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Wednesday, September 30, 2009
Early retirements strain Social Security: Is U.S going broke?
In the latest sign the Social Security ticking time bomb is almost ready to explode, an unexpected spike in the number of early retirement claims will cause the entitlement program to run a deficit as early as 2010, nearly a decade ahead of earlier projections.
The system has suffered not only a 23% increase in early retirement applications, but the severe recession has resulted in the loss of 6.9 million jobs. In this negative feedback loop, older employees lose their jobs and thus stop paying into the system while applying for early retirement benefits when they are unable to secure a new job. (more)
Three Trading Videos
This week we have not one, but three trading videos to watch. Each video will offer insights into three of the most important markets in the world.
The first video is on gold and where this market is headed by the end of the year:
Watch here: http://broadcast.ino.com/education/goldcycle921/
The second is about crude oil and where we will see this market heading:
Watch here: http://broadcast.ino.com/education/straightline/
Lastly, a different look at the S&P 500 that you won't want to miss:
Watch here: http://broadcast.ino.com/education/sp500twoforces/
U.S. Economy: Home Prices Increase by Most Since 2005
Home values in 20 U.S. cities climbed in July by the most in almost four years, helping stem the record plunge in household wealth that’s depressed spending. The S&P/Case-Shiller home-price index rose 1.2 percent in July from the prior month, the biggest gain since October 2005, the group said today in New York. Another report showed consumer confidence unexpectedly fell in September, while holding above the record low reached earlier this year.
Home values are rebounding as low borrowing costs and government tax credits lift home sales. Combined with rising stock prices, the gains will begin to restore the $13 trillion plunge in net worth caused by the worst financial crisis since the Great Depression, a process that economists such as Brian Bethune say will take years to complete. (more)
U.S. Government Gold Manipulation Document Declassified
The Federal Reserve, in the 1970's, had a secret agreement with the German government whereby the German government agreed not to buy gold in the open market, or from other governments, at a price above the then-official U.S. government price of $42.22 per ounce, despite the fact that the open market price for gold was then trading between $160 to $175 per ounce.
The information has come to light as a result of a declassified Memorandum sent by then-Federal Reserve Chairman Arthur Burns to President Gerald Ford. The document was originally classified as "Strictly Confidential".
The document was originally posted at ZeroHedge and brought to my attention by Lori Smith. I have since verified the authenticity of the document in a conversation with the Gerald R. Ford Library archivist Mark Fischer. Although the document appears to have a declassification date stamped on it of 6-28-05, Fischer tells me that the document was declassified just recently on 9-15-09. (more)
The information has come to light as a result of a declassified Memorandum sent by then-Federal Reserve Chairman Arthur Burns to President Gerald Ford. The document was originally classified as "Strictly Confidential".
The document was originally posted at ZeroHedge and brought to my attention by Lori Smith. I have since verified the authenticity of the document in a conversation with the Gerald R. Ford Library archivist Mark Fischer. Although the document appears to have a declassification date stamped on it of 6-28-05, Fischer tells me that the document was declassified just recently on 9-15-09. (more)
CNBC September Total Viewership Down 37% YoY
According to Nielsen, CNBC's annual decline in total September viewership was a massive 37%: the worst YoY performance in 2009. The decline in the demo audience also hit a high of 27%. The dilemma for Jeff Immelt is the following: do CNBC pundits keep pumping GE (which everyone ignores, as CNBC's credibility is practically nonexistent), or, at the expense of marking a few hundred billion assets at GECC to fair market value, incite another major market crisis. Perhaps, just perhaps, if the later were to occur, CNBC would have some chance of salvaging its prior year numbers. Although with CNBC now spending hours a day advertising GE engines, it seems like external advertisers couldn't care less: after all, GE is subsidizing its own station by selling them ad space. Business schools have a word for that: vertical integration. Sane people have another word: biased reporting.
Newspaper Stocks Surge As Own News Improves
Newspapers may have finally stopped _ or at least slowed _ their harrowing descent into a financial abyss after three years of plunging revenues, crumbling stock prices and shrinking staffs.
The latest glimmer of hope came Tuesday when Gannett Co., the largest U.S. newspaper publisher, announced that its third-quarter earnings will be substantially above analysts' forecasts.
Although Gannett's revenue for the period, which ended Sunday, fell slightly below analysts' projections, executives said newspaper advertising sales didn't fall as badly as they did in the first and second quarters.
That's not saying much. Gannett's ad revenue from USA Today and its other print publications dived 33 percent during the first half of the year. (more)
Tuesday, September 29, 2009
The Myth of Sideline Cash
A quick look a chart on Money Market Funds shows belies the common belief that “cash on the sidelines” is what powers markets higher. As the chart below reveals, the Market goes up, and as we saw in the 1990s and from 2005-08, so too MMF goes up.
This is evidence against the standard sideline cash argument.
Indeed, rather than investigating these common aphorisms, if you trade on them at face value, you will be disappointed. Unless you thoroughly data verify and prove/disprove ANY AND ALL Wall Street myths, rules of thumb, or standard trading phrases, you are going to a) develop a false belief system and 2) that will eventually lose you lots of money.
A new Magna Carta for our times
“Magna Carta (1215) was the first document forced onto an English King by a group of his subjects (the barons) in an attempt to limit his powers by law and protect their privileges.” (www.wikipedia.org)
Let us think of President Obama in the place of the English King, and the Group of G-20 meeting in Pittsburgh, Pa. this week as Obama’s Barons.
The present-day Barons – the Presidents of the G-20 countries – are restless.
They are not happy with the conduct of affairs of their King, Obama. (more)
Most enduring change may be the permanent loss of millions of jobs
Going to work may never be the same again.
