Saturday, September 17, 2011

6 Million 25-To-34-Year-Olds Living With Parents

6 million—14 percent—of 25-to-34-year-olds are now living at home with their parents. This number has increased more than 15 percent since the recession began.

The Obama administration’s policies are hurting young people. Watch this Fox Business segment to learn more:


Here are some other shocking jobs statistics about young people:

“[T]een unemployment is still on the rise, now at 25 percent.” National Public Radio

“The median starting salary for those who graduated between 2006 and 2008 was $30,000. For the 2009 and 2010 grads, it dipped to $27,000.” —Huffington Post

“More than 17 percent of 16-to-24-year-olds who are looking for work can’t find a job.” —National Journal

85 percent of this year’s graduating class will be forced to move back home.”—Huffington Post

“The employment-to-population ratio for that demographic — the percentage of young people who are working— has plunged to 45 percent.” —The Atlantic

Gold, Platinum Ratio Shifts, Hints at Wider Change

Platinum prices have comfortably traded much higher than gold for the bulk of the last 20 years or so, but that relationship is starting to change and may signal a new order of value in the precious metals.

"A gold price higher than platinum is very unusual since the mid-1990s, when platinum's use in catalytic converters really took off for diesel engines," said Adrian Ash, head of research at

"Just like the under-performance of gold-mining equity in 2011, the low gold/platinum ratio points to economic weakness worldwide," he said, adding that the ratio last broke below parity during the post-Lehman Brothers slump in 2008.

Prices for the two metals have been trading fairly close to each other over the last couple of months, with gold surpassing the price of its rival a few times. That's a far cry from about five years ago, when platinum was worth about twice as much as gold.

On Thursday, investors had to spend more to buy gold than platinum. The December futures contract for gold settled with a price of $1,781.40 an ounce on the Comex division of the New York Mercantile Exchange, while October platinum finished at $1,780.60 an ounce.

Just as it did in the post-Lehman slump, the recent break below parity signals that "retained capital is choosing preservation over growth," as Ash puts it.

Traditional Worth

Platinum has usually had a wide premium above gold prices — an understandable relationship given that some consider the metal, which is around 30 times as rare as gold, to be much more precious.

Platinum Guild International, a marketing arm for the global platinum jewelry industry, regards platinum as "pure, rare, eternal" and the "most precious of metals."

"Platinum is a relatively new and scarce commodity and hence its price [is] more sensitive to fluctuations in output," said Edmond Bugos, director of mining finance at Strategic Metals Research & Capital. "It's definitely more like a commodity than gold."

Gold, on the other hand, is an asset, he said, so it's valued differently with "so much of it hoarded relative to annual mine output that its price is driven by investment demand alone."

Bugos points out that, historically, gold has traded at 80% to 100% of the platinum price. The percentage fell in the 1990s to about 44% by 2000 when gold bottomed, he said, and generally stayed in the 40% to 60% range until 2008 "when this all changed."

Investment bank Lehman Brothers filed for bankruptcy in September of 2008, in what has been seen as the catalyst for global financial crisis.

Now, gold trades at around 80% to 100% of platinum price — at the high end of the pre-1996 norm, but that's not necessarily "historically abnormal," said Bugos.

"This bull market in gold is going to break all the historical records before it is over," he said.

Understanding the Change

So what does this change in the gold and platinum ratio indicate for investors?

Economic activity is weakening when platinum prices fall below the price of gold because platinum is an industrial metal, said James Turk, founder and chairman of GoldMoney. And since gold is money, "monetary problems tend to worsen when the gold prices rise above the platinum price."

"The relative demand for these two metals drives these two different results," Turk said. But the "economy can be weakening while monetary problems worsen, which actually appears to be the case at the moment."

Under that scenario, "gold is the safer of the two metals because a flight to a safe-haven during periods of monetary turmoil is an overwhelming force, and gold is the safest haven because it does not have counterparty risk," said Turk. Read about how recent volatility in gold has dulled investor security.

But platinum's a precious metal too, and some analysts predict higher prices for the white metal, particularly amid an expected recovery in demand for the metal from Japan's auto sector.

So gold and platinum may continue their competition for a long time to come.

On Wednesday, Thomson Reuters GFMS predicted that gold would top $2,000 an ounce by the end of this year.

