Saturday, March 10, 2012
Interviewed by Jim Puplava of the financial sense newshour (06 March 2012)Maison Placements Canada Inc. CEO John Ing talks about his outlook for Gold and the performances of the miners compared to bullion , John believes that we would see Gold hitting $3,000 oz. this year especially if the European Union and the Middle east erupt in crisis.
The Federal Reserve often focuses on core inflation, which is stripped of volatile food and energy items, when setting monetary policy, pointing out that headline inflation remains within comfort zones.
Increases in wages are more likely to spark a response from the Federal Reserve, although Rogers points out rising gasoline prices will bring all other prices up with them.
"Everybody is paying higher prices for oil and that obviously impacts consumption everywhere and it's not just oil, its food and everything else that’s going up," Rogers tells Business Insider.
"The U.S. government lies about inflation but there’s inflation everywhere. I mean, I don’t know if you go shopping, but if you do, you know prices are up."
The Federal Reserve has kept interest rates near zero and has flooded the financial system with liquidity to steer the country away from a deflationary cycle and towards growth and hiring.
Commodity prices often rise amid such conditions, while tensions with Iran are also pumping up crude prices.
Eventually, the U.S. economy will suffer.
"We are going to have a slowdown. Such is the staggering debt that America has, it has caused more and more of a drag on our economy," Rogers says, adding the country is due for a cyclical downturn next year anyway.
"We are well overdue for an economic slowdown for whatever reason. Whether it’s caused by high oil or what, we’re going to have a slowdown in the foreseeable future."
Republicans are pointing out President Barack Obama hasn't done enough to foster drilling in the U.S. to boost supply and lower prices.
"The president's policies have not only not helped the economy, they've made it worse. And when it comes to gas prices, the president says he's for an 'all of the above' energy strategy, but his rhetoric does not match his actions," House Speaker John Boehner tells Fox News.
"The facts are that they've closed down most of the gulf. They've closed down all the public lands in the inter-mountain West. And if we're going to bring gas prices down, we need to have all of the above."
At about the same time, a second major bank quietly told the industry it’s getting out of the high-risk mortgage business. TD will shutter its non-prime lending operation, TD Financing Services, at the end of the month. This comes as CIBC formally announced it’s selling FirstLine mortgages, which for years has been shoveling out billions to finance mostly high-ratio loans made through mortgage brokers across the country.
TD says, “To remain competitive, it would have required us to increase (that) risk profile, something we’re not prepared to do.” Of course not. More risk is more risk, especially at a time when housing has hit an unsustainable orgiastic $1.1 million-for-an-old-bung crescendo. And unlike the people banks loan money to, they ain’t stupid.
Only in retrospect will these days find context. Like when Nortel was $120 a share and pension funds could not gobble enough of it. Or when investors sunk $82 million into the IPO of Pets.com, a company which had $619,000 in revenues, spent $11.8 million on advertising and lost money on every bag of dog food. Or Bre-X. Or (soon) FB. (more)
The 30-year US Treasury Bond ($TLT $ZB_F) is forming one of the tightest coils (volatility contraction within a rectangle/symmetrical triangle) within an extended range of any major market on earth right now:
Federal Reserve ($FED) monetary policy has greatly influenced this market’s movements over the last several years, however, once this market breaks free (rest assured that it will eventually) the move will be explosive.
Here are some good macro thoughts that put the oil threat into perspective (via Credit Suisse):
“The impact on GDP: each 10% rise in the oil price takes 0.2% off US GDP growth and 0.1% off global growth. This time the negative impact of a high oil price on growth is limited as: oil is only 10% above its 6-month MA (changes matter more than levels for growth); other energy prices are muted (coal prices are at 12-month lows, US gas prices down 40% yoy) and CPI food price inflation should fall by 5pp from here (adding 0.7% to disposable income); critically, unlike 2008 and 2011, neither the ECB nor GEM central banks are likely to raise rates in response to higher energy costs; and US macro momentum is currently consistent with GDP 0.8% above 2012 consensus, suggesting some buffer before consensus estimates get downgraded.
Impact on equities: since 2007, equities have tended to fall when oil prices rise by 40% yoy (i.e. an oil price of c$150/bbl). From a macro perspective, we would start worrying if the rise in the oil price pushed up US CPI above 4% (that is when equities de-rate, c$160/bbl), US GDP started being revised down (c$150/bbl) or European inflation rose above 2% year-end (c$140/bbl). Another warning signal is when inflation expectations decouple and start falling as oil continues to rise (as has happened in the past week). Each 10% rise in the oil price takes 2% off European EPS and c1% in the US, on our estimates (yet current valuations can accommodate a c10% fall in earnings).
From a regional perspective, we rank countries’ sensitivity to oil by looking at: net oil imports, energy’s weight in the CPI, output gap and the correlation with oil prices. The winners from a higher oil price are Norway, Russia and Canada, while Thailand, Turkey and Korea are negatively affected. We show cheap domestic plays in the ‘winners’ and expensive domestic plays in ‘loser’ countries.”