The Great Recession has reshaped the American workplace and work force in ways that will last years, if not longer.
The work force is graying as college graduates can't find jobs, young workers get laid off and older workers delay retirement. People in white-collar jobs are feeling increasingly vulnerable to economic downturns, an insecurity that blue-collar workers have known for years. (more)
U.S. auto sales in September slump post-"clunkers"
U.S. auto sales likely fell in September back to the nearly three-decade lows of early 2009 without government incentives to spur buying, leaving in doubt the timing and pace of a recovery for the battered industry. Nearly 700,000 new cars and trucks were bought by U.S. customers through the government "cash for clunkers" incentive program from late July through the first three weeks of August, a leap from recession-stunted sales earlier in 2009.
The massive jump in buying versus earlier in 2009 depleted the stores for all the major auto manufacturers, leaving industry inventories at historically low levels. (more)
Schiff: Dollar is the New Peso
The U.S. dollar will continue weakening, and investors may borrow it to invest in higher-yielding assets, says Peter Schiff, president of Euro Pacific Capital.
“I don’t know when (the dollar) is going to strengthen,” Schiff told CNBC.
“The dollar isn’t the new yen, it’s unfortunately the new peso.”
A weak dollar and low U.S. interest rates push the greenback toward becoming a carry trade currency, which, like the yen for many years, attracts investors to borrow it cheaply to invest elsewhere. (more)
Monday, September 28, 2009
Technically Precious With Merv, Sept 25, 2009
FREE weekly precious metals investment newsletter, click here
Michael Moore Kills Capitalism with Kool-Aid
A friend recently invited me to a private screening of Michael Moore's
new film Capitalism: A Love Story. The September 16th invite not
surprisingly leaned a certain direction:
"[Michael] Moore takes us into the homes of ordinary people whose lives
have been turned upside down; and he goes looking for explanations in
Washington, DC and elsewhere. What he finds are the all-too-familiar
symptoms of a love affair gone astray: lies, abuse, betrayal and 14,000
jobs being lost every day. Capitalism: A Love Story...is Michael
Moore's ultimate quest to answer the question he's posed throughout his
illustrious filmmaking career: Who are we and why do we behave the way
that we do?" (more)
Wiggin: Bernanke Wrong, Recovery Fictitious
Federal Reserve Chairman Ben Bernanke has declared that the recession is over.
Addison Wiggin, executive publisher of Agora Financial, isn’t buying it.
In an interview with Dan Mangru of Newsmax TV, Wiggin said that the recent economic data, such as GDP and retail sales, don’t tell the whole picture.
“It’s fictitious growth. It’s government stimulus making its way through the economy. But we don’t see any real recovery at the moment.” (more)
Oversold US Dollar threatens stock, commodity, bond prices
When we wrote “Inflating a Bull Market,” we mentioned the inverse relationship between the US dollar and stock prices. In March, the US dollar peaked from overbought levels and began to decline. At the same time stocks bottomed from oversold levels and began to move up. The reason is simple – Stocks are priced in US dollars. As the dollar weakens, it takes more of them to buy stocks (or anything priced in Dollars), which causes prices to rise.
The US Dollar is now oversold and may be poised for a move-up (at least in the shorter term) which should cause the price of “things” priced in dollar to decline (Stocks, Bonds, Commodities, etc) (more)
Study shows a stunning gap between U.S. rich and poor
The rich have left the poor far behind in the United States.
That's according to data posted on the Web site of the National Union of Public and General Employees.
It shows that the top one percent of income earners obtained two-thirds of the income gains between 2002 and 2007.
The gap between the top one percent of income earners and the bottom 90 percent is greater than at any time since 1928, according to the NUPGE. (more)
Saturday, September 26, 2009
The Tiny $0.001 Trillion Silver Market
The Silver Market is small. Very small. I don't think people quite understand how small it is, nor understand fully the implications, meaning how much higher silver prices must go as the market grows to accommodate future silver buyers.
Confusing matters is that the terms million, billion, and trillion mean different things, in different nations, and other nations also have different notations for how to write numbers exceeding 1000. Furthermore, most Americans are also unfamiliar with the terms, since most people don't use these terms in daily life. Who needs a billion french fries? But you do need to understand the numbers, in order to interpret political events, such as the amounts being spent by Congress. (more)
Confusing matters is that the terms million, billion, and trillion mean different things, in different nations, and other nations also have different notations for how to write numbers exceeding 1000. Furthermore, most Americans are also unfamiliar with the terms, since most people don't use these terms in daily life. Who needs a billion french fries? But you do need to understand the numbers, in order to interpret political events, such as the amounts being spent by Congress. (more)
Friday, September 25, 2009
A Look at Strategic Oil Reserves - Whos Buying Oil?
As the U.S. strategic petroleum reserve (SPR) approaches capacity (721.5 million barrels filled out of a total possible 727 million, and will be filled by January 2010), the federal government will fade out of the oil-buying business. Some bearish traders believe that this factor can weigh in on prices, since most petroleum stocks in the United States are government-held rather than private. Bullish traders have also used the filling of the Chinese SPR as a reason that oil should go much higher. The team at Casey's Energy Opportunities believe that planned government buying or selling of crude oil for SPRs actually have very little impact in the overall market. However, an overall drawdown of worldwide inventory could put downward pressure on the price of oil. The various countries also have their particular reasons and influences in decisions to tap their reserves. (more)
Morgan Stanley’s Todd Boosts S&P 500 Year-End Target
Morgan Stanley’s Jason Todd, who had been Wall Street’s most bearish equity strategist, boosted his 2009 forecast for the Standard & Poor’s 500 Index by 17 percent because of higher-than-anticipated earnings.
