Wal-Mart CEO Bill Simon expects inflation

It’s getting more difficult to relegate the inflation problem as a fringe argument. Hyperinflation has always been the inevitable consequence of excessive money creation (i.e. printing money – also known as quantitative easing (QE) today). The fact that Wal-Mart and/or other mainstream players are beginning to discuss it suggests that the point of public recognition is nearing. This recognition will change the ebb and flow dynamics of the gold market.

Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

Video

Liquidity Is Grease For The Wheels In Equities

Liquidity, also known as quantitative easing (QE), is grease for the wheel to higher nominal stock prices.

NYSE Composite and Internal Force


The Fed is hinting about ending QE in June 2011. As the old saying goes, talk is cheap. QE, announced, unannounced, domestic or international, can assume many forms. The Fed knows that terminating QE within a fragile economic back drop of contracting credit and unstable debt will generate headline ‘consequences’ that will extend well beyond lower nominal stock prices.

Higher nominal stock prices does not always equate to economic recovery. There’s a difference between nominal and real trends, but it’s easy to ignore them within endless headlines of one-dimensional analysis.

U.S. Large Cap Stocks Capital Appreciation Index (LCSCAI); S&P 500 to Gold Ratio and Z Scores from Primary Trend:

Irish prepare to learn full cost of banking crisis

If the full cost were disclosed by the stress test(s), the consequences to "the game" supporting the banking system would be headline news. This is nothing more than a controlled release of selective information.

Ireland prepared to learn the full cost of its banking crisis on Thursday when the results of stress tests were expected to reveal that four banks need billions more in aid, likely giving the government extra ammunition in its campaign to force some of the losses on international investors.

As the results loomed, market tensions were at a high, forcing the suspension of trading in the shares of Bank of Ireland and Allied Irish Banks. Irish Life & Permanent and the Educational Building Society were also being tested.

A senior Irish banker, Mike Aynsley, said he expected the tests to conclude that the four lenders would need another euro18 billion to euro25 billion ($25 billion to $35 billion) to strengthen them against any future shocks.

Source: finance.yahoo.com

It's All About Debt And Currency Devaluation

Any discussion about the direction of the secular trend in U.S. dollar that fails to mention debt is incomplete. The dollar is headed lower because currency devaluation is the only viable political option to handle industrialized nations' excessive debt burdens. This includes the United States. So, while the headlines focus on the day's new flavor of the day (i.e. better than expected economic data), they ignore what's driving the secular trends. It's all about debt and currency devaluation. Roosevelt knew it, but most of the public did not. This commentary and chart could be repeated on regular intervals for another ten years without widespread public recognition of what's driving the trends.

Total Credit Market Debt As A% GDP:


Headline: Why the Dollar May Make Comeback

One of the favorite bets in the market right now is short the U.S. dollar. But could the greenback be in for a turn higher?

The case against the dollar is strong and widely held. Last week, the Commodity Futures Trading Commission's weekly report of currency positions showed that almost all speculators were short the dollar and long the yen, euro, pound, Swiss franc and other currencies.

Source: finance.yahoo.com

GSR Says It's Game On For QE

All global citizens, Chinese included, are hedging against soaring inflation caused by infinite quantitative easing (QE) through the accumulation of gold. The gold to silver ratio (see below) represents that it's game on for QE.

Gold to Silver Ratio (GSR):


Headline: China's new gold rush: its nervous citizens are helping fuel the bullion boom

INSATIABLE Chinese demand has sent the prices of commodities such as iron ore and copper to historic highs; now the Middle Kingdom is helping to drive the gold price ever higher as local investors look for a hedge against soaring inflation and the rising risks to the global economy.

China is the largest gold producer but requires so much of the precious metal (in addition to what it already mines) that it imported more than 209 tonnes during the first 10 months of last year. This represents a five-fold increase from the estimated tonnes it imported in all of 2009.

Source: theaustralian.com.au

Setbacks mount in Japan at leaking nuclear plant

Setbacks mounted Wednesday in the crisis over Japan's tsunami-damaged nuclear facility, with nearby seawater testing at its highest radiation levels yet and the president of the plant operator checking into a hospital with hypertension.

Nearly three weeks after a March 11 earthquake and tsunami slammed and engulfed the Fukushima Dai-ichi plant, knocking out cooling systems that keeps nuclear fuel rods from overheating, Tokyo Electric Power Co. is still struggling to bring the facility in northeastern Japan under control.

The country's revered Emperor Akihito and Empress Michiko reached out to some of the thousands displaced by the twin disasters — which have killed more than 11,000 people — spending about an hour consoling a group of evacuees at a Tokyo center.

"I couldn't talk with them very well because I was nervous, but I felt that they were really concerned about us," said Kenji Ukito, an evacuee from a region near the plant. "I was very grateful."

Source: news.yahoo.com

Utah: Forget dollars. How about gold?

History being made one day at a time.

The big legal change in Utah is that the state tax code now treats gold and silver coins -- issued by the U.S. Mint -- as currency rather than an asset. That means no capital gains or other state taxes will be levied when the coins are exchanged.

Gather 'round, gold standard enthusiasts.

There is a new law in the state of Utah that might be of interest.

The Beehive State has a new measure on the books that eliminates state taxes on the exchange of gold and silver coins and directs the legislature to study an "alternative form of legal tender."

The law, signed by Gov. Gary Herbert last week, also recognizes gold and silver coins issued by the federal government as legal tender in the state.

Of course, they already are. But people use them as investments, not pocket change.

The big legal change in Utah is that the state tax code now treats gold and silver coins -- issued by the U.S. Mint -- as currency rather than an asset. That means no capital gains or other state taxes will be levied when the coins are exchanged.

