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Lower inflation ahead
Policymakers Claim Inflation Overstated—CPI Revision in the Works : http://www.financialsense.com/contributors/monty-guild/tony-danaher/policymakers-claim-inflation-overstated-cpi-revision
Excerpt:
So, what shows up in Bloomberg BusinessWeek this past weekend? An article saying that lawmakers from both sides of the aisle believe that inflation is overstated, and that a move to further change the Consumer Price Index (CPI) is in the works.
Another bottom in housing ?
My comment: The reason sounds like wishful thinking: including a decline in the number of foreclosures and continued job growth. In addition, homebuyers will have better access to mortgages as they get their finances in order and improve their credit scores
One thing is for sure, once Europe collapses, then home prices will take another big hit as the economy sinks into recession. And from what I'm reading the improvement in consumer debt levels is due to foreclosures and defaults.
Buying a home won't get much cheaper : http://money.cnn.com/2012/05/03/real_estate/home-buying/index.htm?iid=HP_LN
Excerpt:
Stuart Hoffman, chief economist for PNC Financial Services (PNC, Fortune 500), said he expects home prices to flatten out by the third quarter and start climbing by next year.
A number of factors will help bolster the housing market, he said, including a decline in the number of foreclosures and continued job growth. In addition, homebuyers will have better access to mortgages as they get their finances in order and improve their credit scores.
Some economists, like Trulia's Jed Kolko, expect home prices to pick up even more quickly. Trulia's data shows that the national average for asking prices already increased 1.4% in the first quarter of 2012, compared with the last three months of 2011.
Consumer debt reduction
Debt inequality is the new income inequality : http://money.cnn.com/2012/05/02/news/economy/income-debt-inequality/index.htm?iid=Lead
Excerpt:
While Americans have been shedding their debt since the Great Recession, it's come largely through foreclosure or bankruptcy.
And we don't have long to wait. Europe is just one domino in the row of highly indebted sovereigns and once one falls, they all fall. I expect Spain to fall within a couple of months unless the ECB just gives them a whole lot of money (the Germans would not approve of that). After Europe comes Japan, the UK, and the US, with China taking a beating as well. Frontline had a good report on the ongoing financial crisis last night. I think they missed one very key element though: that the CBs, particularly the Fed, are at the center of our economic problems, not the commercial banks. The Fed is supposed to regulate the banks and they failed to do that. The Fed has been bailing out global crises since the stock market crash of 1987 and each successive bailout in the form of added liquidity has created ever larger bubbles. We're at the end of the road for bubble creation. No bubble can replace the sovereign debt bubble or as Noland call it, the government finance bubble.
Hit'em while they're down
Past performance is no guarantee of future performance
My comment: I am always amazed at this type of analysis which uses history to extrapolate to what's happening now. The problem is that they don't consider all of the factors that make the past different from now. Comparing prior recessionary periods to today's environment is like comparing apples to oranges. Yet, too many economist do just that and they end up with erroneous conclusions.
Can the U.S. Skirt Global Recession? : http://www.financialsense.com/contributors/dwaine-van-vuuren/can-the-us-skirt-global-recession
re: Grant and the Fed
The Fed has invited it's critics to voice their opinions in an open forum before the Fed. I'm not sure what the Fed's rationale is for this. Surely they must already know what their critics are saying and I doubt very seriously that the Fed will change their modus operandi.
I also question just how much real gold the US really has since it has not been audited. As Bernanke has already said, a gold standard is not conceivable since the gold would have to be dug up out of the ground and hauled to a NY bank and that's too much work. It's much easier to just electronically add zeros to the currency.
Crude to $150 by summer ?
My comment: I don't know that we'll see $150 crude by summer, but I do predict that we'll see $200/bbl by 2015 and that will be a base support level. Imagine what that would do to an economic recovery. Sure there will be some conversions to electric and NG vehicles by then, but not enough to offset the demand. There will be little doubt about peak oil (at least economically recoverable oil). So global economies will have to contend with huge deficits, higher interest rates, and high oil prices.
T. Boone Pickens: Natural gas has bottomed : http://money.cnn.com/2012/05/01/markets/tboone-pickens-natural-gas/index.htm?iid=Lead
Excerpt:
Pickens also thinks oil prices will continue to rise.
"I think you're going to find oil will get pretty tight this summer," he said. "The Saudis don't have as much oil as they say they do."
