US Stocks Close August On Sour Note; DJIA Off 48 Pts

An overnight stock market slide in China spooked investors in U.S. industrial, materials and energy companies, including Caterpillar, Alcoa and Exxon Mobil, as a flight to safety weighed on U.S. stocks Monday.

Since peaking on Aug. 4, the Shanghai Composite has given back nearly a quarter of its value, including a drop of 6.7% on Monday. Throughout the world, and especially in the U.S., investors have been touting China as further along the recovery cycle, which has in turn lifted several stock market sectors in the U.S. Throughout the U.S. stock market's run since hitting decade-long lows in March, metals and energy stocks have been at the forefront.

But on Monday, materials stocks were weighed down as more China declines created trepidation. Within the Dow Jones Industrial Average, aluminum giant Alcoa lost 45 cents, or 3.6%, to 12.05. Other decliners in the index included Caterpillar, down 1.40, or 3%, to 45.31, and Exxon Mobil, off 97 cents, or 1.4%, to 69.15, as the oil giant was weighed down by a decline in crude prices. (more)

Wall Street Journal Europe August 31 2009

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Technically Precious with Merv

FREE weekly precious metals investment newsletter for August 28, 2009.

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Will Gold Reach $5000?

Martin Armstrong’s latest contribution poses the question of whether or not gold will go to $5000.
He does say it will reach $3000.
Mr. Armstrong, although living a complex life probably as a victim, has NOT been wrong ONCE on trend since I first knew him in the 1970s.
Keep in mind that loss of confidence in government is loss of confidence in the currency of that government. It is not jumping up and down yelling bad government.
Please review the following, and then you will better understand my strategy.

http://www.scribd.com/doc/19199220/Will-Gold-Reach-5000-809

Cerberus clients overwhelmingly want out: report

Cerberus Capital Management has been swamped with redemption requests with the Wall Street Journal reporting that investors are asking to pull out $5.5 billion or 71 percent of assets from its hedge funds.
Cerberus last month tried to entice investors into staying with the firm, but found that its clients overwhelmingly wanted to leave, the newspaper reported. (more)

Is hyperinflation on the way? We’re spending like there’s no tomorrow.

The government printing presses continue to pump out currency with the backing of the Federal Reserve and, as a result, a bottomless pit is being created for all of us.

It is of the utmost folly to think that these spending programs by the politicians in Washington are of lasting benefit (think future tax increases) to the populace as a whole. Sure, the CARS program provided a temporary boost for a few — mainly dealers who sell vehicles bearing Japanese labels — but with no substantial gain for American label manufacturers. (more)

Economy Bottoming, Demand Improving, Frontline Says

The world economy may be improving from its worst slump in six decades, bolstering demand, said Jens Martin Jensen, head of the management unit of Frontline Ltd., the world’s biggest operator of supertankers.

The company, based in Hamilton, Bermuda, posted a better- than-expected 91 percent drop in second-quarter profit today.

“On the demand side, maybe the world economy has hit the bottom and things are starting to improve,” Jensen said by phone today from Oslo.

European confidence in the economic outlook increased twice as much as economists forecast in August, a European Commission report showed today. The U.S. economy, the world’s biggest oil user, shrank less than expected in the second quarter, and France and Germany returned to growth in the same period. (more)

MARC FABER ON LATELINE BUSINESS INTERVIEW AUG 26, 2009

The Trend Trader for Monday, August 31

Foreign Policy - September/October 2009

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FOREIGN POLICY is the premier, award-winning magazine of global politics, economics, and ideas. Our mission is to explain how the world works - in particular, how the process of global integration is reshaping nations, institutions, cultures, and, more fundamentally, our daily lives.

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Kiplinger's Personal Finance - October 2009

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World Financial report, August 28,2009

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Business Week (07/09/2009)

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Natural Gas Supply squeeze

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Lefrak: Commercial Real Estate Will Kill 500 Small Banks

Looming Crises Golden Exits

In July, Vienna’s Erste Bank, released its 2009 Special Report on Gold, In Gold We Trust. The analysis of the current gold market and its future direction by Ronald-Peter Stöferle and his colleagues at Erste Bank is commendable both for its information and its timeliness; for, today, the future of gold is inextricably interwoven with everyone’s future—whether they know it or not.

The current economic collapse has its roots in a crisis caused by the decline in the value of paper money over time resulting from the removal of gold and silver from global monetary systems. Previously, for much of mankind’s history, money was gold and/or silver and its value was intrinsic and fixed. (more)

Cramer: Rally Stops Before Dow 10,000

Jim Cramer, host of CNBC’s Mad Money, says the stock market rally will peter out before the Dow Jones Industrial Average breaks 10,000.

