Friday, October 29, 2010

Globalization Creates Unemployment: American Job Loss Is Permanent

Now that a few Democrats and the remnants of the AFL-CIO are waking up to the destructive impact of jobs offshoring on the US economy and millions of American lives, globalism’s advocates have resurrected Dartmouth economist Matthew Slaughter’s discredited finding of several years ago that jobs offshoring by US corporations increases employment and wages in the US.

At the time I exposed Slaughter’s mistakes, but economists dependent on corporate largess understood that it was more profitable to drink Slaughter’s kool-aid than to tell the truth. Recently the US Chamber of Commerce rolled out Slaughter’s false argument as a weapon against House Democrats Sandy Levin and Tim Ryan, and the Wall Street Journal had Bill Clinton’s Defense Secretary, William S. Cohen, regurgitate Slaughter’s claim on its op-ed page on October 12.

I sent a letter to the Wall Street Journal, but the editors were not interested in what a former associate editor and columnist for the paper and President Reagan’s Assistant Secretary of the Treasury for Economic Policy had to say. The facade of lies has to be maintained at all costs. There can be no questioning that globalism is good for us. (more)

Real Growth in US Stocks, 1871-2010

Is hard currency on its way out? Introducing the new virtual world currency.

When discussing reserve currency alternatives to the US dollar, conversation almost inevitably returns to the International Monetary Fund’s “synthetic reserve asset,” the Special Drawing Right (SDR).

However, the SDR basket of currencies is noticeably antiquated in its design, including only the currencies of industrialized nations… namely British Pounds, Euros, Japanese Yen, and US Dollars. This week, foreign exchange manager Overlay Asset Management has announced a currency basket it’s launching in order to offer a more up-to-date “virtual world reserve currency.”

According to the Financial Times:

“[Overlay Asset Management's] Wealth Preservation Currency Index consists of the currencies of the world’s 15 largest economies, weighted by their gross domestic product, adjusted for purchasing power parity. The PPP element ensures a higher weighting to emerging market currencies than is commonplace in other currency baskets, with the Chinese renminbi (accessed through non-deliverable forward contracts) accounting for 16 per cent, Indian rupee 6 per cent and Brazilian real 4 per cent. (more)

Stockhouse Short Report: Is the REE bubble about to burst?

U.S. research report tells investors in rare earth element stocks to be wary. It says the world could be awash in rare earth elements if and when the Mountain Pass mine gets into production.

A U.S. research report is raising red flags in the direction of rare earth stocks, including Canadian junior Rare Element Resources Ltd. (TSX: V.RES, Stock Forum) (AMEX: REE, Stock Forum), and telling investors to be wary.

The report by “Shareholder Watchdog’’ follows a surge in the value of Rare Element Resources shares, which traded at $13.91 on Thursday. That’s up from $2 in July.

Although the Vancouver junior has zero revenue, and posted a loss of $1.7 million or 6 cents a share in the year ended June 30, 2010, (compared to a year earlier loss of $1.2 million or 5 cents), it has a market value of $447 million, based on the 32million shares outstanding.

Rare earth elements are a collection of seventeen chemical elements with tongue twisting names such as scandium, yttrium. Found in the earth’s crust, they are applied in a wide range of devices, including superconductors, and magnets.

Stocks in the sector have skyrocketed amid concerns about export restrictions in China, currently the source of 95% of the world’s production. (more)

AAII Bullish Sentiment Hits a Two Year High

According to the American Association of Individual Investors (AAII), bullish sentiment this week rose to 51.23%, which is the highest reading since May 2008. So what do high levels of bullish sentiment portend for the prices of equities going forward?

Imminent Big Bank Death Spiral

The mortgage & foreclosure scandal runs so deep that ordinary observers can conclude the US financial foundation is laced with a cancer detectable by ordinary people. The metastasis is visible from the distribution of mortgage bonds into the commercial paper market, money market funds, the bank balance sheets, pension funds under management, foreign central banks, and countless financial funds across the globe. Some primary features of the cancerous tissue material are mortgage bond fraud, major securities violations, absent linkage to property title, income tax evasion, forged foreclosure documents, duplicate property linkage to single mortgage bonds, NINJA (no income, no job or assets) loans to unqualified buyers, and more. In fact, more is revealed it seeems each passing week toward additional facie to high level and systemic fraud. The world is watching. The growing international reaction will be amplified demand for Gold, from recognition that the USDollar & USEconomy have RICO racketeering components extending to Wall Street banks and Fannie Mae mortgage repositories.

The centerpiece question, when the US bond fraud is coupled with European sovereign debt distress, comes down to WHAT IS MONEY? The answer is Gold & Silver and not much of anything else. Other assets like crude oil or farmland are effective hedges against tainted money, but when they contain debt tethers, they too are vulnerable. Huge flows of funds are fleeing traditional asset groups. Some mistakenly still believe the USTreasurys to be a safe haven. A shock of cold water comes to them when that bubble goes into reverse perhaps several months later after reaching 2% yields. The big magnificent epiphany in the last couple years has been that a house is not a hard asset, but rather a debt instrument extension. Important questions have arisen as to what assets are free from counter-party debt risk. The grand demands for physical gold prove that the futures gold contracts are not money either, but tainted Wall Street and London securities contracts that keep the system going. (more)

Uranium and Mining Stocks Recovering

The Energy Report: Between the first quarter of 2009 and the first half of 2010, uranium tested $40 on the downside about three times. Has it found solid support? Also, what minimum level does it need to maintain for companies to be profitable?