Source: money.cnn.com

Food inflation kept hidden in tinier bags

We've talked about shrinking total serving sizes often hidden behind the illusion of similar sized packages for years - see 2010 commentary). Perhaps, the public is finally catching on to the shell game? My gut reaction says don't count on it. I still believe that portion sizes approaching that of Dixie cup are needed for the public to equate the ever shrinking shelf size as a consequence of currenncy devaluation.

Chips are disappearing from bags, candy from boxes and vegetables from cans.

As an expected increase in the cost of raw materials looms for late summer, consumers are beginning to encounter shrinking food packages.

With unemployment still high, companies in recent months have tried to camouflage price increases by selling their products in tiny and tinier packages. So far, the changes are most visible at the grocery store, where shoppers are paying the same amount, but getting less.

For Lisa Stauber, stretching her budget to feed her nine children in Houston often requires careful monitoring at the store. Recently, when she cooked her usual three boxes of pasta for a big family dinner, she was surprised by a smaller yield, and she began to suspect something was up.

Source: msnbc.msn.com

Regulators define "safe" home loan

It only stands to reason that "safe" must be defined by regulations since "unsafe" cannot be reflected by current prices. A distinction between the two does exist. Don’t expect this distinction to be recognized as long as the world struggles to service the “unsafe” kind.

WASHINGTON (Reuters) - U.S. lenders would have to offer mortgages with at least a 20 percent down payment if they want to repackage the loan to sell to other investors without keeping some of the risk on their books, according to a proposal U.S. bank regulators endorsed on Tuesday.

The Federal Deposit Insurance Corp board agreed to seek public comment on the proposal that is intended to restore lending discipline and define the safest form of mortgages that can be sold to investors.

Last year's Dodd-Frank financial law requires firms that package loans into securities -- a practice known as securitization -- to keep at least 5 percent of the credit risk on their books.

Source: finance.yahoo.com

Real Estate Far Worse Than Advertised

Falling home prices represents a classic illustration to the old saying, adding insult to injury. Home prices despite on going currency devaluation continue to fall in most major US cities. In other words, the headlines ‘slant’, even the more realistic ones, tend understate the severity of the housing problem. This suggests another old expression, "far worse than advertised."

The real (gold adjusted) median housing price breached the 1983 and 2010 lows in February 2011. This suggests lower real prices in the future.

U.S. Median Home Price (MHP) And MHP to Gold Ratio:


Headline: Home prices falling in most major US cities

Home prices are falling in most major U.S. cities, and the average prices in four of them are at their lowest point in 11 years. Analysts expect further prices declines in most cities in the coming months.

The Standard & Poor's/Case-Shiller 20-city index released Tuesday shows price declines in 19 cities from December to January. Eleven of them are at their lowest level since the housing bust, in 2006 and 2007. The index fell for the sixth straight month.

Home values in Atlanta, Las Vegas, Detroit and Cleveland are now below January 2000 levels.

Source: finance.yahoo.com

A Picture of Growing Concern

Below is a picture of liquidity.

St. Louis Adjusted Monetary Base:


Below is a picture of concern. An up tick in historically low yielding cash assets suggests growing concern within the banking system. A breach of the 2010 highs cannot be ignored.

Cash Assets 12-Month Change (CASH12LN) And Percentage of Total Bank Credit (%TBC)

Dear Jim:

Why you should be confident about your gold holdings. I doubt you will see this chart in the mainstream media any time soon, if EVER.

CIGA Ed P.

Source: jsminset.com

Buffett Says Buy Businesses Over Long-Term Bonds as Dollar Value to Erode

This also includes gold. Though, don't look for this suggestion to get a lot of headline space from notable names.

Warren Buffett, the billionaire who urged Congress in 2009 to guard against inflation, said investors should avoid long-term fixed-income bets in U.S. dollars because the currency’s purchasing power will decline. “I would recommend against buying long-term fixed-dollar investments,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A), said today in New Delhi. “If you ask me if the U.S. dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not.”

Source: bloomberg.com

Here Comes The Fear

It's ok to buy volatility, as long as it does not include gold? Gold is not only a favorite currency of 19th century cowboys and druids but also global citizens of the 21 century. This ‘favoritism’ manifests itself as rising gold prices across all global currencies.

Watch how connected players use fear as a tool to reposition money into the weakness. These paper games (i.e. operations) while still effective no longer carry the punch of the old days. The physical market is beginning to flex its muscles.

Headline: Leo Grohowski: Volatility’s a Buy, but Be Careful With Gold

BNY Mellon's Chief Investment Officer Leo Grohowski dropped by "Breakout" Monday to discuss how investors can put their money to work safely in a "see no evil, hear no evil market." Noting that the CBOE volatility index, or VIX, is well below 20 and its 5-year average, Grohowski sees long-term options straddles as one possibility for long-term investors. Grohowski is somewhat skeptical regarding the recent torrid gains in gold, believing the favorite currency of 19th century cowboys and druids of old has gotten ahead of itself relative to commodity metals. Gold spikes tend to unwind in a hurry, leading the CIO to advise investors to use some caution in the yellow metal.

Source: finance.yahoo.com

N.Y. governor, legislature agree on state budget

Any material reduction in consumption as a direct result of spending cuts from the States will be met with additional liquidity. Have not doubt about it. Either direct or indirect injections, consumption cannot falter. Consumption, representing over 70% of GDP, drives the U.S. economy. The 2012 election will be all about jobs creation and economic growth with a few side show debates.

"This budget makes tough choices, which is what you sent me to Albany to do," Cuomo said in a statement. "It closes a $10 billion deficit with no new taxes or borrowing, redesigns government to force it to cut waste and inefficiency and finally delivers real results for hard-working families across New York state."

