What QE2 means

Bottom line is that during quantitative easing, savers are losers. I look at the Fed buying as a bailout for asset prices. Destined to fail but great for the nimble trader/investor.

The New Road to Serfdom

My Comments: Great speech by British member of the EU parliment Daniel Hannan.

George Soros on China, Gold, and Yen

China is the winner of the crash

Gold "not safe"

Japan "right to intervene"

This is cool...Math

Nature by Numbers from Cristóbal Vila on Vimeo.

My comments: Fibonacci relationship also exist in markets!

Trader Vic calling for Hyperinflation

Weekly update from Puru

The stealth bull-market in global stocks is climbing the proverbial ‘Wall of Worry’. Wherever you care to look, there is widespread skepticism and retail investors are still not participating in the market’s advance. Recent data reveals that investors in America continue to withdraw capital from equity mutual funds and this just shows that this bull-market is nowhere near its ultimate peak. On a near-term basis, the markets are over-extended and due for a pullback, however powerful bull-markets can stay overbought for long periods of time. In our view, as long as the monetary policy is accommodative and investors remain skeptical, the primary trend will remain positive. Therefore, we are holding on to our positions in the developing markets (China, India and Vietnam) and may add to our holdings during the next correction phase.

Over in the energy complex, the price of crude recently broke out to a new recovery high and is currently trading around US$86 per barrel. In our opinion, as the economic recovery gathers momentum, the price of crude will rise even further. Furthermore, if our homework is correct, before the end of this business cycle, the price of crude oil will trade above its all-time high recorded two years ago. In this environment, upstream energy companies will prove to be big winners and at current levels, they are on the bargain table. So far in this bull-market, the energy stocks have lagged the broad market but this may be about to change. Accordingly, we are maintaining our overweight exposure to energy and recommend oil producers and the oil services firms.

In the metals patch, the prices of base metals continue to defy gravity and against our expectation, the price of copper has climbed to a new recovery high. As we have explained before, supply and demand fundamentals do not justify this advance, therefore we will not re-invest in this sector. It is our contention that base metals are rising largely due to the easy monetary policy and speculative froth is now rampant. Accordingly, we urge caution and re-iterate our view that better investment opportunities exist elsewhere.

As far as precious metals are concerned, it looks as though gold and silver have recently put in important lows and the spring rally is now underway. If seasonal trends remain intact, both gold and silver are likely to rally until mid-May. Over the past few days, precious metals miners have appreciated considerably and this sector is still inexpensive relative to physical bullion. We are keeping our positions in gold and silver mining companies and suggest that you do the same.

In the world of paper money, it seems as though the US Dollar Index is rolling over. Conversely, the European currencies are now extremely oversold and a sharp rebound cannot be ruled out. Finally, our preferred currencies (Canadian and Australian Dollars) are performing very well and we suggest that you keep your cash in these leaders.

Finally, in the US government bond market, yields are on the rise. At the time of writing, the yield on the 10-Year Note has climbed to 3.9% and the yield on the 30-Year Bond is 4.76%. We maintain our view that the great bond bull-market ended in December 2008 and over the following months, we will see even higher interest-rates. Accordingly, we suggest that unless you are holding Treasuries for income and plan to hold them until maturity, consider liquidating your fixed income holdings.

No Housing Boom This Decade

In the midst of all the bailouts you might have missed that last month, in perma-bubble Southern California the median price of the entire regional market fell by $17,500. This was the first regional price drop since April of 2009. Now one month doesn’t make a trend of course but if you only listen to the real estate industry and banking cabal you would think that all of a sudden we are circa 2003 real estate. There is this pervasive speculative attitude once again in the air even in the face of a 12.4 percent unemployment rate. The unemployment situation was revised last month nationwide and the BLS upped the number of jobs lost in this recession from the “low” 7 million to 8.4 million. So basically we were underestimating how “good” things were for an entire year (the BLS has suspect numbers because of their methodology). Yet this is part of the new economic psychology where real data is ignored in exchange for bread and circus statistics and political theater. The reality is we are not going to see any sort of housing boom for the next decade. In fact, housing will be weak for the next ten years (at least) regardless of what the government and Wall Street attempts to do.

Full Article here

My Comments: Good info. I personally want to see how the market fares after the first time home buyers stimulus. My guess is it will be another failed Govt. program that duped buyers into quick decisions. Those that took advantage of it might need a bailout if things get worse.

Point being...buy when the situation is right not because of a Govt. bribe.

Weekly Update From Puru

In baseball terms, we are passing through the middle innings of the ongoing correction in the financial markets.

