Markets tumble on poor Chinese, US economic data

The index of 100 leading shares fell 3pc by early afternoon to 4905 points – the lowest since September. Markets in France , Germany and the US suffered similar declines after a larger-than-expected decline in US consumer confidence.

Frankfurt's DAX 30 slid 3.2pc and Paris's CAC 40 tumbled 3.7pc. In New York, the S&P 500 was off 2.8pc, with the Nasdaq down 3pc while the Dow Jones Industrial Average dropped more than 2pc, to below the 10,000 mark.

Michael Sheldon, chief market strategist at RDM Financial, said: "Investors are clearly nervous ...if we see consumers once again take on that bunker mentality that we saw during the prior recession, we could be entering a period of lower growth once again." (more)

HUMOR

Jay Taylor: Turning Hard Times Into Good Times

click here for audio

O'Neill: It's a 'Perfect Storm' for Gold

Gold, which recently surged to a record high $1,265, still has plenty of room to rise, many experts say.

Concern about the explosion of sovereign debt worldwide, low interest rates, and anticipation of gold purchases by China have put the precious metal in a sweet spot. Low rates make gold attractive compared to fixed income investments.

“There is a perfect storm for gold,” Bill O’Neill, former head of commodity research at Merrill Lynch and now a partner at Logic Advisors, told CNBC.

“The metal has become the ultimate currency, as few want to commit to the euro, pound or yen. And while the U.S. dollar may be the best of a weak lot, it also holds little appeal.” (more)

Fear Returns for Quarter's Final Act

The second quarter's biggest worries took an unwelcome curtain call on Tuesday, hitting global markets.

The trifecta of trouble—European debt woes, China's slowing growth and the stagnating U.S. recovery—conspired to put the quarter on the cusp of being the worst for U.S. stocks in more than a year.

All three concerns flared anew in a grim highlight reel just ahead of the quarter's end. In response, the Dow Jones Industrial Average tumbled 268.22 points, or 2.65%, to 9870.30, its first close below 10000 since early June.

The blue-chip average is on pace to fall more than 9% in the quarter, which ends on Wednesday. This would be the Dow's first losing quarter since the first quarter of 2009, when a prolonged bull market began. The Dow Jones U.S. Total Stock Market Index has lost roughly $1.5 trillion in value in the quarter so far. (more)

Consumer confidence craters in June

A key measure of consumer confidence fell in June, reversing a three-month gain, as Americans remain nervous about the job market.

The Conference Board, a New York-based research group, said its Consumer Confidence Index dropped to 52.9 in June from 62.7 in May. It was the lowest level since March, when the index stood at 52.3.

Economists had expected the index to have fallen to 62 in June, according to consensus estimates from Briefing.com.

"Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence," Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement. (more)

Roubini says Greece needs orderly debt restructuring to avoid 'inevitable default'

He said the "draconian" austerity measures agreed as part of a €110bn (£90bn) EU-IMF bailout is prolonging the country's recession.

"It is time to recognised that Greece is not just suffering from a liquidity crisis; it is facing an insolvency crisis too," he writes in the Financial Times.

Greek debt is being downgraded to junk levels, making it harder and more costly for the government to borrow.

In return for the emergency loans, Greece has pledged to bring its fiscal shortfall under the EU's 3pc by 2014 from 13.6 percent last year and to implement structural reforms in its economy to make it more competitive. (more)

Britain 'might not cope with another bank emergency'

Britain's mountain of debt could leave the country powerless to launch another rescue bid in the wake of a fresh financial crisis, the world's central bankers warned yesterday. Their "club" - the Bank of International Settlements - presented in its annual report a frightening picture of the impact of a second banking emergency on heavily indebted nations such as Britain.

The Bank of England's Governor, Mervyn King, has estimated that the Government has pumped as much as £1trillion of taxpayers' money into the banking system. Billions of pounds were spent part-nationalising the Royal Bank of Scotland and Lloyds Banking Group, as well as fully nationalising Northern Rock, in an attempt to stave off collapse. Measures such as the "special liquidity" scheme propped up other lenders and prevented the system from freezing up. (more)

High Unemployment, Lower Stocks and Growing Worries. Is This 1930 All Over Again?

Yesterday, economist Paul Krugman said we're headed for another Depression. The world's new obsession with "austerity" will kill the global recovery, Krugman says, and plunge the economy into a double dip.

Could that really happen? Could we really be headed for a repeat of the 1930s?

Last year, Dan Alpert, managing principal with Westwood Capital, described the huge stock market rally that followed the March lows as the "greatest sucker's rally in history." He also produced a fascinating series of news clippings from early 1930, a few months after the historic market crash of 1929, that showed that market participants in those days had no idea of what was about to hit them.