Source: Credit Suisse
Today legendary trader and investor Jim Sinclair told King World News the “credit event” in Greece totals much more than the $3.5 billion which is being reported by the mainstream media. Sinclair also said if the CDS’s are in fact made to pay, this could require the rescuing of eight international banks, through Fed swaps that could total in the trillions of dollars. Here is what Sinclair had to say about what is happening : “The release made by the International Swaps & Derivatives Association (ISDA), for the average Mensa member or genius, is totally incomprehensible. The press is using the word default, but the ISDA is using the word ‘auction.’ Clearly, the amount of CDS’s outstanding is infinitely more than the $3.5 billion that is being quoted.”
Jim Sinclair continues:
“The BIS confirms, in the area of CDS’s the total outstanding is approximately $37 trillion. So I believe the reports being given about this just being a small and modest market event is false. As a market observer and having more than 50 years in the business, the real number is at least 50% or more of the existing $37 trillion that is related to Greece.
The $3.5 billion figure being quoted in the press could easily be the reporting to the US Comptroller of the Currency. For example, a foreign, non-consolidated subsidiary of a US bank, operating out of London, reports the size and kind of the over the counter derivatives to the BIS, not the Comptroller of the US…..
Friday Technical Take Blog Post:
We are seeing stocks, oil and the dollar move up nicely today.
Stocks are pushing deep into a resistance level with very light volume… not a bullish sign. This is why we took profits yesterday with our SSO trade once we reached our dead cat bounce target of 2.5%. With it being Friday volume should only get lighter as the say progresses. I am starting to look at buying SDS as risk is low in my opinion but I’m going to let the morning play out first and re analyze in the afternoon.
Pre-Dead Cat Bounce Warning:
The rising market has sent the volatility index tumbling lower and this just goes to show why you must manage position and use protective stops. I know many of you were angry that I said to take partial profits and that we got stopped out yesterday on the VXX trade for a net gain of 2.9% in three days. Maybe one day emotional traders will see that you must trade with the market and adjust your trade outlook while in the trade. The market does not stop and wait for you to see the light, rather it will just steam roll you and never look back.
So with that being said I am starting to really like the VXX again for another buy signal. With any luck it could keep dropping for most of the session and we could go long this afternoon.
Crude oil is moving nicely in our favor today up another 2% on our 2x leveraged ETF’s. I am keeping my stop at breakeven for now as but that may change by the end of the day if we break the $109 level which is unlikely. Where to put your stops for any trade is always a tough call. It varies on the time frame, overall market condition and the size of your position so don’t think it’s just as simple s using the previous pivot high or low. That being said, those are good places for them if you have the timing correct or if the market co-operates with you…
*One key thing to point out today, the dollar bounced off support which is what I warned about last night and again this morning in pre-market. The strong bounce in the dollar has not caused any selling in oil or stocks this morning. I think that is based on the strong jobs report this morning. More jobs means businesses should be getting stronger and the more gas/oil will be consumed. But if the dollar keeps on moving higher and breaks above this key resistance level in the next few trading sessions then it will likely cause selling in stocks. Oil may hold up because demand will still be there.
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Miners ETF (GDX) finds itself on channel support and has created a couple of bullish wicks of late. Aggressive investors should consider buying on support with a stop below the channel.
A quick glance at the complete quarterly data series in linear chart suggests a bubble in net worth that peaked in Q2 2007 with a trough in Q1 2009, the same quarter that the markets bottomed. The latest Fed balance sheet shows a total net worth that is 15.9% above the 2009 trough but still 12.5% below the 2007 peak. The positive news in the Q4 balance sheet is that real total net worth has increased 2.1% from Q3 of 2011, although the year-over-year number is a fractional decline of 0.6%.
But there are problems with this analysis. Over the six decades of this data series, total net worth has grown by 5000%. A linear vertical scale on the chart above is misleading in its failure to provide an accurate visual illustration of growth over time. It also gives an exaggerated dimension to the bubble that began in 2002. (more)
What's most interesting about all this is that Germany may follow in Hugo Chavez’s footsteps and repatriate their gold to Germany so as to have direct possession of and ownership of their gold reserves. It's really the only way to protect a central bank's gold ownership, since by simply going in and asking the New York Fed to show Germany "their" gold, the Fed can walk them in and show them a pile of gold and tell them that it is theirs. The next day they can walk Chinese officials in and show the Chinese the exact same pile of gold and tell them that the gold is theirs.
Possession is the only sure protection.
Germany’s huge gold reserves – 3,396.3 tonnes of gold are some 73.7% of Germany’s national foreign exchange reserves, and are held not only in Germany but at the New York Fed, in London and in Paris. Dumb.
What kind of pressure will the U.S. put on Germany to prevent them from repatriating their gold? The banksters clearly have German Chancellor Merkel in their pocket, but this is unlikely to be influence that is deep into German political leaders. Thus, a run on gold, started by Germany, is not an impossibility.
In this scenario, the noise you would hear is the spike in gold as Bernanke prints more dollars for open market purchases of gold to fill demand for delivery by various central banks. Yikes.
Bob Chapman - Discount Gold and Silver Trading - 09 March 2012 : Gold and silver prices are back up again and it is likely that the rally will continue for next week despite the recent Greece's bailout....hold on to your gold and silver coins bullion and shares the best days are ahead of us.