Mailbox

Roman,

The Romans took from the "barbarians" because they could. The Europeans took from the Native Americans because they could.

$30 billion is pocket change for a world saddled with hundreds of trillions of failing and largely unrecognized debt.

Eric

Hooray! The world cheers as another dictator-for-life takes his bow
and exits the world stage, his unprotected assets claimed by
authorities (to say nothing of his remaining, untouched assets and
allies).

How many people stop to think about how this is done? What legal
procedure is followed to appropriate funds not belonging to the
powers-that-be and is there anything preventing them from doing the
same to anyone they choose? The Obama administration could use that
tidy sum of $30 billion, throwing it at the economy (where it will end
up in the coffers of banks again) and claiming that all is fixed
because of it.

I'm not cynical, I just have a long memory.

Roman

-------------------------

WSJ UPDATE: US Freezes $30 Billion In Gadhafi-Controlled Assets

WASHINGTON (Dow Jones)--The Treasury Department froze $30 billion in
assets controlled by Libyan leader Moammar Gadhafi and his family in
what the Obama administration said was the single largest financial
seizure in U.S. history.

U.S. officials said Monday the Treasury's action was a crucial step to
further increase pressure on Gadhafi to give up power in Tripoli, amid
signs that his security forces have intensified a crackdown on
political opponents.

Treasury officials said some of the seized assets belonged to Libya's
central bank and its sovereign wealth fund, the Libyan Investment
Authority, which the U.S. concluded were both under Gadhafi's control.
U.S. officials said they believed the central bank of Libya is sitting
on a total of $105 billion in reserves world-wide, while the sovereign
wealth fund has more than $70 billion.

"This marks the largest blocking action" in U.S. history, said David
Cohen, Treasury's acting undersecretary for terrorism and financial
intelligence.

Source: djnewsplus.com

The Worst Assumption - This Time Will Be Different

Apparently lessons from history are forgotten once the book is closed. Or, perhaps, the ego makes us think that this time will be different.

The prohibition of alcohol from 1920 to 1933 did not stop its consumption in the United States. A black market run by bootleggers quickly materialized to meet the demand that legislation couldn't curtail (control).

Gold trade in Vietnam will continue, either officially or underground, as long as demand exists.

Headline: Vietnam eyes ban on unofficial gold bullion trade

Vietnam is planning to ban unofficial trade in gold bars in a fresh bid to strengthen its struggling currency, state media reported Monday.

The central bank is preparing a draft decree that would prevent gold shops from trading bullion, Vietnam News Agency (VNA) said, citing an unnamed central bank official.

Source: asiaone.com

Why 2011 May Be the End of the Housing Crash

Don't count on it.

The state of housing is often quite different than picture painted by headline interpretations. The game of perception often suggests that the worse is over in the real estate market. It is not. New home sales continue to contract as supply swamps demand. The sharp and steady decline real or currency adjusted prices reflects cycle weakness that will take decades to overcome.

More analysis: edegrootinsights.blogspot.com

There might finally be some good news this year about the nation's dismal housing market. Or, at least, the bad news could stop.

Either way, it will be welcome relief for current homeowners as well as for potential real-estate investors. Reasons to be optimistic have been sadly lacking since the housing bubble burst in 2006.

For sure, last week we learned the widely watched S&P/Case-Shiller home-price index fell 1% in December, its fifth straight decline. The index tracks 20 major markets.

Source: finance.yahoo.com

Long Term Secular Trend In Stocks

TA driven predictions/forecasts that do not consider long-term secular trends and cycles tend to pick up only trend "noise". Trend noise never catches major inflection points.

Large Cap Stocks Capital Appreciation Index (LCSCAI) and Z Scores from Primary Trend (48 Month)


Talking Numbers

Should investors worry about a major sell-off coming? Walter Zimmermann, United-ICAP chief technical analyst, weighs in.

The Dollar Lost Its Safe Haven Status A Long Time Ago

While the talking heads and various experts are busy talking up the dollar, they ignore the message coming from the market. Contrary to consensus interpretation, it’s a message of weakness.

International and domestic political upheaval should be creating undeniable safe haven flows into the dollar. The dollar’s action since 2008 can only be characterized as consolidation within the context of a downtrend despite the growing political risks. The display of weakness when strength is expected implies that a continuation of the downtrend is only a matter of time. A drop below the lower trading channel (magenta) will signal another round of aggressive devaluation.

U.S. Dollar Major Currencies Index


Leverage money flows reflect an understanding of this weakness.

U.S. Dollar Index and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Has the dollar lost its safe haven status? Yes, but this fact is not been a recent development. This designation was lost a long time ago. How do I know that? The once stable (flat) trend in the dollar has turned into a ski slope. Safe haven status trends are not characterized by parabolic ski slopes! Unfortunately, most investors and Americans will have to learn this lesson the hard way.

Purchasing Power of the USD


Headline: The Dollar: Safe Haven No More?

Has the dollar lost its safe-haven status? Not exactly, but the state of the U.S. economy is keeping traders wary. With economic indicators like new home sales, jobless claims and durable goods orders, all released today, pointing to a slow, uneven recovery with little job growth, traders don’t expect the Fed to raise interest rates any time soon. Since interest rates tend to propel currencies higher, investors are focusing on countries with stable outlooks and tighter-money policies, or at least some indication that they might raise rates.

Source: cnbc.com

Madoff to NY magazine: Government a Ponzi scheme

Wall Street swindler Bernard Madoff said in a magazine interview published Sunday that new regulatory reform enacted after the recent national financial crisis is laughable and that the federal government is a Ponzi scheme.