Specifically, Dan assembled headlines and commentary from the New York Times, Wall Street, Journal and other papers that showed vigorous debate about how strong the recovery would be--with almost no suggestion that the market crash of the previous fall might only be the beginning. The market rallied strongly in the spring of 1930 amid booming optimism. Then it crashed to the horrific lows of early 1932. (more)

Chart of the Day

The Next Crisis: Public Pension Funds

Ever since theWall Street crash, there has been a bull market in Google hits for “public pensions” and “crisis.” Horror stories abound, like the one in Yonkers, where policemen in their 40s are retiring on $100,000 pensions (more than their top salaries), or in California, where payments to Calpers, the biggest state pension fund, have soared while financing for higher education has been cut. Then there is New York City, where annual pension contributions (up sixfold in a decade) would be enough to finance entire new police and fire departments.

Chicken Little pension stories have always been a staple of the political right, but in California, David Crane, the special adviser to Gov. Arnold Schwarzenegger, says it is time for liberals to rally to the cause.

“I have a special word for my fellow Democrats,” Crane told a public hearing. “One cannot both be a progressive and be opposed to pension reform.” The budgetary math is irrefutable: generous pensions end up draining money from schools, social services and other programs that progressives naturally applaud. (more)

Central Banks Warn of New Crisis If Debt Continues to Soar

Governments must slash budget deficits decisively and central banks should not wait too long to raise borrowing costs as side effects from measures prescribed to tackle the global recession may create the next crisis, the Bank for International Settlements said.

The global economy and financial markets were on the mend, though the recovery remained fragile in the advanced economies and in the euro zone the debt crisis put the recovery at risk, the BIS said in its annual report, published on Monday.

Global leaders meeting in Toronto agreed to take different paths for shrinking budget deficits and making banking systems safer and Washington in particular has warned against cutting too fast.

The head of the BIS said there was no time to waste. "We cannot wait for the resumption of strong growth to begin the process of policy correction," BIS general manager Jaime Caruana told the bank's annual general meeting. (more)

800,000 mortgages in California are 30+ days late or in foreclosure. Only 132,000 show up in the MLS. Why there will be no housing bottom for Californ

The latest data on new and existing home sales shows us evidence that housing has benefited from a bear market bounce but that has now come to an end. The drop in existing home sales was sizable but the drop in new home sales came in at a record breaking figure. The difference here comes from the large amount of distress inventory still moving at lower prices. The amount of troubled mortgages still filtering through the system is large and gives us pause for caution. Much of the boost can be said to have come from massive government intervention. In California there is now money going to banks to match a principal reduction for those homeowners in distress. In other words, the focus is on problems and not having a more stable market for housing. Over the last year, we also saw many people moving off the sidelines spurred by low interest rates, tax credits, and the perception that housing had hit bottom. For California, the data signifies that there will not be a bottom until at least 2012 and that is what we will examine in this article. (more)

College: Big Investment, Paltry Return

If there's one truism that goes virtually unchallenged these days, it's that a college degree has great value. Beyond the great books, beyond the critical reasoning skills, and beyond the experience itself, there's another way that a college degree has value: Over the course of a working life, college graduates earn more than high school graduates. Over the past decade, research estimates have pegged that figure at $900,00, $1.2 million, and $1.6 million.

But new research suggests that the monetary value of a college degree may be vastly overblown. According to a study conducted by PayScale for Bloomberg Businessweek, the value of a college degree may be a lot closer to $400,000 over 30 years and varies wildly from school to school. According to the PayScale study, the number of schools that actually make good on the estimates of the earlier research is vanishingly small. There are only 17 schools in the study whose graduates can expect to recoup the cost of their education and out-earn a high school graduate by $1.2 million, including four where they can do so to the tune of $1.6 million. At more than 500 other schools, the return on investment, or ROI, is less—sometimes far less. College, says Al Lee, director of quantitative analysis at PayScale, "is not the million-dollar slam dunk people talk about." (more)

Whitney: Beware of Housing Market

RBS tells clients to prepare for 'monster' money-printing by the Federal Reserve

Entitled "Deflation: Making Sure It Doesn’t Happen Here", it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost."

Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE). (more)

Krugman: The Third Depression

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense. (more)

Silver Posting Best Streak Since Hunt Conspiracy as Economy No Impediment

Silver, the precious metal most used in industry, is attracting investors betting on both faster and slower economic growth as prices extend the longest run of quarterly gains in three decades.

Doubling as a store of value for buyers concerned about the economy and as an industrial material for those bullish on growth, silver is outperforming metals from copper to zinc this year and keeping pace with gold. It will rise as much as 15 percent to $22 an ounce before December, from $19.145 today, according to Daniel Brebner, an analyst at Deutsche Bank AG whose fourth-quarter outlook was accurate to within 0.7 percent. (more)

Five common investing mistakes to avoid

Russell Investments recently posted a list of companies joining and leaving the Russell 3000 index on June 25. In anticipation of this event, many investors have either bought the stocks of companies being added to the index or sold those being deleted from it. Big mistake.