While the underlying economic fundamentals are strong, much of that is already priced into the market, he says. The Dow has soared 44 percent from its March low, trading at 9,531 Thursday afternoon.

“As we get closer to Dow 10,000, a level that I don’t think we’ll breech, I just can’t like the market as much as I do at Dow 9,000,” Cramer said on his show.

The only way the Dow will surpass 10,000 is if “we get all sorts of positive new information.” (more)

The Economist (August 29th - September 4th 2009)

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The Wall Street Journal Asia August 28-30 2009

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Wall Street Journal Europe August 28 2009

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Stock advisors sentiment index hits late-2007 levels

An indicator of investor sentiment on Wednesday showed stock market optimism had hit levels last reached in late 2007, the start of the last bear market and a possible sign that the recent rally is ready for a pullback.

The Investors Intelligence Advisors Sentiment index, which gauges the stock advice of about 150 newsletters and other paid market-advice outlets, said the portion of positive stock advisers jumped to 51.6% in the past week, the highest since December 2007.

Bears fell to 19.8%, the first time since October 2007 that the percentage fell below 20%.

A parallel with October 2007 is notable because the S&P 500 /quotes/comstock/21z!i1:in\x (SPX 1,031, +2.86, +0.28%) hit a peak that month and then tumbled for 17 months, losing nearly two-thirds its value by the time it hit a March low. (more)

S&P 500 Approaches 200-Month Moving Average: Technical Analysis

A decline in the Standard & Poor’s 500 Index below its 200-month average would probably signal an additional slump of as much as 6.5 percent, according to Chicago-based Technical Analytics Inc.

The measure finished at 1,028.12 yesterday. That’s 1.2 percent more than 1,015.58, its average close on the 26th day of the past 200 months, according to data compiled by Bloomberg. Falling below that level would presage a drop to about 990, said Al Bicoff, the president of Technical Analytics. If that is breached, the S&P 500 might slip to 950, he added.

The S&P 500 plunged 25 percent from the start of the year through March 9 before rallying 52 percent in the steepest advance since the Great Depression. The index has traded higher than its 200-day moving average since July 13 and rose 17 percent above it yesterday, the most since April 1999. That distance has increased the importance of the 200-month average, which is less studied by analysts, Bicoff said. (more)

Wall St Unspun - Peter Schiff - August/26/09

Hummel: The US Will Default On Its Debt

The flood of debt that the US is taking on in its efforts rescue to economy will combine with huge social insurance obligations--Medicare, MedicaidSocial Security--to create an unsustainable level of public indebtedness, economist Jeffrey Rogers Hummel argues in at length here.

Faced with this mountain of debt, policy makers will have just two choices: repudiate the debt or engage in hyper inflation to monetize it, Hummel writes. And faced with that choice the Treasury will likely protect the currency and default on Treasuries. (more)

"In the Tank Forever": U.S. Consumers, Retailers in a "Death Spiral,"

Retail maven Howard Davidowitz paid another visit to Tech Ticker this week. And despite signs of improvement in consumer confidence and retail stocks rising, Davidowitz is steadfast in his belief the consumer is dead.

Rather than summarize, let me just highlight some of his best one-liners:

On retail:

• "The retail business is terrible... It's almost all negative."
• "We're going to close hundreds of thousands of stores."

On the consumer:

• "They’re still over leveraged, they're losing jobs, their credit has been cut back." (more)
  

Green Shoots or Greater Depression?

While we aren't contrarian for the sake of being contrary, more often than not that is the position in which we find ourselves. Today, with the media falling all over itself to paint a rosy outlook for the economy while simultaneously voicing encouragement to the new administration in its remake of the nation in previously unimaginable ways, it's hard not to question our conviction that the worst is yet to come.

Could the economy really recover this quickly from the traumatic trifecta of a record real estate bubble, leviathan levels of debt, and a global credit collapse? We don't see it as remotely possible, but yet... but yet... there for everyone to see are countless happy headlines and breathless exhortations that the worst is behind us.

So, is it Green Shoots or Greater Depression? (more)

Poll Reveals 34 Percent of U.S. Workers Surveyed Have Only One Week or Less of Savings to Cover Expenses if Laid Off from Work

Despite the fact that most financial advisors caution workers to save the equivalent of six months’ salary in preparation for troubled economic times, a recent Monster Meter Poll reveals more than one-third of U.S. workers surveyed on Monster.com admit they have only one week or less of savings to cover living expenses if they were to be laid off from work. Monster.com is the leading global online career and recruitment resource and flagship brand of Monster Worldwide, Inc. (NYSE: MWW).