The strategist recommended investors cut stock holdings in July following a 41 percent surge in the S&P 500 since March 9. Todd now expects the index to finish the year at 1,050 after it rose 10 percent to 1,050.78 since his comments two months ago. He also upgraded his 2010 profit forecast for S&P 500 companies by 13 percent to $70 a share.
“The current rally is typical of what follows major bear markets and is not, in our view, the start of a new multi-year bull market,” Todd wrote in a note to investors dated today. “However, we now think it can run for longer than we previously expected.” (more)
The strategist recommended investors cut stock holdings in July following a 41 percent surge in the S&P 500 since March 9. Todd now expects the index to finish the year at 1,050 after it rose 10 percent to 1,050.78 since his comments two months ago. He also upgraded his 2010 profit forecast for S&P 500 companies by 13 percent to $70 a share.
“The current rally is typical of what follows major bear markets and is not, in our view, the start of a new multi-year bull market,” Todd wrote in a note to investors dated today. “However, we now think it can run for longer than we previously expected.” (more)
US May Face 'Armageddon' If China, Japan Don't Buy Debt
The US is too dependent on Japan and China buying up the country's debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.
"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Robertson said in an interview. "I don't know where we could get the money. I think we've let ourselves get in a terrible situation and I think we ought to try and get out of it."
Robertson said inflation is a big risk if foreign countries were to stop buying bonds.
“If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said. “It's not a question of the economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy.” (more)
"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Robertson said in an interview. "I don't know where we could get the money. I think we've let ourselves get in a terrible situation and I think we ought to try and get out of it."
Robertson said inflation is a big risk if foreign countries were to stop buying bonds.
“If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said. “It's not a question of the economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy.” (more)
Why the U.S. economy CAN'T “recover”
The U.S. propaganda-machine now reports on a daily basis that a “U.S. economic recovery” is underway – despite not one piece of evidence to support this “bold assertion” (shameless lie?).
Let's start with a definition of “recovery” suitable to the current, economic context: economic “recovery” means the economy is returning to (or “recovering”) a previous level of economic activity. In other words, with an economy which has shrunk by more than 10%, a “recovery” could only be occurring if the economy is already growing.
There is still absolutely no evidence that the U.S. economy is growing. Granted, the propagandists already know that the Treasury Department will report “economic growth” this quarter – regardless of what is actually happening in the real world. However, contrast this with the extremely cautious attitude of the same “experts” and “economists” when the U.S. economy started its collapse. Despite enormous volumes of evidence showing that the U.S. economy had started a serious collapse, these shameless shills refused to declare a “recession” had started for many months after that fact was obvious to the entire world. (more)
Let's start with a definition of “recovery” suitable to the current, economic context: economic “recovery” means the economy is returning to (or “recovering”) a previous level of economic activity. In other words, with an economy which has shrunk by more than 10%, a “recovery” could only be occurring if the economy is already growing.
There is still absolutely no evidence that the U.S. economy is growing. Granted, the propagandists already know that the Treasury Department will report “economic growth” this quarter – regardless of what is actually happening in the real world. However, contrast this with the extremely cautious attitude of the same “experts” and “economists” when the U.S. economy started its collapse. Despite enormous volumes of evidence showing that the U.S. economy had started a serious collapse, these shameless shills refused to declare a “recession” had started for many months after that fact was obvious to the entire world. (more)
Total issues oil shortage warning
Christophe de Margerie warns that there could be an oil shortage by 2015
The head of oil giant Total has told the BBC the world could face a shortage of oil because of underinvestment.
Chief executive Christophe de Margerie warned that too little has been spent trying to tap into new oil reserves because of the economic crisis.
"If we don't move [now] there will be a problem," Mr de Margerie said. "In two or three years it will be too late."
He also said he thought oil prices would rise to more than $100 a barrel, from their current level of around $70. (more)
Faber: Choose Stocks Over Bonds, Cash
Investment guru Marc Faber sees stocks outperforming cash and bonds as the Federal Reserve’s massive monetary stimulus props up the U.S. economy.
“I think that he (Ben Bernanke) will print (money) like never before in history.”
As a result, the Standard & Poor’s 500 Index can rise as high as 1,250 in a year, up 17 percent from midday Wednesday, Faber told Bloomberg.
“Where there is inflation in the system as defined by money supply growth and credit growth, you have currency weakness. Stocks can easily go higher. If you print the money, they can go anywhere.” (more)
Thursday, September 24, 2009
Federal Reserve Admits Hiding Gold Swap Arrangements, GATA Says
The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.
The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.
The Fed's disclosure came this week in a letter to GATA's Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA's administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund's treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.) (more)
McAlvany Weekly Commentary, Sept 23, 2009
The Silver Lining: An Interview With David Morgan
September 23rd, 2009David Morgan has been an independent precious metals analyst for over thirty years. He adheres to the
Free Report from Mr. Morgan
Silver Fundamentals– Fundamentally Flawed. This report is available for free by visiting www.Silver-Investor.com/freereport
< href="http://www.mcalvany.com/podcast/#" onclick="javascript: podPressShowHidePlayer('1','http://www.mcalvany.com/podcast/wp-content/uploads/ica2009-0923.mp3',300,30,'true'); return falsek">Hide Player | Play in Popup | Download Mp3Carry traders given blank check on dollar weakness
The dollar, already plumbing its lowest levels of the year, is expected to continue to weaken even as an improving U.S. economy eventually leads the Federal Reserve to unwind more of its liquidity-boosting programs.
