Thursday, August 11, 2011

Stephen Leeb: Silver to Hit $200 Within 24 Months

With the Dow trading up 429 points and gold hitting new all-time highs, [Aug 9th] King World News interviewed acclaimed money manager Stephen Leeb to get his thoughts on where things are headed. When asked about the action in the stock market Leeb replied, “Well I think the action in the market, the sharp, sharp decline, it really was an incredibly sharp decline, stems from the fact that investors started to realize that no one in Washington knows what they are doing.

There is no real prospect for coming to agreement…if that’s the hand you are dealt and you’ve got an economy you want to grow, then start talking about cutting taxes or cutting expenditures. But you don’t talk about things you know a big group won’t agree with. What does this make America look like? What does a typical citizen feel when he sees his Congress and his administration with absolutely no plan for a future with growth in it? It makes them feel sick and I think that was really the major reason for the selloff, it was a psychological reason.” (more)

Treasury sells 10-year notes at record low rate

A stampede by investors into Treasurys helped the U.S. government borrow at record low rates for the second day straight.

The Treasury sold $24 billion in 10-year Treasury notes Wednesday afternoon at a yield of 2.14 percent. That's the lowest borrowing rate for an auction of 10-year notes on record, according to Treasury dealers.

It's the second day in a row that the Treasury was able to borrow at an all-time low rate since Standard & Poor's stripped the U.S. of its AAA credit rating. The Treasury sold $32 billion in three-year notes at a record low of 0.50 percent Tuesday.

Europe's debt problems, weak economic growth in the U.S. and the falling stock market have led many investors to seek safety in Treasurys, still considered a safe haven despite S&P's downgrade. As demand increase, Treasury prices are pushed higher and their yields fall.

In Wednesday trading, the 10-year Treasury note rose $1.21 for every $100 invested. The yield fell to 2.11 percent, down from 2.26 percent late Tuesday. It briefly touched 2.03 percent Tuesday afternoon, just under the previous low reached during the financial crisis in 2008.

In other trading, the yield on the two-year note dropped to 0.18 percent from 0.20 late Tuesday. The yield on the 30-year Treasury fell to 3.50 percent from 3.61 percent, while its price jumped $2.53 for every $100 invested.

The three-month Treasury bill paid a 0.01 percent yield. Its discount was 0.02 percent.

Ellis Martin Report with David Morgan

New evidence that a gold correction could be just around the corner

This will be a brief post about what appears to me to be the issue of the day - the US Dollar. I snapped this chart of the US Dollar about an hour ago, noticing it appeared poised to break out. Since this chart was made, the US Dollar has broken reather decisively through the overhead downtrend line on price and trying very hard to get up through the 200 period moving average on this 4 hour chart.

Meanwhile, a rising dollar is not good for the stock market, as this 4 hour chart of the Standard and Poors 500 Continuous Contract shows us. It appears that if a retest of the lows is going to happen, the True Strength Index (TSI) indicator will make a positive divergence with respect to price and I hope that means the downdrafts are done for a while.

And finally, this look at a 4 hour chart of GOLD, which has succeeded in making a new high today. The indicators are in negative divergence, as I presumed yesterday they would be. I will be the first to admit that in very strong momentum moves these kind of negative divergences can just get run over..... ie price ignores them and continues higher. In these cases, and I have seen it happen many times, the TSI will continue to rise but only until it just about reaches its previous high. Then price collapses. I don't know exactly why this is, but I do believe my observations to be true.

I believe that Bernacke's position seems to favor gold. He basically said that interest rates will be below inflation for an extended period of time. That is incredibly bullish for gold.

My concern about gold, however, is that it has entered an unmistakable parabolic phase. These things never last long (I looked back at all previous C-wave tops and 4 days was commonly the limit - today is Day 3). My other concern is that gold is incredibly overbought while the stock market is incredibly oversold. I think big money would infinitely prefer to pile into an oversold market than an overbought market.

At any rate, my 2X short gold ETF (DZZ) I will just hold through whatever gold does next.

Cramer's Buy, Buy, Buy List

"What can you buy right here, right now in this crazed, volatile rollercoaster of a market," Cramer asked Tuesday. "More than anything else, what you need at this moment is a shopping list of stocks that make sense at these levels and make even more sense if they go lower."

Before drawing up his list, Cramer gave homegamers a few ground rules. First, stick with dividend-paying stocks because they pay you to wait. Second, avoid Treasury bonds at all costs, especially in light of comments by the U.S. Federal Reserve on Tuesday, announcing it will keep rates low for "at least through mid-2013."

With that in mind, Cramer outlined his diversified dividend shopping list:

Consolidated Edison [ED 52.07 0.17 (+0.33%) ]: This utility’s stock pays a 4.7 percent dividend yield. The company has boosted its dividend for the last 37 consecutive years.

