Thursday, May 13, 2010

McAlvany Weekly Commentary, May 12, 2010

The Trouble with Trillions: ECB Monetization and the European Bank Bailouts.

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Big List of 14 American Debts/Losses/Shortfalls

Warning: Bears taking over. Time to short Buffett's new "Baby Berkshires," short Goldman, short Moody's and other favorites of Uncle Warren.

Why? Behind the fa├žade, the lovable, good ol' Uncle Warren strumming his cute little ukulele, ostensibly supporting reform, there's a dark force that's part of the toxic Goldman Conspiracy fighting to keep alive everything that's wrong with Wall Street, everything that got us into this mess, everything that will trigger another meltdown that even Uncle Warren says: "I can guarantee it."

Buffett belongs to the past while the news screams of a new world order ... Riots in Greece, more coming when the other PIIGS demand EU bailouts ... conservatives regain Britain ... unregulated BP's greed is spilling millions of gallons of oil destroying Gulf states, confirming Foreign Policy magazine warning of the "End of the Age of Oil" ... the Dow's techno-fear-driven irrational 1,000-point plunge as technicians turn bearish, ending the year-long bull rally ... even Hank Paulson's changing his tune, warning the Financial Crisis Commission that we need stronger reforms than Dobb's Senate bill. (more)

Transocean (NYSE:RIG) – Don’t Throw the RIG Out with the Bathwater


Transocean (NYSE:RIG) shares hit $65 last week, and I think that’s a near-term bottom. Yes, there’s a lot of finger-pointing at Transocean, mostly by people who are immensely ignorant of how the drilling business works. Or they have a vested interest in shifting the blame.

At the end of the day, BP hired Transocean to drill a well that BP designed. If Transocean followed the specs, you can’t pin the donkey-tail on these guys. The worst anyone can say – and they’re saying it – is that Transocean had a bad blowout preventer (BOP) that didn’t function. (more)

Gold & Silver: The Only Game in Town 2010-2011


There are numerous reasons both fundamental and technical as to why the precious metals complex will surge over the next 18 months. The sector’s surge will be reinforced by the lack of an obvious trend in most other markets. Gold, Silver and the mining stocks will surge while other markets languish.

First let us look at a chart of Gold and Silver along with the major asset classes. Before I analyze it, what do you notice? (more)

The Real Misery Index April 2010: Underemployment Woes Lead To Two-Tier Economy

The unemployment crisis continues to stymie a full economic recovery, with ripple effects from credit card delinquencies and rising food stamp participation indicating new hardships for millions of Americans, according to the latest update of Huffington Post's Real Misery Index.

The index for March/April 2010 was 33.1, a slight increase from 33.0 in February, representing another new high in the 26 years going back to 1984 analyzed by HuffPost. Though there have been some encouraging signs, from higher housing prices (which have an inverse relationship to the index) to declining home equity delinquencies, the jobless numbers continue to increase the misery. In addition, nearly 40 million American were enrolled for food stamps in February, which has been described by anti-hunger groups as the highest share of the population ever in the assistance program. (more)

Economist Tim Madden: The PIIGS Brief: understanding how oligarchs rig, loot our economies. 3 of 4

Canadian courts use Thomson to turn centuries of civil and criminal law upside down
Rather than submit to its own legal and lawful limitations, however, the Canadian (Ontario) court of appeal in Thomson nominally (and unanimously) protected the solicitors from the financial consequences of their technically illegal/criminal/racketeering actions, by ruling that the Criminal Code does not expressly prohibit the making of agreements to receive interest at a criminal rate, but only provides for severe punishment for those who do so. Accordingly, it concluded, such contracts are "not fundamentally illegal" (emphasis added): (more)

The U.S. Government Is About To Get Hit With 'The Perfect Storm' Of Debt

Hearing President Obama’s economic peptalks, you might be under the impression that the U.S. needs to keep spending for just a little while longer to stimulate the economy – but then will swear off big deficits.

Reinforcing the point, to address concerns stirred by a Congressional Budget Office (CBO) forecast that the U.S. government will accumulate total deficits in excess of $6 trillion over the next decade, in February President Obama issued an executive order to create a bipartisan fiscal commission. The commission’s task is to deliver recommendations to the president by December 1 for limiting future deficits to 3% of GDP. (The FY 2009 deficit approached 10% of GDP. The FY 2010 deficit will probably go even higher.) (more)

Peter Schiff Tuesday May 11, 2010 CNBC Fast Money

Intervention Alert - Here Comes The Bailout Bailout: European Cental Banks Gobbling Up Portuguese, Irish And Greek Government Bonds

And so the European private banks win the overnight battle with the Central Banks again: after shorting the EURUSD all the way to almost 1.25, they have forced the European Central Banks to buy ever more of their worthless Government bond holdings. Reuters reports that overnight CBs have been aggressive buyers of Greek, Portuguese and Irish Sovereign (if there is such a laughable concept as sovereign any more) bonds, which in turn has forced a quick short covering spree in the EURUSD and the EURJPY, which in turn has forced futures to go from 10 handles down to up 4. In other words, Central Banks now are fighting tooth and nail to prevent the market from going down ever again. To all the shorts out there- you are no longer taking on merely the Fed, now you have every money printer against you as they scramble to load up with every worthless asset imaginable. At this rate Dow, Dax and Dung Manure 36,000 is easily reachable. The only way to play this is through gold, which is now the only flight from Central Bank lunacy. ZeroHedge.com

Gold Is Money

The Western financial world is officially in full panic mode. A nearly $1 trillion bailout of Greece confirms that fact. Our very own Federal Reserve is providing billions to the effort, but this is much more than a bailout for Greece. It is a bailout for banks holding Greek debt and the debt of other European nations teetering on default.

This bailout is not a fix or a cure for too much debt. People on both sides of the pond are simply spending more than they earn. The “fix” is a long painful road of consuming less and saving more, but that is not what this bailout represents. What the leaders of the Western World chose was the short painless path of money printing. You have to ask yourself where did they come up with nearly a trillion dollars in such a short amount of time? (more)

What is good for Goldman Sachs is bad for the world

Excuse me, Charlie Wilson, for parodying your 1955 line as chairman of General Motors that “What is good for General Motors is good for America.” Especially since 53 years later GM’s stock is at an all-time low with little prospect of zooming back up.

It seems that dinosaur GM helped extinct itself through a series of errors. They are well documented by financial trader Adam Hewison, co-founder of the MarketClub.com, in his linked article and DVD. The errors include developing an electric car in 1996 when gas was $1.28 a gallon, naming the battery powered car the EV1, then scrapping it in 2002 when prices were climbing to $4 a gallon. Oops! (more)

Chart of the Day