That's because the U.S. currency has increasingly been at the center of a so-called carry trade. With interest rates effectively at zero in the U.S., global investors seeking risks and higher returns are increasingly borrowing risk-free dollars to invest in higher-yielding currencies and assets, such as stocks, commodities, and emerging markets. (more)
Crude oil tumbles as weak demand pushes up inventories
Crude supplies rose 2.8 million barrels in the week ended Sept. 18, the Energy Information Administration reported. Gasoline inventories gained 5.4 million barrels, and distillate stockpiles, which include diesel and heating oil, rose 3 million barrels.
"With a rise across the board in all inventories the numbers today confirm that we are in a high supply and weak demand environment," said Tariq Zahir, managing member of Tyche Capital Advisors. (more)
Wednesday, September 23, 2009
U.S. mortgage delinquencies set record
High U.S. unemployment keeps pushing up the rate of mortgage delinquencies, which could in turn drive personal bankruptcies and home foreclosures, monthly data from the Equifax Inc credit bureau showed on Monday. Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.
August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed.
The rate of subprime mortgage delinquencies now tops 41 percent, up from about 39 percent in each of the prior five months. (more)
Moody’s: Some Home Price Won’t Rebound Until 2030
"For many reasons, the rebound will be disproportionately small compared to the decline," Moody's said this week in its latest outlook on the residential market. "It will take more than a decade to completely recover from the 40% peak-to-trough decline in national home prices."The housing market is in the third year of the current downturn, one of the worst corrections in U.S. history as a result of the economic recession and the mortgage industry nearly grinding to a halt during the credit crunch.
"The bursting of the housing bubble precipitated a crisis in financial markets the likes of which have not been seen since the Great Depression and plummeted the nation into recession," Moody's said. (more)
China's resource nationalism is on the rise as it hoards minerals essential for batteries, cell phones, computers, and the green revolution.
For some countries, trade policy is the stuff of arcane rules and wonky bureaucracy. But for centuries in China, trade has been the biggest bugaboo of foreign affairs. Every Chinese knows about the moment their country was forcibly "opened" to the West: British merchants compelled Beijing to allow imports of opium—a baleful product that many Chinese nonetheless desired—in the 19th century. More recently, though, the tables have turned. China has come to possess a raft of things coveted by those same foreign powers: cheap labor, abundant capital, and, as it turns out, the world's greatest supply of so-called rare earths—metals essential for everything from hybrid cars to iPods to precision-guided weaponry. (more)
Venture capital funding takes a plunge
Confronting the roughest recession in generations, the nation's venture capital industry raised only $1.7 billion in the second quarter of 2009 — a cliff-like plummet from the $4.6 billion raised during the previous quarter, according to an industry report released Monday.
It was the smallest quarterly dollar total since the first quarter of 2003, when $938 million was raised in the depths of the dot-com crash. Meanwhile, the number of new funds created in the quarter shrank to 25 — the smallest number in 13 years.
Venture capital, an industry with deep roots along Silicon Valley's Sand Hill Road, has long been regarded as a kind of rocket fuel for the region's innovation economy, bankrolling hundreds of startups each year. Such companies as Intel, Apple, Microsoft, eBay, Yahoo and Google were financed by venture investments. (more)
Richard Rahn: The Growing Debt Bomb
Assume you had put much of your savings into U.S. government bonds and then you learned the following. In just the last eight months, the Congressional Budget Office estimates of the amount of additional federal debt to be held by the public grew by an astounding $4 trillion for the 2010-19 period; and that the amount of federal debt held by the public grew from $5.9 trillion to $7.5 trillion in just the last 12 months.
In addition, you learned that the federal government (i.e., taxpayers) now owns (primarily through Fannie Mae and Freddie Mac) or insures (through the Federal Housing Administration and other government programs) about 80 percent of the $14.6 trillion of home mortgages outstanding in the United States . Last week, Congress passed a bill requiring all student loans be made by the federal government rather than banks, which means the taxpayers will be 100 percent liable for any student loan defaults. (more)
Tuesday, September 22, 2009
Lessons to Be Learned From Dow 36,000
Call it the audacity of cluelessness: Let us congratulate James K. Glassman and Kevin Hassett, the authors of the incredibly money losing advice in their book Dow 36,000, on their 10 year anniversary. The book forecast that lofty number would be obtained in 3 to 5 years; it was published precisely 10 years ago today. In the ensuing decade since this book (and I use the term lightly) was published, the Dow is still below where it was 10 years ago, rather than tripling in price. The Nasdaq remains more than 60% below its highs of one decade ago.
I tried to read the book as a history lesson, but it was, to be blunt, unreadable. I got through enough to learn the basic argument they made: Stocks have been undervalued for decades, and over the ensuing years, we should expect a dramatic one-time upward adjustment in stock prices. Why? People were about to figure out what only these two geniuses already knew (hubris anyone?). (more)
Federal Reserve Accounts For 50% Of Q2 Treasury Purchases
The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption. This is a startling number, as the Fed's $164 billion in Q2 Treasury purchases dwarfs the combined foreign/household UST purchases of $101 billion and $29 billion, respectively, over the same time period. In fact, the Fed was a greater factor in UST demand than all three traditional players combined: Foreigners, Households and Primary Dealers, which amounted to a $158 billion in net Q2 purchases.
This dramatic imbalance puts a lot of question marks over how the upcoming hundreds of billions in incremental Treasury purchases will be soaked up, now that QE only has $15 billion of capacity for USTs: with Households lapping up risky assets it is unlikely they will look at Treasuries absent some dramatic downward move in equities, while Foreign purchasers, which many speculate are in a game of Mutual Assured Destruction regarding UST purchases, have in fact been aggressively lowering their purchases of Treasuries (from $159 billion in Q1 to $101 billion in Q2, an almost 40% decline in appetite!). Will the US make these purchases much more attractive come October when QE for USTs ends? And if so, what kind of rates are we talking about? One thing is certain: in terms of priorities of the Federal Reserve, keeping the equity market buoyant, is a distant second to ensuring successful auction after auction well into 2010. After all there is near $9 trillion in budget deficits that need financing over the next 10 years. (more)
THIS IS OUR 1000th POST. YIPPY!