Platinum group metals refiner Johnson Matthey (JMAT.L - News) forecast the six-month average platinum price at $1,870 an ounce, in an industry review report released in mid-May — and said prices might even trade as high as $2,000 during that period.

The gold price will continue to outperform platinum "as long as the financial uncertainties [in the worldwide economy] are present and investors are fearful," said Terry Hanlon, president of Dillon Gage Metals.

As for how high gold prices can go, Matthew Tuttle, chief executive officer at Tuttle Wealth Management in Stamford, Conn., targets $2,200 to $2,400 an ounce by the end of next year.

However, he also sees a retracement down to $800, "probably a couple of years" after that because "parabolic moves typically will eventually pull back to where they started."

Either way, "the real story is all about gold," he said. "Platinum is an innocent bystander."

Analyzing the Cisco Systems (CSCO) chart

Over the past 12 months Cisco Systems Inc (CSCO) shares have traded between $13.30 and its 52-week high of $24.60. Believe it or not but the sleepy old company is now trading over $16.60 a share.

Cisco is a company we have talked up to death here on the Masters and now shares are now trading just 3 points off of the 52 week low.

It seems that the bounce play is inevitible. Let's take a look at the chart to make sure

Note the green arrows in the chart. These denote the price crossing the 50 day MA. In the past year, every time the stock has crossed over it's 50 day moving average, shares have spiked - followed by a sharep sell-off. This was more prenounced in the first 2 occurences in the chart.

CSCO ChartHere's where it gets interesting, on the 4th green arrow, shares sold off as usual but had a big spike in buy volume at the bottom. I believe this calls the bottom of CSCO.

The final green arrow is where we are right now; CSCO has crossed over the 50 & 150 day MA's. Also, the lines seem to be smoothing out at the bottom here and pointing up.

Mastery Bottom Line:

It is often thought that a stock that has a price trading above its 50 day moving average and if the 50 day moving average is above the 200 day moving average, then the stock is healthy and should continue upwards in the near future.

This is what we want to happen in the CSCO chart for confirmation.. The 50 day must cross the 200 day average to confirm the bullish trend.

As I pointed out earlier, historically there have been a lot of head fakes with CSCO. Each time the price has crossed the 50 day MA in the last year, investors were rewarded by a few points, followed by a massive selloff.

With the current trend in tech, I think it would be fine to scale into a position in CSCO right now, but watch out for the downturn if the 50 doesn't cross the 200.

SocGen's 6 Easy Charts On What Happens To Gold And Stocks Under "QE2.5"

Looks like SocGen pulled a TGIF today and in response to its Corporate Market Alert, in which it asked the rhetorical question, "Fed QE '2.5': gold and equities to take off again?" it answers itself quickly and to the point in just 6 simple charts. Here they are...

Euro Collapse Could Lead to War: Polish FinMin

A collapse of Europe’s monetary union would likely lead to a breakup of the European Union as a whole, posing significant risks to the region and even raising the possibility of war in the long term, Poland’s Finance Minister told CNBC late on Thursday.

Franck Fife | AFP | Getty Images
A tramway pass in the center of Warsaw

"If the euro zone were to fall apart then it's hard to exclude the possibility of EU falling apart as well," Polish finance minister Jacek Rostowski said in an interview.

"The EU has been one of the two great pillars of European peace and security of the past 60 years," he said.

"Therefore the danger in a longer-time horizon, in 10-20 years, in the absence of one of the key elements of our security system and one of the key elements of our political system, which ensures we deal with problems in this peaceful, democratic way we've developed, the risk of all sorts of authoritarian political movements, and therefore even war, in the long horizon, rises,” he said.

On Friday, Treasury Secretary Timothy Geithner will join EU finance ministers at a meeting in Poland, which holds the rotating EU presidency, to urge them to take decisive action in response to the euro zone debt crisis.

Poland joined the European Union in 2004, but has not adopted the euro.

"I think a lot has been done and a lot is on its way,” Rostowski said of the meeting of EU finance ministers on Friday and Saturday.

He said the intervention on Italian and Spanish bond markets by the European Central Bank had been “very courageous but also necessary and essential and correct.”

“The ECB has provided a window of opportunity, given democracy a time to work,” Rostowski said.

