEwen, Leeb interviews

In the weekly precious metals review at King World News, Bill Haynes of CMI Gold & Silver says retail buying eased off last week but futures market analyst Dan Norcini says big money flowed back into commodities. You can listen to their comments at King World News here:

» read more

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US Worse Off Financially than Euro Nations



Greece Denies Missing Fiscal Targets as Default Looms

Greece's hopes of averting default dimmed on Saturday as fears grew the country may have missed fiscal targets set by its lenders while euro zone policymakers bickered on how to respond.

The Political Doctrine of Statism  by  Lew Rockwell



Mirror, Mirror on the Wall, When is the Next AIG to Fall? - Marc Faber