Thursday, December 16, 2010

Roger Wiegand: Phase Two Of Greater Depression II Begins Now

We all know what caused the 2008 banking crisis killing Lehman and others. It was reckless lending, too low interest rates, loosy-goosy credit for consumers and most of all, instigation of derivatives by greedy bankers hungry to make billions on the quick. Now that central banks have bailed them out of their insolvency and replenished minimum capital standards by stealing TARP funds from taxpayers, we find the next LARGER MESS looming on the horizon. Governments grasping for tax income will be grubbing, and taking all at a new furious pace. Consumers that are able will simply drop-out of the system and down-size.

If you thought Lehman was fun get ready to see new price controls and acceleration of existing capital controls, with inflation that will knock your socks off. We have at least two to five more years of crash and burn in the financial markets before a new base is found. Then, toxic trade policies and old grudges open the door to a new World War, which obviously no one can afford. This is simply historical fact and not any wild forecasting by me although some may consider me crazy.

Many of the very large global banks will be nationalized and some will fold into insolvency or merger. Roughly 90% of the derivatives and real estate toxic paper trash remains hidden on banker balance sheets. Not only was the problem never fixed, they’ve been piling on more bad loans-paper at a furious pace. The Banker’s Motto is “Steal while you can. You never know when the party ends.” (more)

McAlvany Weekly Commentary

2011 – 2014: The Inevitable Hyperinflation with John Williams

Belgium Faces Threat of S&P Downgrade

(Reuters) - Standard & Poor's cut its outlook for Belgian debt to negative on Tuesday, flagging a new risk for money markets as investors weighed prospects of higher borrowing costs for one of the euro zone's most indebted states. If the country's inability to form a government threatened deficit- and debt-reduction goals, S&P said Belgium'S AA+ rating could be downgraded within six months.

The strong warning places Belgium, which has a debt-to-GDP level of almost 100 percent, among the riskier states in a region being pummeled by a debt crisis that has led to bailouts for Greece and Ireland amid concerns Portugal and Spain might need rescuing too.

In the latest in a series of negative rating moves on euro zone states by the three main agencies, S&P said it was lowering the outlook from stable to negative largely because of Belgium's failure to form a new government since elections in June.

Analysts said they were not surprised by S&P's decision, which was a clear sign the country needed to come up with a comprehensive deficit-reduction plan soon. (more)

BNN: Top Picks

Gordon Reid, President and CEO, Goodreid Investment Counsel Corp., shares his top picks.

click here for video

Bob Chapman: Economic Crisis in America: Mounting Household Debts, Threat to Pension Funds and Social Security

The experts’ keep telling us how great shopping is this Christmas Season when only 17% of shoppers are using credit cards. That is a drop of 50% from last year, and the lowest usage in 27 years. We guess buyers have unloaded the cookie jar and pulled their savings from under the mattress. The consumer sentiment index has risen 2.6, but we will wait to see if attitudes turn into sales. Home buying intentions continue to fall as interest rates hit 4.66% for a 30-year fixed mortgage this past week, putting a further damper on future sales.

By many yardsticks it looks like the stock market is topping out again. If for no other negative fundamental or technical reason then the fact that all strategists are bullish. GS believes profits will rise 25%. We don’t, we see GDP growth at 2% in 2011 including a tax compromise and a net of $800 billion and the Feds addition of $1.7 trillion. This is what happened in the last stimulus effort. Besides from our point of view shares are already overpriced. The market will be helped by a relatively stable dollar due to the turmoil in Europe and Japan. As the year moves on we see an eventual weaker dollar in spite of sovereign credit problems in Europe reflected in the euro. As 2011 wears on the developing world will have inflation problems caused in part by imported dollar inflation. During the course of the year barriers will be erected as they have been in Brazil.

The Fed will continue to monetize, as the deflationary undertow remains strong. Money velocity will rise, as will inflation and the prices of gold and silver. In spite of dollar strength on a relative basis the struggle between the dollar and gold for mastery will be ongoing as the dollar loses the pitched battle versus gold for monetary supremacy. Underlying deflation will be aided by ever falling prices in residential and commercial real estate. Household de-leveraging will continue at a moderate pace as it has for the past 2-1/2 years. Personal savings are back down to 4%, a reflection of debt pay down. (more)

Lumber rises, issues Buy Signal

Lumber posted a strong rally today (12/15) seeing its highest prices since May.

This move higher gives me a buy signal for January lumber on the daily chart. Lumber also gave me a buy signal on the weekly chart last week. The trend is up on the monthly chart.

