Europe's "Liquidity Run" Has Begun Because There Is An Unsolvable $30 Trillion Problem

No, not that Sarkozy. His half-brother - the one who actually can use a calculator. In an interview on CNBC, the Carlyle group head had the temerity to tell the truth, the whole truth, and use math - that long-forgotten concept which one has to scour various backwater blogs to rediscover - to explain nothing but the truth which is that Europe needs many more trillions than either the EFSF or the ECB can afford to give. Actually, we take that back. The ECB can inject the needed €3-5 trillion, but after that concerns about localized episodes of (hyper)inflation, especially now that Kocherlakota has confirmed that the transmission mechanism between bank reserves and inflation may be broken, will be all too justified. In the meantime, Sarkozy on Europe math fail: "The math i'm working with is very simple. In the US banking sector, we had 3 trillion of wholesale funding that needed to be stabilized, got stabilized by the implementation of TARP which saw the US treasury buy $212 billion worth of preferred in the banking sector to stabilize that $3 trillion, give our banks the time to work through hair problem their problem assets. In Europe, that $3 trillion is $30 trillion. so if you multiply the $212 by 10, you get the $2.12 trillion. In my view, the issues on the European banks are bigger than the issues on the books of the US Banks. So if you want to stabilize that $30 trillion and in my view it's not that you want to, it's that you have to, you do not have a choice, you're going to have to be at least at 2.1 trillion and i suspect it may need to be more." Q.E.D. - there, the math wasn't that difficult, was it?

And for his other clips from the morning click here and here.

McAlvany Weekly Commentary

A View from the Top of the Bond Market: An Interview with the Aden Sisters

Posted on 23 November 2011.

A Look At This Week’s Show:
-The interest rates are being artificially held low by our government. This makes calling the timing of the top of the bond market uncertain. But it will top nonetheless, and it will be ugly when it happens.
-Gold is one of the only safe haven investments during a time of rising inflation and falling bond prices.
-People always fear and dislike change. Adaptability and acceptance of the inevitable change coming to our lifestyle is a skill that should be exercised now.

About the Guests: The Aden Forecast is one of the most influential investment publications in the world today. Its easy to understand format and powerful advice has consistently produced double-digit profits for subscribers in 21 out of the past 25 years…That’s an 83% batting average, one of the best and most consistent long-term track records in the business. www.adenforecast.com

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How to Trade Using Market Sentiment & the Holiday Season

The months of November and December are the second strongest back to back months for the financial markets. Many traders and investors use this time of the year to reap big gains as they close the year out. The fact that most traders and investors are sitting in cash and underweight stocks in their portfolio’s leaves me to believe a Santa Clause rally is just around the corner. Reason being is everyone has cash on hand to buy stocks because they are selling their positions in this pullback we are in right now. I know traders well enough, they will buy back into the market trying to catch the holiday rally in the coming weeks.

Subscribers and myself have been short the SP500 for a couple weeks after watching the broad market become overbought and sentiment levels became overly bullish with greedy pigs thinking they could buy stocks after a massive month long rally that had not pullback. Once the selling started you would either get you head handed to you or you were going to make a killing buying leveraged inverse ETFs.

Those who arrived late to the rally are the ones selling out of their positions this week. The interesting thing about this week’s market condition is that I have not seeing any real panic selling in stocks, and I’m not seeing the volatility index spike in value yet.

What does this mean? Well it means we could actually see another big dip in the market which should last 1-2 days and then we get a sharp reversal to the upside.

Take a look at the SP500 & Volatility index below:

This chart allows us to get a feel for fear in the market. Me being a contrarian trader, I focus on market sentiment extremes. When the masses are losing money hand over fist I’m generally on the other side of that trade with open arms. Trading off fear is one of the easiest ways to trade the market. That is because fear is much more powerful than greed and it shows up better on the charts. Spotting panic selloff bottoms is something that can be traded successfully if you know what to look for and how to trade them.

On the chart you can see the pullbacks in the SP500 which triggered a panic selling spike in my green indicator. What I look for is a pullback in the SP500 and for my panic selling indicator to spike over 20. When that happens I start watching the volatility index for a spike also. The good news is that the volatility index typically rises the following day making my panic indicator more of a leading one…

Market Sentiment Trading

I could write a 20 page report going into depth this with topic, but that’s not the point of this report. Just realize that the stock market is likely going to put in a bottom very soon and likely end with a STRONG panic selling washout this week or next. If you want to learn more about how to trade market sentiment and panic selling you can read my strategy which was published in Futures Magazine.

Prepare for a sharp drop in the market which should kick start a holiday rally in the next few trading sessions.

3 Charts That Should Scare You

Along with the normal pressures from weak European economies and a failed budget committee, investors had to consider the impact of slower-than-expected GDP growth. The Fed said that Q3 GDP was revised down to 2% from 2.5%. It also announced a new round of stress tests for U.S. banks.

