Thursday, August 4, 2011

Bailout Fallout: Italy, Spain next on Eurozone crisis 'death list'?

Silver Miners Acting Well: AG, AMEX:GPL, EXK, SLV

We took a look at silver miners in early July as they had appeared to have stabilized and were ready to bounce. The metal and miners did indeed bounce from that area and have continued to firm up. This group remains as one of the few that are still in a decent position despite the recent market slide. While gold has surged ahead of silver, the latter remains in a decent position.

The metal as represented by the iShares Silver Trust (NYSE:SLV) ETF just cleared an important resistance level near $37.50. SLV had been confined to a tight range since the spectacular drop in May, and by clearing the $37.50 level, SLV may have put in an intermediate bottom. The $32.50 level has held on a few occasions, and now that SLV has set a higher pivot high, it can set its sights on the all-time high near $48. Traders should keep a close eye on the $37.50 area, as it should now act as a support level. Any close below this level would certainly merit caution.

Endeavor Silver Corporation (AMEX:EXK) is a silver miner that has been quietlyconsolidating after a strong rally earlier this year. It recently cleared some resistance along with the metal in July, as it closed above first its 50-day moving average, and then a pivot high near $10.40. EXK remains in a larger consolidation and has been forming anascending triangle pattern, with trendline resistance near $11. Any close above this level would be bullish, and may lead to new highs.

Great Panther Silver Limited (AMEX:GPL) has been trading in almost exactly the same pattern as EXK. It first cleared some resistance levels in late June and early July and after a shallow pullback, could be poised to break out of the triangle pattern it has been building. GPL found support near its 50-day moving average and a close above $4 could signal a breakout.

First Majestic Silver Corp. (NYSE:AG) is also close to breaking out of its consolidation pattern, although the base is flatter and closer to a rectangle than an ascending triangle. In the end, either pattern is simply a consolidation pattern and the underlying psychology behind them are the same. The $26 level would be the area to watch as a close above this level would put $AG in position to run to all-time highs. (For more, see Triangles: A Short Study In Continuation Patterns)

The Bottom Line
It’s usually a good sign when an entire group moves in unison, as it usually has institutional money behind it. The silver miners are all basically shadowing the precious metal and with silver recently clearing some resistance, it could be setting the stage for a miner rally. This, coupled with the fact that the miners have held up better than most other sectors could be pointing to higher prices for the group. Traders should monitor how these stocks react to the top of their current bases, but any breakout above resistance could lead to a fast move higher.


McAlvany Weekly Commentary

The Crash Course: An Interview With Dr. Chris Martenson

A Look At This Weeks Show:
-Exponential growth is different from linear growth. We naturally think linear yet the current situation is exponential.
-Growth and prosperity are also different. You can have growth or prosperity, but not both perpetually.
-Problems and predicaments are different as well. A problem can be solved to avoid a certain outcome. A predicament has no solution, only an outcome. We currently have a predicament that we must adjust to.

About the Guest: Dr. Chris Martenson is an independent economist and author of a popular website, ChrisMartenson.com. His Crash Course video series explores the intertwining significance of the “three E’s”—the economy, energy, and environment and offers articulate, dynamic insight into the workings of our monetary system. Click Here to Purchase The Crash Course

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US vs Canada vs Australia vs UK Realty Bubble


Source: Realty Bubble Monitor

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Realty Bubble Monitor looks at the Housing markets in English speaking nations — US, UK, Canada and Australia.

Canada’s Housing is now 32% above trend, just a tad below the 35% mark upon which the USA bubble burst.

Australian median home prices had already detached from the long term Price/Family-Income ratio of 3.2 way back in 1997. The onset of record low interest rates shortly thereafter enabled consumers to buy more expensive Existing Homes w/o increasing their mortgage payments. Subsequent irrational exuberance swept the Price/Family Income ratio to an unsustainable bubble high of 4.8 in 2007.

UK average home price has also detached from its long term Price/Family-Income ratio of 2.0 way back in 1997. The onset of record low interest rates shortly thereafter enabled consumers to buy more expensive Existing Homes w/o increasing their mortgage payments. Subsequent irrational exuberance swept the P/I ratio to an unsustainable bubble high of 4.9 in 2007.

Canadian average home price moved away from long term Price/Family-Income ratio of 2.7 in 2002. P/I ratio hit a bubble high of 3.6 in 2011.