Speaking Silver’s Language, By The Mogambo Guru
Everybody knows that I can always be counted on to go ballistic about silver being such a Screaming Freaking Bargain (SFB) because of (according to the most recent Official Mogambo Count (OMC)) more than a dozen very good reasons, which is a lot of reasons, and that at $17-and-change per ounce, silver is loudly saying, “Buy me! Buy me!” although obviously not in the literal sense, nor (perhaps less obviously) in the “voices in my head” sense, which shows I am responding to therapy and why everybody is so pleased with me. One of the reasons for my bullishness and bullheadedness about silver is the large short position, which is the number of ounces already sold (opening the short position) but which have not been bought yet (closing out the position), which means these shorts are going to get clobbered if they have to cover their short position by buying silver at a higher price than they sold it. (more)
Perfect storm for gold and silver
As gold trades above US$1,000 (HK$7,800) an ounce once again, it has been attracting renewed investor interest.
Many are wondering whether it is too late to enter the fray, or if it's still a good time to gain exposure.
In our view the latter is the case, since the perfect storm of bullish factors for precious metals is just only starting to come together.
It should be reiterated that there appears to be no end in sight for the "quantitative easing" (money-printing) policies of the United States and Europe. (Quantitative easing obviously benefits gold, as it usually foreshadows much higher future inflation.) This is in good part due to the unsustainable budget deficits in most Western countries. (more)
Many are wondering whether it is too late to enter the fray, or if it's still a good time to gain exposure.
In our view the latter is the case, since the perfect storm of bullish factors for precious metals is just only starting to come together.
It should be reiterated that there appears to be no end in sight for the "quantitative easing" (money-printing) policies of the United States and Europe. (Quantitative easing obviously benefits gold, as it usually foreshadows much higher future inflation.) This is in good part due to the unsustainable budget deficits in most Western countries. (more)
Oil Options Hit Highs as Verleger Predicts 44% Plunge
Oil traders are paying more than ever in the options market to protect against a plunge in crude prices.
The gap between prices of options betting on a decline and those that would profit from a rise in oil widened to a record 10 percentage points, according to five years of data compiled by Banc of America Securities-Merrill Lynch. Crude stockpiles in the U.S. are 14 percent larger than a year ago and OPEC is pumping 600,000 barrels a day more than the world needs, according to the International Energy Agency.
While the recovery from the first global recession since World War II pushed oil up 62 percent this year to $72.04 a barrel in New York, growth alone isn’t likely to erode the glut by the end of next year because production exceeds demand, data from the Paris-based IEA shows. A drop in prices would penalize companies from Exxon Mobil Corp. to BP Plc and exporters Russia and Saudi Arabia. (more)
The gap between prices of options betting on a decline and those that would profit from a rise in oil widened to a record 10 percentage points, according to five years of data compiled by Banc of America Securities-Merrill Lynch. Crude stockpiles in the U.S. are 14 percent larger than a year ago and OPEC is pumping 600,000 barrels a day more than the world needs, according to the International Energy Agency.
While the recovery from the first global recession since World War II pushed oil up 62 percent this year to $72.04 a barrel in New York, growth alone isn’t likely to erode the glut by the end of next year because production exceeds demand, data from the Paris-based IEA shows. A drop in prices would penalize companies from Exxon Mobil Corp. to BP Plc and exporters Russia and Saudi Arabia. (more)
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The footage of him speaking on the Senate floor has become something of a cult flick for the particularly wonky progressive. The date was November 4, 1999. Senator Byron Dorgan, in a patterned red tie, sharp dark suit and hair with slightly more color than it has today, was captured only by the cameras of CSPAN2.
"I want to sound a warning call today about this legislation," he declared, swaying ever so slightly right, then left, occasionally punching the air in front of him with a slightly closed fist. "I think this legislation is just fundamentally terrible."
The legislation was the repeal of the Glass-Steagall Act (alternatively known as Gramm Leach Bliley), which allowed banks to merge with insurance companies and investment houses. And Dorgan was, at the time, on a proverbial island with his concerns. Only eight senators would vote against the measure -- lionized by its proponents, including senior staff in the Clinton administration and many now staffing President Obama, as the most important breakthrough in the worlds of finance and politics in decades. (more)
"Option" mortgages to explode, officials warn
The federal government and states are girding themselves for the next foreclosure crisis in the country's housing downturn: payment option adjustable rate mortgages that are beginning to reset. "Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams.
"That's the next round of potential foreclosures in our country," he said.
Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These "underwater" mortgages have been a driving force behind rising defaults and mounting foreclosures. (more)
The Ant and The Grasshopper
Two Different Versions! …………….. Two Different Morals!
OLD VERSION: The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter.
The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.
Come winter, the ant is warm and well fed.
The grasshopper has no food or shelter, so he dies out in the cold.
MORAL OF THE STORY: Be responsible for yourself
MODERN VERSION:
The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter.
The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.
Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while others are cold and starving.
CBS, NBC , MSNBC, PBS, CNN, and ABC show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food. America is stunned by the sharp contrast.
How can this be, that in a country of such wealth, this poor grasshopper is allowed to suffer so?
Kermit the Frog appears on Oprah with the grasshopper and everybody cries when they sing, ‘It’s Not Easy Being Green.’