Enterprise Products Partners [EPD 42.06 1.32 (+3.24%) ]: This pipeline operator reported strong earnings results on Tuesday, Cramer said. He likes its 6 percent dividend yield.

Verizon [VZ 33.66 -0.63 (-1.84%) ]: Cramer noted this stock has recently come down so hard that it now yields 5.8 percent. Verizon has a consistent, growing business that’s augmented by its half-ownership in Verizon Wireless, he noted.

Bristol-Myers [BMY 26.46 -0.64 (-2.36%) ]: Thanks to new drug discoveries, this health care company is really getting its act together, Cramer said. He thinks it’s ripe for a takeover. BMY yields 4.9 percent, too.

Darden [DRI 45.05 -1.07 (-2.32%) ]: Restaurants are crucial in this environment because they benefit from lower gas prices, Cramer said. He likes this operator of the Red Lobster and Olive Garden chains. It yields just 3.7 percent, but he thinks it’s worth a look.

Kimberly-Clark [KMB 62.57 -1.67 (-2.6%) ]: Being as plastic is made from petroleum, Kimberly-Clark has been crushed by rising raw costs. It uses a lot of plastic, after all. But with oil prices falling, Cramer thinks this stock will soon go back up. He also likes its 4.4 percent yield.

International Paper [IP 24.17 -0.64 (-2.58%) ]: Having recently reported a strong quarter, Cramer remains bullish on International Paper. It’s levered to fast-growing emerging markets and is trying to buy Temple-Inland [TIN 25.97 -0.79 (-2.95%) ], a move he thinks will benefit shareholders. This stock yields 4.4 percent.

McAlvany Weekly Commentary

The Worldwide Redefinition of “Riskless-Assets.”

  • How the downgrade of U.S. Treasury Debt will cascade to Mortgage Backed Securities, Fannie & Freddie as well as Municipal Bonds.
  • I scream, you scream we all scream Double Dip!
  • Old habits die hard: Americans get scared due to downgrade in bonds and then run into the same (recently downgraded) bonds for protection!? The rest of the world sees the paradox and runs to gold and German bonds.

Crude Oil Rises From 10-Month Low on Fed Statement; IEA Sees Risks in 2012

Oil rebounded from a 10-month low in New York on signs of shrinking U.S. crude inventories and after the Federal Reserve said it may to use a range of methods to bolster the economy.

Futures gained for the first time in three days after the Fed said yesterday it will keep interest rates near zero until mid-2013 and use other tools “as appropriate.” Crude supplies fell the most since June, according to the industry-funded American Petroleum Institute. The International Energy Agency said it may need to cut next year’s estimate for oil demand.

“Brent and WTI have made strong gains this morning on the back of brighter sentiment on markets after the Federal Reserve’s decision not to raise the federal funds rate until mid-2013,” said Carsten Fritsch, an analyst in Frankfurt at Commerzbank AG, the third most-accurate forecaster of oil prices in the second quarter.

Crude for September delivery advanced as much as $3.60, or 4.54 percent, to $82.90 a barrel in electronic trading on the New York Mercantile Exchange, and was at $82.12 at 1:17 p.m. London time. The contract yesterday fell $2.01, or 2.5 percent, to $79.30, the lowest settlement since Sept. 29. Prices are down 10 percent this year.

Brent oil for September settlement gained $3.66, or 3.6 percent, to $106.23 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $24.11 to U.S. futures, having reached a record of $24.23 earlier.

IEA Projections

Brent crude oil may fall to $80 a barrel in a “mild” recession, a price that would prompt the Organization of Petroleum Exporting Countries to reduce supply, Bank of America Merrill Lynch said in a report dated yesterday.

The IEA said threats to global economic recovery may cut oil demand growth next year by more than 60 percent, while keeping underlying forecasts for 2011 and 2012 little changed.

The Paris-based agency, which advises 28 industrialized nations on energy policy, trimmed demand forecasts for 2011 by 60,000 barrels a day as fuel costs weigh on consumers, and raised projections for next year by 70,000 a day to 91.1 million on growth in Japan. The IEA expects global oil consumption will increase 1.6 million barrels a day, or 1.8 percent, in 2012. It may expand by less than half that amount if worldwide growth misses expectations, it said.

“It looks like markets want to turn back up,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in an e-mailed note. Traders bought oil after the settlement and “prices were back in positive numbers after the API report, which showed inventory drawdowns across the board,” he said.

U.S. Supplies

U.S. crude-oil supplies declined 5.21 million barrels to 348.6 million last week, the American Petroleum Institute said. An Energy Department report today may show stockpiles increased 1.35 million barrels in the seven days ended Aug. 5, according to the median estimate of 12 analysts and traders in a Bloomberg News survey.

Gasoline inventories decreased 1.01 million barrels to 211.2 million barrels, the API data show. The Energy Department report will probably show they rose 900,000 barrels, according to the Bloomberg News survey.