Over the past week, sellers dominated the markets and the counter-trend moves are now well established. Yesterday, global stock markets experienced intense selling and this has prompted the perma-bears to (yet again) announce the start of a new bear-market. In our view, this weakness in the markets is a routine pullback within the ongoing cyclical bull-market and we expect most indices to bottom out around the 200-day moving average.

As we pointed out in February’s Money Matters, technical data does not suggest the commencement of a new bear-market and there is no evidence of a breakdown in the price charts. Accordingly, we suggest that you ride out the volatility and consider adding to your positions in an incremental manner. In any bull-market, the best time to buy is when an item briefly corrects to its 200-day moving average and most stocks and commodities are likely to approach that level over the following days. Therefore, we urge you to keep your nerve and advise you to take advantage of Mr. Market. Remember, pessimism is an investor’s best friend, euphoria his mortal enemy.

The ongoing weakness in the markets is largely due to sovereign default risk in the West but this has even affected the developing markets in Asia. In our opinion, nations such as China, India and Vietnam are not in the same boat as the debt-plagued developed nations and this weakness in prices is a great long-term buying opportunity. Over the following years, these fast-growing economies will benefit from capital flows and their stock markets will appreciate considerably. Accordingly, we recommend buying on additional near-term weakness.

Over in the commodities complex, ‘risk aversion’ is the story of the day and most hard assets are under pressure. Yesterday, crude oil dropped significantly and the selling may continue for a few more days. However, this manic-depressive nature of Mr. Market does not change the reality of supply and demand. We maintain our view that crude oil is in a secular bull-market and its price will appreciate significantly over the following years. Accordingly, we are keeping our positions in the oil patch.

Elsewhere, metal prices got whacked in yesterday’s panic sell-off. Silver was down by more than a dollar and gold broke through its important support at US$1,075. At the time of writing, gold is trading at US$1,064 per ounce and further weakness looks likely. The next major support for gold comes in around the US$1,000-1,030 region and it looks as though the yellow metal’s price will decline to that level. The related mining stocks have depreciated considerably in the past few days and the selling looks overdone. Yesterday’s moves in precious metals appeared climactic, therefore we are in the latter stages of this correction. During this turmoil, do not forget that most nations in the West are bankrupt and precious metals represent your insurance policy. Therefore, do not join the herd by giving away your safety net at throw away prices.

Base metals are also facing selling pressure and as per our expectation, the price of copper is declining. A couple of weeks ago, we advised liquidating copper-related plays and suggested going ‘short’. This seems to be working out as planned and we expect the price of copper to decline by another 10-15%.

Finally in the realm of monopoly money, the US Dollar is rallying and this should not come as a surprise to our readers. As you will recall, we were expecting the American currency to strengthen. In our view, this advance is likely to continue for a few more days, so keep all your cash in US Dollars. In our view, the European currencies are most vulnerable and we would not buy the Euro or the British Pound; not even with your money! Once the rally in the US Dollar has run its course, we will advise you to buy back the Australian and Canadian Dollars, but for now, hold on to your greenbacks.

Weekly Update From Puru

We are going through a routine pullback within the ongoing cyclical bull-market in stocks. Prior to this correction, stock markets were strenuously overbought and due for a consolidation. Our expectation was that the correction would come in late spring, however it seems to be unfolding a few weeks earlier.

At this stage, the technical data suggests that this is not the start of a nasty bear-market. For instance, the advance/decline line is firm, the number of new lows on the NYSE is still depressed and the yield curve is very steep. All this data leads us to conclude that the majority of the stock markets are likely to find support on their 200-day moving averages. This means that if our cyclical bull-market assumption is correct, the Dow Jones will find a bottom around the 9,500 level. Accordingly, we suggest that you hold on to your long-term investment positions and consider adding more capital after some evidence of a bottom formation.

Over in the commodities complex, the price of crude is trading around the 74 level and it may continue to consolidate over the near-term. A rallying US Dollar is keeping a lid on the price of oil but the long-term trend in energy is up. We suggest that you keep your positions and allocate more capital to upstream energy companies, oil services stocks and alternative energy businesses.

In the metals arena, the prices of gold and silver are staying under pressure. This is largely due to the strengthening US Dollar. Now, if the trend consistency in precious metals is still intact, both gold and silver must rally soon. Otherwise, we may experience a lengthy consolidation and the highs recorded a few weeks ago may not be taken out before the end of the year. In any event, we suggest that you keep your positions in this sector as an insurance policy against the madness of currency debasement.