Pickens says that anything Saudi Arabia produces above 10 million barrels a day will come from storage and not new production. And it could come just as demand heats up.
Pickens forecasted prices for Brent crude -- Europe's benchmark -- to hit $150 a barrel by this summer.
Speculators again:
My comment: I wonder if Obama will be on their case. Oh, I forgot, he only complains when prices go up.
(Kitco News) - Speculators shed bullish positions in U.S. gold, silver and platinum futures and options contracts traded on the Comex division of the New York Mercantile Exchange and on the Nymex as prices fell, according to U.S. government data released Friday.
For the week ended April 24, speculators in the Commodity Futures Trading Commission’s weekly commitment of traders report reduced their net-long positions in those precious-metals markets for both the disaggregated and legacy reports. Speculators’ net-long positions in copper and palladium rose.
‘Roro’ reduces trading to bets on black or red : http://www.ft.com/cms/s/0/953e0e80-8b07-11e1-bc84-00144feab49a.html#axzz1tMMbKhj2
My comment: Of course, we've known this for along time. It's all about gaming the Fed. The fundamentals are irrelevant.
Excerpt:
Markets are broken. Accepted investment wisdom has been overturned and the basic tenets of value and diversification no longer work. The financial crisis put the market into a volatile “risk on, risk off” – or Roro – mode for which there is no cure.
Gold turning positive after being down $18. I added another 10K shares of TomaGold at $0.41 today. The mining shares have been it hard and I keep buying at these low prices. Mining shares are disproportionately low relative to the POG and I don't expect that to last much longer.
Yep, the dominoes are falling. UK in double dip. And the Fed has artificially kept rates low. I think many investors will continue to rush into bonds as the global economies slid into recession. The problem is that recession will only increase the sovereign debt. Just imagine what the Federal deficits will look like in a recession with lower revenues and increased expenditures and we are starting from a projected deficit for FY2012 of $1.3Trillion. I wouldn't touch US Treasuries. To me, all those buying US bonds now are like a football player running as fast as he can toward the opposing teams goal.
How long can the market ignore Europe ?
My comment: The markets so far have shown little reaction to the European crisis, but I think not for long. Merkel's comments will only help Hollande get elected.
Merkel Pushes Back Against Hollande’s Call to End Austerity : http://www.bloomberg.com/news/2012-04-24/merkel-pushes-back-against-hollande-s-call-to-end-austerity.html
Excerpt:
German Chancellor Angela Merkel said balanced budgets are the best answer to the debt crisis, rebuffing French Socialist presidential candidate Francois Hollande’s campaign pledge to reverse Europe’s austerity drive.
Is Europe about to implode ?
My comment: Even though the IMF announced commitments of another $430 to bail out Europe, it did not prevent more calamity in Europe today.
Mark Grant: "I Do Not Believe, Any Longer, That The Catastrophe Can Be Avoided" : http://www.zerohedge.com/news/mark-grant-i-do-not-believe-any-longer-catastrophe-can-be-avoided
Dutch Cabinet Resigns : http://www.zerohedge.com/news/dutch-cabinet-resigns
Excerpt:
Dutch Prime Minister Mark Rutte and his cabinet have resigned after failing to reach agreement on reducing the country's budget to meet European guidelines, the Dutch government information service said Monday.
Stocks end day down on China, Europe fears : http://money.cnn.com/2012/04/23/markets/stocks/index.htm?iid=HP_LN
Excerpt:
Investors reacted to news that French President Nicolas Sarkozy came in second place in the first round of elections there behind Socialist candidate Francois Hollande, who has been openly hostile to EU austerity measures.
Plus, the Dutch prime minister, Mark Rutte resigned, putting that country's prized AAA rating in jeopardy.
News of a slowdown in China's manufacturing sector also exacerbated investors' skittishness at the start of what will be a busy week on the economic and earnings front.
Gold not giving up much ground today
Gold is down $3.70 after being down about $20 earlier. It is getting harder to push gold lower. Would the European banks give up their gold for currency in this environment ?
Added TomaGold
The mining shares have been hit hard. I just keep buying because it's the cheapest way to play the sovereign debt crisis.
