Interest Alone on Federal Debt: $4.8 Trillion

When you think about the government’s exploding debt burden, you probably don’t focus on interest payments.

But those payments will likely total $4.8 trillion over the next 10 years, amounting to more than half the government’s $9 trillion in debt.

Interest rates are near zero now, thanks to the Federal Reserve’s massive monetary stimulus. But at some point the Fed will have to reverse that easing.

"When interest rates rise, even a small amount, the interest payments go up a lot because of the size of the debt," Charles Konigsberg, chief budget counsel of the Concord Coalition, told CNNMoney.com. (more)

Bill Gross: Major China Bubble Emerging

The investment guru who runs the world’s biggest bond fund at Pimco, Bill Gross, says a speculative bubble is emerging in China.

Real economic growth there is still constrained by limited consumer demand from the United States and other trading partners

Gross told Bloomberg News that the Chinese will have “a bubble of their own” to confront shortly.

“It’s gearing up for export that doesn’t find an end consumer, that’s the real problem in China.” (more)

Deficits Do Matter

In short, traders buy credit default swaps to insure against bond default. Hmmm… what could have possibly happened to these four countries -- of all the developed nations, the ones to experience the most rapid CDS purchase growth in the last 12 months. Here’s a hint: Brazil’s CDS volume shrank 16% over the same period.

THE VANISHING OF THE GOLD BASIS

The gold basis is defined as the difference between the nearby futures price and
the cash price of gold in the same location. A positive basis is called contango; a
negative one, backwardation. Since there were no organized futures markets in
gold prior to 1971, the history of gold basis is confined to the last 35 or so years.
Gold futures trading started on the Winnipeg Commodity Exchange in
Canada in 1971 at a time when ownership and trading of gold was still illegal in
the United States. Upon becoming legal the bulk of gold futures trading moved
to New York and Chicago. (more)

Cramer: “People Like Overpaying!”

(CCN ­ Englewood Cliffs NJ)

With The Dow at new highs of 10440, CNBC¹s resident revisionist historian Jim Cramer encouraged what remains of his audience To “Buy! Buy! Buy!” recommending the purchase of Williams Sonoma (WSM $22) who sells over-priced culinary gadgets that few actually need. “People LOVE over­paying for things!” he exclaimed.

The Carnival Barker host of CNBC’s “Mad Money,” Mr. Cramer’s assertion has a solid basis in truth for those who listened to him. His most notable “Buy” recommendations have been Sears Holdings (SHLD) at $197 ­down 60%, Google (GOOG) at $700 ­ down 20% and the almost daily reiteration to “Buy” natural gas stocks like Chesapeake Energy (CHK) at $43, which currently
trades for half that at $21. “Hey!” he told a befuddled caller “If you liked the stock at $43, you’ve got to be just nuts about it at $21!”

Coincidentally, Nielsen reports that his viewership has moved in lock-step with his recommendations, and is also down 50%.

Cramer remains his own biggest fan despite studies which show his picks have actually underperformed the markets and are no better than those chosen randomly by a chimpanzee.

Cramer’s most notable calls have been the “Buy!” recommendation of Bear Stearns at $65 which fell to $30 and then $2 the following week, before rebounding to $10. His call of the “market bottom,” which records show he made at 13,000, 12,500, 11,800, 10,000, and 9,000 before advising viewers to get out of the markets at 7900. His revisionist claim that he called the actual bottom at 6500 cannot be verified in print or on tape, and a $15,000 reward posted by a former follower for just such evidence remains unclaimed.

Apparently feeling better than a few weeks ago when he advised viewers to exit the market at 9100, Cramer extolled “I feel really good about the market here” as the Dow peaked for the day.

Technically Precious With Merv

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Gold ETF Impact

Five years ago this week, an obscure little ETF called StreetTracks Gold Shares was born. As the first American ETF enabling stock traders to gain direct price exposure to a physical commodity, GLD was truly revolutionary. Now known as SPDR Gold Shares, this ETF has proven to be a smashing success.

Today GLD is the second largest ETF on the planet, behind only SPY which tracks the flagship S&P 500 stock index. GLD now holds a staggering 1117 metric tons of physical gold bullion in trust for its shareholders, which was worth $41.3b this week! This "people's central bank" fueled by stock-trader gold demand has amassed so much bullion it now boasts the world's sixth-largest holdings. (more)