Over a one week period beginning July 6 and running through July 13, more than 16,000 visitors to Monster.com participated in the Monster Meter Poll question “If you were laid off without severance, how long would your savings cover your living expenses?” Thirty-four percent of U.S. workers report their savings would last one week or less if they were laid off, compared to 20 percent who say their savings would last six months or longer, according to a nationwide poll conducted by Monster.com®. (more)

U.S. stock market takes detour from positive economic data

The U.S. stock market continued a recent pattern Thursday by tracking the price of oil while shrugging off good news, with positive data seen as already factored into the market, while moves in China fueled worries about a recovery.

"This week was the first that we've seen recently where we didn't sell off on good news, but we also didn't continue to march higher," said Peter Boockvar, equity strategist at Miller Tabak.

"In the last couple of days, the market is showing signs of fatigue," Boockvar observed.

On Wall Street, energy shares pared earlier losses, with equities also erasing intraday declines to turn mildly higher as the price of crude oil rose to $72.49 a barrel on the New York Mercantile Exchange after earlier edging below the $70 mark. Read Futures Movers. (more)

Wall Street Journal Europe August 27 2009

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The American banking system is not improving...

The American banking system is not improving, the FDIC reports.

This morning, the government agency added 111 more lenders to its “problem bank” list, which now stands at a 15-year high of 416 banks. That’s nearly $300 billion in combined assets at risk. As always, the FDIC will not name names, lest the list might actually become useful.

What’s more, as we forecast Monday, the FDIC’s deposit insurance fund took a major hit in the second quarter. Even after raising $5.6 billion in replenishments, the fund fell from $13 billion to $10.4 billion. We hasten to add this still doesn’t account for the roughly $7 billion in losses occurred by the Colonial and Guaranty failures.

In all, FDIC insured banks reported a $3.7 billion net loss in the second quarter, only the second quarterly loss reported in the last 18 years.

The FDIC can borrow up to $500 billion from the Treasury for future bank failures and deposit rescues… hard to believe that they won’t be tapping that backstop soon.
Agora Financial

McAlvany weekly Commentary, August 26, 2009

Exchange Controls On The Horizon

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U.S. Dollar Likely to Gain Versus Loonie: Technical Analysis

Aug. 26 (Bloomberg) -- The U.S. dollar will likely extend its two-day advance against its Canadian counterpart after posting a “bullish daily reversal” yesterday, according to Citigroup Inc. A rally in the greenback to C$1.1126 against the Canadian dollar, nicknamed the loonie, “is expected,” technical analysts Tom Fitzpatrick in New York and Shyam Devani in London wrote in a note to clients today. “A close above there would be quite a bullish development over an extended period.” Canada’s currency dropped 1 percent to C$1.0974 per U.S. dollar at 4:43 p.m. in Toronto, after sliding 1 percent yesterday, its first loss in six days. One Canadian dollar buys 91.12 U.S. cents. A move to C$1.1126 would represent a 1.4 percent rise in the value of the U.S. dollar. (more)

Stocks led by four wounded horsemen

They say you can't trust the government. Don't tell that to Wall Street traders.

A bizarre trend has emerged during these hazy, lazy days of late summer. Overall market volume is unsurprisingly wafer-thin, but a big chunk of trading has been in just four financial companies that have received a healthy dose of support from Washington in order to make it through the credit crisis.

For the past few days, Citigroup (C, Fortune 500) (which taxpayers now own a third of), mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) (which were placed under government conservatorship last September) and Bank of America (BAC, Fortune 500) (which has needed $45 billion in bailout funds) have been far and away the most actively traded stocks on the New York Stock Exchange. (more)

Real US unemployment rate at 16 pct: Fed official

The real US unemployment rate is 16 percent if persons who have dropped out of the labor pool and those working less than they would like are counted, a Federal Reserve official said Wednesday.

"If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart.

He underscored that he was expressing his own views, which did "do not necessarily reflect those of my colleagues on the Federal Open Market Committee," the policy-setting body of the central bank. (more)

US Stocks Slightly Lower On Weak Industrials

U.S. stocks traded slightly lower Wednesday as several sectors that contributed to last week's big rally pared back, though the declines were muted by a report of rising new home sales.

The Dow Jones Industrial Average was recently off about 14 points at 9525, on the heels of six straight days of gains. Within the index, decliners were led by industrials, such as 3M and General Electric, and financials, including JPMorgan Chase. Both sectors had been at the forefront of the Dow's recent winning streak.

The Nasdaq Composite Index was off 0.4%. The S&P was down 0.3%, hurt by a 1% decline in its industrial sector. Its materials sector was off 0.7%. (more)

The Second Coming of Natural Gas

By Chris Mayer

Natural gas is in the dumps. And that is a good reason to own some. Cycles self-correct, and for natural gas, the self-correction process is already in the works.