"The whole new regulatory reform is a joke," Madoff said during a telephone interview with New York magazine in which he discussed his disdain for the financial industry and for its regulators.

The interview was published on the magazine's website Sunday night.

Source: finance.yahoo.com

Retail Longs Flushed From Natural Gas

As expected, retail longs are being aggressively flushed from the long side. Connected money continues to accumulate into weakness. The market awaits a technical trigger while behind the scenes money reallocates from weak to strong.

Natural Gas (UNG) and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest

State spending cuts slow US economic growth in Q4

Balance the budget and ignore the cries of "save me" from the public? These are dangerous choices.

Deeper spending cuts by state and local governments weighed down U.S. economic growth in the final three months of last year.

The government's new estimate for the October-December quarter illustrates how growing state budget crises could hold back the economic recovery.

Source: finance.yahoo.com

Identify Secular Trends

Bob, don't let short-term headline noise obstruct the long-term, secular message from the market. Do not wait for public recognition. It always comes way too late.

(1) Identify
(2) Trade in Sympathy with it

Regards,

Eric


West Texas Intermediate Crude Oil (OIL) AND Oil Composite Index to Oil Ratio (OILCOILR)


Headline: Libya oil production to shut down completely-BofA

Oil production in Libya is expected to shut down completely and could be lost for a prolonged period of time, Bank of America Merrill Lynch said on Thursday.

Source: reuters.com

Beast Prowling And Public Sleeping

The gold to silver ratio illustrates a cyclical shift from gold to silver since 1991. This cycle has showed periods and of ebb (1998-2003) and flow (1991-1998 and 2003-2008). A break of the 1998 low would imply the follow: (1) a retest of the 1968 low (15:1 ratio), and (2) an acceleration of silver’s out performance.

Gold to Silver Ratio (GSR):


Silver has completely the three taps and out by showing that previous resistance (2002 upper linear channel) has become support. The probability that higher-order trend acceleration can materialize has increased substantially with the completion of the above technical setup. In other words, “the GAME”, unbeknownst to the majority of the public, has quietly changed in silver and gold. This historic change has been confirmed by TA, leveraged money flows, and global events. I can only describe the situation as the beast has begun to prowl while the public remains asleep.

Silver, London P.M. Fixed:


Silver London P.M Fixed and the Silver Diffusion Index (DI)



As I wrote back in December 2010, the gloves are off in gold and silver. Violence within the trend will only increase as time passes, so be patient and disciplined when buying the dips. The “GAME” has changed and the beast is prowling. This means the rhetoric that supports the game will adapt and escalate.

Patience Is Need At A Time Of Impatience

Looks like a step towards social polarization. Will curtailing collective bargaining rights solve the problem? Will balancing State budgets solve the problem? The answer is no to both.

To quote a common phrase, it's all about the debt, stupid. This is the message of the national municipal bond market. What happens when there's an auction and there's no bids? Don't laugh, it's already beginning to happen. The size of the most recent bond auction in New Jersey had to be reduced for lack of interest. This suggests that Capital is demanding higher interest rates (lower prices) to balance the reward to risk equation. Unfortunately, higher borrowing costs are not an option for cash-trapped governments; they can't afford to service their existing debt.

There are no easy solutions that won't eventually lead to increased social polarization. Patience is needed most at a time when it's running thin for most. The debt problem cannot be solved with a stroke of pen.

Headline: Wis. Assembly passes bill taking away union rights

Republicans in the Wisconsin Assembly took the first significant action on their plan to strip collective bargaining rights from most public workers, abruptly passing the measure early Friday morning before sleep-deprived Democrats realized what was happening.

The vote ended three straight days of punishing debate in the Assembly. But the political standoff over the bill — and the monumental protests at the state Capitol against it — appear far from over.

Source: news.yahoo.com

Housing Will Remain Weak For Years (Decades)

The state of housing is often quite different than picture painted by headline interpretations. The game of perception often suggests that the worse is over in the real estate market. It is not. New home sales continue to contract as supply swamps demand. The sharp and steady decline real or currency adjusted prices reflects cycle weakness that will take decades to overcome.

(1) New home sales continue their sharp and steady contraction. In time the unwinding in the real estate market will be compared to the contraction from the Great Depression.

New Home Sales And Change YOY, SA:


(2) Supply, which fails to account for substantial 'shadow' inventory held in foreclosure, dominates demand.

Months Supply And Change YOY:


(3) A supply driven market means real (devaluation adjusted) prices will continue to decline.

Median Home Price to Gold Ratio (MHPGOLDR) And YOY Change:


Headline: Sales of New U.S. Homes Fell More Than Forecast in January

Purchases of new houses in the U.S. fell more than forecast in January, reflecting declines in the West and South that indicate a California tax credit and bad weather may have played a role.

Sales declined 13 percent to a 284,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease to a 305,000 rate. Demand dropped 37 percent in the West and 13 percent in the South.

Foreclosures will keep depressing prices, making distressed, previously owned properties more attractive to prospective buyers than new houses. Combined with unemployment at 9 percent and tight credit standards, home construction may keep lagging behind the rest of the economy this year.

Source: bloomberg.com

The Message From The Oil Market

Bob's end game interpretation, while likely viewed as 'crazy talk' by the mainstream, is not so far-fetched. In time Bob's price target will viewed as way too conservative.

Regards,

Eric

West Texas Intermediate Crude Oil (OIL):

Eric,

Over the years Oil Company's with the help of modern technology have made discovery's of oil and natural gas right here in the U.S.A. The technology, location, paying for drilling rights, and hosts of unforseen cost's have prevented these company's from bringing this oil to production stage and selling it, "up until now that is". What We are witnessing in all of the Middle East is America's version of the Fall of The Berlin Wall only this time its Our turn.
All the dictators We have helped to take power over many years are now being overthrown, is Saudi Arabi next? and without Saudi Arabia where does that leave Us ?.
As the price of oil continue's to rise at what price will the oil company's be able to make a profit on their "capped off oil" I am betting $150.00 + per barrel and You should to.

