Saturday, February 18, 2012

John Williams: $8,890 Gold, $517 Silver & Hyperinflation Update

from King World News:

John Williams, of Shadowstats, discusses some extraordinary prices for gold and silver as well as giving an update on his hyperinflation watch. Williams also says that there is no recovery in the economy and inflation is picking up steam. Here is what Williams had to say about the situation: “Hyperinflation Watch: The upside pressure on oil prices, at the moment, largely is from escalating political tensions in the Middle East, not from significant new weakness in the U.S. dollar. Risk remains high, though, of a sharp sell-off in the U.S. dollar and dumping of dollar-denominated paper assets, particularly as the euro area crises come to head and the damages are absorbed, in due course, by the global financial system.”

John Williams continues: Read More @

Gold Price will kick in any day - Bill Murphy of GATA

Gold Price Manipulation Explained and Why Silver Will Soon Go Ballistic says Bill Murphy of GATA .Bill Murphy explains that he will be shocked if silver won't hit the $60/oz by the end of this year , he also explains how JP morgan was able so far to rig the market and keep the prices of gold down , which is a great opportunity for the average investor to buy more gold and silver , gold prices will kick in any day and they are ready to explode he said

Big Long Is New Big Short as Bass Joins Subprime Bet

Investors who made some of the biggest profits from the 2007 bust in U.S. mortgages are once again in agreement. This time, they’re going long.

Hedge fund manager Kyle Bass, who made $500 million betting against subprime debt in the crash, is raising a fund to buy home loan securities. He’s joining Greg Lippmann, a former Deutsche Bank AG trader, and John Paulson, who made $15 billion in 2007, in betting on default prone mortgages. Goldman Sachs Group Inc. (GS) and American International Group Inc. (AIG) have also emerged as buyers this year as trading more than doubled for non-agency mortgage notes.

The $1.1 trillion market for U.S. mortgage bonds without government-backing is joining a global rally in everything from stocks and commodities to company loans, as confidence grows that Europe’s sovereign debt crisis will be contained. Investors are speculating the riskiest mortgage securities are priced to withstand an economic slowdown and home price declines even as President Barack Obama and the Federal Reserve pursue policies to combat the six-year residential real-estate slump.

“You can end up, even using severe assumptions on things such as home prices and defaults, with a very high yield based on the prices that bonds are trading at,” Larry Penn, chief executive officer of Old Greenwich, Connecticut-based Ellington Financial LLC (EFC), said yesterday in a telephone interview. “Especially with interest rates this low, if you can buy something where you can end up with a double-digit yield under severe assumptions, that’s great.”

Toxic Debt

Typical prices for the most-senior bonds tied to option adjustable-rate mortgages rose to 55 cents on the dollar last week from 49 cents in November, according to Barclays Capital.

Option ARMs, a type of loan that allowed borrowers to pay less than the monthly interest due with the shortfall added to the balance, were among the “toxic” debt that the Financial Crisis Inquiry Commission said was at the center of the “corrosion of mortgage-lending standards” that helped fuel the housing boom and subsequent bust. About 45 percent of the option ARM loans that are in bonds are delinquent, according to JPMorgan Chase & Co. data.

The rally may help bolster fixed-income trading revenue that fell at the five biggest U.S-based Wall Street banks by more than 20 percent last year, excluding accounting gains, according to data compiled by Bloomberg. (more)

Rallies Following 30% Bear Corrections (1900-Present)

Last weekend, I showed a chart titled Stock Market Rallies Since 1900. The metrics were “rallies that followed a major Dow correction defined as a decline of 15% or more. By that definition, the last Dow correction ended on October 3, 2011 with a decline of 16.8%.”

A few readers thought that was too restrictive, so I contacted the folks at the Chart of the Day, and they were kind enough to redraw the chart using 30% declines as a basis:


Source: Chart of the Day


The chart above includes all major market rallies of the last 111 years. Each dot represents a major market rally as measured by the Dow. Dates mark the year in which the rally began.

For today’s chart, however, a rally is being defined as an advance that follows a 30% decline (i.e. a major bear market).