Low natural gas prices, for example, are bringing in fresh demand from utilities. They are switching from coal, which is more expensive and comes with the added threat of new and as-yet- undefined carbon regulations. Natural gas production gives off about half of the carbon dioxide as coal. You can also build natural gas plants more quickly than coal plants. Natural gas is also cheaper to move. Therefore, power companies are upping the investment in natural gas. Already, coal-to-gas swapping has created incremental demand of 3 billion cubic feet per day.

The consensus is we'll have cheap gas for years. The firm Wood Mackenzie says natural gas prices won't recover until 2015. That's a pretty good crystal ball they got over there at Wood Mackenzie.

I think that prediction will be wrong.

Joe Rosenberg, the savvy chief investment officer at Loews Corp., a stock I have recommended to the subscribers of Capital & Crisis, has made a number of timely calls, including jumping on fertilizers in 2002. Today, two of his favorite investments are natural gas and gold.

He calls natural gas "one of the cheapest commodities in the world today and -- I would daresay -- one that over the next 10 years will be a very, very attractive commodity." I agree with Rosenberg. Cheap commodities have a way of becoming dear after a time.

"The best way to own natural gas,” says Rosenberg, “is to have very long-term reserves of natural gas in the ground -- and not worry about it." Loews has 20-year reserves of natural gas through its subsidiary, HighMount.

Another way to play the rise in natural gas production is to own the stocks that do the drilling and make the equipment. I like Tesco (TESO:nasdaq), a solid play and a good shot at a triple from here. It basically makes the motors that power those drilling rigs working in the shale gas plays.

Robert Rodriguez, the great manager of First Pacific Advisors' Capital Fund, shares Rosenberg’s bullish outlook for the energy sector. Rodriguez has been buying energy stocks all year. In fact, nearly 67% of his purchases in the last quarter were in energy. He added new positions and bolstered older ones. As he writes:

"In each case, we deployed capital in companies that have strong balance sheets with managements that have expressed a policy of living within their current cash flows. The E&P companies were acquired at valuation levels that are 20-40% less than the value of proved reserves, on a per share basis, than in 2002. We estimate that both the new and existing energy service companies were acquired at valuations that were approximately 30% of replacement cost." (Rodriguez's fund owns Ensco [ESV:nyse], for example, which is a stock I recommended several months ago in Capital & Crisis).

Bargain valuations are not the only appeal of the energy sector, according to Rodriguez. He also sees energy as a hedge against inflation. "We view the energy sector as both a store of value and a hedge against a future inflation,” Rodriguez explains. “It is one of the few sectors where we believe the underlying fundamentals will continue to improve despite the worldwide economic contraction. With worldwide oil depletion rates of 9% annually for those fields past peak and U.S. natural gas first-year production decline rates of 30- 50%, these trends should be supportive of energy prices longer term. Again, within three-five years, we believe oil prices will be back above $100 or even higher than $150 per barrel."

I agree with Rodriguez. And while the price of oil has gone up a lot, the price of natural gas is scratching seven-year lows. So natural gas may be even better than oil, since it has not moved much, yet many of the same oil dynamics apply. Of the E&P companies Rodriguez added recently, most are heavy on natural gas. My favorite natural gas producer is Contango Oil & Gas (MCF:amex), which is still very cheap. It's also a debt-free and low-cost producer.

One of these days, natural gas will recover from its depressed prices. So why not avoid the rush. Buy now!

Wallstreet Journal Europe August 26 2009

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Gold ‘Deja Vu’ Shows Advance Above $1,000: Technical Analysis

Gold will rise to more than $1,000 an ounce next month based on moving-average “deja vu” patterns since the start of 2005, according to Barclays Capital.

This year’s trading was similar to previous patterns that indicated gold has a tendency to “break higher” in September and the 200-week moving average showed the uptrend on the precious metal remained intact, Jordan Kotick and other analysts at Barclays wrote in a report on Aug. 21.

Bullion jumped 7.8 percent in September 2005 and 10 percent in September 2007, laying the ground for the metal to rise to new highs in the following months. Gold traded at $946.20 an ounce at 12:40 p.m. local time in Singapore, up 7.3 percent this year. The metal was “mired” in a contracting range between $967 and $928, the analysts said. (more)

Case Shiller Improves Monthly, Falls Yearly

Data through June 2009 by the Case-Shiller Home Price Indices shows that the U.S. National Home Price Index improved in the second quarter of 2009, while falling year over year.

How much voluntary foreclosure moratoriums impacted pricing is an unknown in terms of degree, but they likely had a significant effect.

The chart below shows the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. (more)

Berkowitz: Buy Pharma on Obama Dip

Fairholme Fund manager Bruce Berkowitz says that investor fears over what the Obama administration’s policies could do to pharmaceutical and healthcare companies drove down their share prices, making them even more attractive investments.

