Friday, August 31, 2012

Fed to Crash Markets Before Launching QE3 / By Dominique de Kevelioc de Bailleul / August 29, 2012

Desperate to print Wiemar-style to fight off the most viscous Kondratiev Winter on record, Federal Reserve Chairman Ben Bernanke may not satisfy ‘inflation trade’ onlookers at the close of his Jackson Hole speech scheduled Friday. He may, instead, merely allow months of anticipatory front-running of stocks do the work of propping up asset prices for him.

And if investors don’t get the ‘all-systems go’ at Jackson Hole, there’s always the FOMC meeting of Sept. 12 & 13 to get the good news. That’s when market volatility could move off the charts, maybe extreme volatility to the downside, according some Wall Street analysts.

“With the equity market pricing in a significant chance of QE3, stock prices are no longer as useful a signal to Fed officials. Should the Fed disappoint at its September policy meeting, the risk of a stock sell-off is high,” Bank of America Merrill Lynch analysts wrote in a note to clients, Aug. 21.

“Some in the markets think that the Fed effectively targets equity prices, meaning that to predict Fed policy, one merely needs to track the U.S. stock market,” the analysts add. “There is a curious circularity to this view, however: the Fed will not launch QE3 so long as stock prices are high, yet the stock market is high because it anticipates QE3.”

The old adage on the Street, ‘buy the rumor, sell the fact’, may be at play here. But if Bernanke plays too-hard-to-get with investors in the coming weeks, a nasty fall could be in store for the Fed chief—a fall that could outright overwhelm the NY Fed’s PPT and result in a stock market plunge akin to the Crash of 1987. Maybe.


Real Estate Turnaround?

by Greg Hunter
USA Watchdog

There was some good news released yesterday by the Standard & Poor’s/Case-Shiller home price index. Residential housing prices rose .5% year-over-year for the first time since June of 2010. In a press release, David M. Blitzer, Chairman of the Index Committee, said, “All 20 of the cities saw average home prices rise in June over May and all were by at least 1.0%. . . . We are aware that we are in the middle of a seasonal buying period, but the combined positive news coming from both monthly and annual rates of change in home prices bode well for the housing market.” (Click here for the complete Case-Shiller press report and release.)

Does a .5% increase (year-over-year) really “bode well for the housing market”? It has been widely reported the Federal Reserve has spent trillions of dollars suppressing interest rates. There’s been quantitative easing (money printing), “Operation Twist” and near 0% interest on a key Fed lending rate. A 30-year mortgage is hovering at or near historic lows–around 3.5%. This is all we got after all that? According to the latest Case-Shiller report, “As of June 2012, average home prices across the United States for the 10-City and 20-City Composites are back to their summer 2003 levels.” Home prices are back to where they were 10 years ago and this is good news?

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Agnico CEO Warns Gold To Hit $3,000 On Supply Concerns

from King World News

Today one of the top CEO’s in the world told King World News that going forward, “… we will see increasing central bank demand for gold.” He also warned, “We will (also) see reduced supply.” Sean Boyd, who is CEO of $8 billion Agnico Eagle, also discussed why the gold price is set up to frustrate the bears by nearly doubling from current levels.

Here is what Boyd had to say: “We are just looking at further stimulus, this time coming out of China, where they are looking to spend over one trillion dollars on stimulus projects to try to boost the economy. This takes us back to late 2008, when the powers that be were trying to sort out the financial crisis.”

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Is the End Near Mayan Discovery of Time: Martin Armstrong

Is the End Near

Mayan Discovery of Time

click here to read

Chart Of The Day: From Pervasive Cheap Credit To Hyperinflation

from Zero Hedge

The topic of the student loan bubble is not new: having crossed $1 trillion recently, student debt is now the biggest consumer debt category, greater even than US credit card debt. We have extensively discussed the implications of the parabolic curve representing outstanding student debt before, and it is no surprise that the issue of student loans has become of one of the key topics of debate in the ongoing presidential mudslinging campaign. As is also known, an increasing portion of student debt is funded by the government at an ever lower rate of interest: after all it is critical to allow the bubble to keep growing with as little interest expense diverting the stream of cash from the end borrower – wide eyed students who increasingly realize they are stuck with tens of thousands in loans and no jobs available to allow them to repay this debt, in effect making an entire generation debt slaves. Finally, as should be known, student debt is non-dischargeable, meaning once a person becomes indentured, they are so for life, and filing bankruptcy will do nothing to resolve debt claims against the individual. After all there is no other collateral by definition that can be confiscated by the creditor – the only thing the debtor “acquires” in exchange for this debt is a skillset, which sadly in the New Normal is increasingly redundant. But there has always been one question outstanding: just what does all this easily accessible and now pervasive student debt fund? The chart below, courtesy of Bloomberg, provides the answer: in the past 3 decades there has been no other cost that comes even remotely close to matching the near hyperinflationary surge in college tuition and costs.

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China’s Looming Inflation Problem

The economic climate in China is unsteady. Inflation, high last year, has settled, but another rise could spell trouble for the national economy.

And an unlikely market could be an indicator for a looming rise in inflation: hog sales.

Pork is the nation’s staple meat. It’s a huge part of the food market, and pork prices can have a large impact on food prices in general.

And right now, pork prices are set to jump.

A large amount of Chinese corn and soybean come from imports, and the U.S. produces a fair amount of these products. But this summer, a drought which has covered more than half of the United States has pushed up the price of these crops. Benchmark Chicago futures for corn and soybeans are at all-time highs.

And corn and soybeans are key ingredients in hog feed – putting pressure on hog farmers.

So some of these farmers are cutting down on their herd sizes, selling off their hogs in a move that will likely lead to a reduction in supplies and a jump in prices.


Commodities Index Building Strong Foundation

CRX is taking it’s time forming a bottom and it’s starting to really look like it’s laying a strong foundation of support. That should allow it to bounce off that $790-800 level and springboard higher in the fall. Watch the RSI trendline as it shouldn’t break that support and I would really want to see it pierce that 70 level and beyond to display superior relative strength.

VIX has completely worked off it’s oversold state and it is in a position where the markets could rally. Note has the SPX has basically moved sideways as VIX rose.