In fact, it might be better to do the exact opposite, because stocks deleted from an index tend to have significantly higher factor-adjusted returns than index additions, and stocks added to an index have "poor long-term returns," according to a study published in the Financial Analysts Journal in 2008 by Jie Cai, an assistant professor of finance at Drexel University, and Todd Houge, a chartered financial analyst and professor of finance at the University of Iowa.

1. Don't sell stocks deleted from an index, or buy stocks added to an index

The Russell 3000 index represents about 98% of the investable U.S. equity universe, and on June 25 about 261 companies will be added to the index and about 205 companies will be deleted from it.

That fact alone shouldn't prompt investors to make buy or sell decisions, said David Zuckerman, a certified investment management analyst and chief investment officer of Zuckerman Capital Management LLC. (more)

Chart of the Day

Weekly Summary and a Look Ahead

The key economic report this week will be the June Employment Report to be released on Friday. It will be a busy week ...

On Monday, the BEA will release the May Personal Income and Outlays report. The consensus is for a 0.5% increase in income, and a 0.2% increase in spending. Also on Monday, the May Chicago Fed National Activity Index will be released at 8:30 AM. This is a composite index of other data.

On Tuesday, the April Case-Shiller house price index will be released at 9:00 AM. The consensus is for a slight decline in the house price index. At 10:00 AM, the Conference Board will release Consumer Confidence for June (consensus is for about the same as in May or 63.3).

On Wednesday, the ADP employment report will be released (consensus is for an increase of 60K private sector jobs, up from 55K in May). Also on Wednesday, the Chicago Purchasing Managers Index for June will be released. Consensus is for the PMI to be about the same as May, or 59.7. (more)

Technically Precious with Merv, June 25, 2010

FREE weekly precious metal investment newsletter, click here

Which Investments To Own…And Which To Avoid

Investing has never been easy, but the last 15 years have been some of the toughest investors have ever faced, largely due to the fact that the US stock market has either been in a bubble or post-bubble Crash for most of that time.

Indeed, we officially entered a bear market in 1999 (or 2007 depending on how you look at it) but because so much of the US's collective wealth and economic activity relies on financial speculation, the Federal Reserve has essentially blown serial bubbles to combat the collapse ever since.

Because of this, many investors today view the stock market with suspicion. After all, if the only investing environments that occur are speculative bubbles or gut-wrenching collapses, it's hard to find any fundamentally sensible reason to invest in stocks. (more)

Fear Feeds Greed With S&P 500 Correlation to Bond Yields Highest on Record

U.S. stock prices are mirroring government bond yields more than ever, a signal to bulls that shares may be poised to rally.

The Standard & Poor’s 500 Index and 10-year Treasury rates posted a correlation coefficient of 0.8412 in the 60 trading days through June 16, showing stock prices and bond yields were the most linked in Bloomberg data going back to 1962. The last time the relationship was almost this strong during an economic expansion was at the beginning of the 2002 to 2007 bull market, when the benchmark gauge for U.S. equities doubled.

Rising correlations show investors are ignoring relative values among industries and assets and reacting to day-to-day signals on the economy, convinced Europe’s debt crisis will spur the second global contraction in three years. Invesco Ltd., Wells Capital Management Inc. and Chemung Canal Trust Co., who together manage $957 billion, say those concerns are overblown and shares will advance as the fastest profit growth since the mid-1990s restores confidence.(more)

Current Technical Setups On The Emini S&P

The latest minor trend in the emini points to a downward reversal on June 21, so the short-term trend is lower. Things get a little more complicated when you are looking at the bigger picture and trying to figure out whether this market is going to make another leg lower or continue with the trendline breakout to the upside.
This is where trading skills are very important. It is likely that the technical picture could evolve multiple times before we get a clear movement. Steadfastly sticking to an opinion even though the technicals change in a new direction is a recipe for eventual losses. (more)

King World News Interviews James Turk

James is Chairman and Founder of Goldmoney.com - Since 1987 James Turk has written “The Freemarket Gold & Money Report,” an investment newsletter. James has specialized in international banking, finance and investments since 1969. His business career began at The Chase Manhattan Bank (now JP Morgan Chase Bank). He subsequently joined the investment and trading company of a prominent precious metals trader based in Greenwich, Connecticut then moved to the United Arab Emirates to be appointed Manager of the Commodity Department of the Abu Dhabi Investment Authority, a position he held until resigning in 1987. In this interview James discusses which stage of the bull market that silver is in and it may surprise the listeners, he also discusses the strength of the gold bull, the fact that we may not get the usual summer selloff, how bull markets keep investors out, how others lose their position, increased taxes guaranteeing a depression and much more.

click here for audio

Suiting Up for a Post-Dollar World

The global financial crisis is playing out like a slow-moving, highly predicable stage play. In the current scene, Western governments are caught between the demands of entitled welfare beneficiaries and the anxiety of bondholders who fear they will be stuck with the bill. As the crisis reaches an apex, prime ministers and presidents are forced into a Sophie's choice between social unrest and bankruptcy. But with the "Club Med" economies set to fall like dominoes, the US Treasury market is not yet acting the role we would have anticipated.