I added 13K shares of TomaGold at $0.53. Their recent drill results were very good:
TomaGold Hits High Grade Intersection of 237.6 g/t Over 5.7 Metres at its Monster Lake Project : http://www.stockhouse.com/financialtools/sn_newsreleases.aspx?qm_symbol=v.lot&newsid=8475500
The Bond Bubble
My comment: Of course, the Fed cannot allow higher interest rates given the vulnerable economy and the ever increasing national debt. The problem is that at some point rates will no longer be controlled by the Fed and that's when we'll know "IT'S GAME OVER". The markets will demand higher rates just as they currently do in Spain and Greece.
Watch out! Is the Fed pushing us into another bubble? : http://finance.fortune.cnn.com/2012/04/23/federal-reserve-rates-bubble/?iid=HP_River
Excerpts:
The Fed's actions have kept Treasury bond prices high (while keeping the government's interest costs low), but the fundamentals do not support the high valuations, given the fiscal mess we are in. Sooner or later, the bond bubble will burst. History has shown that a structurally weak economy combined with a fiscally irresponsible government propped up by accommodative central-bank lending always ends badly. Absent a change in policies, a toxic brew of volatile interest rates and uncontrollable inflation could define our future.
Looks like fun. I know I'd get wiped out by the little waves.
Re: Bernanke the Greatest
I though Ali was the greatest.
Seriously, there will be a huge price to pay for Bernanke's shenanigans. The bill has not not come due yet. Greenspan has already admitted that he found a flaw in the way he thought the world operated. Bernanke's confession is forth coming.
By implementing ZIRP:
He has allowed the housing bubble to expand to extreme levels
He has allowed the national debt to grow exponentially
He has flooded the global economy with excess dollars
There is a time coming when he will no longer control interest rates, the markets will, and that will mean a debt spiral for the US due to the extreme levels of debt. And the longer it takes, the worst the consequences.
This is funny
My comment: If you don't like what they are saying, just censor it.
Faber: ‘Massive Wealth Destruction’ Coming, Well-to-Do ‘May Lose 50%’ : http://www.moneynews.com/StreetTalk/Faber-massive-wealth-destruction/2012/04/04/id/434832?PROMO_CODE=E969-1
Excerpts:
The overwhelming amount of feedback to publicize the interview, initially screened for a private audience, came with consequences as various online networks repeatedly shut it down and affiliates refused to house the content.
Bernanke and Greenspan were not about to support Wiedemer publicly, nor were the mainstream media.
“People were sitting up and taking notice, and they begged us to make the interview public so they could easily share it,” said Newsmax Financial Publisher Aaron DeHoog, “but unfortunately, it kept getting pulled.”
re: No way out
The analogy of a train coming down the tracks appeals to me. There is a way out, but many will choose to believe they will not get run over because the Fed is the engineer on the train.
Experts vs IMF and CBs
My comment: Of course all of this just means that the CBs will print even faster, driving up the price of gold even more until the whole system collapses. It a question of when, not if and all the CBs can do is to delay the inevitable.
Central Banks Favour Gold As IMF Warns of “Collapse of Euro” and “Full Blown Panic in Financial Markets” : http://www.zerohedge.com/news/central-banks-favour-gold-imf-warns-%E2%80%9Ccollapse-euro%E2%80%9D-and-%E2%80%9Cfull-blown-panic-financial-markets%E2%80%9D
Excerpts:
The Eurozone could break up and trigger a “full-blown panic in financial markets and depositor flight” and a global economic slump to rival the Great Depression, the IMF warned yesterday. In its World Economic Outlook report, the International Monetary Fund said the collapse of the crisis-torn single currency could not be ruled out. It warned that a disorderly exit of one member country would have untold knock-on effects. "The potential consequences of a disorderly default and exit by a euro area member are unpredictable... If such an event occurs, it is possible that other euro area economies perceived to have similar risk characteristics would come under severe pressure as well, with full-blown panic in financial markets and depositor flight from several banking systems," said the report. "Under these circumstances, a break-up of the euro area could not be ruled out." “This could cause major political shocks that could aggravate economic stress to levels well above those after the Lehman collapse," said the report. The risks outlined by the IMF are real and are being taken seriously by central banks who are becoming more favourable towards diversifying foreign exchange reserves into gold. Central bank reserve managers responsible for trillions of dollars of investments are shunning euro assets and questioning the currency’s haven status because of the region’s sovereign debt crisis, research has found, according to the FT.... Elsewhere, gold demand in India, the world’s biggest importer, may climb as much as 25 percent during a Hindu festival next week, according to Rajesh Exports Ltd., reviving jewelry buying that was curtailed by a nationwide shutdown.