Bob.C

Divergences and Nonconfirmations Provide Warnings

The evolution of a top can only described as a process. Divergences and nonconfirmations tend to provide warnings before the breaks.

Chicago Fed National Activity Index (CNFAI) and S&P 500 Average


Economic Activity Slower in January

Led by declines in production-related indicators, the Chicago Fed National Activity Index decreased to –0.16 in January from +0.18 in December. Three of the four broad categories of indicators that make up the index made positive contributions in January, but they were offset by continued weakness in the consumption and housing category.

Source: chicagofed.org

State Budget Woes Ensure QE to Infinity

How many years will it take for the Great Recession to be recognized as another depression by excessive debt? It is certain to be long after that fact. Clearly, the media coverage of the financial woes and the social consequences of the solutions proposed to solve them are not limited to the Midwest.

Budget shortfalls infect nearly every State within the Union. The budgetary problems of major players such as New York, New Jersey, California, etc dwarf those that have been receiving the bulk of media attention right now.

Big deal you may say. Material spending cuts within a consumption-centric economy, consumption accounts for more than 70% GDP, will have an immediate social impact. Keep that in mind as the 2012 presidential election approaches. Smart money knows that quantitative easing to infinity is the only option.

Headline: All Providence teachers receive layoff notices

The Providence Public School Department sent layoff notices Tuesday to every one of its 1,926 teachers, warning them they could lose their jobs at the end of this school year.

To be sure, not all teachers in Rhode Island's capital city will be let go. But the warning was necessary because of the dire fiscal straits that both Providence and its school system are in.The school district is facing a nearly $40 million shortfall for the coming academic year.

The city's financial condition is even worse. Providence, which faced a $57 million deficit a year ago, is preparing a budget that will contain major cuts to education, officials said. The city, which has been hit hard by the Great Recession, spends half its budget on schools.

Headline: GOP spending cuts would hit economy hard

The more federal spending Congress slashes this year, the greater the potential drag on economic growth, according to a new analysis from Goldman Sachs.

In a research note, economists at the Wall Street bank estimate that the House GOP's spending bill -- which would cut $61 billion between March and Sept. 30 -- could reduce economic growth by 1.5 percentage points to 2 percentage points in the second and third quarters.

Source: money.cnn.com
Source: money.cnn.com

Social Unrest in Greece Continues

The weaker players will be forced out of the EU. This will unexpectedly strengthen the Euro relative to other paper. Relative paper strength does not turn junk into gold.

Warning - content is graphic.

Saudi king back home, orders $37 billion in handouts

Smart money is watching Saudi Arabia.

Saudi King Abdullah returned home on Wednesday after a three-month medical absence and unveiled benefits for Saudis worth some $37 billion in an apparent bid to insulate the world's top oil exporter from an Arab protest wave.

The king, who had been convalescing in Morocco after back surgery in New York in November, stood as he descended from the plane in a special lift. He then took to a wheelchair.

Source: reuters.com

US govt agrees to supply coins

You can't make this s(h*t)tuff up. It gives new meaning to an old phrase - out of the frying pan and into the fire. Zimbabweans are substituting one form of hyperinflation for another. Perhaps, the problem lies in the printing press that backs both currencies.

FORGET change problems, getting a token or a sweet as change and being stuck with greasy soiled notes. This is because the United States Federal Reserve has agreed to supply coins and replace soiled notes to Zimbabwean banks in a bid to end change problems in the economy, businessdigest has established.

According to sources, representatives Bankers Association of Zimbabwe led by its president and FBC Bank boss John Mushayavanhu met Finance minister Tendai Biti last week to map a way forward in dealing with change problems in the economy.

The sources, said the US Federal Reserve have “formally” agreed that Zimbabwe’s economy is now dollarised and will now supply Zimbabwe with coins and replace notes.

Source: theindependent.co.zw

Nervousness In The Oil Market

The Internet, following in the steps of major technological advances such as the printing press, invented by Johannes Gutenberg around 1440, has made the world a lot smaller. It has also been the great levelier of men and women across the globe.

The best form of intelligence has always been the capital markets. The skittishness in the oil market is not accidental. Gold has and will continue to anticipate.

West Texas Intermediate Crude Oil to Gold Ratio (Oil/Gold):


Please notice the dates in the following facebook listing.

Date: Saudi Revolution 20 March - الثورة السعودية يوم 20 آذار

Founded: 21 February 2011

Source: facebook.com

Swimming Against the Secular Current

Few traders/investors have the skills necessary to ‘time’ short-term reactions within secular trends. Even the 'best of the best' often struggle securing consistent profit scalping the dominant trend. It’s also important to note that anticipating the movement of capital goes well beyond observation of price formations defined by technical analysis (TA). The current up cycle will be decided by TIME, not technical price formations defined by TA.

Yet, despite these observations, there's never a shortage of traders/investors willing to ‘swim’ against the secular current. A word of caution, the current is strong. Its strength will wear down the stamina of all swimmers, regardless of their skill level.

Commodity Research Bureau Commodity Index (CRB):


A demand driven commodity market? Try monetary driven.

Commodity Research Bureau Commodity Index (CRB) to Gold Ratio:


Headline: A Crack in the Commodities Story

Prices of goods ranging from copper to cotton are beginning to break down following strong runs.