There have been 13 major rallies over the past 111 years which equates to an average of one rally every 8.5 years. It is also interesting to note that the duration and magnitude of each rally correlated fairly well with the linear regression line (gray upward sloping line). As it stands right now, the current Dow rally that began in March 2009 (blue dot labeled you are here) would be classified as well below average in both duration and magnitude.

Why Does The Market Keep Rising?

By Gordon T. Long

This gigantic flood of extremely inexpensive high-powered money does have a major impact, not in the real economy, but in the liquid investment markets.

Free money sets a very low hurdle for a short-term investment and as long as the transaction has decent liquidity, why not do the trade. As a result, almost every equity, commodity, and credit market is moving higher.

High beta currencies are moving higher as well, as risk is clearly on the front foot. This positive mood began at the start of October, a bit more than a week after Bernanke announced the start of ‘Operation Twist,’ a subtle way to improve the profits of the banks and increase the risk of the Fed without expanding its balance sheet.

Global equity markets began to climb.

· Bernanke then announced an expansion and cheapening of the US swap lines with Europe, which currently have $103 billion outstanding, adding massively to Europe and Japan’s liquidity.

· Mario Draghi’s move into the ECB Presidency on November 1 was the next harbinger of a new wave of liquidity, as he dropped the refinancing rate a few days later.

· Then Draghi announced the LTRO on December 8, expanding the ECB balance sheet by over 4% of the GDP in one day later in the month.

· By the end of December things were clearly moving up in all the traded markets.

· Bernanke put the cherry on the top of the sundae not once, but several times in the last few weeks. (more)

12 Scary Debt Facts for 2012

As President Obama unveiled the 2013 fiscal year budget, the nation's financial situation came back into sharp focus. Experts say partisan gridlock in Washington means the budget will probably go nowhere.

Considering this is an election year, however, expect politicians to harp on facts, figures and terms that most Americans weren't taught in high school. To help out, it's time to dredge up lots of scary facts to make you pay attention.

Before we get going, a quick primer on the number TRILLION:

  • $1 trillion = $1,000 billion or $1,000,000,000,000 (that's 12 zeros)
  • How hard is it to spend a trillion dollars? If you spent one dollar every second, you would have spent a million dollars in 12 days. At that same rate, it would take you 32 years to spend a billion dollars. But it would take you more than 31,000 years to spend a trillion dollars.
  • And now, some scary facts about the debt and the deficit -- some basics:
  • Deficit = money government takes in -- money government spends
  • 2012 US deficit = $1.33 trillion
  • 2013 Proposed budget deficit = $901 billion
  • National debt = Total amount borrowed over time to fund the annual deficit
  • Current national debt = $15.3 trillion (or $49,030 per every man, woman and child in the US or $135,773 per taxpayer)

[Also see: Who Benefits From the Safety Net]

OK, let's get started!

1. The U.S. national debt on Jan. 1, 1791, was just $75 million dollars. Today, the U.S. national debt rises by that amount about once an hour.

2. Our nation began its existence in debt after borrowing money to finance the Revolutionary War. President Andrew Jackson nearly eliminated the debt, calling it a "national curse." Jackson railed against borrowing, spending and even banks, for that matter, and he tried to eliminate all federal debt. By Jan. 1, 1835, under Jackson, the debt was just $33,733.

3. When World War II ended, the debt equaled 122 percent of GDP (GDP is a measure of the entire economy). In the 1950s and 1960s, the economy grew at an average rate of 4.3 percent a year and the debt gradually declined to 38 percent of GDP in 1970. This year, the Office of Budget and Management expects that the debt will equal nearly 100 percent of GDP.

4. Since 1938, the national debt has increased at an average annual rate of 8.5 percent. The only exceptions to the constant annual increase over the last 62 years were during the administrations of Clinton and Johnson. (Note that this is the rate of growth; the national debt still existed under both presidents.) During the Clinton presidency, debt growth was almost zero. Johnson averaged 3 percent growth of debt for the six years he served (1963-69).

5. When Ronald Reagan took office, the U.S. national debt was just under $1 trillion. When he left office, it was $2.6 trillion. During the eight Regan years, the US moved from being the world's largest international creditor to the largest debtor nation.