Acorn stages a demonstration in front of the ant ’s house where the news stations film the group singing, ‘We shall overcome.’ Rev. Jeremiah Wright then has the group kneel down to pray to God for the grasshopper’s sake.
Nancy Pelosi & Harry Reid exclaim in an interview with Larry King that the ant has gotten rich off the back of the grasshopper, and both call for an immediate tax hike on the ant to make him pay his fair share.
Finally, the EEOC drafts the Economic Equity & Anti-Grasshopper Actretroactive to the beginning of the summer.
The ant is fined for failing to hire a proportionate number of green bugs and, having nothing left to pay his retroactive taxes, his home is confiscated by the Government Green Czar.
The story ends as we see the grasshopper finishing up the last bits of the ants food while the government house he is in, which just happens to be the ant’s old house, crumbles around him because he doesn’t maintain it.
The ant has disappeared in the snow.
The grasshopper is found dead in a drug related incident and the house, now abandoned, is taken over by a gang of spiders who terrorize the once peaceful neighborhood.
MORAL OF THE STORY: Be careful how you vote in 2010.
OLD VERSION: The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter.
The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.
Come winter, the ant is warm and well fed.
The grasshopper has no food or shelter, so he dies out in the cold.
MORAL OF THE STORY: Be responsible for yourself
MODERN VERSION:
The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter.
The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.
Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while others are cold and starving.
CBS, NBC , MSNBC, PBS, CNN, and ABC show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food. America is stunned by the sharp contrast.
How can this be, that in a country of such wealth, this poor grasshopper is allowed to suffer so?
Kermit the Frog appears on Oprah with the grasshopper and everybody cries when they sing, ‘It’s Not Easy Being Green.’
Acorn stages a demonstration in front of the ant ’s house where the news stations film the group singing, ‘We shall overcome.’ Rev. Jeremiah Wright then has the group kneel down to pray to God for the grasshopper’s sake.
Nancy Pelosi & Harry Reid exclaim in an interview with Larry King that the ant has gotten rich off the back of the grasshopper, and both call for an immediate tax hike on the ant to make him pay his fair share.
Finally, the EEOC drafts the Economic Equity & Anti-Grasshopper Actretroactive to the beginning of the summer.
The ant is fined for failing to hire a proportionate number of green bugs and, having nothing left to pay his retroactive taxes, his home is confiscated by the Government Green Czar.
The story ends as we see the grasshopper finishing up the last bits of the ants food while the government house he is in, which just happens to be the ant’s old house, crumbles around him because he doesn’t maintain it.
The ant has disappeared in the snow.
The grasshopper is found dead in a drug related incident and the house, now abandoned, is taken over by a gang of spiders who terrorize the once peaceful neighborhood.
MORAL OF THE STORY: Be careful how you vote in 2010.
Monday, September 21, 2009
Gold is due a correction – but then it will hit $1,400
Gold closed last week above $1,000 an ounce, its highest ever weekly close. Yet who was reporting this fact in the Sunday papers?
I was reading The Telegraph, whose financial coverage is generally ahead of the curve compared to the other broadsheets. I was delighted to see that, far from being on the front pages, gold's milestone got barely a passing mention.
The fact is, the mainstream still don't get gold. The longer this continues (and long may it) the longer this bull market has to run. (more)
California’s Financial Depression: Unemployment and Underemployment rate at Great Depression Levels. 23 Percent Unemployment for Biggest State in the
California has now reached Great Depression unemployment levels. Many are now calling the end of the recession but there is no sign that California is inching closer to prosperity. Last month the unemployment rate shot up to a post-World War II high of 12.2 percent. This is only the official headline number. The unemployment and underemployment rate is up to 23 percent putting California into its own mini depression. The great housing bubble is still beating down on the state economy. Alt-A and option ARM products are staring us squarely in the eyes for 2010. Many of the banks and lenders were probably assuming that somehow by this point in the cycle that the economy in California would be bottoming out. It is not. What this means is housing will take another leg down. (more)
2 Nobel Economists Confirm that Credit is NOT Created Out of Excess Reserves
We've all been taught that banks first build up deposits, and then extend credit and loan out their excess reserves.
But critics of the current banking system claim that this is not true, and that the order is actually reversed.
Sounds crazy, right?
Certainly.
But take a look at the following quotes:
- 1960s Chicago Federal Reserve Bank booklet entitled “Modern Money Mechanics” (more)
International Monetary Fund to sell over 403 tons of gold
The International Monetary Fund said its executive board endorsed the sale of 403 tons of gold, worth an estimated 13 billion dollars, to boost its lending capacity to poor countries. The IMF said in a statement the sales would be “in a volume strictly limited to 403.3 metric tons, with these sales to be conducted under modalities that safeguard against disruption of the gold market.”
The 186-nation institution said the decision was a core element of a new income model to make it less dependent on its lending revenue to cover expenses, such as surveillance of members’ economic and financial policies, that the board had approved in April 2008. (more)
Has the Gulf Coast become a Ponzi haven?
The list of failed Southwest Florida investments keeps getting longer.
Arthur G. Nadel faces 15 federal counts in an alleged scheme that cost investors nearly $400 million. Beau Diamond has been hit with wire fraud and money laundering charges, accused of preying on Sarasota's New Age community. John and Marian Morgan have traded their bayfront mansion for Sri Lankan jail cells while awaiting indictment over an alleged get-rich-quick prime bank scheme.