Our argument has always been that the US benefits from its reserve-currency status, allowing it to accumulate unsustainable debts for an unusually long period without the immediate repercussions of inflation or higher borrowing costs. But this false sense of security may be setting us up for a truly monumental crash. (more)

Here Comes The Recession

We are halfway through the year (where did the time go?) and it is time to make some predictions about the last half of the year. This week we look at what the leading indicators are telling us, size up a new indicator, drop in on banking data, and do a whole lot more.

Quickly, I will be on Larry Kudlow's show next Tuesday, which is at 7 pm Eastern. Larry has promised that we will spend some quality time on some of the current issues facing us. See you there! And now, let's jump in.

The Risk of Recession

I am on record as saying I think there is a 50-50 chance we slip back into recession in 2011, as I think the economy will soften in the latter half of the year and a large tax increase in 2011 (from the expiring Bush tax cuts) will tip us into recession. (more)

The G8 "Solution" to the Crisis is the Cause of Economic Collapse

Chart of the Day

World Financial Report, June 25, 2010

click here for audio

The Economist - 26 June 2010

The Economist is a global weekly magazine written for those who share an uncommon interest in being well and broadly informed. Each issue explores the close links between domestic and international issues, business, politics, finance, current affairs, science, technology and the arts.
In addition to regular weekly content, Special Reports are published approximately 20 times a year, spotlighting a specific country, industry, or hot-button topic. The Technology Quarterly, published 4 times a year, highlights and analyzes new technologies that will change the world we live in.

FREE download click here

20 Must-See Charts On America's Disastrous Level Of Government Spending

more pics click here

ECRI Leading Economic Index Plunges At -6.9% Rate, Back To December 2007 Levels When Recession Officially Started

It's getting close: the fabled -10% annualized change (see David Rosenberg) which guarantees a recession is now just 3.1% away, which at this rate of collapse will be breached in two weeks. The ECRI is now at December 2007 levels, the time when the last recession officially started. The index dropped from an annualized revised -5.8% (previously -5.7%) to -6.9%. As a reminder, from Rosie, "It is one thing to slip to or fractionally below the zero line, but a -3.5% reading has only sent off two head-fakes in the past, while accurately foreshadowing seven recessions — with a three month lag. Keep your eye on the -10 threshold, for at that level, the economy has gone into recession … only 100% of the time (42 years of data)." We are practically there. (more)

The Many Faces Of Gold

Who isn't talking about gold these days? Maybe that's more the appropriate question than not. Of course dial the clock back seven to ten years and serious discussions of gold set against the context of the macro credit cycle, monetary and fiscal policy, etc. were almost strictly confined to the bearish underground. Certainly we are in the underground no more. Well above ground and gaining more widespread recognition by the day as many of the former bearish underground rationales for accumulating and holding gold are now coming true right before our eyes and clearly entering mainstream debate, if not conviction. It's time for a quick little review, but what we hope to accomplish in this discussion is twofold. We want to have what we believe is very much an unconventional look at gold that we really have not seen in this conceptual format anywhere else. As you know, charts of gold relative to the major global currencies are a dime a dozen. We don't want to waste your time as you can find them anywhere and everywhere across the net. Gold is breaking out really against all global currencies. That's not new news. The Dow and S&P expressed in terms of gold, etc. Pretty conventional stuff in terms of more mainstream commentary and analysis. We're going to have a look at gold relative to what we believe are important historic economic markers of the real economy itself. And it just so happens that this little view of life dovetails into the second purpose we have in presenting this review. We know you've seen a number of pundits predict $2,000 gold, $3,000 gold and even perhaps a moon shot to $5,000 gold and beyond. (more)

5 housing and financial stories showing profound weakness in the economy

Unfortunately the storyline regarding housing is all too predictable. For California, once the vice grips tightened around the option ARM and Alt-A universe in 2007 and 2008, the housing market in the state collapsed like a piñata in the subsequent years. Now, all the mainstream analysts are “shocked” that new home sales have fallen into the abyss. Thing are so bad, that new home sales on a seasonally adjusted basis fell to a record low level and Census data goes back to 1963. When we chart this as you will see, this is a historic fall. Yet this is all expected. The removal of the federal tax credit and pent up demand moved forward caused a bear market bounce for housing. All it took was one month worth of data to crush the entire idea that the housing market was somehow supporting itself. (more)

Obama Strategy for G-20 in Ottawa: Push Euro Down, Drive Renminbi Up, Attack Germany, and Keep Toxic Derivatives in Charge of the World Economy

Business Week - 28 June - 4 July 2010

Each issue of BusinessWeek features in-depth perspectives on the financial markets, industries, trends, technology and people guiding the economy. Draw upon Business Week's timely incisive analysis to help you make better decisions about your career, your business, and your personal investments.