6. The U.S. national debt has more than doubled since the year 2000.

  • Under President Bush: At the end of calendar year 2000, the debt stood at $5.629 trillion. Eight years later, the federal debt stood at $9.986 trillion.
  • Under President Obama: The debt started at $9.986 trillion and escalated to $15.3 trillion, a 53 percent increase over three years.

7. FY 2013 budget projects a deficit of $901 billion in 2013, representing 5.5 percent of GDP, down from a deficit of $1.33 trillion in FY 2012, which was the fourth consecutive year of more than $1 trillion dollar deficits.

8. The U.S. national debt rises at an average of approximately $3.8 billion per day.

9. The US government now borrows approximately $5 billion every business day.

[Also see: States with the most homes in foreclosure]

10. A trillion $10 bills, if they were taped end to end, would wrap around the globe more than 380 times. That amount of money would still not be enough to pay off the U.S. national debt.

11. The debt ceiling is the maximum amount of debt that Congress allows for the government. The current debt ceiling is $16.394 trillion effective Jan. 30, 2012.

12. The U.S. government has to borrow 43 cents of every dollar that it currently spends, four times the rate in 1980.

You can track the national debt on a daily basis here.

How Increased Iranian Sanctions Affect South Africa

The U.S. new sanctions initiative, strongly supported by Israel, to impose new sanctions against Iran, is designed to punish it for its purported covert nuclear weapons program by imposing new restrictions on Tehran.

As a result, many of Iran's oil customers are scrambling to avoid collateral damage to their economies.

The sanctions' potential fallout is now hitting South Africa, Africa's biggest economy, which receives nearly 25 percent of its needs from Iran, roughly 98,000 barrels per day (bpd), or about 4 percent of Iran's total exports.

South Africa's economy, which has been hit by fuel shortages in the past because of strikes and refinery problems, would be hard-pressed to fill any gap quickly.

South Africa's Department of Energy director general Nelisiwe Magubane said that South Africa had not yet received any formal request from the United States to halt or reduce Iranian crude imports following a visit to South Africa last week by a senior U.S. energy official but added that, as most South African refineries are designed to treat Iranian crude and that any adjustment to handle other crudes would involve a financial cost, telling reporters, "We have said let's work on a worst case scenario. In other words, let's just assume that we cannot get anything out of Iran or at a reduced rate, what is going to be the impact?"

According to the U.S. Energy Information Administration (EIA),South Africa is Iran's ninth largest export market, after China (543,000 bpd), India (341,000 bpd) Japan (251,000 bpd, South Korea (239,000 bpd), Turkey (217,000 bpd), Italy (204,000 bbd), Spain (170,000 bpd) and Greece (158,000 bpd.)

Within these figures however is the issue of how much Iranian crude represents in terms of a country's total percent of imports, and South Africa is only exceeded by Greece (53.1 percent) and Turkey (30.6 percent).

The U.S. administration has been assiduously involved in discussions to shield nations that sign on-board for increased sanctions to obviate the effects on them. Last week U.S. Deputy Secretary of Energy Daniel Poneman said during his visit to South Africa that Washington had been in talks with all oil importers to find alternatives to Iranian supply and would work to avoid price rises.

U.S. South African embassy spokesman Elizabeth Trudeau told journalists, "We ... are working with oil consuming countries to help them respond to the new legislation and find alternatives to energy supplies from Iran." Regarding the U.S. presence in South Africa Trudeau added that a representative of the U.S. Treasury was in Pretoria, commenting, "The Treasury official met representatives of private business in South Africa, including members of the banking industry, as well as officials from the South African government," adding that the meetings were "part of our ongoing dialogue with countries around the world on the implications and implementation of the sanctions legislation."

However, even if South African refineries could locate alternative sources of crude oil, it would involve a substantial cost to them, which, according to South African Department of Energy Director General Nelisiwe Magubane, are designed to process lighter grades of oil, such as those from Iran. Magubane estimated that the cost to alter South African refineries to utilize other grades of crude would exceed $44 million.

South African-Iranian ties have a long, deep and complex history. During South Africa's white apartheid regime Iran supported the African National Congress resistance when it was an anti-apartheid movement, but Tehran played both sides of the fence, as it also supplied oil to the white minority government both before and after the Shah's overthrow by the Islamic regime led by Ayatollah Ruhollah Khomeini in February 1979.