Elsewhere, the anticipated correction in copper has now commenced. If our assessment is correct, the price of copper is likely to decline by another 15-20%, so we suggest that you wait before buying back copper related plays. Aggressive traders should remain ‘short’ copper and consider covering their positions around the $2.60-$2.70 level.

Finally, in the world of currencies and debt, the American currency is rallying and the European currencies are struggling. As you may recall, we were expecting this outcome. Our view remains that the US Dollar is in a bull-market against the Euro and British Pound, however, it will probably decline to new lows against the Australian and Canadian Dollars. For now, it looks as though the rally in the greenback has legs and we want you to keep your cash in the US Dollar. Last but not least, the government bond market is benefiting from the ongoing risk aversion, but this should not last. In our view, once this phase of risk aversion in over, interest-rates will rise and government bonds will face intense selling pressure. Therefore, we suggest that you resist the urge of lending money to bankrupt governments.

Economic Debates...Hip Hop Style

My Comments: Funny cause it true...

Weekly Update From Puru

The long awaited stock market correction seems to have arrived and further declines can be expected over the following days. Although the American market’s internals still look solid, stocks were strenuously overbought and due for a pullback. Remember, no market goes up in a straight line and periodic declines are a part of this business. At this stage, the ongoing correction looks like a routine decline within the ongoing cyclical bull-market. Once this period of weakness is over, stocks should resume their advance.

It is noteworthy that Wall Street’s technical indicators are still strong. For instance, the Advance/Decline line is close to its high, new highs are healthy and new lows are in single digits. Furthermore, the yield curve is very steep and credit spreads are still narrowing. All this data diminishes the probability of a major market decline or the resumption of the bear-market. Accordingly, we suggest that you hold on to your investment positions and consider increasing your allocation towards the end of this market correction.

Over in the commodities market, the price of crude has softened somewhat but the long-term trend is still up. The supply and demand dynamics in oil are so out of whack that unless the world sinks into a global depression, the price of crude will rise. In fact, we are convinced that (under the most optimistic scenario) the world’s production of total liquids will peak within the next 3-4 years and crude oil exports may peak even sooner. Now, if this seems too much of a wait, just remember that the biggest game changer in economic history is only a thousand days away! Whether you like it or not, new discoveries and new oil-fields cannot keep up with the depletion in the existing oil-fields. When this reality dawns upon the public, we will witness an epic energy crisis.

According to our best estimates, the supply of total liquids (including unconventional oil, natural gas liquids, tar sands, ethanol and hydrocarbon processing gains) will never exceed 89 million barrels per day. And if demand grows by 1.5% per annum over the next 2 years, the world will require 89 million barrels per day by 2012. That will probably be the inflection point and the day when the world faces ‘Peak Oil’. In any event, in a post-peak world, there will be big winners and big losers. If our assessment is correct, upstream oil producers and pioneers in the alternative energy sector will be big beneficiaries. Therefore, we are maintaining our exposure to these businesses and plan to increase our holdings during this market correction.

In the metals complex, gold and silver are experiencing a routine correction and this is largely due to the expected rally in the American currency. It seems as though this counter-trend rally in the US Dollar will continue for a while longer, so gold and silver may face some additional selling pressure. We see strong support in gold around the previous correction low and recommend buying more bullion around US$1,070 per ounce. Now, it is conceivable that the price of gold may test US$1,000 per ounce, but even if it does, the downside is fairly limited. In our view, gold and silver remain in secular bull-markets and short-term corrections notwithstanding, their value should increase relative to paper money.

In the base metals camp, last week we advised you to get out of everything related to copper. Well, it looks as though the correction is still in its infancy and we expect a violent decline over the following days. The price of copper has run ahead of the fundamentals and we urge extreme caution. Long-term investors should be out of harm’s way and aggressive traders should be short copper.

Finally, in the world of currencies, our expectation of a dollar rally turned out to be correct. We maintain our position that for as long as the US Dollar Index trades above the 77 level, your cash reserves should be in the greenback. Look; when it comes to investing, nothing is set in stone and market reversals usually occur when the majority of participants are not expecting them. Only a few weeks ago, the whole world hated the American currency, so this rally should not come as a surprise. We re-iterate our view that the US Dollar has already made its lows against the European currencies, however it will probably make new lows against the Canadian and Australian Dollars

Its Funny cause its true...

The Banker Who Said No

In late 2006 he sold $74 million of preferred stock although he had no immediate use for the proceeds. He says he couldn't resist the "stupidly mispriced" terms--as low as Libor plus 1.7 percentage points for 30 years. He wanted as much money available when the boom turned to bust. With the extra money the bank could pay off nearly all its depositors with capital on hand--nearly unheard of in the history of banking.