FREE download click here

The Coming U.S. Real Estate Crash

This week headlines across the United States screamed that new home sales in the U.S. had declined to the lowest level since the U.S. government began keeping track in 1963. But in the news stories covering this data in the mainstream media, they were always very careful to give their readers lots of reasons why things are going to "get back to normal" very soon. But the truth is that is simply not going to happen. Right now the United States is heading for another real estate crash. The only thing that has been holding it back was the huge bribe (called a tax credit) that the U.S. government was giving people to buy houses. Now that the tax credit has expired, there is no artificial incentive to buy homes and the real estate market has fallen through the floor. Unfortunately, there is every indication that things are going to get even worse. Read on to find out why.... (more)

Lawmakers agree on Wall Street's biggest overhaul since 1930s

Congressional negotiators Friday approved the most sweeping overhaul of U.S. financial regulation since the Great Depression, reshaping oversight of Wall Street and some of its most opaque concoctions.

Lawmakers from the House and Senate worked through the night in a 20-hour session to reach deals on two of their most far-reaching and contentious proposals -- a ban on proprietary trading by banks and new oversight of the derivatives market. This month, they’ve also agreed on measures to wind down big firms whose collapse might shake markets, to keep tabs on hedge funds and to make it easier for investors to sue credit raters.

“This is going to be a very strong bill, and stronger than almost everybody predicted that it could be and that I, frankly, thought it would be,” House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, told reporters June 23 as lawmakers prepared for the final round of talks. (more)

Jim Rogers Video On: Silver, Gold, Sugar, Agriculture, Oil, Euro, US Dollar And Currencies

Chart of the Day

What's Ahead for Gold, Oil, and S&P

It’s been a crazy week for gold, oil, and the S&P 500 again. Since the market top in April we've seen large moves almost every day in the market. I'd say this is one of the toughest times for traders as you must be very quick to enter and exit if you want to lock in any profits. Good news is that things should start to smooth out in the next week or so if stocks kick into rally mode.

I've made a video of this week's price action showing how I see the market, what I think it's about to do, and what to be aware of. Click here to watch video.

Firms Furiously Buy Back Shares to Prop Up Stock Price

U.S. companies are showing they want to buy back their own shares at the highest rate in months as record levels of cash pile up on balance sheets.

Companies recently announced 27 new buyback programs in a week totaling $18.5 billion, the most since February, according to data from TrimTabs.

"We've seen a pretty big decline in share price, so companies are trying to prop them up, and these announcements are one way they can do that," David Santschi, an analyst at TrimTabs, told the Financial Times.

"The spike is highly unusual for June, which is not an earnings announcement month. That's a bullish sign." (more)

Wanna Buy An Island ?

Desperate attempt to repay debts also driven by inability to find funds to develop infrastructure on islands.

There's little that shouts "seriously rich" as much as a little island in the sun to call your own. For Sir Richard Branson it is Neckar in the Caribbean, the billionaire Barclay brothers prefer Brecqhou in the Channel Islands, while Aristotle Onassis married Jackie Kennedy on Skorpios, his Greek hideway.

Now Greece is making it easier for the rich and famous to fulfill their dreams by preparing to sell, or offering long-term leases on, some of its 6,000 sunkissed islands in a desperate attempt to repay its mountainous debts. (more)

Deutsche Bank: U.S. Financial Conditions Just Collapsed Back To Crisis Levels

Deutsche Bank has a new and improved index of U.S. financial conditions, and this index just slumped back towards the lows of our recent crisis.

Deutsche Bank's Peter Hooper:

Financial conditions appear to have worsened substantially in recent quarters based on our update of the broad index of US financial variables presented earlier this year at the US Monetary Policy Forum. In the wake of recent developments in Europe, increased stress in financial markets has pushed that index halfway back to its immediate post- Lehman crisis lows. (more)

Headwinds & Market Messages

The stock market for the past year has been supported by numerous economic and financial tailwinds that have helped propel it to retrace a significant portion of the 2007-2009 decline, roughly a 61.8% Fibonacci retracement for the S&P 500. That said many of the prior tailwinds have become headwinds leading to a deceleration in stock prices. Looking at various indicators suggests that these headwinds are likely to continue through the bulk of 2010 and implies a potential economic growth scare. Moreover, with a slew of potential market wild cards (BP oil spill, Euro debt crisis, China economic deceleration, US state fiscal nightmares) filling the investment landscape it would not take much for a growth scare to turn into a double-dip recession. Clearly the time to be bullish was in 2009, while at the present time capital preservation is likely to be the order of the day. (more)

The future of oil is the future of the gulf

Oil looks terrible right now. And while nobody wants to need what's gushing into the gulf, poisoning marine life and coating the coasts, our way of life depends on it. In fact, the U.S. needs the oil from the Gulf Coast and the jobs that deepwater drilling generates so badly, we can't afford to pause long enough to overhaul the regulators.