History aside, South Africa could provide a unique opportunity for settling the Iranian nuclear debate, should the UN Security Council decide to avail itself of Pretoria's services. South Africa is the only nation in the world to have voluntarily surrendered an incipient nuclear weapons program and now maintains that all countries should have the right to develop peaceful nuclear energy. South Africa has both uranium reserves and its own civilian nuclear power program. Seeking to build on its twin heritage of civilian and military nuclear endeavors, last week South African Foreign Affairs department spokesman Clayson Monyela said that South Africa has informed Iran that it is ready to help any nation that wants to follow its lead and give up nuclear weapons.

It is a concept worth pursuing as an alternative to war, as all five members of the UN Security Council possess nuclear arsenals as well as civilian nuclear programs. Perhaps the UN Security Council should consider listening to the advice of a nation that produced a Nobel Peace Prize winner rather than dictating.

And South Africa? Quite aside from the diplomatic laurels it would gather, it would save the funds needed to retool its refineries.

A win-win situation.

The Petro Business Cycle

Oil is the lifeblood of modern society, powering over 90% of our transportation fleet on land, sea, and air. Oil is also responsible for 95% of the production of all goods we buy and ultimately drives the natural rhythms of recession and recovery. We define this as the "Petro Business Cycle".

fuel gauge recession recoveryThe post-crash world we have inhabited since the credit crisis of 2008 has been defined as "The New Normal"—a phrase used to describe an economic and market environment much different than the three decades that preceded it. In contrast to the past, the "New Normal" will mean a lower living standard for most Americans. It will be a world of lower economic growth, higher unemployment, stagnant corporate profits, and the heavy hand of government intervention in all aspects in the economy. For investors it will be an environment marked by volatility, zero interest rates, and disappointing equity returns.

The age of leverage is coming to an end as consumers, businesses, and governments are forced to rein in their balance sheets. For consumers it will mean less discretionary spending as higher taxes and inflation erode the purchasing power of wages. Businesses will have fewer profit opportunities and find it more difficult to replicate the growth rates of the booming '80s and '90s. Governments will struggle with the illusion that their fiscal and monetary stimulus will produce long lasting effects on the economy. Eventually profligate government spending will give way to an age of austerity now beginning to spread across Europe. It will either be done voluntarily or involuntarily by the heavy hand of the market.

It should be obvious by now to the casual observer that change is in the air. The economy and the markets aren't acting normal. Despite trillions of dollars of fiscal stimulus, unemployment has remained high and economic growth has remained anemic. It has taken zero percent interest rates and copious amounts of money printing to keep the economy from falling back into a recession. The deflationary forces of deleveraging have fused with inflationary monetary forces with the end result leading to stagflation. (more)

10 Rules for SILVER Investing

1. Why silver, Why Now?

2. Start small- keep it simple.

3. Boost the buying power of your dollars with mining shares.

4. Dollar – cost average to lower your costs – and increase your discipline.

5. Do not get a raw deal from your dealer.

6. What’s yours is yours – so keep it that way.

7. Silver speculation’s like cough syrup- good in small doses-- But too much can make your portfolio sick.

8. A little information can mean a lot more dollars.

9. Collecting silver is an art- but not really an investment.

10. What percentage is the correct amount?

MAKE SURE YOU GET PHYSICAL SILVER IN YOUR OWN POSSESSION. Don't Buy SLV, or Futures or Pooled Accounts or any other BS paper silver product .Remember anything on paper is worth the paper it is written on. Go Long Stay long the bull market have even started yet

Chart of the Day - Genuine Parts (GPC)

The "Chart of the Day" is Genuine Parts (GPC), which showed up on Thursday's Barchart "All Time High" list. Genuine Parts on Thursday posted a new all-time high of $65.61 and closed up 2.66%. TrendSpotter took a profit on a Long position on Wednesday, but then issued a new Buy signal with Thursday's rally. Genuine Parts was last featured by "Chart of the Day" on Dec 23 when the stock closed at $61.57. In recent news, Bloomberg on Jan 31 reported that the U.S. vehicle age reached an all-time high and that parts spending rose 9%. Genuine Parts, with a market cap of $10 billion, is a distributor of automotive replacement parts in the U.S., Canada and Mexico.