Faber: Emerging Markets Should Thank Bernanke

The Federal Reserve is taking a lot of heat overseas for its latest round of quantitative easing, with countries including Brazil, Germany and China worried that it will push the dollar lower against their currencies.

But market guru Marc Faber says those countries should be thanking the Fed and chairman Ben Bernanke rather than criticizing it. Fed policy has helped emerging markets grow, he says.

"U.S. monetary policies have been very good for Asia, specifically for China because it fostered industrial-production growth in China, employment growth, wage increases, domestic consumption, increased demand for raw materials," Faber tells CNBC.

"That then lifted commodities prices. For that, actually the developing world, the emerging economies including China, Vietnam, Brazil and so forth should all send a 'Thank You' note to Mr. Bernanke."

To be sure, the Fed’s coming securities purchases spell trouble down the road, Faber says. (more)

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What A Climax Run Looks Like

Does everyone know what a capitulation sell off looks like? That’s where you get those wicked spikes down AFTER you’ve been falling for a period of time. Know what the flip side to that is? CLIMAX RUNS. We bring this up because if you look at SLV and SLW that is exactly what you are seeing. (more)

CME Group Announces Money and Margin Requirement Increases

CME Group today announced a hike in the amount of money or margin needed to control a full-sized (5,000 ounces) silver contract. Margin for silver jumped to $6,500 from $5,000 or 30%.

Several things to know about this:

First, it is quite common to see this occur in markets that are undergoing sharp upmoves in price. The increasing price range can easily wipe out the entire margin amount in a single day with ease and this is designed to protect the integrity of the clearing houses and the brokerage firms. Customers who lose big cannot oftentimes meet margin calls and end up sticking the brokerage firm with losses. The idea is that the firms protect themselves by having more money at the clearing houses sufficient to cover potential losses.

Second – members of the exchange generally tend to be on the short side of a market moving higher and once they get trapped, they begin to squeak, and quite loudly at that. Squeaky wheels get the grease and since the exchange membership brings with it voting rights, they generally get what they want.

Thirdly – Small specs whose accounts are generally underfunded to begin with and who chase the markets higher based on the hype end up buying at relatively high levels. Once the margins get raised, these weak hands get forced out since they generally cannot meet margin calls and their exodus precipitates a wave of selling. That engenders more paper losses which then engenders more margin calls and the snowball effect occurs. (more)

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BNN: Top Picks

Norman Levine, managing director, Portfolio Management Corp shares his top picks.

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Dow Jones Never Loss Trade, Click Here!

Chart of the Day : Real Unemployment

China downgrades U.S. debt

A publicity-minded Chinese rating agency has added its two renminbi to the cacophonous debate over the Fed's latest tilt at money-printing.

The state-backed Dagong Global Credit Rating Co. on Tuesday downgraded its rating on the United States to A-plus from double-A, maintaining its negative outlook.

It warned that the Federal Reserve's plan to buy $600 billion of Treasury securities over eight months in its second go at so-called quantitative easing could trigger a creditor crisis.

"The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar, and the continuation and deepening of credit crisis in the U.S.," Dagong writes in its latest report on its U.S. rating. "Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government's intention of debt repayment."

This is a salient point because China is America's biggest foreign creditor, with official Treasury holdings creeping up on the $1 trillion mark and unofficial holdings expanding rapidly as well.

The United States and its trading partners have had a disagreement or two in recent days over Fed chief Ben Bernanke's decision to expand his holdings of Treasurys in a bid to further bring down interest rates. Lower rates tend to equal a lower dollar, which tragically enough mucks up everyone else's plans to export their way to prosperity. (more)

Jay Taylor: Turning Hard Times Into Good times

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