On May 30, President Obama issued a six-month drilling moratorium in the gulf, as recommended by Secretary of the Interior Ken Salazar. On June 7, a company called Hornbeck Offshore Services, which transports people and supplies for deepwater-drilling companies, led the charge challenging the moratorium. (more)

No Recovery in Real Estate

Pound reaches 19-month high against euro

The pound has hit a 19-month high as debt concerns weigh down on the euro.

It touched 1.2222 euros on Thursday, its highest since the immediate aftermath of the financial crisis in November 2008, before dropping back.

Markets continue to worry about the European debt crisis, with the perceived risk of a default by Greece hitting an all-time high.

Leading shares across Europe lost ground, with the UK's FTSE and Germany's Dax indexes down about 1.5%. (more)

Drowning in Debt? Dave Ramsey's Advice for Lightening the Load

Dave Ramsey is a high-octane personal finance guru who advises people on how they can get out of debt.
His advice is simple: Come clean, cut up your credit cards and take back your life.

In a segment that aired this morning on on "Good Morning America," the radio talk show host revisited nine people who had gotten his straight-talk advice about their debt troubles last year, checking up on them to see how they were doing.

When Ramsey met with them in January 2009, he learned that they collectively owed more than $260,000 -- not including their mortgages.

Inspired by Ramsey's advice, they've paid off more than $140,000 of their debt -- despite divorce, illness and the daily challenges of sticking to strict budgets in a tough economy. (more)

Funds versus ETFs

There are individuals who approach investing with a broad base of knowledge and experience. Some have plenty of time to pour over quarterly company statements, technical charts, economic data and to listen on conference calls. Others would rather do something else with their time in much the same way we don’t all spend evenings reading ‘dentistry for dummies’ so that we can perform our own root canal next week. And just so we’re sure on this point, the time limitation to going through all these exercises applies to the majority of financial planners and advisers too. For this reason, and because all investment platforms have to share one thing in common – diversification – the choice for many is to create diversification using the broadest investment products available. In other words, mutual funds and exchange traded funds (ETFs). (more)

Chart of the Day

McAlvany Weekly Commentary, June 23, 2010

Growing Numb to Crises: Don’t Let it Happen to You

Posted on 23 June 2010.

Standard Podcast: Hide Player | Play in Popup | Download

Expert: US Debt Bomb to Now Explode Five Years Sooner

The Treasury Department’s projection that U.S. debt will reach $19.6 trillion by 2015 brings the ticking debt bomb five years closer to exploding than previously projected, says Delta Global Advisors’ Michael Pento.

He warns that time is running out to do something to avoid such an economic doomsday.

The Treasury also estimated that total U.S. debt will top $13.6 trillion this year and rise to 102 percent of GDP by 2015, and that publicly traded debt would reach $14 trillion by 2015, up from last year's debt of “just” $7.5 trillion.

“The problem is that growing GDP when debt levels are so high is extremely difficult,” Pento wrote in a note to investors. (more)

Two Leading Indicators Pointing to Another Recession

There are two well-known and important leading economic indexes for the U.S. economy:

• The Conference Board’s Leading Economic Index (LEI), and

• The Weekly U.S. Leading Economic Index published by the Economic Cycle Research Institute.

I use them both in my analytical work to better understand the economy’s actual position in the business cycle. And in 2007, they gave me clear, recession warning signs. (more)

Small Banks and Big Risks

Congress is planting the seeds of the next big bank bailout.

Attention is focused on the House-Senate conference on a once-in-a-generation rewrite of the rules of finance. Meanwhile, a provision added, almost unnoticed, to a help-small-business bill that passed the House last week would allow all but the 100 largest banks to pretend they haven't made bad loans. The goal is to prompt them to lend more readily to small businesses.

The provision would permit more than 7,800 banks, with nearly $3 trillion in assets among them, to spread losses on bad real estate loans over six to 10 years instead of recognizing reality immediately. (more)

Euro's Fall Brings New Bargains Overseas

Europe is on sale.

A friend of mine left this week for Paris and a charming Left Bank hotel for less than $200 a night. A quick glance at some Internet travel sites indicated a slew of bargains, including cruises of the Greek isles for travelers who want to contribute to the country's struggling economy.