Berkowitz, whose fund holds several drug and healthcare companies, told Forbes he became interested in the sector not because of the unbelievable money that the companies are making, but “because of the fear that the new administration was going to destroy our drug companies, destroy our healthcare companies, which sent the prices of these securities over the cliff.”

“The (share) price you paid versus the earnings that the companies were making were quite reasonable and one could get a double-digit yield,” Berkowitz says. (more)

Bove: Bank Stocks Ready to Slide

After their recent huge run-up banks stocks now are overvalued, says superstar bank analyst Dick Bove of Rochdale Securities.

Until the end of the year bank shares “are probably a little bit ahead of themselves,” Bove told Moneynews.com’s Dan Mangru in an interview.

“Bank of New York is up 200 percent, SunTrust and State Street are up 300 percent, Citigroup is up 400 percent, Bank of America 500 percent,” he points out.

“Yet most of these companies, other than State Street and Bank of New York, are going to lose money in the third quarter. And probably they’re going to lose money in the fourth quarter.” (more)

Robert Kiyosaki Why the Rich Get Richer

"Is the crisis over?" is a question I am often asked. "Is the economy coming back?"

My reply is, "I don't think so. I would prepare for the worst."

Like most people, I wish for a better future for all of us. Life is better when people are working, happy, and spending money.

The stock market has been going up since March 9, 2009. Talk of "green shoots" fill the air. Yet, in spite of the more positive news, I continue to recommend that people prepare for the worst. The following are some of my reasons:

1. I believe the stock market is being manipulated. I suspect the government, banks, and Wall Street are doing everything they can to keep the market from crashing. Our leaders know that nothing makes the world feel better than a raging bull market.

Do I have any proof that the market is being manipulated? No. I just smell a rat, or a pack of rats. I believe greed, self-interest, arrogance, and fear control the financial markets. I suspect those in charge will do anything to keep us all from panicking... and I don't blame them. A global panic would be ugly and dangerous. (more)

Candlestick Formations For Google, Gold, and Oil

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Tsunami of Home Foreclosures to Hit US: Economist

A tsunami of home foreclosures is set to hit the US as banks are unable to keep bailing out tenants that can’t afford their rent and struggling home owners show their anger at the financial crisis by giving up on their mortgage, David Karsbøl, chief economist at Saxo Bank, told CNBC.

“I believe we are about to see a tsunami of foreclosures in the US,” Karsbøl said.

“A lot of homes have been held back because if the banks are foreclosing on them they will have to do a writedown on the mortgages they have on their balance (sheets),” he said. “That’s why they have been reluctant to do so,” he added. (more)

Highest P/Es for Commodity Companies Hide Bargains

Commodity companies, the most- expensive stocks in the Standard & Poor’s 500 Index, are turning into relative bargains.

While investors paid an average 33.1 times earnings this year for copper, plastic and seed producers last week, the premium fell to 17.7 based on 2010 analyst estimates that call for profits to almost double, data compiled by Bloomberg show. The decline in the price-earnings ratio is the steepest for any group in the S&P 500 and would leave the companies 23 percent less expensive than their historical average of 23.2 times.

To some of the world’s biggest hedge funds, that opportunity is too good to pass up, especially as brokerages boost forecasts following second-quarter profits that were 60 percent higher than estimates, the most of any industry. At a time when bears say China’s moves to rein in speculative investments may curb demand, Harbinger Capital Partners, D.E. Shaw & Co. and Marshall Wace LLP all bought commodity producers last quarter amid signs the global economy is emerging from its first recession since World War II. (more)

The Calm Before the Financial Storm?

Is the rally over?

Not at all! The world’s bankers say the economy is recovering. Investors believe them; they’re bidding up stocks.

The Dow rose 155 points on Friday. And today, stocks are rising in Asia. Oil is over $74. Gold rose $13 on Friday…to close at $954. And the dollar is killing us softly…sinking to $1.43 per euro on Friday.

Stocks and oil are at their highest levels so far this year. With such profits at hand people figure they don’t need the dollar. Investors run to the safety of the greenback when financial storms approach. But now…they think it will be clear sailing.

“Worlds bankers suggest rebound may be under way,” says a headline at The New York Times.

Is the world economy really recovering? Should you buy stocks now to take advantage of this new bull market? (more)

The Bad News Banks

Star analyst Richard Bove thinks 150 to 200 more banks will fail within the next year. So much for things looking up.
Richard Bove, one of Wall Street's most influential analysts, foresees further trouble for banks on the horizon. In fact, he believes an additional 150 to 200 will fail within the next 12 months.