Cuomo outlined a series of spending cuts, including a $170 million budget reduction for the Office of Court Administration as well as 10% reductions in the budgets of the executive branch, and the offices of the Attorney General and the Comptroller. There were also $54 million in other miscellaneous cuts, he said.

"Government had to tighten its belt with the same sense of urgency that working families have been tightening their belts since the economy went into freefall in 2008," said Assembly Speaker Sheldon Silver.

Source: cnn.com

Falling Supply, Rising Demand & Currency Devaluation

Falling supply and rising demand within backdrop currency devaluation is an explosive cocktail driving commodity markets.

Headline: USDA confirms corn exports of 1.25m tons to anonymous destination

Meanwhile, US inventories of corn for 2010-11 are currently expected to be at a 15-year low of 17.1m tons, China’s corn consumption is powered by its affluent middle class whose dietary habits have shifted to meat-based food items thereby driving up livestock feed demand.

Source: commodityonline.com

From Bob

Watching For Retest of Support as Resistance

An underside kiss of previous support as resistance in the U.S. dollar Index is quite likely over the short-term. The testing process will bring volatility to gold and silver as connected money quietly repositions into the churn. Volatility tends to breed headline fear for precious metals holders must remain disciplined.

U.S. Dollar Index

Massachusetts job fair canceled because of lack of jobs

Economic spin reaches only so far.

A Massachusetts employment organization has canceled its annual job fair because not enough companies have come forward to offer jobs. Richard Shafer, chairman of the Taunton Employment Task Force, says 20 to 25 employers are needed for the fair scheduled for April 6, but just 10 tables had been reserved. One table was reserved by a nonprofit that offers human services to job seekers, and three by temporary employment agencies.

Source: usatoday.com

From Bob

Japanese Yen

Japan's crippling debt rather than official interventions dictates a change in trend for the Yen in the future. Leveraged money will likely lead the change but does not have to pinpoint the exact high.

Japanese Yen (FXY) and Yen Diffusion Index (DI)


Headline: Yen action sets scene for carry trade’s return

The billions of dollars in yen sold by the world’s most powerful central banks have sent a strong message to speculative investors. Those daring to bet that the Japanese currency will again test Y76.25, the record high against the dollar it hit last week before the G7’s intervention, better have deep pockets.

Source: ft.com

The Facade Of Recovery Beginning To Crack

Capital follows secular trends and breaks in counter trend reactions while headlines focus on the short-term. The facade of a economic recovery is beginning to crack. Any decay in the 'real' economy will be met with additional liquidity.

Real Business Core Capital Spending: Real or CPI-Adjusted New Orders of Durable Goods ex. defense and aircraft (RBCCS) and YOY Change


Gold-Adjusted New Orders of Durable Goods ex. defense and aircraft (BCCSGLDR) and YOY Change



Headline: U.S. durable-goods orders fall 0.9% in February

Orders for U.S. durable goods in February posted the biggest drop in four months, falling 0.9% largely because of lower sales of machinery and defense-related products. Orders minutes the volatile transportation sector also fell, down 0.6%, the Commerce Department reported Thursday. Economists surveyed by MarketWatch has expected orders to rise 1.5% overall, or an even stronger 2.5% minus transportation. Orders for January, meanwhile, were revised up to a 3.6% increase. The government originally reported that total orders rose 3.2% in January.

Source: marketwatch.com

QE to Infinity - Follow The Money

QE to Infinity because there is no other functional alternative.

The operative word here is "functional."

Jim

Jim has an uncanny ability to anticipate moves, because he understands the forces driving capital. In other words, Jim follows the money. Notice how money is quietly moving in anticipation of additional liquidity; liquidity is also known as devaluation or ever increasing inflation.

SP 500 And Equity Diffusion Index (DI)


Stocks and gold are moving together but at different rates of appreciation. The downtrend since 2000 illustrates gold's dominance.

U.S. Large Cap Total Return Index (LCSTRI); S&P 500 Total Return Index to Gold Ratio


The Achilles’ heel of infinite liquidity has always been debt issuance. Capital knows it. It's easy to see the short-term, inverse movement of capital in the bond market. At some point in the not too distant future, price declines will not be met with capital inflows. Until then, the players whistle past the graveyard and hope no one notices.

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


Headline: Household wealth down 23% in 2 years - Fed

The average American family's household net worth declined 23% between 2007 and 2009, the Federal Reserve said Thursday.

A rare survey of U.S. households, first performed in 2007 but repeated in 2009 in order to gauge the effects of the recession, reveals the median net worth of households fell from $125,000 in 2007 to $96,000 in 2009.

It is widely known that the 2008 financial crisis resulted in the vaporization of trillions of dollars in household wealth. But Federal Reserve officials said Thursday the new report offers a look at exactly how hard the recession hit families, and how they reacted.

The numbers paint a stark picture.

Families that owned stock saw their portfolios drop by more than a third to $12,000 from $18,500, on average. The value of primary real estate holdings decreased by an average of $18,700.

Source: money.cnn.com

Breach suspected at troubled Japanese power plant

Reactor three has plutonium. If the protective core has been compromised, the uranium inside could be transmuted into plutonium. Plutonium is extremely toxic to humans. This would be bad development for the Japanese in desperate need of positive news.

"The situation today at the Fukushima Dai-ichi power plant is still very grave and serious. We must remain vigilant," a somber Prime Minister Naoto Kan said. "We are not in a position where we can be optimistic. We must treat every development with the utmost care."

The possible breach in the plant's Unit 3 might be a crack or a hole in the stainless steel chamber of the reactor core or in the spent fuel pool that's lined with several feet of reinforced concrete. The temperature and pressure inside the core, which holds the fuel rods, remained stable and was far lower than what would further melt the core.