Jim Lopez, CEO of Canadian lumber company Tembec Inc. recently told Bloomberg, "Our lumber business in China: it's booming right now. It's a shot in the arm for an industry that was so dependent on the U.S."

Baxter International: Top Health-Care Stock to Buy

Baxter International Inc. (NYSE: BAX) — This global medical products and services company is a leader in critical therapies for life-threatening conditions.

The company’s profit margins are expected to improve from 2010′s 51.4%, and revenues are expected to rise by about 5%, according to S&P. But recent challenges to the health-care reform act, if successful, could have a strong positive impact on Baxter’s earnings, which are currently estimated to be $4.30 in 2011, up from $3.98 in 2010.

S&P maintains a “four-star buy” on the stock with a 12-month target of $58. But that target could be achieved much sooner if the recent triple-top is penetrated and the stock moves into the open gap at $52 to $58.

Buy this high-quality health-care equipment maker on either a break from the top at $52 or a pullback to the 50-day moving average at $50.

Big Oil Sells Assets at Record Pace as China Inflates Prices

The world’s largest oil companies sold assets at a record pace this year, finding buyers at higher prices as China and other emerging economies vie for reserves.

BP Plc, Royal Dutch Shell Plc and ConocoPhillips led 95 sales in 2010 valued at $49.5 billion, the most in at least 12 years, data compiled by Bloomberg show. The pace of disposals has picked up through the year -- deals in the fourth quarter topped $20 billion -- signalling momentum may carry into 2011.

BP Plc has agreed to $21 billion of sales in less than six months to help cover the cost of the Macondo oil spill. Even without the troubled London-based explorer, deals would have topped 2007’s $16 billion tally. Explorers are using funds from asset sales to meet the rising costs of production projects including deepwater drilling and liquefied natural gas plants. (more)

How High Will This Market Go?

The Dow Jones Industrial Average finally gained enough ground to close at a new high yesterday. But a broad market advance that started at the opening ran into a brick wall following the Fed’s decision to keep interest rates at current levels. As the FOMC statement was digested, stocks sagged accordingly, and by the close, much of the early gains had vanished.

The bond market also contributed to the late selling of stocks as a spike in bond yields took the 10-year Treasury note to the highest yield since March 2009. And strong renewed selling of municipal bonds also had a huge impact on stock prices as muni yields spiked, as well.

In economic news, Duke University and CFO Magazine released a survey showing that, in December, chief financial officers had become more optimistic. And, according to the Census Bureau, November retail sales were better than forecasted, and the sentiment of small business owners improved to its highest level in three years. Producer prices rose to better-than-expected levels, and business inventories were higher, but failed to meet estimates.

In corporate news, Best Buy Co., Inc. (NYSE: BBY)‎ missed analysts’ earnings by a wide margin, and the stock fell 15%. Other electronic retailers saw their stocks fall with BBY: RadioShack Corporation (NYSE: RSH) fell over 3% and GameStop Corp. (NYSE: GME) was off .82%. Amgen, Inc. (NASDAQ: AMGN) rose 4.9% on positive results from its prostate cancer drug. And C.R. Bard, Inc. (NYSE: BCR) gained 4.1% after announcing that it expects double-digit earnings growth next year. Bard also announced a restructuring that will result in some job cuts, as well as a boost in its stock buyback plan. (more)

Daily FX Roundup

The US Dollar Index (DXY) rallied on the back of rising treasury yields, confirming Tuesday's bullish hammer pattern. The next obstacle for dollar bulls is last week's highs at 80.40, above which confirms a higher double bottom base. A swing low could form near the 79.87 region, where the 20-day moving average and 100-day moving average overlap. A sustained loss of this pivot would suggest a third test of the 38.2% retracement level at the 79.20 level.

The British Pound was the weakest performer of the major currencies following a surprisingly weak employment report. The GBP/USD collapsed through its upward tilting channel then rejected near formation support. The 2-day retreat has wiped out nearly all of the gains from the previous two weeks. This bearish development suggests an imminent re-test of the November low at 1.5480. The Sterling also reached new lifetime lows against the Aussie and Swissy, as focus shifts to tomorrow's UK retail sales report.

The USD/JPY broke above the recent 84.40 ceiling to signal further strength towards 84.82/85.40 (between the 2009 former low & the September 24th spike high). Only a daily close below the formerly resistant 110-day moving average delays dollar bulls.

James Turk Gold 8000 Hyperinflation a sure thing