Bove, who is the vice president of equity research at Rochdale Securities, made the call in a report that examined the Federal Deposit Insurance Corporation's capacity to meet the continued challenges of the financial crisis. The bright side is that the nation's top 19 banks appear in a good position. (more)

World faces hi-tech crunch as China eyes ban on rare metal exports

A draft report by China’s Ministry of Industry and Information Technology has called for a total ban on foreign shipments of terbium, dysprosium, yttrium, thulium, and lutetium. Other metals such as neodymium, europium, cerium, and lanthanum will be restricted to a combined export quota of 35,000 tonnes a year, far below global needs.

China mines over 95pc of the world’s rare earth minerals, mostly in Inner Mongolia. The move to horde reserves is the clearest sign to date that the global struggle for diminishing resources is shifting into a new phase. Countries may find it hard to obtain key materials at any price. (more)

Fed to Steal State Pension Funds

Congress may confiscate every state pension fund into the bankrupt social security system. Indications that this strategy is being discussed in Washington have come in to us from several sources over the last few days.

Tonight, a correspondent who has just come home from a Tea Party Townhall Meeting in Salado, Texas with US Representative John Carter (R-Round Rock) issued the warning. She said, “Representative Carter informed the crowd that talk has been bandied about Congress to appropriate every state’s pension plans into the bankrupt Social Security System.” She is absolutely 100% sure that she understood him correctly.

Dear readers, please understand that we are bloggers, and not professional journalists. Our information comes from ordinary folk who do the best they can to understand the political scene. Ordinarily, this would seem so outrageous that we would wait to share the news until we could get more clarification. But the current administration has moved with such breathtaking swiftness to federalize private assets and plunge our country into socialism, that we feel the need to sound the alarm, just in case. (more)

10 Solid Dividend Stocks Worth Considering

The market has been defying gravity this summer, with the S&P500 up 49% since March. But most of the appreciation has been in what I consider lower quality stocks. Many homebuilders with doubtful prospects have doubled from their recent lows, while stocks that are somewhat recession proof like McDonalds (MCD), Walmart (WMT), Coca-Cola (KO) and Procter & Gamble (PG) have bounced a mere 15-20%.

According to Bloomberg, “companies with the worst earnings led the 45 percent gain in the Standard & Poor’s 500 Index since it fell to a 12-year low five months ago”. It might be a good time to sell some of your winners that have done exceptionally well and either wait for a pull-back, or, if you’re trigger happy, buy solid investment-grade companies. (more)

On the Edge with Max Keiser - interview with Alex Jones

Marc Faber on Kingworldnews, August 19, 2009

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$107 trillion in liabilities

AS Americans listened to people yammer on about "death panels" and other distortions of some of the health "reform" proposals circulating in Congress, larger and more important questions have gone unasked and unanswered.

First on the list should be: Are members of Congress out of touch with reality?

The nation can't pay for Social Security and the health entitlement programs it has now. (more)

The Korelin Report, August 22, 2009

Guests include: Eric Coffin, David Morgan,Roger Wiegand, David Cook, Peter Grandich (more)

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Rise of the Super-Rich Hits a Sobering Wall

The rich have been getting richer for so long that the trend has come to seem almost permanent.

They began to pull away from everyone else in the 1970s. By 2006, income was more concentrated at the top than it had been since the late 1920s. The recent news about resurgent Wall Street pay has seemed to suggest that not even the Great Recession could reverse the rise in income inequality.

But economists say — and data is beginning to show — that a significant change may in fact be under way. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon. (more)

FREE NEWSLETTER: Technically Precious with Merv

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Global Trading Showing No Sign of Recovery

I happened to be watching The Kudlow Report last tonight were First Trust’s Chief Economist, Brian Wesbury, stated that the economy is in great shape and global trade is fantastic. He cited the Baltic Dry Index as an indicator of strong trade. However, there must be another Baltic Dry Index as the one everyone else follows shows a horrible past month.
In fact, the Baltic Dry Index has dropped another 3.1% Wednesday on top of horrible losses in the last few weeks. Couple that with Japan’s latest trade data which shows the China is now Japan’s largest trade partner. Furthermore Japan stated that exports to the US dropped by 43% to $40.5B which is a stunning drop since most have declared the recession is over.
The latest report from Japan also said the following: (more)

Millions face shrinking Social Security payments

Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

"I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal." (more)

The Economist August 22nd 2009

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Jay Taylor Radio Show, August 18, 2009

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Six Important Gold Price Indicators

Here are six things I'm personally keeping an eye on to gauge the direction of the price of gold:

1. COT report. This report shows that commercial traders -- generally believed to be "smart money" traders involved in day-to-day operations of the commodity in question -- are short gold. The commercial traders are increasingly short while others are increasingly long; in such a scenario, when the non-commercials run out of fuel in their trend, they will start liquidating, and the commercials can see this as an opportunity to add to their short positions and push the market further down.