With the euro worth about $1.23, it might be time to book a long-delayed visit to a euro-zone country. But it’s not only hotels and restaurants that are attractively priced. Everything priced in euros is cheaper than it was as long as a buyer is paying in a currency that has appreciated against the euro. That’s not just dollars, especially since China said over the weekend that it would allow the yuan to appreciate. (more)

Find a personal money coach, free

Can't control your finances? Get yourself a coach.

Financial coaching is a relatively new concept, and it's available -- free -- to folks who realize they're headed for trouble as well as to those in crisis situations like collections or foreclosure.

Most programs are set up for low-income workers. Action for Boston Community Development, for example, is designed for Beantown residents living at 200% or less of the federal poverty level.

Other programs don't have income limits. After all, it isn't only the working poor who have financial problems. Tiffany, a 33-year-old Connecticut resident, says she and her husband both have good jobs. But one month they couldn't find the money to pay a utility bill. (Last names have been withheld for privacy.) (more)

2 ETFs for any market conditions

With the last few years' volatility and major indexes still below highs last seen more than ten years ago at the beginning of "The Tech Wreck," many investors are wondering if there are any "safe harbors" or investments that can still generate a decent return on investment for the long term.

While there's no "sure thing," one can look back over the last ten years and find various asset classes that have steadily outperformed the S&P 500 and might continue to do so in the future.

In this article we'll take a look at two of these and examine how they've fared and how and why they might continue to outperform in the future. (more)

Fed stands pat on rates as data worsen

Disinflation, high unemployment, tumbling housing starts and European debt woes.

Acknowledging significant cracks in the economic recovery, Ben Bernanke and his U.S. Federal Reserve colleagues voted again Wednesday to keep priming the pump with record-low interest rates.

The decision to leave the central bank’s key interest rate ultra-low at zero to 0.25 per cent wasn’t unexpected.

But Mr. Bernanke put some fresh concerns on the table, including a surprising plunge in new home sales, pushing the likely date for an eventual rate hike until well into next year. (more)

Shout Bubble From the Mountains

It’s now official, Gold has broken it’s perfect cup and handle formation. It’s heading much higher here and now, with a very high degree of confidence. To buy or not to buy is the question. I’ve always liked to buy on weakness. Gold is not weak right now.

That being said, trading the move may be a great way to increase that pile of cash and buy all the more oz’s once gold does exhibit some weakness.

Surprisingly the all-time high gold prices are attracting little more than a headline, or if a story is done it’s usually bearish. That’s bullish!

Sentiment is abysmal. If this were tech stocks, it would be touted everywhere and talk of a bubble would not even be tolerated, let alone given credence. (more)

Where's All the Gold? Start with the Federal Reserve

The bull market in gold shows no signs of abating, as investors big and small pile into bullion, coins, mutual funds and exchange-traded funds (ETFs) -- and who can blame them? With the world awash in more than $200 trillion in household, corporate and government debt, it's not unreasonable to question the long-term value of fiat currency like the almighty dollar.

It sure looks like a bunch of country's central banks have caught the gold bug. The dollar might be the world's reserve currency, but something about the U.S. being $13 trillion in debt -- or roughly the equivalent of its gross domestic product -- has other nations taking on greater reserves of the yellow metal. (more)

Getting Out of Dodge

Were I without family ties, I might consider expatriating to one of the quiet, out-of-the-way towns in Central- or South America that I drove my VW bus through in 1977-1978. Spending a year and a half living life at a slower pace and speaking in a second language was world view- opening for this California born American. Through it all, I met many wonderful, amazingly generous people. Unfortunately, I also saw a lot of grinding poverty and misery. I finally lost count of how many times I stared into the barrel of a loaded submachine gun held by an edgy 19 year-old soldier at some border crossing or roadblock.

My experience was life-changing, and made me appreciate the blessings of life in the United States - such as they were then. Thirty years later, I am not sure what I would feel coming home from such an adventure. I am saddened that governments at all levels have completely lost self-control. I am distressed that corporations now find it more profitable to pay off politicians for special subsidies and protections than to compete. I am depressed that Americans now walk away from commitments and belly up to the entitlement bar without any compunctions. We have spent the last forty years eating our seed corn and frittering away our wealth on trifles. (more)

How to ride an up-and-down market

Volatility in the stock market is a lot like turbulence on an airplane: scary, nausea-inducing, and, if at all possible, best to ignore. Just as a plane almost certainly will land safely despite the uncomfortable bumps, the market usually rises over time (the gruesome past decade notwithstanding). Yet while for the vast majority of investors the sensible thing to do in the face of choppy markets is nothing at all, some yearn to seize the day. After all, seesawing prices can mean opportunity.