Then came a shocker: Amid one of the most reckless lending sprees in history, regulators focused on the one bank that refused to play along. Beal's moves confused and worried them, and so they began to probe him with questions. "What are you doing?" he recalls them asking. "You're shrinking yet you're raising capital?"

Says Beal about the scrutiny, "I just didn't fit into any box." One regulator, the former head of the Texas Savings & Loan Department, Charles Danny Payne, says, "I was skeptical at first, but I've gained a lot of confidence over the years," adding that Beal has an "uncanny ability to sniff out deals."

Next, the credit rating agencies started pestering him about his dwindling loan portfolio. They never downgraded him but scolded him for seeming not to have a "sustainable" business model. This while their colleagues were signing off on $32 billion of bum collateralized debt obligations issued by Merrill Lynch.

My Comments: A very good write up on Andy Beal.

Full Article here...

The Greatest Business Model Ever

With all the banks paying back the TARP money, some folks are assuming that the great Wall Street bailout is finally coming to an end.

But of course it isn't!

Taxpayers are still guaranteeing all big bank bonds (Too Big To Fail) and subsidizing huge bank earnings and bonuses with absurdly low interest rates.

But instead of bellyaching about it, you might as well just smile and cash in. After all, that's what Wall Street's doing.

So here's how to make the world's easiest $1 billion:

Continue Reading Here:

My Comments: This is the kind of stuff I like. Pointing out what a fraud things have turned into is easy because the system has turned pretty sour. But what I've realized is that you don't make money getting "mad as hell". You almost have no choice but to find away to work within the new system for your benefit. Cause if you don't someone else will.

Look I don't like the the way things are as much as the next guy. But dont dwell on the things you can change. Just survive and prosper.

Off Topic Video

My Comments: Good documentary on food. Worth the watch.

Weekly Update from Puru

Global stock markets are selling off in a state of panic as jittery investors run for the hills. Yesterday, Dubai World, the government-owned investment company announced that it sought to delay repayments of its US$59 billion worth of debt. This development sent shock waves around the financial markets and once again, fear has gripped the investment community.

It is worth remembering that Dubai was one of the most leveraged states and its property market was hit especially hard during last year's financial crisis. So, is it really a surprise that it wants to delay its debt repayments? More importantly, should investors see this as an apocalyptic event? It is our contention that this senseless liquidation of assets is overdone and in the next few days, calm will return to the financial markets. After all, Dubai is not a dominant economy and Dubai World's debt burden of US$59 billion is pocket change when compared to the trillions of dollars of credit losses in the West. Therefore, we do not see this as a game changing event. In fact, we suggest that long-term investors seize this market correction as a buying opportunity. If our assessment is correct, this panic will subside in a few days time and that may be a good time to add to your long-term investment positions. We continue to like China, India and Vietnam as long-term investment destinations.

Over in the commodities markets, the price of crude oil has slipped to US$75 per barrel and this is in line with the ongoing 'risk aversion' play. It is possible that the price of oil will stay under pressure for as long as the stock market correction continues, however, the bull-market should resume thereafter. We are holding on to your positions in energy companies and have no intention of selling our holdings. Elsewhere in the energy patch, it seems as though the price of uranium is trying to find a floor and long-term investors should consider allocating capital to promising uranium mining stocks. Our homework suggests that the uranium market faces severe supply and demand imbalances and this should result in a multi-year bull-market (more on this subject in December's issue of Money Matters).

In the precious metals sector, both gold and silver are facing some selling pressure as investors dump 'risky' assets. This morning in Asia, the price of silver is down by roughly 4.5% and the price of gold has shed almost 2%. In our view, this sell-off will soon be over and long-term investors should ride out this pullback. Remember, precious metals are in a gigantic bull-market and the ongoing upleg should continue until spring next year. We suspect that within the next six months, the price of gold will climb to US$1,400-1,500 per ounce and the price of silver may climb to US$25-26 per ounce. Accordingly, we are holding on to our positions in gold and silver mining stocks and we suggest that you do the same.

Over in the currency markets, the US Dollar is benefiting from the 'risk aversion' trade. Now, unless Dubai defaults on its debt, we believe the US Dollar rally will be short lived. Therefore, we suggest that you keep your positions in the Australian and Canadian Dollars. In addition to the US Dollar, the Japanese Yen is also getting assistance from the 'flight to safety' trade, however Japan's economic fundamentals are awful, so we don't expect this rally to last either.