Below is the chart that illustrates. (more)

World Financial Report, August 20, 2009

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Monetization of USTreasurys In Isolation

Every few months a chart comes along that needs almost no follow-on paragraphs to make the point of the issue. The chart provided by CIGA Eric covers several important types of US$-based bonds, their inflow and outflow, and the aggregate GrandNet. The financial data is publicly available from the USGovt TIC Reports. The messages are clear. Inflows of foreign funds are dwindling. In the case of USAgency Mortgage Bonds and USCorp Bonds, the nation is witnessing something unprecedented, the net outflow of funds. This is outright rejection. This chart exposes the isolation problem of the USDollar in the bond world, clearly the most important market beneath the currency market. The printing press is the last option. (more)

A Flock of Black Swans

From the battle lines in Extremistan, the time is growing near for these birds to swarm together as the seasons change once again. So what happens if there is one more than Black Swan event in a compressed period of time? Let’s see what could threaten this little bubble of joy and happiness that our friends in Bubblevisionland live in and what could trigger the Messiah taking that course of action that Vice-President Biden warned about before his regime took power. 1. Swine Flu Disaster - The vaccine is only partially effective and due to the economic situation, fewer people go to the Doctor, work more and spread the disease rapidly throughout the public in North America. This kills the Christmas retail season, possibly hundreds of thousands of citizens, and turns whatever projected positive GDP numbers into a sinking nightmare. (more)

Days Away From Economic Chaos?

America is just a few days away from a possible day of reckoning. I again call attention to this day, August 25, when the Federal Deposit Insurance Corporation issues its 2^nd Quarter report for 2009 on the state of health of American banks.

It has not particularly alarmed Americans that its growth and prosperity have been built upon debt. The American public is a bit desensitized, particularly since the Y2K threat fizzled. We must wait and see how Americans respond to the upcoming FDIC report.

The following charts tell the story. There are roughly 8400 American banks that set aside a small portion of their profits to aggregately insure bank depositors should their local bank fail. A plethora of bank failures has depleted the FDIC reserve fund from $52.8 billion in 2008 to $13 billion in the 1^st Quarter of 2009. (See chart below) (more)

Even Warren Buffett Is Now Saying Bonds Could Crack!

I’ve made no secret about my view on U.S. bonds and the U.S. dollar …

I’ve minced no words, and cut no corners …

Instead, I have given you specific, consistent guidance on those fronts: Namely stay the heck away from long-term Treasuries and hedge yourself against the government’s unofficial policy of trashing the greenback.

It started last year in my December 5 Money and Markets column, when I issued the most strident warning I’ve EVER released on bond prices. I labeled long-term Treasuries “the biggest bubble of all” and warned you that … (more)

The Wall Street Journal Asia August 21-23 2009

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U.S. stocks and crude in synch; both rise to 2009 highs

As crude oil on Friday finished at its highest level for the year near $74 a barrel, energy shares rallied, fueling the broader U.S. stock market to cross the finish line with similar gains. But if oil does a replay of its performance last summer, what's been viewed as a bullish signal could turn bearish for U.S. equity investors.

"If it jumps back up to $140 (a barrel,) for the U.S. economy that is broadly negative. If it drops back to $40, it's a positive in the short term, since it's a tax break for consumers and businesses. The opposite is true when prices are going up," said Ryan Brecht, senior economist North America, Action Economics.

Asked at what price level the stock market would no longer be applauding crude's rise, Dan Greenhaus, chief economic strategist, Miller Tabak & Co. replied: "Well, last year we found out that around $100, the market took notice." (more)

The End of Cheap Water?

The price of water is starting to rise in a big way, at least in China. I’ve expected this for a few years.

To set the table, water rates in China have been so far below the global average it’s ridiculous. Especially when you consider the severe water problems in China. The graphic below is from The Wall Street Journal (“China Cities Raise Water Price in Bid to Conserve” by Andrew Batson):

The Chinese are water-poor. They are sucking their aquifers dry. It is particularly bad in the north of China. The groundwater under the North China Plains is draining away quickly. By some estimates, China will exhaust this water supply in the next ten years. (more)

HUMOR

Nickel May Gain as Stockpiles Fail to Deter Funds: Chart of Day

Nickel, which surged 17 percent the past month, may advance further as “price momentum” and inflation expectations lure fund managers even as stockpiles of the metal approach a 14-year high, according to Commerzbank AG.