Geordie Mark: That's a very good question. Certainly it has had a lot of technical support at $40 with a lot of buying strength coming in at that level. I'd say there's been even more buying strength recently. So that's a lot of strength. For the ultimate strength of investment health of this sector, I think we're looking at numbers north of $65. In fact, it would probably have to be higher than that to warrant risking venture capital for exploration. Also, you need to see higher prices for investment in large-scale, leveraged development-stage projects. Spot is now around $52, and we see positive movement there in terms of pricing with the long-term price at $60.

TER: You see positive movement, but it sounds like mining uranium is risky now. Is that right?

GM: Yes, mining does have technical risk. That's correct. As part of an offset to that, the projects we see going into production, certainly over the next year or so, are the lower-cost projects involving lower capital expenditure for development. Those are called in-situ recovery operations and they have a low-cost basis. So you're looking at cash costs of $30 per pound or less. They are the ones that can accommodate the current commodity price, but not the larger-scale projects requiring significant injection of capital. That's why we've seen delays in that development pipeline; $40 spot prices make it difficult to justify large, higher-cost projects. However, in our view, we do need those larger projects to sustain increasing demand. (more)

Long-term housing prospects hinge on an economic recovery for working Americans first – No housing bottom until middle class recovers a foothold in th

The housing market can have no sustainable recovery without the employment market improving. It is incredible that over three years into this crisis that there has been little focus on coupling employment with housing. Banks argue that many are simply not paying their mortgage yet they want the Federal government to ease lending restrictions. Who are they going to lend to? Over 95 percent of all mortgages now being originated are government backed. It is disturbing that all bank bailouts including the Fed forcing the interest rate lower merely focus on one aspect of the financial equation. The reality is, without a burgeoning middle class housing will never recover. Even the rising default rates in government backed loans, many “plain vanilla” loans are defaulting in record numbers because people are not able to service their debt.

We need a backdrop to the current foreclosure problems. The financial industry simply dominates too much of our economy and now has deep connections in our political system. Let us first look at mortgages currently in foreclosure: (more)

JPMorgan, HSBC sued for alleged silver conspiracy

* Hundreds of millions in illegal profit alleged

* Triple damages sought in one of two lawsuits

* CFTC proposed new tools to thwart price manipulation (Adds adviser comment, details)

By Jonathan Stempel

NEW YORK, Oct 27 (Reuters) - JPMorgan Chase & Co (JPM.N) and HSBC Holdings Plc (HSBA.L) were hit with two lawsuits on Wednesday by investors who accused them of conspiring to drive down silver prices, and reaping an estimated hundreds of millions of dollars of illegal profits.

The banks, among the world's largest, were accused of manipulating the market for COMEX silver futures and options contracts from the first half of 2008 by amassing huge short positions in silver futures contracts that are designed to profit when prices fall.

"Defendants reaped hundreds of millions of dollars, if not billions of dollars in profits" from the conspiracy, one of the complaints said.

The respective plaintiffs, Brian Beatty and Peter Laskaris, each said they traded COMEX silver futures and options and contracts, and lost money because of the alleged manipulation.

Beatty lives in Connecticut and Laskaris in New York, court records showed. The lawsuits seek class-action status, damages that may be tripled and other remedies. The defendant banks are major participants in the silver market. (more)

George Carlin ~ The American Dream

Emini Futures And The Falling Dollar

When in doubt, sit it out? That may be the mantra of many traders today. The Initial Jobless Claims actually came in better than expected falling 21,000 to 434,000. This was about the best number in the last 2 years. The high of today in the E-Mini S&P 500 of $1187.50 was reached at 7:30 AM CST, but by 11:30 AM CST, we descended to the low of the day at $1173.50.

After the first couple of hours, we saw coiling and a pretty choppy session. Emphasis is still on the Election and the FOMC with the buzz reflecting sentiment about the potential Election results and the Fed’s next move. It is my thought that in such a fragile time frame, that the Fed may walk softly and want to alleviate fears of any severe change. It may be after the impact of the two events that ideas or rumors in fact create more of a stir in the marketplace the latter part of next week.

The US Dollar traded lower on the day creating a question mark regarding its typical inverse relationship with the E-Mini S&P 500. We traded within the CFRN Weekly Trade Zones of $1185 - $1186 and $1178 - $1179 today.

Tomorrow, we look forward to the GDP numbers which consists of 70% consumer spending. It will be interesting to potentially see a positive report with so many citizens still out of work. The market may still shrug off any positive report to focus on the events of next week. We may see lower volume that could cause more erratic moves in the market.

China Urges Bernanke: Stop Printing Dollars!

Too many dollars rolling off Washington’s printing presses are giving China a huge case of “imported inflation,” according to Chinese Commerce Minister Chen Deming.

"Given the current situation, companies have thought ahead and prepared for exchange rate fluctuations as well as an increase in labor costs," Chen said, reports.

"But because the issuance of dollars is out of control, and international commodities prices are continuing to rise, China is confronted with imported inflation, which has created major uncertainties for businesses.”

While Beijing pledged several months ago that it would allow the yuan to trade more freely, U.S. and European policymakers believe the currency is still undervalued by as much as 40 percent.

Critics of China in the U.S. assert that the Chinese government is artificially undervaluing its currency to give itself an unfair advantage in exporting goods. (more)