None of the four have been convicted of anything, but losses associated with what federal investigators say are Ponzi schemes in Southwest Florida have already claimed about double what Sarasota County will spend next year on its 1,000-person sheriff's office, fire and ambulance service, libraries, parks, beaches and other day-to-day services. (more)
Arthur G. Nadel faces 15 federal counts in an alleged scheme that cost investors nearly $400 million. Beau Diamond has been hit with wire fraud and money laundering charges, accused of preying on Sarasota's New Age community. John and Marian Morgan have traded their bayfront mansion for Sri Lankan jail cells while awaiting indictment over an alleged get-rich-quick prime bank scheme.
None of the four have been convicted of anything, but losses associated with what federal investigators say are Ponzi schemes in Southwest Florida have already claimed about double what Sarasota County will spend next year on its 1,000-person sheriff's office, fire and ambulance service, libraries, parks, beaches and other day-to-day services. (more)
Saturday, September 19, 2009
The U.S. Balance Sheet: Households See Net Worth Down by $12 Trillion Since Peak and Total Debt Floating in the Market of $33 Trillion.
The Federal Flow of Funds report was released on Thursday with an expected jump in household net worth. When we did our last report, we stated that with the $13.89 trillion in wealth that evaporated to the trough, we would expect a jump in net worth to come from the massive stock market rally. The report shows this paper wealth gain that started at the end of Q1. Household net worth increased by $2 trillion from the first quarter to the end of the second quarter of 2009. Much of the increase came from the $1.36 trillion increase in corporate equities and mutual funds. Real estate grew by $139 billion. Yet this increase is merely a reflection of all the liquidity being flushed into the equity markets by the Federal Reserve. (more)
The Stealth Gold Bull Market is Back
Silver Stock Report
by Jason Hommel, September 17th, 2009
One trouble with Americans is that we think we are the center of the world. We do have about 5% of the world's population, and use up about 25% of the resources. That's mostly a function of being significantly "wealthier" than the rest of the world. But that's mostly paper wealth. Will it last? Only if we buy at least 25% of the world's silver and gold. Do we? Not in gold, but we do in silver! Let's get to the facts.
Worldwide, the world buys about 80 times as much gold as silver, for investment. The world annually purchases gold worth $80 billion (about 80 million oz., or 3500 tonnes). If American-led Central bank selling did not help meet demand and add to mine supply, then the gold price would go up faster than it already has. Remember, central bank selling is a manipulative and unsustainable supply source.
The annual silver investment market is only $1 billion. Annual production is about 600 million oz., but only about 50-100 million oz. is purchased for investment.
These figures show that the world is buying 80 times as much gold as silver, for investment. (more)
by Jason Hommel, September 17th, 2009
One trouble with Americans is that we think we are the center of the world. We do have about 5% of the world's population, and use up about 25% of the resources. That's mostly a function of being significantly "wealthier" than the rest of the world. But that's mostly paper wealth. Will it last? Only if we buy at least 25% of the world's silver and gold. Do we? Not in gold, but we do in silver! Let's get to the facts.
Worldwide, the world buys about 80 times as much gold as silver, for investment. The world annually purchases gold worth $80 billion (about 80 million oz., or 3500 tonnes). If American-led Central bank selling did not help meet demand and add to mine supply, then the gold price would go up faster than it already has. Remember, central bank selling is a manipulative and unsustainable supply source.
The annual silver investment market is only $1 billion. Annual production is about 600 million oz., but only about 50-100 million oz. is purchased for investment.
These figures show that the world is buying 80 times as much gold as silver, for investment. (more)
Economic Duplicity: Recession and Record Profits
In December 14, 2008, in his interview on the CBS sixty minutes show, Whitney Tilson an investment fund manager predicted that the subprime collapse was only half way of the total real estate bubble, and that the second half will begin take place around 2010 and will continue until about the year 2013. Tilson also discussed the two fancy Wall Street terms for bad mortgages namely Alt-A (Alternative-A paper) and option arms mortgages. These loans lured borrowers with teaser rates that will begin to reset this year.
Tilson has also predicted that seventy percent of these loans will eventually default, based on existing evidence of pre-reset default rates [1]. (more)
42 states lose jobs in August, up from 29 in July
Forty-two states lost jobs last month, up from 29 in July, with the biggest net payroll cuts coming in Texas, Michigan, Georgia and Ohio.
The Labor Department also reported Friday that 27 states saw their unemployment rates increase in August, and 14 states and Washington D.C., reported unemployment rates of 10 percent or above.
The report shows jobs remain scarce even as most analysts believe the economy is pulling out of the worst recession since the 1930s. Federal Reserve Chairman Ben Bernanke said earlier this week that the recovery isn't likely to be rapid enough to reduce unemployment for some time.
The jobless rate nationwide is expected to peak above 10 percent next year, from its current 9.7 percent. (more)
Taylor: Rates May Rise Early in 2010
The Federal Reserve may hike up interest rates to combat inflation as early as the beginning of next year, says Stanford University Professor John Taylor.
Interest rates have hovered at a very low target range of zero to 0.25 percent since December, as monetary policymakers have worked to get the country out of the recession.
Lower lending rates can eventually lead to rising consumer prices.
The government, meanwhile, has earmarked $787 billion in stimulus spending programs that should inflate the country's budget deficit, which can also fuel inflation, Taylor told Bloomberg News.
The Congressional Budget Office predicts the budget deficit will widen to $1.6 trillion this year. (more)
Friday, September 18, 2009
World to America: We Want Our Gold Back
The world is preparing to abandon the U.S. dollar and the UK pound. Pronouncements from Hong Kong, the United Arab Emirates, Switzerland and Germany have made clear that the Anglo-Saxon financial system’s doom is only a matter of time.
A huge announcement out of Hong Kong rattled the financial world on September 3. Although big media relegated the story to the back pages, it should have been front and center! What’s the news? China is demanding its gold back.