By that measure there has been plenty of opportunity of late. The Dow Jones industrial average (INDU) registered triple-digit gains or declines 22 times between April 20 and June 9, the most since the financial crisis of late 2008. Here, then, are three approaches to volatility that anyone can take -- provided you have the stomach and the attention span to do so. (more)

Middle class shackled by banking debt chains. 113 million households each owe an average of $113,000 in banking debt for mortgages, student loans, cre

The middle class has been systematically shackled by large amounts of debt, banking debt to be exact in a new form of financial serfdom. Much of this started in the early 1970s on par with the deficits don’t matter policy that engulfed our monetary policy for the next four decades. Like any giant structure built on debt, there is usually a point where a sort of debtor’s spiral will hit. Many middle class Americans have seen this occur with their credit card debt, mortgages, and auto loans. This also comes at a time when we have a record amount of two (or more) income households. More people are working under one roof but earning less and less in low paying service sector jobs. If it wasn’t for the two income trap, we’d see how shackled the public is to the banking debt that is so pervasive in America.

This amount of debt will cripple any recovery. Take a look at the current trap: (more)

Silver, ‘Gold’s Little Brother,’ May Advance to $23

Silver may surge to as much as $23 an ounce next year, the highest price since 1980, as investors seek a cheap alternative to gold and a global economic recovery boosts industrial demand, according to Commerzbank AG.

The metal may advance to as much as $21 an ounce by the end of this year, about 12 percent higher than yesterday’s close, Eugen Weinberg, head of commodity research, wrote in a report, dubbing the metal “gold’s little brother.” Compared with gold, silver may be considered low priced, Weinberg wrote.

Gold surged to a record $1,265.30 an ounce yesterday as investors sought to preserve their wealth against declining currencies, and China’s decision to drop the yuan’s dollar peg boosted commodity prices. There’s rising demand for silver, or “poor man’s gold,” the Perth Mint said earlier this month. (more)

Rise Of The New Gold Rush

They called us “kooks” and “crackpots”. They said our ideas were outdated and incompatible with modern finance. They said it wouldn’t last. Oh yes, Gold, they said, was a silly investment with no inherent value, and soon, precious metals investors would be “wiped out” by the “inevitable implosion of the gold bubble” (gold bubble….?). Mainstream establishment economists and Keynesians have been yipping and snarling like overanxious Chihuahuas for the past two years against gold and silver, most specifically their use as a hedge against collapse in stocks and currencies.

The vitriol they have aimed at PM’s and PM enthusiasts, though, borders on the obsessive. If we are all “crazy survivalists” and Y2K’ers, then why bother with us? Wouldn’t the folly of our financial strategy be blindingly evident to the majority of investors if we really are all madmen waiting for the seas to boil? If there is no chance of monetary implosion, why bother to plead and beg with the average American NOT to buy gold? Why invent wild generalizations and stereotypes of precious metals investors to dissuade the public from examining our model for economic security? Wouldn’t the mere passage of time prove us inaccurate? What is it about gold that frightens them so…..? (more)

Loonie and Aussie dollar gaining reserve currency status

The Australian and Canadian dollars are becoming reserve currencies for central bankers seeking alternatives to deteriorating government credit quality in Europe, the U.S. and Japan.

“They’ll gain an increasing place in reserves because of diversification,” European Central Bank governing council member Christian Noyer said in a June 16 interview with Bloomberg News in Paris.

Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. currency and euro, Alexei Ulyukayev, the first deputy chairman of the nation’s central bank, said in an interview in Moscow on June 15. The International Monetary Fund may add the Aussie and loonie to a basket of currencies it uses in transactions, strategists at UBS AG, the world’s second-largest foreign-exchange trader, predict. (more)

Jay Taylor: Turning Hard Times Into Good Times

click here for audio

Australia reportedly plans 'fix' to resource tax

The Australian government is planning to use about A$4 billion in savings from axed rebates to refashion its contentious resource super profits tax, say government sources according to a report in Wednesday's Australian Financial Review.

The report says the government will ditch a proposed exploration rebate and 40% upfront capital allowance for losses and use the savings from this to raise the rate of return at which the tax will kick in.

The revised proposal will also see lower-value resources such as clay, sand, gravel, rock and limestone dropped from the tax, while the taxing point for other commodities will be brought forward to nearer the point at which they are extracted from the ground. (more)

The New Word on Gold Reserve Reporting

Today, we add a new phrase to our gold bubble lexicon: “Peacocking.”

How else would you explain this: Saudi Arabia “restated” its gold reserves yesterday, right as the spot price found an all-time high of $1,265. Last week, SAMA, the shady Saudi sovereign wealth fund, held 143 tons of gold. Today – 322 tons!

The Saudis gave little explanation other than a humble “adjustment of the SAMA’s gold accounts.” Heh, 100+%? That’s some adjustment.

China did the same thing roughly a year ago. Having not reported its gold holdings in years, the Chinese quietly announced they were holding over 1,000 tons of the metal, double what the world expected. (more)