Source: news.yahoo.com

Should The Government Stop Dumping Money Into A Giant Hole?

Source: youtube.com

From Bob

U.S. Dollar Index

The technical position of the dollar remains weak. An underside kiss of previous support as resistance will confirm technical breakdown of consolidation and accelerate selling.

U.S. Dollar Index


Headline: U.S. Dollar ETF Put-Options Volume Surges to a Record Level

Put volume for an exchange-traded fund tracking the U.S. dollar against six other major currencies surged to a record after a single trade with a strike price 3.4 percent below today’s close.

An investor bought 94,039 June $21 puts to sell the PowerShares DB US Dollar Index Bullish Fund (UUP) for 16 cents each at 12:28 p.m. in New York, according to a report by Trade Alert LLC, a New York-based provider of options-market data and analytics, and data compiled by Bloomberg.

More than 102,700 puts traded today, a record. The June $21 puts were the most traded and accounted for almost all put trades. The ETF, which began trading in February 2007, declined 0.2 percent to $21.73. It has never closed below $21.65.

Source: bloomberg.com

Gold Is Getting Wild, Get Used To It

Experts rush to urge caution after an intraday plunge (hit) in gold and silver. They use words like outside reversal day and an unstable parabolic trend. An outside reversal day will be little more than "noise" within a secular trend in a few months, but fear is driven by the moment. As for a parabolic trend, yes, it's critical to correctly identify them. Is the current parabolic trend extended far beyond previous advances? Discipline says no.

Gold, London P.M. Fixed (Gold) and Z Scores from Primary Trend


As Jim writes, you must realize that the point of correctness in the article How & When that is true is his $5000 to $12,500 and not prognostications of the next 90 days. Discipline sees not only the trees but also forest.

Armstrong also suggests that the correction into June does not necessary have to be down. Corrections can be down, sideways, or periodically in a strong market a running (upwardly sloping) correction can form. The message from the market is most important here.

Commetary: Martin Armstrong just wrote an paper on gold titled, "How and When"

My question to this article is WHY?

Why in the world, if you believe that the gold price can go to $5000 and $12,500, as the article says, do you give a flipping damn about the next 90 days.
You must realize that the economic and political damage is already done.
You must realize that the mountain of OTC derivative paper is not going away.
You must realize that all the old Legacy asset, (broken OTC derivatives) demand to be adjusted at each market turn in order to maintain any sememblence that they are serious contracts.
You must realize that this adjustment means adding on new OTC derivatives.
You must realize that this means the mountain of OTC derivative weapons of mass financial destruction can only grow.
You must realize that it is not if, or not, QE will continue, it is what it already has done to the Western Economies that much higher gold prices will reflect.
You must realize this is not a business problem, but rather a debt problem as it applies to the gold price.
You must realize the monumental change in the Middle East is NOT positive for the West in any manner, shape or form.
You must realize that the change in the Middle East is from some form of government to Chaos.
You must realize that the beneficiaries of Chaos in the Middle East is Iran and Russia.
You must realize that the main product of the establishment of a no fly zone in Libya is to benefit the Rebels.
You must realize that the rebels are an unknown factor in Libya.
You must realize that a second product of the no fly zone is greater hatred in the Middle East for all things West.
You must realize that the Peak Production of Energy is behind us.
You must realize that the production of energy in chaos will be less than under some form of rule.
You must realize that this combination of monumental Middle East change and the Peak Oil means Peak oil is no longer a consideration for 10 to 15 years from now, rather it is now.
You must realize that the Angels, gold prices, are not simple talk but rather a method used by the great market mavin Jesse Livermore.
You must realize that on the next trip to $1444, that price will FALL to the long term bull market on gold.
You must realize that $1650, a place where gold will trade is so low as to be comical looking back from 2015.
You must realize that "QE to Infinity" is not a choice but all there is the left in the tool box of US Fed.
You must realize the truth of today's comment by Dallas Federal Reserve Bank President is true.
You must realize that what the President of the Federal Reserve Bank fear will occur.
You must realize no sovereign country needs to go broke.
You must realize they simply refer to QE as policy.
You must realize that it is the currency that breaks, not the country.
You must realize that the point of correctness in the article How & When that is true is his $5000 to $12,500 and not prognostications of the next 90 days.

Jim

Source: jsmineset.com

Watch Consumer Credit

Consumer loan growth, largely driven by growth in credit card loan expansion, is beginning to slow after a big surge in early 2010. Are the headlines beginning to reflect a tapped out consumer? Any decrease in consumer loan demand not matched by increases in business and/or real estate loans will place downward pressure on total bank credit creation in the US. The Fed and its QE(n) programs are trying desperately to avert this outcome.

Business & Commercial, Real Estate, and Consumer Loans Year-over-Year Change For All Commercial Banks


Headline: Best Buy plans to get small as sales fall

Best Buy is changing its TV-selling strategy by significantly increasing TV selection online -- offering 100 models in stores but 300 more online only at more competitive prices.

The chain is also pushing hard to open smaller stores. The company is opening 150 smaller-format mobile only stores by the end of the year, nearly doubling its total to 325.

"We are exploring and redefining what the optimal big-box footprint is for us," CEO Brian Dunn said on a call with analysts.

Source: finance.yahoo.com

US Finances Rank Near Worst in the World: Study

Tell us something we don't know.

The US ranks near the bottom of developed global economies in terms of financial stability and will stay there unless it addresses its burgeoning debt problems, a new study has found.

In the Sovereign Fiscal Responsibility Index, the Comeback America Initiative ranked 34 countries according to their ability to meet their financial challenges, and the US finished 28th, said David Walker, head of the organization and former US comptroller general.