Signifying the mood of caution among the world’s central bankers, 71% of those polled said gold was a more attractive investment than it had been at the start of last year. Central banks made their largest purchases of gold in more than four decades last year and have continued to buy the precious metal in the early months of 2012.
Central bank demand is set to continue and may accelerate as the global debt crisis deepens in the coming months.
Here comes the bear market for bonds : http://finance.fortune.cnn.com/2012/04/18/bonds-bear-market/?iid=HP_Highlight
Excerpt:
We're coming out of a generational bull market, and I believe rates for Treasury securities have traded at their lows. Over the next three to five years, I expect rates to move up significantly [which means bond prices will drop]. The Fed's policy has been to maintain very low mortgage rates to help clear the inventory in the housing sector. We expect the overhang in housing to be cleaned up by 2015. At that point the Fed will realize that inflation is becoming a problem and will begin to raise rates, and that'll be the beginning of the generational bear market.
My comment: The only problem with this is that by 2015, the US Federal debt will be $20Trillion and crude will be over $200 (because of the speculators, of course). So where will housing be in that environment because I expect higher rates due to the debt to kill housing.
Dad says to buy gold. Expert says no way. : http://money.cnn.com/2012/04/18/pf/expert/new-investor.moneymag/index.htm?iid=HP_Highlight
Excerpt:
I'm sure your dad has your best interests at heart, but I'm going to suggest that you ignore his advice to invest your ten grand in precious metals.
My comment: This "expert" recommends putting some of your money in and FDIC insured account and using the rest to buy overvalued stocks.
Recycling failed policies
My comment: It didn't work then, it won't work now. Obama did the same thing: recycled Clinton's advisers. The end result is total incompetence and a bigger mess than before.
Romney's economic brain trust : http://economy.money.cnn.com/2012/04/18/romneys-economic-brain-trust/?iid=HP_LN
Excerpt:
Mitt Romney, now considered his party's presumptive nominee, has his own team of four economic advisers. Harvard economist Greg Mankiw and Columbia Business School's Glenn Hubbard hail from academia. Former Sen. Jim Talent and Rep. Vin Weber bring knowledge of Washington's hallways of power.
Hubbard and Mankiw are both prominent economists with solid academic reputations. And both should be comfortable brushing shoulders with Romney after leading George W. Bush's Council of Economic Advisers (at different times). Mankiw is the author of an extremely popular economics textbook. Both trend to the right politically, and are well respected by colleagues.
There's little credibility in what governments and CBs do anymore.
The examples are numerous:
The manipulated economic data that does not reflect reality
The wrangling in Congress with nothing being accomplished
The Fed's conjuring up excuses for why things don't work as they expect or to misguide the public (eg the savings glut)
The continual blame game (eg it's the speculators driving up oil prices and Republicans blaming Democrats and vice versa)
The Fed and Congress bailing out the TBTF banks
The TBTF banks that become ever larger and more leveraged than ever
I've gotten to the point that I expect those in charge to lie anytime they say anything. I'd list more, but it's late.
re: Bernanke
The Fed is the real source of our economic problems globally. I have no control over the maniacs that run the country. But if I see a train coming down the tracks, I know I only have two choices: either get off the tracks or get run over. A lot of people are still standing on the tracks and the train's a comin'. Actually I'm expecting Bernanke's foolishness is going to allow me to retire wealthy. Just keep on screwing things up Ben.
re: Bernanke...Deficits don't matter, until they matter. The they really matter
I think we are near that point where they really do matter and Europe is the first to demonstrate that the CBs do not have control of the markets.
It's the speculators
My comment: The "speculators" are again being blamed for the high price of gasoline. But the role of the Fed and their continued devaluation of the currency is not considered to be a factor.
Obama moves to curb oil speculators : http://money.cnn.com/2012/04/17/markets/obama-oil-speculators/index.htm?iid=Lead
TBTF banks pose an ever bigger threat.
Banks Seen Dangerous Defying Obama’s Too-Big-to-Fail Move : http://www.bloomberg.com/news/2012-04-16/obama-bid-to-end-too-big-to-fail-undercut-as-banks-grow.html
Excerpts:
A 40-year Fed veteran, Rosenblum wrote in the report released last month: “TBTF institutions were at the center of the financial crisis and the sluggish recovery that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy.”