He warned however that EU leaders had to use the time gained by the ECB’s intervention effectively.

“We really are very close to twelve o'clock and the fact we've been given a little more time does not mean we can afford to waste any of it. We have to use every second of that time to come to agreement, to devise solutions, and not delay and not pass the ball backwards and forwards without coming up with the goods," Rostowski said.

The Coming Collapse: “We Can Buy Time, But We Can’t Change the Outcome”

The Ayn Rand Institute held its annual "Atlas Shrugged Revolution" dinner Thursday night in New York City.

In attendance were a number of financial luminaries and hedge fund managers, including Peter Schiff of EuroPacific Capital, John Tamny of RealClearMarkets, Dmitry Balyasny of Balyasny Asset Management and Scott Schweighauser of Aurora Investment Management.

The setting was the tony St. Regis Hotel on Fifth Avenue but there was nothing pleasant about the primary message coming from both the speakers and those in attendance: Western civilization is heading for hell and a hand basket, just like Rand predicted in her seminal novel.

In the accompanying video, ARI president Yaron Brook tells Henry why Rand's devotees believe the global economy is "heading for collapse."

In a nutshell, Brook believes politicians and policymakers have "no solutions" for the problems facing the globe.

"The fundamental problem," Brook says, is with the philosophical belief our society has that governments can solve problems and more rules and regulations are the answer to our economic ailments.

Barring "real structural change" to our economic underpinnings toward self-reliance and true laissez-faire capitalism, "we can buy time, but we can't change the outcome," Brook says.

And what will that outcome be? A repeat of the Great Depression in the 'best'-case scenario, he says. And the worse-case? A repeat of the fall of the Roman Empire.

"I don't expect that, I think we'll rebound," Brook says. "But we have to remember that…civilizations in human history have declined, they've disappeared."

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @atask or email him at

The Economist - 17 September 2011

The Economist - 17 September 2011
English | PDF | 104 pages | 59.1MB

click here to download

Mayor Bloomberg predicts riots in the streets if economy doesn't create more jobs

Mayor Bloomberg warned Friday there would be riots in the streets if Washington doesn't get serious about generating jobs.

"We have a lot of kids graduating college, can't find jobs," Bloomberg said on his weekly WOR radio show.

"That's what happened in Cairo. That's what happened in Madrid. You don't want those kinds of riots here."

In Cairo, angry Egyptians took out their frustrations by toppling presidential strongman Hosni Mubarak - and more recently attacking the Israeli embassy.

As for Madrid, the most recent street protests were sparked by widespread unhappiness that the Spanish government was spending millions on the visit of Pope Benedict instead of dealing with widespread unemployment.

Bloomberg's unusually alarmist pronouncement came as President Obama has been pressuring reluctant Republicans to pass his proposed job creation plan.

"The damage to a generation that can't find jobs will go on for many, many years," the normally-measured mayor said.

Bloomberg gave Obama kudos for coming up with a jobs plan.

"At least he's got some ideas on the table, whether you like those or not," he said. "Now everybody's got to sit down and say we're actually gonna do something and you have to do something on both the revenue and the expense side."

And everybody's got to share in the pain.

The streets of Cairo erupted in violence this spring. (AP Photo)

"When you start picking and choosing which groups do and do not, that's when it becomes unfair in a lot of people's minds," the mayor said. "But we're all in this together."

Obama didn't create this economic mess, it developed "over long periods of time," Bloomberg said.

Obama's approval rating has sunk along with the economy, but the ratings of the Republicans who have stymied his attempts repair the damage are even worse, most polls show.

Already, House Speaker John Boehner, an Ohio Republican, has drawn a line on raising taxes on the rich to pay for Obama's proposed $447 billion jobs plan, which aims to help the middle class.

Euro Oversold As Shorts Surge To Highest Since June 2010

For those seeking an oversold security, look no further than the EUR, which in the week ended Sept. 13, was the biggest FX loser, as non-commercial exposure rose 50% to a net short of -54,459 from -36,443 contracts the week before. This is the most bearish net exposure in the EUR since June 2010, and positions the currency for a short squeeze, although if history is any guide it still has a ways to go: the 2010 trough was -114k net contracts hit in May of 2010, just after it became apparent that Europe is falling apart. Also, despite speculation that traders have left the safe-haven status of the CHF following last week's SNB intervention, the Swiss Franc retained its bullishness, with net exposure remaining long, although declining modestly from 7,549 to 5,493 contracts. Also not surprising is that bullish bets in the JPY rose from 32,787 to 34,955 after declining past week. It seems that Yoda will be watching, watching, watching his Bberg terminal very closely in the coming days.