Source: cnbc.com

Euro's Collapse Is Not Unthinkable: Warren Buffett

History clearly tells us that all currencies fail in time. The only constant has been gold. At times, it's the centerpiece of commerce, while at others it is considered a barbaric relic of the past. That is, until the past repeats and the public transforms gold from relic to money.

The Euro zone will shrink before it collapses. The shrinking process should provide it relative strength against other fiat.

Headline: Euro's Collapse Is Not Unthinkable: Warren Buffett

Warren Buffett told CNBC Thursday that the collapse of the euro zone's single currency is far from "unthinkable."

"I know some people think it's unthinkable...I don't think it's unthinkable," Buffett said in an interview.

Still, Buffett said he believes there will be "huge efforts" put forth to preserve the euro. In the meantime, struggling peripheral countries like Portugal must find a way to resolve fiscal crises.

"You can't have three or four or five countries that are in effect free-riding on the other countries. That won't work over time-they have to get their fiscal houses in reasonable harmony," he said.

Source: finance.yahoo.com

Gold to Silver Ratio (GSR)

The market is barking out a clear message, but few seem to be listening.

Gold to Silver Ratio (GSR):

Greed and Fear Often Replace Objective Discipline

The old idiom look before you leap is often forgotten in the investment world. Humans have a tendency to get emotional when money is involved. This means that greed and fear rather than objective discipline tend to drive public money decision-making.

Investment discipline must study extremes. Investors unable to characterize a trend as warm, hot, or white-hot are likely to make emotional decisions.

Silver and gold are doing their thing, but it is important to stay disciplined.

Silver, London P.M. Fixed (Silver) and Z Scores from Primary Trend:

Public vs Capital Perceptions

Recently headline rhetoric predicted that extreme bullish sentiment readings in late 2010/early 2011 were foreshadowing an equity market crash.

Sentiment Survey:


The only thing that's crashed is extreme bullish sentiment.

The stock market in response to endless QE(n) remains entrenched within sharp secular down trend in real terms. The "crash" in real prices, nevertheless, continues to elude headline analysis.

The public, driven by headline analysis, sees only nominal trend. Unforunately, they have no idea what's driving it.

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


Capital sees the true secular trend.

U.S. Large Cap Stocks Capital Appreciation Index (LCSCAI); S&P 500 to Gold Ratio and Z Scores from Primary Trend (48 Month)


Source: aaii.com

China May Match India as World's Biggest Gold Consumer on Investor Demand

China and India are becoming a growing force in the physical gold market.

Chinese consumption of gold may climb to rival that of India, the top user, as investors buy the metal as a store of value, said GFMS Ltd. and INTL FCStone.

Demand in China, the world’s second-biggest economy, almost tripled to 580 metric tons last year from 206 tons in 2001, data from the producer-funded World Gold Council show. Use in India may slump 5 percent to 26 percent this year from 963 tons in 2010, Morgan Stanley said in a report yesterday.

Bullion soared to a record $1,444.95 an ounce on March 7 and rallied 30 percent last year for a 10th annual gain as investors sought to preserve their wealth against inflation, Middle East unrest and currency debasement. Consumer prices in China climbed 4.9 percent in February from a year ago, exceeding the government’s 4 percent goal for the full year.

Source: bloomberg.com

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Explosive Setup in Gold and Gold Shares

Gold, following historical precedence, is leading. Gold led the gold shares until 2010 breakout. The gold shares, despite the constant wall of worry, have played an impressive game of catch since 2009.

Gold is currently probing the upper trading channel (green circle). This is an explosive setup for both gold and gold shares. Yet, most investors tend to 'see' only fear and doubt during the dips and rallies, respectively. This suggests that recognition is still very early.

Gold and Gold Stocks Side by Side Comparison:

QE(n) Has No Convenient On/Off Switch

Doubt it. The problem is and has always been debt. QE(n) has been and will continue to be used to combat the massive debt burden accumulated during the previous economic expansion. The following chart represents only the officially recognized debt.

Total Credit Market Debt As A% GDP:


Off-the-balance sheet and market-to-model debt understates the severity of this trend. Moreover, a convenient on/off switch for QE(n), despite the suggestion of one, does not exist. The consequences of curtailing QE(n) are beginning to manifest themselves in the headlines of unrest across the globe.

Headline: Federal Reserve official: 'we've done a bit too much' QE

Richard Fisher, who heads the Dallas branch of the Fed, said that the world's biggest economy is no longer in need of further stimulus and the real question is when to begin tightening monetary policy. To embark on a third round of quantitative easing (QE) would "only prolong the injustice inflicted" on savers through inflation, Mr Fisher said.

The Fed started a second, $600bn (367bn pounds) round of QE in November in an effort to ward off the threat of deflation and ignite a recovery that has made little dent in unemployment. The move sparked criticism outside the US that it would fuel inflation, while domestic opponents argued it threatened to debase the dollar.

Source: telegraph.co.uk

Gold may hit $5,000 an ounce in 3-4 years: Canadian miners

It's easy to discount such as a biased forecast from a gold mining CEO.

1. Rob McEwen is no fool, "Gold is used as insurance for bad governments," Rob McEwen, chairman and chief executive of Minera Andes Inc (MAI.TO) and US Gold Corp (UXG.TO).
2. The investment herd has a tendency of interpreting solid market vision as "crazy talk." Why? The herd tends to be guided by headline rhetoric that history has proven repeatedly lacks the vision to anticipate secular turning points.
3. The secular trend(s) favor this outlook.
   
   Gold, London P.M. Fixed (Gold) and Z Scores from Primary Trend (48 Month):
   
   

Headline: Gold may hit $5,000 an ounce in 3-4 years: Canadian miners

The price of gold may hit $5,000 per ounce, nearly three times current levels, in three to four years, as demand from sovereign states, central banks and exchange-traded funds (ETFs) rises, the chairman of two Canadian gold mining companies said.