United States had record low interest rates coming out of the 2001 Recession enabled consumers to buy more expensive Existing Homes w/o increasing their mortgage payments. Added to pent-up demand, this caused median price to rise above the long term Price/Income ratio of 1.8 starting in Y2k. As lending standards dissipated, irrational exuberance took the P/I ratio to an unsustainable bubble high of 2.8 in 2005

The Average Life Expectancy For A Fiat Currency Is 27 Years ... Every 30 To 40 Years The Reigning Monetary System Fails And Has To Be Retooled

David Galland notes:

Monetary scholar Edwin Vieira ... pointed out that every 30 to 40 years the reigning monetary system fails and has to be retooled. The last time around for the U.S. was in 1971, when Nixon cancelled the convertibility of dollars into gold. Remarkably, the world bought into the unbacked dollar as its reserve currency, but only because that was the path of least resistance. But here we are 40 years later, and it is clear to anyone paying attention that the monetary system is irretrievably broken and will fail.

What will replace it is still unclear, but I suspect that when the stuff really hits the fan and inflation rages the government will try the approach taken by the Germans to end their hyperinflation back in the 1920s, coming up with the equivalent of the Rentenmark – a dollar that is loosely linked to some basket of commodities and financial instruments. It won’t be convertible, because it would be impossible for bank tellers to exchange your dollar for a cup of oil, and a coupon off of a bond, and a chip of gold, or whatever makes up the basket – but it might restore some semblance of confidence in the currency. That’s one option. Another is that some government decides to make its currency convertible into precious metals; but that will only happen when all other less fiscally restraining systems have been floated and failed. Simply, at this point we can’t know what will replace the current monetary system, or when. All we can know is that the status quo cannot and so will not survive this crisis.

Regardless, between now and the point in time where the Fed throws in the towel on today’s fiat monetary system, you would have to be na├»ve in the extreme not to expect volatility, uncertainty, and wholesale financial dislocations.

Chris Mack writes:

According to a study of 775 fiat currencies by DollarDaze.org, there is no historical precedence for a fiat currency that has succeeded in holding its value. Twenty percent failed through hyperinflation, 21% were destroyed by war, 12% destroyed by independence, 24% were monetarily reformed, and 23% are still in circulation approaching one of the other outcomes.

The average life expectancy for a fiat currency is 27 years, with the shortest life span being one month. Founded in 1694, the British pound Sterling is the oldest fiat currency in existence. At a ripe old age of 317 years it must be considered a highly successful fiat currency. However, success is relative. The British pound was defined as 12 ounces of silver, so it's worth less than 1/200 or 0.5% of its original value. In other words, the most successful long standing currency in existence has lost 99.5% of its value.

Given the undeniable track record of currencies, it is clear that on a long enough timeline the survival rate of all fiat currencies drops to zero.

And Jeff Clark points out:

History has a message for us: No fiat currency has lasted forever. Eventually, they all fail.

BMG BullionBars recently published a poster featuring pictures of numerous currencies that have gone bust. Some got there quickly, while others took a century or more. Regardless of how long it took, though, the seductive temptations allowed under a fiat monetary system eventually caught up with these governments, and their currencies went poof!

You might suspect this happened only to third world countries. You’d be wrong. There was no discrimination as to the size or perceived stability of a nation’s economy; if the leaders abused their currency, the country paid the price.

As you scroll through the currencies below, you’ll see some long-ago casualties. What’s shocking, though, is how many have occurred in our lifetime. You might count how many currencies have failed since you’ve been born. (more)

Unemployment rose in nearly all US cities

Unemployment rose in more than 90 percent of U.S. cities in June, mirroring a national slowdown in hiring.


The Labor Department says the unemployment rate rose in 345 large metro areas. It dropped in 20 cities and was unchanged in seven. That's worse than May, when the rate rose in only 210 cities and a sharp reversal from April, when unemployment actually fell in nearly all metro areas.


The biggest increase was in Joplin, Mo, which was hit by a major tornado on May 22. The city lost 9,400 jobs in June and the unemployment rate jumped nearly 2 percentage points, to 9.6 percent.


Nationwide, unemployment ticked up to 9.2 percent in June, the highest level this year.




Debt ceiling doesn't fix the economy

CHART: Sovereign Credit Default Swaps Pricing

Then click on any individual CDS price.

David Walker On The Debt Deal: "U.S. Is 3 Years Away From Being Greece, Congress Dealt With $2T Of A $61T Problem"

CNBC Video - David Walker With Joe Kernen On Squawk Box - Aug. 2, 2011

"We are less than three years away from where Greece had its debt crisis as to where they were from debt to GDP," he said.

The US is nearing the 100 percent threshold which historically shaves about one percentage point off GDP, which was just 1.3 percent for the second quarter and 0.4 percent for the first quarter.

With the recent increase in the debt ceiling and continued higher budget deficits at the federal level, the US is on course for its own crisis, Walker said.