Why Oil Prices Could Fall No Matter What Happens Next

When oil prices start to decline, investors and economists get worried. Oil prices in large part reflect global sentiment towards our economic future – prosperous, growing economies need more oil while slumping, shrinking economies need less, and so the price of crude indicates whether the majority believes we are headed for good times or bad. That explains the worry – those worried investors and economists are using oil prices as an indicator, and falling prices indicate bad times ahead.

But oil prices have to correct when economies slow down, or else high energy costs drag things down even further. And the current relationship between oil prices and global economic output is not pretty. In fact, every time the cost of oil relative to global production has hit current levels – and that’s after the sharp corrections earlier this month – an economic slump, if not a recession, has followed, according to a Reuters article.

The “warning signal” that is currently flashing red is the Oil Expense Indicator, which is the share of oil expenses as a proportion of worldwide gross domestic product (specifically, it is oil price times oil consumption divided by world GDP). Since 1965, this indicator has averaged roughly 3% of GDP and has only exceeded 4.5% during three periods: in 1974; between 1979 and 1985; and in 2008. Each period saw severe global recessions.

In 1973/‘74, the Arab oil embargo sent oil prices rocketing skywards in the world’s first “oil shock.” In 1979, a revolution in Iran knocked out much of that country’s oil output and catalyzed the world’s second oil shock. And, of course, in 2008 the housing bubble collided with speculative buying of new debt instruments and a commodities boom to propel oil prices to a record high of US$147 a barrel, which helped to trigger the global financial crisis and the worst slump since World War II.

So where are we right now? Well, Brent crude prices would have to fall to the low US$90s per barrel for the Oil Expense Indicator to drop below 4.5%. Instead of that, Brent prices have been above US$100 per barrel for more than six months (aside from an intraday low of US$98.97 on August 9) and are still hovering between US$105 and US$110.

Oil prices play a major role in global economic growth because oil is crucial to every part of the economy. It powers manufacturing as well as food and commodities production, it fuels transportation, and it is a building block for industries like plastics and electronics. When oil prices stay too high for too long, they choke out economic growth.

Merrill Lynch analysts agree, writing in a recent note: “The last two times that energy as a share of global GDP neared … the current level, the world economy experienced severe crises: the double dip recession of the 1980s and the Great Recession of 2008.”

So we face two options: oil prices come down sharply, or we enter a recession, which will drag oil prices down. Either way, crude has to get cheaper.

That being said, remember that there are many forces at play in the oil markets, not the least of which is supply. At present the world’s most important supplier, Saudi Arabia, is pumping out more oil than it has for 30 years. In July the country produced 9.8 million barrels per day (bpd), lifting total OPEC production to 30.05 million bpd.

If they want, the Saudis can exert considerable influence over prices by reducing supply. And they may want to do just that. Oil analysts generally agree the Saudis want to see oil prices remain above US$85; lower oil prices would impair the country’s ability to meet its spending obligations. Iran, Kuwait, and other OPEC countries similarly want to see oil prices remain strong, to meet their spending requirements. Current OPEC governor Mohammad Ali Khatibi, of Iran, recently said that the cartel’s members have not set a desired price level but some think US$80 to US$90 is appropriate, while others want prices to remain above US$100 a barrel.

On top of that, no one is yet predicting a reduction in global oil demand. The International Energy Agency (IEA) reduced its forecast for demand growth, but still expects the world to consume 1.2 million more barrels of oil each day next year than this year. Similarly, OPEC reduced its demand growth estimate, but still foresees oil demand rising by more than 1 million barrels of oil a day over the next 12 months.

So, oil prices will come down when the economy falls too, but if oil goes on a tailspin à la 2008, expect to see OPEC step up to the plate, tighten the market, and support prices, so that its members can continue to pay their bills.

The Economic Collapse - The Video