"Gold is used as insurance for bad governments," Rob McEwen, chairman and chief executive of Minera Andes Inc (MAI.TO) and US Gold Corp (UXG.TO), told Reuters on the sidelines of the Mines and Money conference in Hong Kong on Wednesday.

Source: reuters.com

Running for the Exits

Long bonds will become an investment pariah when confidence breaks - Follow The Money In The Bond Market. Smart money knows it.

The wisest and most successful bond investor of all time, Bill Gross, has dumped his bond fund’s $150 billion investment in U.S. bonds. One should not ignore the importance of this event. The largest bond fund in America no longer believes that Treasury bonds are a good investment. Moreover, Gross is not alone. Blackrock, the world’s largest money manager, is now underweighting Treasuries overall and reducing the duration of the bonds it still holds. That means they are dumping their long-term bonds, which are the most sensitive to interest-rate changes, in favor of Treasury instruments that mature in a year or less. Other bond funds, such as the $20 billion Loomis Sayles funds, are also forgoing Treasuries in favor of high-yield corporate bonds. Virtually everywhere you look, from great investors such as Warren Buffett to insurance companies such as Allstate, everyone is dumping their long-term U.S. debt and either buying debt that matures in less than a year or moving their money elsewhere.

So who is still buying U.S. debt? According to Bill Gross, the “old reliables” — China, Japan, and OPEC — are still in the market for 30 percent of all new debt. The rest, however, is being purchased by the Federal Reserve. There is no one in else in the market. For the first time ever, Americans are refusing to purchase their own country’s debt.

Source: nationalreview.com

Power crumbling, Yemen leader warns of civil war

Yemen's U.S.-backed president, his support crumbling among political allies and the army, warned that the country could slide into a "bloody" civil war Tuesday as the opposition rejected his offer to step down by the end of the year. Tens of thousands protested in the capital demanding his immediate ouster, emboldened by top military commanders who joined their cause.

Ali Abdullah Saleh's apparent determination to cling to power raised fears that Yemen could be pushed into even greater instability. In a potentially explosive split, rival factions of the military have deployed tanks in the capital Sanaa — with units commanded by Saleh's son protecting the president's palace, and units loyal to a top dissident commander protecting the protesters.

Source: news.yahoo.com

Blithely off to war

Markets are one of the best sources of intelligence gathering (Intel) on the plant. This makes them an excellent barometer to success and failure of political policies and decisions. The ability to gather and interpret this intel depends one’s ability to read the message beyond the biases of the headline rhetoric.

The missile strikes that inaugurated America's latest attempt at regime change were launched 29 days before the 50th anniversary of another such -- the Bay of Pigs of April 17, 1961. Then, the hubris of US planners was proportional to their ignorance of everything relevant, from Cuban sentiment to Cuba's geography. The fiasco was a singularly feckless investment of US power.

Does practice make perfect? In today's episode, America has intervened in a civil war in a tribal society, the dynamics of which America does not understand. And America is supporting one faction, the nature of which it does not know.

Source: nypost.com

Follow The Three Horsemen

Paper shuffling always seems to find enough inflows to cover the deficit spreads. Deterioration in "funding game", however, will be revealed by following the marginal buying and selling the three horsemen rather than total inflows. The Chinese and Japanese have slowed their net purchases since the onset of the debt crisis. This is reveal by the downward slope of holdings as percentage of the total since 2008. Any material reduction in the net buying of treasury securities must be met with a reduction of issuance or the emergence of a new buyer. The second chart clearly illustrates that the UK and Fed through timing of QE2 have absorbed the majority of this supply.

FOREIGN PURCHASES AND SALES OF LONG-TERM DOMESTIC AND FOREIGN SECURITIES BY TYPE:


The three horsemen hold over 50% of total issuance.

Major Foreigner Holders of US Treasury Securities: The Three Horsemen


Headline: China US bond purchases decline for 3rd month

China's holding's of US debt fell for the third month in January, while buying from Japan and Britain picked up, the Treasury Department said Tuesday.

Chinese holdings of Treasury securities fell $5.4 billion, or less than half a percent, to $1.15 trillion in January from December.

January's level was $20.6 billion lower than the peak of $1.175 trillion in October.

China's holdings are keenly watched as a sharp turn away from US bonds by their biggest foreign buyer could send US debt costs skyrocketing.

Moreover, leaked diplomatic cables in February vividly showed China's willingness to translate its massive holdings of US debt into political influence on issues ranging from Taiwan's sovereignty to Washington's financial policy.

Source: news.yahoo.com

US Treasury to sell $142 bn of mortgage assets

Right, much more robust.

The products, secured by state-backed mortgage giants Fannie Mae and Freddie Mac, were bought as part of the 2008-2009 financial sector bailout.

As the housing bubble began to burst the Treasury and Federal Reserve bought up swathes of so-called "toxic assets," when losses appeared to be endangering individual banks and the financial system at large.

But the Treasury said the market for asset-backed derivatives is now much more robust, three years after the depths of the crisis.

Source: news.yahoo.com

Mega-Banks and the Next Financial Crisis

At the height of the housing bubble, hedge-fund manager Paul Singer was shorting subprime mortgages. By the spring of 2007, he was warning regulators on both sides of the Atlantic that the world was facing a major financial crisis.

They ignored him. Now the founder of Elliott Management says the biggest banks are headed for another credit meltdown. Among the likely triggers for the next crisis, Mr. Singer sees one leading candidate: Monetary policy "is extremely risky," he says, "the risk being massive inflation."