There are significant cracks in the commodities story, even as oil, gold and silver generally continue to perform well.

In recent weeks, prices for several commodities from soybeans to sugar have stalled. Cotton scored a massive bearish technical reversal last week. And in the stock market, fertilizer and copper stocks have been acting poorly

Source: finance.yahoo.com

Big Money Woes Federal, State, and Local Levels

Federal, State, and local governments all face big money woes with few political ‘solutions’ that will be acceptable to the public. The end result will be a reduction in the standard of living for those without protection.

Headline: Emanuel faces big money woes as next Chicago mayor

"Not since the Great Depression have the finances of the city been this precarious," said Dominic Pacyga, a historian and author of "Chicago: A Biography." The city's next budget deficit could again exceed $500 million, mostly the result of reduced tax revenue from the recession, and could reach $1 billion if the city properly funds its pension system.

Source: news.yahoo.com

Follow The Money In the Treasury Auctions

There’s always a treasury auction around the next corner with America's propensity to deficit spend. Watch not only demand (bid-to-cover) but also who's participating. One day probably in the not too distant future an auction will be held and no buyers will show up. This is what happened in the most recent New Jersey municipal bond auction. Lackluster interest caused prices to fall and the size of the offering to shrink substantially.

Headline: New Jersey Agency Shrinks $1.2 Billion Debt Sale By 40%

A New Jersey agency shrank the size of a $1.2 billion refinancing offering by roughly 40% and hiked yields on the sale as it struggled to market the bonds to institutional investors Thursday.

A term sheet with preliminary pricing for the deal showed the agency--the New Jersey Economic Development Authority--sliced the size of an originally $1.2 billion sale to roughly $712 million Thursday.

Source: online.wsj.com

Headline: Treasuries Snap Rally as U.S. Prepares to Auction Five-, Seven-Year Notes

Treasuries fell following gains yesterday that pushed the 10-year yield down the most in eight months as the U.S. prepared to sell $35 billion of five-year notes today and $29 billion of seven-year debt tomorrow.

The difference between yields on two-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, widened to as much as 2.14 percentage points, the widest in 31 months. The spread expanded as oil costs climbed on violence in Libya and signs of growth in the U.S. economy.

“With the five-years and the seven-years still coming up, the market doesn’t really want to break a lot lower than this” in yield terms, said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. “There is a safe-haven bid but the big issue that’s there in the background is: do Treasuries offer a return that is attractive to investors? Not yet,” he said.

Source: finance.yahoo.com
Source: treasurydirect.gov

Divergences Convey A Message

Interpetations left to the readers.

Tanzanian Rty Explr Co (TRE):

The Decline In Housing Is Not Over

The crash in US housing since 2005, while substantial and painful, is not over. Ignore government and third party data and time series. Interpretations from them never supercede the message from the markets.

S&P Homebuilders (HB) to Gold Ratio:


Headline: New Doubts Over Housing Data

How else do buyers, sellers and investors know how to proceed? Unfortunately, the housing crash itself has undermined the veracity of those readings.

With the boom and the bust came the attention. Housing brought our economy down, and in doing so, boosted itself to the headlines. As with any big story, a cottage industry sprang up around it. Data providers came out of the woodwork, and as online sale and foreclosure web sites proliferated, so too did their ability to add to that data pool. The result is double edged: On the downside, some data providers are less-than accurate, but on the upside, their sheer numbers provide a system of checks and balances, tempering the most outrageous assertions.

So it seems sort of appropriate that today, as a new controversy swarms around potential errors in home sales figures from the National Association of Realtors, the exalted and much-contested S&P/Case-Shiller Home Price Index is released.

Source: finance.yahoo.com

It's Always Been About the Economy (An Economy Saddled With Debt)

Social discontent grows as economic reality of excessive debt burdens manifests itself into lower standard of livings for all. There's always been a fine line between protest and riot. People that believe that have nothing to loose tend to cross it. Here's to hoping we stay behind that line in America.

Headline: Wisconsin Labor Fight Spreads to Ohio, Oklahoma and Indiana

Many unsettled Wisconsin teachers returned to work today after more than a week of protests against Republican Governor Scott Walker’s budget proposal to increase benefit costs for public-sector employees and put an end to unions’ collective bargaining rights.

With states like Wisconsin facing multi-billion dollar budget shortfalls, it is easy to see that something has got to give. It is even clear to public employees in Wisconsin who agreed to work with Gov. Walker in closing that state’s $3.6 billion budget gap by paying more for pension and healthcare benefits.

Source: finance.yahoo.com

Money Moves Into Gold and Silver

Money continues to move into gold and silver as a result of currency devaluation throughout the globe. Increased tension within the middle east is nothing more than a convenient, headline excuse.

Headline: Hedge Funds Boost Bullish Silver Bets as Mideast Tensions Mount

‘Silver Over Gold’

“If I had to, I’d pick silver over gold,” said James Dailey, who manages about $200 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. “Gold and silver are picking up market share in the currency world as a store of value. Silver’s also got the tailwind of the global industrial expansion.”

Source: bloomberg.com

The Market Likes Copper

Copper, unlike the consumer price index (CPI) which easily substitutes hamburger with cat food to combat rising prices, doesn’t have many alternatives. Ever wonder why it's getting harder to find copper pennies in circulation? Smart money has been hoarding them for years; they know that it’s only a matter of time before the copper-plated zinc pennies are officially retired due to rising manufacturing costs. Once retired, it will be legal to melt the 95% copper pennies (pre 1983) for an easy 3x plus profit.

Copper ETN:


Headline: Why 'Dr. Copper' is the master metal

With copper trading at unprecedented highs, the question is being asked: isn’t there anything cheaper we can replace this stuff with?