Finally, over in the fixed income markets, government bonds yields are declining as investors rush to the 'safety' of government debt. In our view, this flight towards 'safety' is ridiculous because various governments in the West are already bankrupt and we do not see the point in lending money to insolvent entities.

The Unemployment Rate Visualized

This is a cool visual. It looks like the country is being attacked by a plague of locusts or something from a science fiction movie...

Check it out here...

Grain Charts for the Iowa Farmer

Soy: Begin backward, it never had the May sell off that the other grains had and is in a firm uptrend. Some MACD downward divergence is showing up but hasn't hurt price to bad.


Wheat and Corn: Charts look the same. The Dark Blue=20EMA, Yellow=50EMA, Light Blue=100. The 20 EMA has crossed the 50EMA confirming the potential start of and uptrend. As more and more of these EMA cross the more the trend builds and runs from there. Plus there is MACD divergence. Most trend followers are in at this point and it looks as if the trend has some wind at its sails.

Weekly Update From Puru

Global stock markets are still in correction mode and the pullback/consolidation may continue for another week or two. Thereafter, we expect a strong year-end rally which will probably take stocks to a new recovery high by next spring. We are in a cyclical bull-market and with record-low interest rates in most nations, it isn't difficult to see why the financial markets are going up. Governments all over the world are creating money, taking on more debt and destroying the purchasing power of paper money. This is inflationary and supportive of asset prices. Now, if the governments continue to inflate, it is possible that many stock markets may climb to record-highs in nominal terms, but they may still do poorly in real terms. Given the technology called the printing press, we are inclined to think that new lows in nominal terms aren't likely, although the US stock market may make new inflation-adjusted lows before this secular bear-market is over. If our assessment is correct, this cyclical bull-market will end when short-term interest-rates have risen significantly and the yield-curve is inverted. At that point, we will start liquidating our holdings, however we don't expect this to happen for another two years or so. Accordingly, we are maintaining our country-specific exposure to China, India and Vietnam. Apart from these developing nations in Asia, we also like energy, materials, precious metals, industrial machinery, Asian retail and American healthcare stocks.

Over in the commodities complex, the price of crude oil is correcting due to the ongoing weakness in the stock markets. We expect the pullback to be short-lived and the price of oil is likely to rise significantly over the following years. We are firm believers in 'Peak Oil' and our largest exposure is to the energy complex - upstream companies, oil service stocks and plays on alternative energy. We have no intention of selling our positions and we suggest that you also allocate a large portion of your capital to energy. Supply and demand data doesn't lie and our solid research leads us to conclude that the supply of conventional crude oil is struggling at a time when demand is rising. This supply and demand imbalance should cause an energy crisis and the price of crude is likely to appreciate considerably. Any temporary pullbacks in the oil and gas patch are buying opportunities.

As far as precious metals are concerned, real money is coming back in fashion! Given the irresponsible monetary and fiscal policies, gold has resumed its role as a store of value; an anchor amidst the reckless money and debt creation. Despite the lengthy bull-market, gold seems to be undervalued and should rise over the following years. More importantly, gold is on the verge of an explosive rally which will probably end next spring. Silver is also benefiting from this flight towards hard assets and its price should appreciate until next spring. We have some exposure to precious metals mining stocks and we will look at booking our profits next spring. In the meantime however, we suggest that you hold on to your positions in this sector.

Finally, in the world of currencies, the US Dollar is desperately trying to rally. Even though a short-term counter-trend rally is possible, we don't expect the American currency to stage a sustainable advance. Remember, the US government's obligations are now worth US$115 TRILLION and the only way America can avoid default is by creating money and debasing its currency. Accordingly, we suggest that you keep your cash in Aussie and Canadian Dollars and if the US Dollar rallies, we suggest that you use that as a selling opportunity. If our world-view is correct, US Dollar cash and American government bonds will probably turn out to be the worst assets to own over the next decade.

Great interview with Karl Denninger

My Comments: In my opinion Karl does great analysis on whats wrong and how to fix it. He also has a good portfolio strategy to protect against either hyper deflation or hyperinflation. Five part interview. Well worth the time to sit down and listen.

How Goldman Conned Everyone

WASHINGTON -- In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.

``The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion,'' said Laurence Kotlikoff, a Boston University economics professor who has proposed a massive overhaul of the nation's banks. ``This is fraud and should be prosecuted.''

My Comments: This is old news for anyone reading my blog. Since Goldman has literally hired the government, (and I'm not being vague...they own everyone they need to) nothing will be done. The only surprise to me is why people are not rioting in the streets.

Full article here...