The CHART OF THE DAY shows the price of nickel and open interest on the London Metal Exchange. The lower panel tracks inventories in metric tons. The price jumped to its highest level for a year on Aug. 13 and open interest was a record 147,117 contracts on Aug. 14, according to LME data. Stockpiles of the material used to protect steel from corrosion are close to the highest since 1995 amid weak demand in the construction and transportation industries.

“I find the one-way, very dramatic price rise in all metals anomalous given the shaky fundamental basis and rising LME inventories,” Eugen Weinberg, a commodity analyst with Commerzbank in Frankfurt, said in an interview Aug 18. “The price momentum behind metals is so strong that the market is attracting external players.” (more)

The History of the "Money Changers"

Economists continually try and sell the public the idea that recessions or depressions are a natural part of what they call the "business cycle".
This timeline below will prove that is simply not the case. Recessions and depressions only occur because the Central Bankers manipulate the money supply, to ensure more and more is in their hands and less and less is in the hands of the people.
Central Bankers developed out of money changers and it is with these people we pick the story up in 48 B.C. below. (more)

4 million home loans are delinquent

The number of Americans who have fallen at least 30 days behind on their home loan payments jumped 44% in the second quarter from a year ago, according to an industry report.

That puts delinquencies at a record 9.24% of mortgages, according to the National Delinquency Report from the Mortgage Bankers Association (MBA). That represents more than 4 million of the 45 million borrowers covered by the report.

What the rate does not include, however, are loans already in foreclosure. Some 4.3% of all the mortgages are in that stage, up from 3.85% three months earlier and 1.55 percentage points from one year ago. (more)

Expect Many More Bank Failures Ahead

The number of banks that had non-performing assets equal to at least 5 percent or more of their assets — considered a critical threshold - more than doubled in the year through June, according to data compiled by Bloomberg.

Altogether, the 150 banks hold assets of $193 billion, 15 times the FDIC's entire insurance fund.

“These numbers are off the charts,” says Blake Howells, an analyst at Becker Capital Management, referring to the nonperforming loan levels at companies he follows.

Banks are losing the “ability to try and earn their way through the cycle.”

The biggest banks with nonperforming loans of at least 5 percent include Wisconsin’s Marshall & Ilsley Corp. and Georgia’s Synovus Financial Corp., Bloomberg reports. (more)

PIMCO: Dollar Supremacy Is Coming To An End

PIMCO portfolio manager Curtis Mewbourne is getting a lot of attention for a new report predicting the long-term demise of the dollar, or at least its end as the undisputed reserve currency.

This kind of stuff is great for sensational headlines, though Mewbourne's own argument isn't particularly sensational or novel.

It basically comes down to: The emerging economies, notably China, are coming on fast, and China is starting to do more trade directly with other countries without the need for dollars.

China for example has entered currency swap arrangements with a number of countries so that trade financing can be negotiated in renminbi as opposed to dollar terms. In addition, several countries have signed up to replace part of their foreign currency reserves with new bonds issued by the IMF and denominated in SDRs (Special Drawing Rights), a basket of currencies. (more)

The New American Dream: Renting

'A man is not a whole and complete man," wrote Walt Whitman, "unless he owns a house and the ground it stands on." America's lesser bards sang of "my old Kentucky Home" and "Home Sweet Home," leading no less than that great critic Herbert Hoover to declaim that their ballads "were not written about tenements or apartments…they never sing about a pile of rent receipts." To own a home is to be American. To rent is to be something less.

Every generation has offered its own version of the claim that owner-occupied homes are the nation's saving grace. During the Cold War, home ownership was moral armor, protecting America from dangerous outside influences. "No man who owns his own house and lot can be a Communist," proclaimed builder William Levitt. With no more reds hiding under the beds, Bill Clinton launched National Homeownership Day in 1995, offering a new rationale about personal responsibility. "You want to reinforce family values in America, encourage two-parent households, get people to stay home?" he said. George W. Bush similarly pledged his commitment to "an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, 'welcome to my house, welcome to my piece of property.'" (more)

Market Stages Quiet Comeback

Wallstreet Journal Europe August 20 2009

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The Countdown To The Implosion Of The Dollar

You can take your waves, percentages, algorithms, quants and quarks and throw them directly into the basket. The time for lines and squiggles are behind us. The common shares of the US dollar are and have been in a long term downtrend. That downtrend is 81 days from implosion. The selling of the US dollar and US dollar instruments is increasing in international markets, making it ever more difficult to manipulate the popular US dollar index, the USDX.

The price of gold is all in the dollar, times 100.

The manipulators have built a fundamental spring into gold by their capping activities.

COT has cooked its own goose.

Where the price of gold is concerned, there is no other focus of interest as all points of interest have but one common denominator.

That entity is the US dollar. (more)

McAlvany Weekly Commentary August 19, 2009

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