In some areas gas prices have reached $4 per gallon, and now Americans must brace themselves for higher grocery bills. This week the Labor Department reported that February wholesale food prices posted their sharpest increase since 1974. News like that has driven Mr. Singer to the history books: He treats visitors to his 5th Avenue office to a copy of a 1931 treatise on German currency debasement, Constantino Bresciani-Turroni's "The Economics of Inflation."

Source: online.wsj.com

Portugal gov't nears collapse amid debt crisis

Changes in the locus of power (control) have almost always been about the debt. Democracy, theocracy, autocracy, communism, etc. will be challenged by the consequences of extreme debt burdens in the coming years. Transitions are never easy as power shifts/struggles do not go gentle into that good night.

Just as Portugal appeared to have dodged a bailout like those taken by Greece and Ireland, a domestic political spat was set Monday to worsen its financial troubles and possibly spoil Europe's efforts to put the sovereign debt crisis behind it.

Portugal's main opposition parties told the beleaguered minority government they won't budge from their refusal to endorse a new set of austerity measures designed to ease a huge debt burden that is crippling the economy.

Source: finance.yahoo.com

Iran bought gold to cut dollar exposure

Don't forget about China. Their purchases will be disclosed long after the fact.

Iran has bought large amounts of gold in the international market, according to a senior Bank of England official, in a sign of how growing political pressure has driven Tehran to reduce its exposure to the US dollar.

Andrew Bailey, head of banking at the Bank of England, told an American official that the central bank had observed “significant moves by Iran to purchase gold”, according to a US diplomatic cable obtained by WikiLeaks and seen by the Financial Times.

Source: ft.com

Follow The Money In The Bond Market

Following the money is easier said than done. The inference of hard does not mean that it can't be done. Long bonds will become an investment pariah when confidence breaks.

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


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

Discpline Removes Emotional Decision Making

Merchants, investors, traders etc that allow their emotions to override their discpline for higher-order reasoning, a human behavior that has ruled organized markets for thousands of years, will lose.

When are the markets not emotional?

Headline: Deals, Disasters Spell “Emotional” Traders’ Market


Source: finance.yahoo.com

What Is Dr. Copper Saying?

Many experts have cited that (Dr.) copper's recent decline suggests a weakening of the economic recovery. The market is sending a different message. In my commentary, Is Copper Suggesting Caution, I proposed that copper is being driven more by liquidity (devaluation) than economic demand.

Copper is being acquired by connected money as the price dips. They have been accumulating the dips despite very little constant currency or what I often describe as real growth in the US and western economies. Prices tend to turn when the accumulation become statistically concentrated.

Follow the money, not opinions.

Copper (JJC) And Copper Diffusion Index (DI):

Confidence Is the Biggest Threat To Economy

Rising oil prices, government deficits, falling real estate prices, etc. are all symptoms of a greater problem. The problem is excessive debt. The greatest obstacle that threatens to derail the liquidity-driven recovery is loss in confidence in the policies (and financial instruments behind them) used to mitigate this burden. This rising price of gold across all global currencies conveys this message.

Biggest Threats To the Economy:


Headline: What has economists most on edge: Oil prices

The U.S. economy faces numerous obstacles that threaten to derail the recovery. But economists are most fearful of one major headwind: oil prices.

More than two-thirds of the 23 economists surveyed by CNNMoney identified high oil prices as the most serious risk facing the economy.

As uprisings spread across the Middle East and North Africa, prices have soared about 15% in the past two months, pushing gas prices higher. And as the situation in Libya escalates, economists are growing more jittery about oil prices, even in the face of other threats to the economy, like the crisis in Japan, cuts in government spending and continued weakness in the housing sector.

Source: money.cnn.com

The Transfer From Weak To Strong Hands In Gold

Connected money sells (shorts) as the market advances. They buy as it declines. Capital tends to show statistical concentration at major inflections points. These tend to reflect 'easier' entry points. Unfortunately, it also represents a time when many within the community, also know as retail money, are too terrified to buy. This tendency represents the genesis of expression "the transfer from weak to strong hands" in gold.

The process of beating the grass to startle the snakes tends to scare the hell out most investors. It’s such an effective accumulation tool, it has been repeated too many times to count since 2001.

Gold London P.M Fixed And Gold Diffusion Index (DI):

Libya to give weapons to 1 mln people:state media

To borrow Jim's phrase, here we go again.

A secular trend of oil priced in U.S. dollars should serve as reminder to the consequences of actions. Russia benefits from this trend.

West Texas Intermediate Crude Oil (OIL) AND Oil to Gold Ratio (OILGLDR):

Libya's government has begun distributing arms to more than one million people and will complete the operation within hours, the state news agency reported on Sunday.

Jana news agency quoted sources in Libya's defence ministry as saying they "expected the operation to end in the next hours to arm more than a million men and women."

Source: af.reuters.com

Secular Trend in Real Estate Is Down

In my commentary QE1 and QE2 are not helping real estate I suggested that QE wasn't doing much to help real estate. The headline and commentary below continues to support this assertion.

• Access to credit (credit creation) has been contracting within residential and commercial real estate since the onset of the debt crisis (2009-2010).
• Constant currency real estate prices (real prices) have been declining sharply since 2005 within the secular down trend that begin in 2001.
• Inventory overhang, both recognized and unrecognized - shadow inventories owned by banks, will retard the housing market until the major cycle low in 2030's. (see chart below).

Months Supply of New One-Family Houses for Sale And Change YOY:


Headline: Nearly 20% of Florida homes are vacant

It's not always easy to feel sorry for sunny Florida. But they just got hit with another blow.

On Thursday, the Census Bureau revealed that 18% -- or 1.6 million -- of the Sunshine State's homes are sitting vacant. That's a rise of more than 63% over the past 10 years.

Having this amount of oversupply on the market will keep home prices depressed and slow any recovery.