But the Fed also said that it may take “new steps” to bolster the economy, but no new simulative measures were announced. And the Richmond Fed said that its manufacturing index improved last month to zero from minus six the month before.

Stocks lost ground again with the Dow Jones Industrial Average falling 0.46%, the S&P 500 down 0.41%, and the Nasdaq off 0.07%. It was another light-volume day with 877 million shares trading on the NYSE and 460 million on the Nasdaq. Decliners were ahead of advancers by about 1.7-to-1 on both exchanges.

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After stubbornly holding at a support line at 11,650 and its 50-day moving average, the Dow finally broke through both. Its Relative Strength Index (RSI) line is still in neutral territory with a distinct slant down meaning that prices have room to head lower.

The breakdown of this senior index is significant because it represents the highest quality stocks, many of which pay above-average dividends. It is this group of blue chips that many analysts have been recommending as a better investment than bonds because of their higher yields and potential for growth.

Click to Enlarge

Yesterday we studied the head-and-shoulders top on Germany’s DAX, and today we’ll look at two other major foreign indices:France’s CAC 40 andChina’s Hang Seng.

The CAC 40 index is composed of the 40 most significant values of the 100 highest market caps on the Paris Bourse. Its chart is similar to the DAX, but where the German index has broken from a clear head-and-shoulders pattern, the CAC 40 has plummeted from the low trendline of a short-term channel down.

Note its RSI, which is rapidly falling. The chances are high that the September lows in the CAC 40 will not hold and that a new bear market leg will be established.

Click to Enlarge

While the Hang Seng index’s bear market pattern is not quite as ominous as the CAC 40, it is nevertheless in a downtrend. It currently rests at just above 18,000, but a break of that line will no doubt lead to a test of the October low.

The RSI of both the CAC 40 and the Hang Seng indicate that declines have further to go on the downside with no support until they reach the September/October lows.

Conclusion: The three indices paint a grim picture for the bulls. Each has broken through important support zones, but it is the Dow that has the best chance of holding above the October lows. Its deep range of trading that began in August could stall the decline enough to move into the new year and a better outlook.

Lindsey Williams - FreedomizerRadio - Nov 15, 2011

Pastor Lindsey Williams on FreedomizerRadio to discuss the Elites' plans for 2012. Some Topics: - What in the world is going on? – 2012 Predictions from the Elite – The Dollar, Debt, Fear, Fuel in 2012 – Division among the Elite – Why 2012 and not 2000 – The Devil’s Messiah according to the Elite – Divine Manifestation

Ian Gordon: “$15T US Govt Debt Can Never Be Repaid, Bond Market To Be Attacked Soon”

Tekoa Da Silva of BullMarketThinking.com talks to Ian Gordon of TheLongWaveAnalyst.ca.

Keith Neumeyer: The Silver Market Lacks Integrity

The Hera Research Newsletter (HRN) is pleased to present an incredibly powerful interview with Keith Neumeyer, Chief Executive Officer, President and Director of First Majestic Silver Corp. (TSX:FR / NYSE:AG). Mr. Neumeyer began his career at the Vancouver Stock Exchange and worked in the investment community for 26 years beginning his career in a series of Canadian national brokerage firms including McLeod Young Weir (now Scotia McLeod), then Richardson Greenshields and then Walwyn Stogell McCuthchen (which became Midland Walwyn).

Mr. Neumeyer moved on to work with several publically traded companies in the natural resource and high technology sectors. His roles have included senior management positions and directorships in the areas of finance, business development, strategic planning and corporate restructuring. Mr. Neumeyer, who has listed a number of companies on the Toronto Stock Exchange, has extensive experience dealing with financial, regulatory, legal and accounting issues.

Hera Research Newsletter (HRN): Thank you for joining us today. Let’s begin by talking about silver supply and demand.

Keith Neumeyer: Silver mine production was around 736 million ounces in 2010. Demand was around 1 billion ounces. Scrap silver recycling and some government sales filled the gap. We’re at historic lows in terms of above ground silver. Eric Sprott recently said there are 1 billion ounces of triple nine silver left aboveground. Unlike gold, silver gets used. We’re at historic highs in supply when it comes to gold, but the exact opposite is true for silver.

HRN: Is there a deficit in terms of mine supply?

Keith Neumeyer: We’ve had a supply deficit for the past 13 years. 2009 was the first year we created equilibrium. We only went into a surplus in 2010, in terms of industrial and jewelry fabrication demand. The surplus mine supply was purchased by investors, obviously. A lot of mining companies are showing lower production because a lot of silver comes from base metals and, with lower base metals prices, it’s becoming more difficult. I don’t see any major supply drivers for silver in the next several years.

HRN: Do you expect more scrap silver to enter the market?

Keith Neumeyer: That’s what happened in 2009 when gold rallied over $1,200 and then corrected to below $1,100. It was primarily caused by scrap gold entering the market. I believe the same thing was happening for silver. We’ll see that again as the metals make new highs. It’s the same as a stock. You replace part of the shareholder base at different levels. (more)