The answer, according to experts, is not much, and not easily.

Source: financialpost.com

In The News

Dangerous stuff.

Headline: Iranian naval vessels enter Suez Canal

Two Iranian naval vessels entered the Suez Canal on Tuesday en route to Syria, officials said, the first time in three decades that Tehran has sent military ships through the strategic waterway.

Canal officials said the ships — a frigate and a supply vessel — are expected to reach the Mediterranean later in the day.

Israel has made clear it views the passage as a provocation. Israeli officials refused to comment Tuesday, though earlier this week Prime Minister Benjamin Netanyahu said he viewed the move "with gravity."

Source: news.yahoo.com

The Bond Market Does Not Back Mild Inflation

If that were the case, why does the long term US government and corporate long bonds to gold ratio look like a ski slope? The gold market is sending a message that headline misdirection prevents many from seeing.

Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) to Gold Ratio:


Long-Term U.S. Corporate Bonds Total Return Index (LTCBTRI) to Gold Ratio:


Historical comparisons and interpretations from nonstationary time series are useless. The aggressively devaluing U.S. dollar makes the bond market a nonstationary time series. Transforming the series into ounces of gold, the world’s premiere currency, reveals the true secular trend.

Headline: Bond Market Backs Bernanke Mild Inflation in Swap Forwards

In the U.S. bond market, the new normal is looking a lot like the old normal.

Interest-rate derivatives show traders anticipate economic growth that fails to spark runaway inflation even as global food and energy prices soar and the Federal Reserve pumps $600 billion into the financial system by purchasing bonds. Based on where they see 10-year swap rates in a decade, the cost to lock in fixed rates in exchange for floating interest payments is the same now as it was before the worst financial crisis since the Great Depression.

For DoubleLine Capital LP in Los Angeles, which oversees $8 billion, the worst is over for the sell-off that drove 10-year Treasury yields as high as 3.77 percent this month from 2.33 percent in October. The notes yielded 3.51 percent as of 10:41 a.m. today in London.

Source: finance.yahoo.com

Gaddafi on the run: Dictator may already have fled and be on his way to Venezuela after Libyan air force attacks civilians

Libyan leader Muammar Gaddafi has fled Libya and may be heading for Venezuela, William Hague said today.
The Foreign Secretary said he had seen 'information' that suggests Gaddafi is on his way to the South American country - as Libya was up in flames amid increasingly bloody battles between protesters and security forces.

Libyan fighter jets and helicopters reportedly fired on protesters in the capital Tripoli, with indiscriminate bombing runs leaving 'many, many dead'.

Source: dailymail.co.uk

Gold Will Continue to Outperform Equities

The recent up tick in the stock to gold ratio has some suggesting that a secular shift away from safe haven (gold) to risk (equities) has begun. This interpretation is wrong. A secular shift from safe to risk will happen only when TIME is right.

Gold began outperforming equities in September 2010. TIME for a bottom is not due for months. This trend will become more obvious through hindsight analysis.

1929-1944 & 2000-Present Comparison: S&P 500 to Gold ($/oz) Ratio:

Gulf shares drop on Mideast unrest

The dominoes of control that characterized the dollar-centric system continue to wobble and fall. While the media focuses on the budding ‘Democracies’ for Northern Africa and Middle East, they blissfully ignore another interpretation suggested by gold, silver and oil markets. The dollar-centric system is falling under the guise favorable revolutions.

Stocks markets across the Gulf Arab states fell Sunday, with Dubai's largest exchange registering the steepest drop as unrest in the Mideast lapped at the shores of oil kingpin Saudi Arabia.

The Dubai Financial Market closed down 3.66 percent, to 1,536 points, with developer Emaar Properties' shares sliding 4.73 percent. The company was the force behind the Burj Khalifa, the world's tallest building. In Kuwait, the benchmark index closed down 2.52 percent, to 6,394, and bringing its year-to-date losses to more than 8 percent.

Source: finance.yahoo.com

The Only Certainty Is Public Uncertainty

The only certainty is public uncertainty.

The can will be kicked down the road because it is the only policy option left.

Kicking the can through infinite quantitative easing, however, is no free lunch. The public is beginning to realize this axiom one day at a time. The messages behind the headline rhetoric are reduced purchasing power and shrinking standard of living for anyone unprotected.

Gold, silver, and stocks are moving higher as a result of infinite quantitative easing, also known throughout history as hyperinflation. The money flows and technical setups in the silver market can only characterized as unusual and explosive. As I have said before, silver will lead the transition to hyperinflation. That's exactly what it's doing.

All I can say is try to let the market do the "thinking". The message of the market is more important than personal opinion. Ego and emotions tend to be the domain of personal opinion.

Capital tends to anticipate rather than react. So must you.

SP 500 And Equity Diffusion Index (DI)



US Treasury Bond 20YR+ (TLT) And Bond Diffusion Index (DI)

Eric: The Boys on Capital Hill appear to be drawing a political line in the "sand" on March 4th the temporary funding for the nations budget runs out.
somehow the dust will settle and half-ass cuts will be made, the can will be kicked again.

Headline: It's Certain: A Government Shutdown Is Coming In Just Two Weeks

Barring some sort of deus ex machina, it seems certain that a government shutdown is coming in just two weeks (March 4, when the existing temporary funding bill runs out).

Source: businessinsider.com

I think this? Some of the stock market indicators are overbought. $CCI is borderline
Uncertainty will will loom over the market The dollar will again defy gravity and rebound, because of talks of cuts. Another attack on precious metals will begin
is my reasoning to simplistic or are we looking at another short term delay in precious metal rally.

