Thursday, January 6, 2011


John Taylor, chief executive officer of FX Concepts LLC, the world’s largest currency hedge fund explains why he is very bearish on the Euro and believes it will decline below parity with the dollar. Taylor says the market is still overly optimistic on the Euro crisis and believes we’re still likely to see defaults and defections from the Euro:

The American Dream: You Have GOT To See This Short Documentary About The Federal Reserve

Have you ever wondered how in the world you can explain complicated topics such as the Federal Reserve, fractional reserve banking and the creation of money in a way that your family and friends will actually understand? Well, the other day I was made aware of an amazing new 30 minute animated documentary entitled The American Dream. Considering the fact that this column is called "The American Dream", that definitely got my attention, and when I sat down and watched the documentary I was absolutely amazed. What Tad Lumpkin and Harold Uhl have done is that they have created a very funny, very entertaining 30 minute cartoon that does an excellent job of explaining how our financial system really works and why the Federal Reserve is bad for America.

You can find out much more information about the documentary and about what they are trying to accomplish right here. The documentary is also posted on YouTube and I have embedded it below....

As you can see, this is the kind of thing that even many of the most dumbed-down members of our society will be able to relate to and understand.

Hopefully as we all work together, we will wake up millions of Americans to what is really happening to our financial system. (more)

BNN: Top Picks

Hap Sneddon, Portfolio manager and techinal analyst, Castlemoore inc shares his top picks.

click here for video

Martin Armstrong: A Total Eclipse of the Economy

Armstrong’s latest article has no concern about the gold trend with the $5000 level still in his sights.

read it here

Sorry ADP, Not Everyone Believes the Economy Created 297,000 Jobs

That big positive surprise this morning from the ADP jobs report was nice while it lasted — which was all of about 30 seconds by market standards.

Unfortunately, a number of traders and economists aren't willing to take seriously the report that ADP and Macroeconomic Advisors put out suggesting the economy created 297,000 jobs over the past month.

A quick straw poll this morning showed a lot of disbelief in the ADP numbers, and the report did virtually nothing to move the stock market, though futures pared some losses immediately after the release.

Equities meandered through morning trading, though other markets did react. In particular, bonds showed a strong reversal of earlier gains, while the dollar gained more than 1 percent and in turn pressured commodities priecs.

But don’t expect many major revisions for Friday’s Labor Department report, expected to show nonfarm job increases of 140,000 jobs and an unchanged unemployment rate of 9.7 percent. (more)

Buy GLD on a Pullback to $130

SPDR Gold Shares (NYSE: GLD) — We have been recommending this exchange -traded fund (ETF), which seeks to mirror the price of gold bullion, for over a year.

On Sept. 16, at $124, the Trade of the Day said: “An intermediate correction in July only temporarily interrupted the rising price of gold, and this week, GLD broke from a triple-top to a new high. The immediate target is still $130, but with new buying from central banks, the price could jump to $140.”

And, on Nov. 9: “With the recent breakaway gap, the possibility of a ‘currency war,’ and a rush to precious metals, our target is raised to $150-plus.”

I’ll still stick with that longer-term assessment. However, if the first line of support at $134 is penetrated, expect an immediate sell-off to $130 where new purchases should be entered.

4 Investment Themes & 4 Stocks to Benefit (CMI, MAN, IACI, DEER)

As I look out over the investment landscape for the New Year I see 4 profitable investment themes playing out. Each offers upside potential for investors. Blending all four into your portfolio this year should lead to strong outperformance. Here are those themes:

Theme #1: Developing Markets

This is the most obvious of the themes; it has been paying off handsomely for the past few years. Since there are no signs of slowing, then I think investors should stay on board.

In essence, developing nations like China, India, Brazil, etc. will be devouring massive amounts of resources to build out their infrastructures to support a booming economy. Certainly one can play commodities like copper or oil to benefit. Yet I think industrials offer the most profit leverage to this trend. Meaning companies that produce machinery that helps keep these new economies humming is where to place your bets.

My favorite industrial to benefit from this trend is Cummins Inc. (CMI - Analyst Report), which makes engines that go into almost every type of large transportation vehicle. As you might imagine, their engines are in high demand for all the new trains, trucks and ships needed to move all the resources that these emerging economies demand. One Wall Street analyst is pounding the table that earnings could nearly double to $11 per share by 2013. That is quite possible, making the current share price very attractive. (more)

Jeff Rubin: Is There Enough Oil to Pay Our Debt?