“Hong Kong is pulling all its physical gold holdings from depositories in London,” reported MarketWatch (emphasis mine throughout).
The announcement, coming in the midst of the global economic crisis, is sending a clear signal: Britain is in far worse economic shape than generally realized, and China thinks it needs to get its gold out while it can—before something happens to it. Gold closed at a new record high of $1,006 per ounce on Friday. (more)
A huge announcement out of Hong Kong rattled the financial world on September 3. Although big media relegated the story to the back pages, it should have been front and center! What’s the news? China is demanding its gold back.
“Hong Kong is pulling all its physical gold holdings from depositories in London,” reported MarketWatch (emphasis mine throughout).
The announcement, coming in the midst of the global economic crisis, is sending a clear signal: Britain is in far worse economic shape than generally realized, and China thinks it needs to get its gold out while it can—before something happens to it. Gold closed at a new record high of $1,006 per ounce on Friday. (more)
Treasury To Sell $112 Billion In Notes Next Week
The Treasury Department said Thursday it will issue $112 billion in notes next week. A record $43 billion in 2-year notes will be sold on Tuesday, followed by $40 billion in 5-year debt on Wednesday. The final offering will be $49 billion in 7-year notes on Thursday. The amounts are each $1 billion more than last month -- the most ever for each security -- and in line with estimates of some of Wall Street's biggest bond dealers. The government will also sell $85 billion in shorter-term bills. After the announcement, 2-year note yields, which move inversely to prices, remained up 1 basis point on the day, at 1%, the highest this month
Whitney: Home Prices Could Drop 25 Percent
Bank analyst Meredith Whitney says home prices have another leg to drop, perhaps 25 percent.
“Fourth quarter, then you see another leg down,” she told CNBC.
"No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said.
"I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."
Oil dips on new data suggesting an economic rebound may be slow to gain traction
Oil prices edged lower on new U.S. government data that indicated a slow economic recovery.
That would mean less demand for energy in the near term and increased the chance of low-priced gasoline and heating gas for some time.
Benchmark crude for October delivery slipped three cents to settle at US$72.47 a barrel on the New York Mercantile Exchange. Prices crested at $73.16 a barrel in morning trading, the highest that crude has reached this month.
At the pump in the United States, retail gas prices dropped nearly a penny overnight to a new national average of $2.55 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gas prices are now falling away from the peaks reached in June at the outset of the driving season, when a gallon hit $2.69. (more)
Gold to $3,000?
The Gold Rush of 2009 likely hasn’t come as a complete surprise to too many investors. After all, gold has been proven time and time again to be a “safe haven” investment that rises during uncertain economic times (such as the last two years), and questions about the dollar’s future as the world’s reserve currency (along with other factors placing downward pressure on the greenback) have led many to reconsider their strategic holdings.But the length and degree of the run-up in gold prices certainly caught a number of investors (myself included) off guard. Brett Arends poses a question I would have laughed at two years ago, but now take quite seriously: is it realistic to think gold could really go to $3,000?
Some gold bugs think it’s a distinct possibility. (more)Want to Own Silver? Forget About SLV
As a writer, it's always a disappointment when something which you see as being among the best or most important examples of your work receives less attention than other pieces. Sometimes this can be due to nothing more than a poorly-worded title, however, what it usuallymeans is that a writer did not do a good enough job of explaining or highlighting the material which is of greatest significance.
It is with this in mind that I have decided to repeat a discussion which I had focused on in a previous commentary. In that commentary, I discovered what I believed (and still believe) to be the most important piece of data I have unearthed since I started writing about this sector.
It came from one, simple graph – on global silver inventories, over roughly a 50-year time horizon. The chart was compiled by the CPM Group, a private consultancy that is one of two quasi-official sources for supply and demand data in the precious metals sector, which we all must rely upon. (more)
The Top 10 Recession Stocks
Over a year ago, when signs were starting to point to a recession, my colleague John Reeves and I compiled a list of the previous recession's top 10 stocks to discover any patterns that would help our investing this time around. That list provided a number of fascinating insights, some of which we had expected, while others surprised us.
I recently updated the list, and while the names may have changed from a year ago, the general lessons remain the same.
Our screen looked for domestic and Canadian stocks that were valued above $250 million and traded on major exchanges -- stocks the individual American investor would have been likely to actually buy. (more)
I recently updated the list, and while the names may have changed from a year ago, the general lessons remain the same.
Our screen looked for domestic and Canadian stocks that were valued above $250 million and traded on major exchanges -- stocks the individual American investor would have been likely to actually buy. (more)
Thursday, September 17, 2009
McAlvany Weekly Commentary, Sept 16, 2009
An Interview With Bill King: Current Market Perspective
September 16th, 2009 < href="http://www.mcalvany.com/podcast/#" onclick="javascript: podPressShowHidePlayer('1','http://www.mcalvany.com/podcast/wp-content/uploads/ica2009-0916.mp3',300,30,'true'); return false;">Hide Player | Play in Popup | Download Mp3
Oil Risks Pullback to $59 If Support Fails: Technical Analysis
Crude oil, struggling to sustain gains above $70 a barrel this month, faces a decline to $59 if support on technical charts fails in the coming days, National Australia Bank Ltd. said. Oil is likely to continue drifting in a sideways pattern as traders seek to gauge the market’s short-term depth, according to Gordon Manning, a Sydney-based technical analyst. Futures, which touched a 10-month high of $75 a barrel Aug. 25, haven’t traded at $59 since mid-July.
“It’s trying to find a bit of a base,” Manning said in a telephone interview. “A close below $66 would easily take it lower.” (more)
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