Thanks BOB.C

Connect the (Foreclosure) Dots

Bernanke urges nations to help ease trade gaps

The consequences of an excessive debt burden debt translated into trade/currency imbalances. The more things change, the more they stay the same.

Federal Reserve Chairman Ben Bernanke on Friday urged countries with large trade surpluses like China to let their currencies rise in value to help prevent another global financial crisis.

He also called on nations with persistent trade deficits like the United States to narrow their budget shortfalls and save more.

Sources: finance.yahoo.com

Powder Keg Setup

Silver is talking to anyone that will listen.

• Three taps and out
• Resistance becomes support

Silver London P.M Fixed and the COT Futures and Options Open Interest Stochastic Weighted Average:


Silver London P.M Fixed and the Silver Diffusion Index (DI)


This is a powder keg setup.

America's Economic Conundrum

Many States cannot support the current standard of living (labor, benefits, services, maintenance, etc) without additional deficit spending and debt issuance. Deteriorating credit ratings for many municipalities, more importantly, new low in trend energy within the national muni bond market reflects not only the severity of problem but also recognition by capital. The later is more important than the former. Capital is neither blind nor stupid. The path of least resistance is down because the fundamentals are deteriorating.

Policy makers, despite the sundry of rhetoric, really have only two choices:
(1) Keep spending, or figuratively kick the can down the road to live another day. The consequence of spending, however, is gradual (hopefully) reduction in the general standard of living, or (2) balance the budget and face the economic music here and now. A common element between the two choices is a lower standard of living for most; an outcome not likely to be embraced by either protesting group.

This protest/discourse will spread across the country. Call it public education about America's economic conundrum.

Muni Bond Market:


Headline: Thousands of protesters surround Wisconsin Capitol

A state Capitol thrown into chaos swelled for a fifth day with thousands of protesters, as supporters of Republican efforts to scrap the union rights of state workers added their voices to the debate for the first time and GOP leaders insisted again Saturday there was no room for compromise.

Supporters of Gov. Scott Walker and his effort to ease Wisconsin's budget woes gathered on the east side of the Capitol, surrounded by a much larger group of pro-labor demonstrators who since Tuesday have filled the Capitol with chanting, drum-beats and anti-Walker slogans. Walker has proposed requiring government workers to contribute more to their health care and pension costs and largely eliminating their collective bargaining rights.

Source: news.yahoo.com

In the News

G20 holds meeting at Disney World. Problem solved - fantasia style.

Headline: G-20 reach compromise deal on imbalances

PARIS (AP) -- The world's dominant economies have reached a compromise deal on how to track imbalances in the global economy that have been blamed for exacerbating the financial crisis, French Finance Minister Christine Lagarde said Saturday.

Finance ministers and central bank governors from the Group of 20 rich and developing countries managed to get China to agree on a list of five yardsticks for imbalances, by softening the criteria for measuring current account surpluses.

Source: finance.yahoo.com

COT Pulse Natural Gas

Hi Eric,
Can you give use an update on what's happening in the natural gas market, it seems to be pretty dire. A rally until July is usually common around this time of the year, but it seems it will be very weak and could set the stage for more decline going into September. What do you think? Do we simply give up on this wretched commodity or are you holding here?
Mark

Hi Mark,

Markets can be a game of frustration. We’ve all been there. NG is neither or your friend or enemy.

(1) Clear the mind,
(2) listen to the message of the tape (market),
(3) and let the market come to you.

A tradable or sustainable bottom tends to be preceded by bullish or bearish setups. Natural gas’s neutral diffusion index (DI) suggests neither.

Natural Gas (UNG) and Natural Gas Diffusion Index (DI)


The emotions behind frustration manifest themselves in the declining participation of the retail traders. Retail traders, also known as wrong way Charlie, will be short when they should be long.

Natural Gas (UNG) and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest



The message within the leveraged market is that connected money continues to increase and decrease long and short position, respectively. This is the market’s way of repositioning the participation of the trade before the next move. In other words, the changing composition with the trend helps to define difference between the weak and short hands.

Natural Gas (UNG) and the Commercial Traders COT Futures and Options ZScore Weighted Average of Long & Short As A % of Open Interest

The setups will come. Technical analysis (TA) then becomes actionable trigger.

RY,

Eric

Headline: US GAS: Futures End Higher As Traders Weigh Weather Outlook

NEW YORK (Dow Jones)--Natural-gas futures ended slightly higher Friday as market participants were reluctant to bet that prices would fall with forecasts pointing toward colder-than-normal weather at the end of the month.

Natural gas for March delivery settled 0.8 cent, or 0.2% higher, at $3.876 a million British thermal units on the New York Mercantile Exchange. On the week, the benchmark contract shed 3.4 cents, or 0.9%.

"There's a little bit of uncertainty," said Cameron Horwitz, a Houston-based analyst with Canaccord Genuity. "People don't want to take it too low in case there's another bout of arctic air."

Source: online.wsj.com

Flush The Weak Hands

Negative Media Coverage (Endless) + Gold Quoted on Paper Markers (COMEX) = Flushing of Weak Hands.

It's as easy as taking candy from a baby, right? Not so much anymore. The "paper hits" are nowhere near as deep as previous reactions. The baby is getting more physical (literally) as time progresses.

Gold London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:

Lots of Arm Waving About Jobless Claims

The trend in jobless claims has little if any influence on global capital flows. A lot of arm waving for nothing. Wake me up when the cycle is over.

Average Weekly Initial Claims State Unemployment (AWIC) And YOY Change


Headline: Jobless claims drop to 2-1/2 year low

New U.S. claims for unemployment benefits dropped more than expected last week to touch their lowest point in 2-1/2 years, a government report showed on Thursday, offering assurance that the labor market was strengthening despite January's poor jobs numbers.