No Change
Robert Wilmers, chairman and CEO of M&T Bank Corp. of Buffalo, New York, said in his 2011 annual message to shareholders that no one can say “with any confidence that we have seen a fundamental change in the big bank business approach, which helped lead us into crisis and scandal.”
You missed the point. Of course it's a stupid statement and that's what Noland was saying also. Did you read any of the article ?
“Worrying Is Good for You and Reflects Higher IQ.”
My comment: Quote of the day
Excerpt from Dough Noland's Prudent Bear.com Credit Bubble report:
For a moment today I tried to take comfort from a UK Telegraph headline that scrolled by on the Bloomberg screen: “Worrying Is Good for You and Reflects Higher IQ.” I’m adding this to my list of notions that sound appealing and I only wish were true.
Ei-Erian is way off base
My comment: El-Erian looks only at the last 3 years when what we are facing is the culmination of CB mismanagement that has occurred over the past 20 plus years. It is the result of Fed interventions to stave both real and perceive financial crises globally and it is the result of not just allowing, but instigating and promoting, economic bubbles in both stocks and housing. So, yes the Fed is now trying to contain a sovereign debt crisis, but it is one of their own making. The sovereign debt bubble is just the next in a series of bubbles intended to prevent an economic collapse. Each successive bubble has by necessity become larger than it's predecessor and we are now at the end of the line; there is no bubble sufficient to replace the sovereign debt bubble.
El-Erian Breaches The Final Frontier: What Happens If Central Banks Fail? : http://www.zerohedge.com/news/el-erian-breaches-final-frontier-what-happens-if-central-banks-fail
Excerpts:
"In the last three plus years, central banks have had little choice but to do the unsustainable in order to sustain the unsustainable until others do the sustainable to restore sustainability!"
Hungary needs a bailout
ECB Has Serious Concern About Hungary Central-Bank Independence : http://www.bloomberg.com/news/2012-04-12/ecb-has-serious-concern-about-hungary-central-bank-independence.html
Excerpt:
Prime Minister Viktor Orban, who’s battling to avert a recession, asked the EU and the International Monetary Fund for a bailout in November as the forint fell to a record low and the country’s credit rating was cut to junk.
So is the downside move over ?
Or is this just a deadcat bounce ?
Gold going vertical: up $19 to $1679
Oil up $1.00 to $103.70
Stocks and Bond rates up
Reflation day
Of course, printing money resolves nothing. It merely kicks the can down the road. At some point printing money is no longer viable because it does more damage than good (think inflation and moral hazard). Growth and structural reform are needed to correct the problem, but growth is not possible with so much debt created by forward purchases during a bubble and reform in Europe is difficult due to sovereignty of each country, not to mention the public backlash.
Yep and more printing is gold positive
Monster project posts monster results
Unfortunately there is no way to buy the shares of TomaGold (v.lot) except on the Canadian exchange. Shares of v.LOT closed at $0.84, up $0.49 today.
TomaGold Hits High Grade Intersection of 237.6 g/t Over 5.7 Metres at its Monster Lake Project : http://www.stockhouse.com/financialtools/sn_newsreleases.aspx?qm_symbol=v.lot&newsid=8475500
The Crux of the problem
My comment: Ah yes, we're all waiting for the Fed's exit strategy. Waiting on Godot. And for some reason the argument that higher interest rates are gold negative seems always to be predicated on stronger economic growth. I contend that we will have higher rates as we're seeing in Spain and Italy but those higher rates are not the result of higher growth. In which case that is gold positive. Higher rates imply higher deficits in a slow growth environment and it results in a debt spiral.
Gold may peak in 2013 after 12-year bull run : http://gulftoday.ae/portal/e4db2e91-6630-4430-85a3-517e6bc72d18.aspx
Excerpt:
Gold prices are likely to be driven above $2,000 as concerns over the euro zone debt crisis persist and the prospect of more US monetary easing gains ground, he said.
But that move could be short lived as those factors dissipate, particularly if the prospect of higher US interest rates becomes a reality the following year, he said
“We are expecting still that we are going to see a push above $2,000 in 2013, but it may be that 2013 marks the high water mark for the market,” Klapwijk said.
“It depends (on whether) we see some resolution in Europe, enough to really take some of the sting out of that issue... an end to stimulus measures in the United States... and the prospect of a normalisation of monetary policy.”