The API collects stockpile data on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed for its weekly survey. Oil-supply totals from the API and the department have moved in the same direction 71 percent of the time in the past year and 75 percent in the past four years.

CME Hikes Gold Margins By 22%

Just after hitting a new all time high of above $1815 in spot gold, the CME immediately sent out a notice to members advising that gold margins for Tier 1 members were increasing by 22% for both initial and maintenance positions, from $4,500 to $5,500. Unfortunately for the CME, this predetermined move was telegraphed to the market weeks ago, and with rumor 57 out of 22 finally turning out correct, this latest move only managed to push gold down modestly, and at last check was once again trading above $1,800. Just like all central bank interventions, which now have a half life between 1 hour and 4 days max, so this latest exchange attempt to subdue prices will fail spectacularly. Naturally, just like in the case of silver, this will merely embolden the CME to proceed with hike after hike, which in turn will kill speculative elements while merely reinforcing the strong hands. End result: in one month gold will be above $2,000 with almost 100% certainty.

In addition, the CME also hiked CHF futures by 443%, Yen futures by 25%, Ruble futures by 36%, as well as TEN, UBE and I3. The only margins that were cut were those of Uranium which dropped from 1320/1200 to 990/900 for initial/maintenance.

CME notice goes out at 6:31 pm, and gold promptly resumes upward climb:

The Collapse:Gerald Celente Predicted It Would Happen. It’s Happening!

On June 13th, Trends Journal subscribers received this Trend Alert®: “Collapse It’s Coming! Are You Ready?”

In that Trend Alert®, Gerald Celente accurately predicted that a global economic collapse was imminent. “The economy is on the threshold of calamity … another violent financial episode is looming,” he wrote.

Celente warned that the trends of the Summer of 2011 paralleled those in play during August of 2007, trends that had culminated in the “Panic of ’08.”

He dismissed the assurances of world leaders that policies were in place to mitigate the escalating European and US debt crises.

He discounted “media experts” promoting an imaginary recovery or debating the prospects of a double-dip recession.

It was all bogus. Those assurances were hot air, and the “recovery” talk and “double-dip recession” debates were just red herrings.

In that Trend Alert®, Celente urged readers to resist the urge to lapse into a vacation state of mind. And he warned that the coming panic was going to be distinctly different!

In the Summer of 2007, before the “Panic of ‘08” set in, the Dow had hit a high of 14,000, the real estate and credit bubbles had not yet burst, and unemployment was a manageable 4.7 percent. People actually still felt prosperous.

The “Collapse of 2011” follows four years of relentless economic decay. The combination of plummeting real estate values, intractable unemployment, and a US/European government debt crises dwarfs the banking/financial institution turmoil of 2008.

Back then, Washington and the Federal Reserve treated the critically wounded economy with trillions of stimulus dollars, low interest rates, and quantitative easing. But in 2011, those fiscal and monetary band-aids are not viable options.

It’s a tale told in chapter and verse in Trends Journals, in Trend Alerts and Trends in The News: the promised recovery was no more than a “cover-up.” We correctly forecast that gold prices would soar, the dollar would dive against the Swiss Franc, the European debt crisis would worsen dramatically, the vaunted emerging markets would submerge, and the “House made of BRICS” would not escape the turmoil.

In forecasting the collapse well in advance, Celente provided an accurate timeline and supported his conclusions with quantifiable data and in-depth analysis. However, now that the collapse is underway, history is already being brazenly reengineered, right in front of our eyes. Blaming the S&P downgrade for triggering the global sell-off/financial panic – as the majority of pundits are doing – is as bogus as blaming the onset of World War I on the assassination of Archduke Ferdinand. The downgrade was no more than the proverbial last straw that broke the nation’s financial back.

Trendpost: Trends Journal subscribers take notice. You know that Gerald Celente predicted the collapse. He now maintains there are no substantive DC/FED/ECB/IMF financial cards left to play to reverse the irreversible. Despite today’s Fed announcement to keep interest rates near zero through mid-2013 – and use policy tools to bolster the economy “as appropriate” – he forecasts that future Fed schemes will, at best, provide only temporary relief and, as with its previous attempts, are doomed to fail.

True to form, the economic propaganda mill is churning at full speed and the media coverage is mostly “bull.” Tune into any business show, pick up any newspaper and what you will get is the economic equivalent of the notorious 9/11 advice from the authorities as people fled the World Trade Center: “Go back to your offices, the fire in the North Tower is under control.”

So now, with some $8 trillion of equity destroyed in just a few days, the authoritative counsel is: “The market is oversold. Get back in. It’s a buying opportunity.”

Peter Schiff: “You Can’t Print Gold” – Credit Agencies Still Giving Central Bankers Too Much Credit