Initial claims for state unemployment benefits fell 36,000 to a seasonally adjusted 383,000, the lowest since early July 2008, the Labor Department said.

Economists polled by Reuters had forecast claims slipping to 410,000. The prior week's figure was revised up to 419,000, from the previously reported 415,000.

Source: finance.yahoo.com

WikiLeaks cables: Saudi Arabia cannot pump enough oil to keep a lid on prices

Outflows in oil won't have much of long-term influence without the ability to increase marginal supply. A close and retest of $100 as major cycle dates approach would be bullish for oil. Leverage money flows would likely flip from outflows to inflows in anticipation of this outcome.

Crude Oil (WTI) and Crude Oil Diffusion Index (DI):

US diplomat convinced by Saudi expert that reserves of world's biggest oil exporter have been overstated by nearly 40%

Source:guardian.co.uk

A Seer on Banks Raises a Furor on Bonds

Those with vision 'see' while those without point fingers. The turmoil in the bond stems from market foces that supercede the power of centralized control. The bond market has been deteriorating in real terms for years.

Ms. Whitney is also drawing scrutiny from Washington, where a Congressional panel will meet on Wednesday to examine the turmoil in the muni bond market, including whether Ms. Whitney’s call has fed the volatility and allowed some investors to profit unfairly

If one stock-picker emerged intact from the wreckage of the financial crisis, it was Meredith Whitney. With a prescient warning about bank stocks in 2007 — as well as a gift for the perfect sound bite — she became a media darling, celebrated in a Fortune cover article and in frequent television appearances as a market seer.

Until now, that is. These days, Ms. Whitney, 41, finds herself pilloried in the news media and by colleagues for predicting a calamity in municipal bonds. Critics say the call is overstated, but it has alarmed investors in that usually sleepy market.

Ms. Whitney is also drawing scrutiny from Washington, where a Congressional panel will meet on Wednesday to examine the turmoil in the muni bond market, including whether Ms. Whitney’s call has fed the volatility and allowed some investors to profit unfairly.

Source: finance.yahoo.com

Fed’s Fisher Says He Won’t Support More QE After June

Dissention, while still quietly kicking the can down the road, is politically acceptable. Failing to supply or withdrawing liquidity (gasp!) and facing the social, political, and economic consequences of doing so is not.

Richard W. Fisher, president of the Federal Reserve Bank of Dallas, said he isn’t inclined to support further quantitative easing after the central bank completes its purchase of $600 billion in Treasuries in June.

“You can never say never, but I cannot imagine a convincing argument for further quantitative easing after this round, given what is developing now in the economy,” the 61- year-old regional bank chief said today on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays.

Source: businessweek.com

'Toxic' Assets Still Lurking at Banks

Accounting tricks may hidden the problem from plain view, but out of sight, out of mind approach only hides the problem behind layers of complexity. Trillions of dollars of toxic assets still exist and have no market. This largely explains why the Fed refuses to throttled back on it's liquidity programs despite the illusion of an economic recovery.

During the financial crisis, investors fretted over "toxic," hard-to-value assets that banks were carrying. Those fears have faded as bank profits have rebounded, loan delinquencies have declined, and bank stocks have soared 25% in the past five months.

But banks still hold plenty of the bad assets that once spooked investors: mortgage-backed securities, collateralized debt obligations and other risky instruments. Their potential impact concerns some accounting and banking observers.

Source: online.wsj.com

Grocery Bills Are on the Rise

The rise in foodstuff, while impressive, is difficult to characterize as ‘extreme’ speculative pushes. The CRB Foodstuffs to CRB All Commodity Spot Index has yet to reach the 1975, 1982, 2001, and 2008 extremes. The charts below illustrate these trends.

CRBFoodstuffs And Year-over-Year (YOY) Change:


Gold and CRBFood to CRBSpot Ratio:



Grocery Bills Are on the Rise


Source: youtube.com

Those With An Economic Plan Create Leverage

Competition for resources will be fierce. Those with good, long-term plans can create economic and political leverage. Currency devaluation is not a free lunch solution.

“The reality is the U.S. has not done enough to secure the supply chain from an inevitable shortage of rare earths expected to come in the next two to three years”

Headline: GTSO: Report Warns that the U.S. is Overly Dependent on China for Rare Earth Metals

A report released this month by the American Security Project supports Green Technology Solutions’ (OTCBB:GTSO) assertion that the U.S.’s reliance on China as the sole supplier of rare earth metals represents a national security risk.

The American Security Project (ASP) is a nonprofit, bipartisan public policy and research organization dedicated to fostering knowledge and understanding of a range of national security issues. ASP released the report, titled "Rare Earth Metals and U.S. National Security," last week. According to the report, China controls more than 90 percent of the rare earths market, making the U.S. totally reliant on the communist nation for the production of its most powerful weapons.

"The reality is the U.S. has not done enough to secure the supply chain from an inevitable shortage of rare earths expected to come in the next two to three years,” said Dr. Jim Ludes, ASP’s executive director.

Source: eon.businesswire.com

My credit card had a 79.9% APR

Life within credit driven consumption bubble...

Personal Consumption Expenditures (PCE) As A %GDP and Personal Consumption Expenditures As A %GDP Average from 1947:

Toni Riss had a credit card with a 79.9% interest rate.

The 58-year-old woman from Texas thought she struck gold when she found the First Premier card, which is aimed specifically at consumers with poor credit.

374Email Print "I had an accident on a motorcycle, went through bankruptcy to pay for medical expenses and my credit went to hell in a hand basket, so I was looking for credit cards for people with bad credit" Riss said.