2010 left us all with a mountain of debt. Whether you’re a taxpayer in the UK, Ireland or the US, it must already be pretty clear that you’re on the hook for a lot of IOUs borrowed from your future. You may not have borrowed the money yourself, but your government has already done it on your behalf, running up massive, record-setting deficits. What’s not clear is exactly how your government is going to pay that debt back.

With students already rioting in London over huge tuition increases, and general strikes the order of the day in places like Athens and Madrid, chances are slim that incumbent governments will survive long enough to cut their way to fiscal solvency. That’s not to say the fiscal brakes aren’t on (they are—at least everywhere but in the US). But the deficits are so gargantuan (as an example, Ireland’s is equal to one third of the country’s GDP) that the twin tasks of slashing spending and hiking taxes could last decades, provoking all kinds of social and political push-back during that time.

Given austerity’s slim chance at success, you might ask why government borrowing rates in the bond market, though rising, aren’t much higher. History would suggest that the yield on a ten-year US Treasury bond should be close to double what it is, given the size of Washington’s borrowing program. (more)

McAlvany Weekly Commentary

2011: A Look at Risk and Uncertainty

A Look At this Week’s Show:
Denomination of assets is as critical as the assets themselves
The impact of depression economics on real estate
U.S. fiscal disaster tied to municipal bonds and Chinese politics

More Bad News For States: State Revenue Plunges By 31% In 2009 To $1.1 Trillion As Spending Increases

The Meredith Whitney "ubiquitous state default" case may have just gotten another leg up. According to just released Census Bureau data, in 2009 total state revenue plunged by 31%, from $1.6 trillion to $1.1 trillion. "The large decrease in total revenue was mainly caused by the substantial decrease in social insurance trust revenue. Social insurance trust revenue is made up of four categories — public employee retirement, unemployment compensation, workers compensation and other insurance trusts (i.e., Social Security, Medicare, veteran's life insurance)." But the drop in the top line did not stop states from spending more: in the same year, state government spending rose by 3%, while that pervasive source of backstop funding, the US government, saw its grants to states increase by 13% to $477.7 billion. At this point it is safe to say nobody believes there is a deficit that the US government can not fill.

Full press release:

U.S. Census Bureau Reports State Government Revenues Decline Nearly 31 Percent

Total state government revenue dropped to $1.1 trillion in 2009, a decline of 30.8 percent from $1.6 trillion in 2008, according to the latest findings from the U.S. Census Bureau. The large decrease in total revenue was mainly caused by the substantial decrease in social insurance trust revenue.

Social insurance trust revenue is made up of four categories — public employee retirement, unemployment compensation, workers compensation and other insurance trusts (i.e., Social Security, Medicare, veteran's life insurance). More details on the social insurance trust revenue will be available from the 2009 Annual Survey of State Government Employee Retirement Systems data later this winter. (more)

US Dollar Soared After Strong US Figures

The US Dollar Index (USDX), an index which measures the valuation of the US dollar against a basket of currencies like the euro, has been stuck in a trading range after it rebounded from its low of 75.631 last November 4. It peaked at 81.444 on November 30 but it has since moved sideways. Yesterday, however, the dollar jumped by 1.0%, its best percentage gain in three weeks. As you can see from the index’s 4-hour chart, it jumped 79.50 to settle just above 80.20. Presently, there are very heavy resistances above the index’s current level. However, a potential pennant pattern could now be forming and a breakout from it could send the index towards its November peak. But if a breakout does not occur, the dollar could weaken and fall back to 79.00. An overbought condition, as indicated by the stochastics, also makes this scenario possible.

Fundamentally, the surprise jump in the US’s private sector jobs and solid growth in its service sector helped buoy the USD. Private payrolls firm ADP that 297,000 new jobs were created in December, almost tripling the market’s forecast of only 101,000. Confidence and dollar buying got another boost when the Institute for Supply Management (ISM) also posted an more-than-projected improvement in its index. The index rose to 57.1 in December from 55.0 in the previous month which is over the 55.6 consensus.

To end the week, the mother of all economic report, the US Non-farm Payrolls (NFP) report will be on deck. About 136,000 new jobs is expected to have been created in December from only 39,000 in November. But with the huge positive gap in the ADP’s figure, an upside in the actual employment figures could happen. Unemployment rate for the same period is also expected to improve to 9.7% from 9.8%. Such would definitely enhance the market’s optimism and push the dollar higher.