"We are not exempt from a debt crisis," he said. "We're never going to default, because we can print money. At the same point in time, we have serious interest rate risk, we have serious currency risk, we have serious inflation risk over time. If it happens, it will be sudden and it will be very painful."

He spoke as Congress is putting the final touches on approving an increase in the $14.3 trillion debt ceiling, a move deemed critical to avoiding a default. Standard & Poor's has warned it still may revoke the coveted triple-A rating for US debt, a move that some fear would increase interest rates and further add to the economic slowdown.[cnbc explains]

While Walker said credit agency downgrades are generally a "lag indicator"—meaning that they look backwards rather than forwards—the Greece situation should stand as a template for where the US could be heading in terms of credit.

Though the US has the lowest average interest rate and lowest duration on its debt of any developed nation, it faces significant rate risk if it continues on the same path.

Greece now pays nearly 15 percent interest on its 10-year notes, while Italy pays 6.13 percent and Spain 6.38 percent. The latter two peripheral euro nations also face serious debt problems though not on a scale with Greece.[cnbc explains]

"We should recognize that this could be a leading indicator for us," Walker said. "You can see what happens to interest rates if you lose confidence. They can go up very dramatically."

Gerald Celente : The 21st Century ‘Global Game Changer’

Gerald Celente
Trends Research

KINGSTON, NY -After reading the newly-released SummerTrends Journal, no responsible journalist will be able, in good conscience, to paint Gerald Celente again as a purveyor of “Pessimism Porn,” a “gloom and doomer,” or an “alarmist.”

Celente will continue to make clear that “Happy Days” will not soon be here again. He will continue to explain that, budget deal notwithstanding, no future Fed quick fixes or DC schemes can reverse the “Greatest Depression”-bound economy. No bipartisan miracle will eliminate the budget or trade deficit, restore the dollar to its former glory, or bring back jobs lost to China, India, Mexico, etc.

Europe’s financial crisis is equally critical. And the EU, IMF and ECB rescue policies will prove as ineffective as America’s. Those warnings are not “alarmism” or “pessimism” ­ they are just a matter of drawing logical conclusions from hard facts and incontrovertible data.

Nevertheless, even with a major economic collapse ahead of us, Celente is convinced there is a basis for expecting positive global outcomes in the long-term. The potential “Game Changer” lies in a widespread recognition that the Industrial Revolution mindset and policies will not, and cannot, work in a 21st century world.

“It’s not just Model T economics that’s outmoded, so are our approaches to education, healthcare, politics and, yes, the military,” says Celente. “The old adage ‘Generals fight the last war’ is as valid as ever. While the technology may have changed, the mindset hasn’t. The conviction that brute force can prevail in an occupied country defended by guerilla combatants has proven a multi-trillion dollar, decade-long failure. Yet even as old wars drag on with no victory in sight, new wars are started such as ‘Operation Odyssey Dawn’ launched against Libya five months ago, a ‘kinetic military action’ that was supposed to end in ‘day’s, not weeks.’"

Celente Solution: Direct Democracy "The government/political ‘system’ in place in America, and throughout much of the world, is obsolete and irreparable. The inept generals masterminding lost-cause wars are mirrored by warring senators and representatives in Congress. Anyone who watched weeks of the Washington Wrestling Federation’s (WWF) Reality Show, ‘Beltway Battle Over the Budget,’ and still trusts the judgment of politicians, is either delusional or ideologically trapped,” says Celente.

Yet, it is an undeniable fact that 535 elected members of Congress, despite their incompetence, pass laws that control the lives of over 300,000,000 citizens. “The problem isn’t just in the numbers,” says Celente, “it’s that the ‘Gang of 535′ represents lobbyists and campaign contributors, not the constituents they claim to represent. ‘Representative Democracy’ is a cruel sham; it’s neither ‘representative’ nor ‘democratic,’ and people are getting wise to it. Polls show that only 17 percent of likely US voters say the country is heading in the right direction, while 46 percent believe most members of Congress are corrupt.

“In those beliefs rest the possibility for change, real change, not Obama-change. As Victor Hugo put it, ‘There is one thing stronger than all the armies in the world, and that is an idea whose time has come.’ I believe that ‘idea’ is Direct Democracy, and I believe that the time has come for the entire world to wrest power from the hands of ruling political mobs and put it into the hands of the public. ‘Let the people vote!’ ”

Can Direct Democracy really work? It does in Switzerland! But is it a viable, realistic substitute for the many representative democracies, which, in practice, are not democratic at all? Or would it lead to mob rule?

Can Direct Democracy really be “The Global Game Changer”? For the inside scoop on the trend that is already generating a wave of international interest and for insights on many other mega-trends featured in the SummerTrends Journal, you’ll want to interview Gerald Celente.