They granted her a card with a $300 limit -- typical for new customers -- and a starting rate of 29.9%, which Riss said she considered decent given her credit score.

But about six months after opening the card -- at the end of 2009 -- she received an unwelcome surprise in the mail.

"I about had a heart attack when I got a disclosure notice saying that my starting rate of 29.9% was going up to 79.9%," said Riss. "It was ludicrous. Talk about a highway robbery."

Source: money.cnn.com

JPMorgan takes gold collateral, inflation in focus

Interesting how gold, often described as a barbaric relic of past monetary systems, continues to find uses in present monetary systems.

J.P. Morgan Chase said on Monday it would accept physical gold as collateral with its counterparties as a growing number of clients look to use bullion as a hedge against inflation.

The bank, which is one of the custodians of physical metals for some of the world's largest precious-metal backed exchange-traded funds, said it would take gold as collateral to satisfy securities lending and repurchase obligations with counterparties.

Source: reuters.com

By one measure, federal taxes lowest since 1950

This interpretation is decent. Real revenues are contracting at an alarming annual rate.

Real or Gold Adjusted Federal Total Receipts 12-Month Moving Average (TR12MA) AND Federal Total Receipts 12-Month Moving Average Year-over-Year Change (TW12MA12LN)

Taxes too high?

Actually, as a share of the nation's economy, Uncle Sam's take this year will be the lowest since 1950, when the Korean War was just getting under way.

And for the third straight year, American families and businesses will pay less in federal taxes than they did under former President George W. Bush, thanks to a weak economy and a growing number of tax breaks for the wealthy and poor alike.

Income tax payments this year will be nearly 13 percent lower than they were in 2008, the last full year of the Bush presidency. Corporate taxes will be lower by a third, according to projections by the nonpartisan Congressional Budget Office.

Source: news.yahoo.com

Gold And Stocks - History Is Repeating

The secular trends are often revealed by simple analysis. The stock market is heavily influence by devaluation of the currency that denominates it; the U.S. dollar denominates US stocks. The stock market invariably churns within ‘depressionary boxes.’ Depression boxes are characterized by aggressive currency devaluation. Currency devaluation, a form of indirect default, is a centralized response, consistent over time, meant to mitigate consequences of debt liquidation after periods of excessive debt creation. This is why Roosevelt confiscated gold during Great Depression and revalue it from $20/oz to $35/oz. It was nothing more than massive devaluation.

History, regardless of public perception or understanding, is once again repeating. The purchasing power of the USD is declining.

Purchasing Power of the USD


And, the stock market is following historical precedence.

Devaluation Steps: S&P 500 Total Market Return and Inverse price of Gold

Layoffs become rarer even with unemployment high

When your neighbor loses his job it’s a recession. When you lose yours it’s a depression.

Apparently, high unemployment is a good thing from a certain perspective. The devious nature of misdirection.

The U.S. labor force has been split into two groups: the relieved and the desperate.

If you have a job, you can exhale; you're less likely to lose it than at any point in at least 14 years.

If you're unemployed? Good luck. Finding a job remains a struggle 20 months after the recession technically ended. Employers won't likely step up hiring until they feel more confident about the economy.

A result is that people who are unemployed are staying so for longer periods. Of the 13.9 million Americans the government says were unemployed last month, about 1.8 million had been without work for at least 99 weeks — essentially two years. That's nearly double the number in January 2010.

Source: news.yahoo.com

China Buying Less Treasuries And More Tangible Assets

Follow the money, while it follows it's economic plan.

Headline: CNOOC pays $570m to buy into US oil shale operation

China National Offshore Oil Corp (CNOOC) Ltd, China's largest offshore energy producer, agreed to pay $570 million in cash for a one-third stake in Chesapeake Energy Corp's Niobrara shale project, adding to its US holdings in crude oil production.

The Chinese explorer also agreed to pay 66.7 percent of Chesapeake's costs up to $697 million to drill and complete wells in the area, the companies said in a statement on Sunday.

Source: chinadaily.com.cn

From Bob

A Recognized Top in US Long Bonds Will Be A Process

A recognized top in US Long bonds, the last golden pillar, will be an ongoing process - an ebb and flow between in and outflows (see bond diffusion index below) rather than a single exogenous event. The bond market through the aid of QE1,2,3,etc will provide support at critical junctures until it (they) no longer stem the decay.



US Treasury Bond 20YR+ (TLT) And Bond Diffusion Index (DI):


While the long-term nominal trend remains in tact, it ignores that fact that real (constant currency) prices peaked years ago. In other words, the canary in the coal mine used to warn miners and investors died in 2002.

Long-Term U.S. Government Bonds Total Return Index (LTGBTRI):


Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) to Gold Ratio:


Smart money knows that another transition from the public to private sector began in 2009.

Long-Term U.S. Corporate Bonds Total Return Index (LTCBTRI) to Long-Term U.S. Government Bonds Total Return Index (LTGBTRI)


Tim makes some interesting observations...

Hi Eric,

US Long Bonds


Wanted to show you an example of a time / price chart. This is my original work. Friday's move in the long bond has great significance I think. I believe you follow bonds also, and I'd like to see one of your ratio charts on the long bond now we have our breakout.

The long bond has consolidated enough time to bring back it back to balance it's countermove downward (a mirror foldback). The move up should show us the length of the consolidation to equal the height of the upward move. Not much interpretation here, just the way markets establish balance over time.

With the higher rates, this will put pressure on JPM's & the FED's balance sheet as their interest rate swaps & POMO purchases put them greatly underwater. It will be interesting to see how these factors play out in the days ahead.

Regards,

Tim