During the housing boom, Florida was among the hottest real estate markets in the nation. Homes were snapped up by the state's growing population as well as hordes of investors confident that prices would continue to soar.

Source: htmoney.cnn.com

From Bob

Radiation found in food as workers scramble to curb nuclear crisis

Radioactivity will burrow into food chain for years to come.

As workers scrambled to curb a nuclear crisis Saturday, the Japanese government is looking into halting the sale of food from farms near Fukushima plant after abnormally high levels of radiation were found in milk and spinach.

Very small amounts -- far below a level of concern -- of radioactive iodine were also detected in tap water in Tokyo and most prefectures near the Fukushima Daiichi plant damaged by last week's monster earthquake and tsunami.

Six members of the emergency crew at the plant have been exposed to more than 100 millisieverts of radiation per hour, the equivalent of getting 10 chest x-rays per hour, plant owner Tokyo Electric Power Company said.

Source: cnn.com

Japan radiation fears spark panic salt-buying in China

Fear is a powerful motivator.

China tried to quell panic buying of iodized salt Thursday after grocery stores across the country were emptied of the seasoning by hordes of people hoping to ward off radiation poisoning after the nuclear accidents in Japan.

The clamor for salt reportedly started after rumors spread, possibly by cellphone text messaging, that China would be hit by a radioactive cloud from Japan's Fukushima No. 1 (Daiichi) nuclear plant, which had been badly damaged during last week's earthquake and tsunami.

Source: latimes.com

Forget Harvard and a 4-Year Degree, You Can Make More as a Plumber in the Long Run, Says Prof. Kotlikoff

The value of an education is a lot like a race car driver. While a fast car helps, it's always the skill of the driver that wins a race. Whether one's education merely introduces the fast car, or imparts the skills necessary to drive it, depends more on the individual than institution.

The value of a college education has been a hot topic of discussion here at Tech Ticker. Now there’s more fodder for debate.

A new study from Princeton University shows that expensive college degrees are not necessarily worth the lofty price tags in the long run when you take into account one's natural ability.

Laurence Kotlikoff, professor of economics at Boston University agrees that an expensive education just isn't worth it -- much to his chagrin of course because tuition and fees at Boston University totalled $39,314 for 2010-11.

With unemployment still about 9 percent, on average, for college graduates under the age of 25, and total student-loan debt now topping that of credit card debt in this country, he tells Aaron in the accompanying clip, “If you think of education as solely a monetary investment, if we are not thinking about all the other benefits from education like learning things, and getting to hang out with me, and also just becoming a more cultured person, then we have to look at this very carefully.”

Source: finance.yahoo.com

QE3 May Be ‘Unavoidable Fact of Life’: Strategist

The function would be defined as QE(n) for those familiar with the nomenclature of calculus.

The US Federal Reserve may have no choice but to introduce a third round of quantitative easing, or QE3, in light of the significant headwinds facing the global economy as well as problems at home, Stephen Pope, Managing Partner at Spotlight Ideas said.

“The plight of several US states is becoming serious,” he said.

“California is not likely to reduce the double digit level of unemployment it currently endures and the “Golden State” is said to carry a budget deficit of $25 billion by the end of the second quarter of 2012. State pension programs are pushing the state close to the brink and yet the administration of Governor Jerry Brown appears, bar a state hiring freeze, to do nothing to address the issue,” he said.

Source: cnbc.com

Yemeni snipers open fire on protesters, kill 40

The level of control (or lack their of) within a governing body tends to proportional with the level of violence used against their own citizens.

Yemeni government snipers firing from rooftops and houses shot into a crowd of tens of thousands of anti-government demonstrators on Friday, killing at least 40 people and injuring hundreds demanding the ouster of the autocratic president.

The protest in the central square was the largest yet in the popular uprising that began a month ago — and the harsh government response marked a new level of brutality from the security forces of President Ali Abdullah Saleh, a key — if uneasy — ally in the U.S. campaign against al-Qaida who has ruled Yemen for 30 years.

Source: news.yahoo.com

World stocks higher amid G7 pledge to restrain yen

Centralized intervention against the flow of capital never succeeds. The Yen, driven by devaluation (printing press), will weaken under the crippling weight of its enormous debt burden in time. A change in the trend is likely to occur at key cycle dates.

Asian markets posted gains and European shares were headed higher Friday as the yen retreated from historic highs after the world's seven leading industrial nations pledged to rein in the currency to help earthquake-stricken Japan.

The benchmark Nikkei 225 in Tokyo rose 2.7 percent to close at 9,206.75, capping a turbulent week that saw stocks lose 16 percent over Monday and Tuesday. Those were the first two trading days after Japan was struck by a mammoth earthquake and tsunami on March 11 that wiped out much of its industrial northeast and severely damaged a nuclear power plant that continues to leak low levels of radiation.

Source: finance.yahoo.com

Nearing Significant Shift In The Bond Market

Commentary No. 358: February CPI, PPI, Production, Housing Starts, Real Retail Sales, Real M3

- Economy Slumps Anew as Inflation Soars
- Fed’s Dollar Debasement Efforts Begin to Yield Their Poisoned Fruit
- February Annual Consumer Inflation: 2.1% (CPI-U), 2.3% (CPI-W), 9.6% (SGS)
- Housing Starts Fall Back to Post-World War II Historic Low

From Jim

While buying programs and infinite liquidity may be attempting to place a floor under bonds, they are not bigger than the forces driving the market. Capital not only anticipates but it also "sees" subtle changes in the secular trend. Very few Internet contributors realize, one being Jim and its contributors, how close we are to witnessing a significant change in the bond market’s nominal secular trend.

Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) and Z Scores from Primary Trend (48 Month)

BAHRAIN LIVE: Iran Will Respond With "All Power And Potentials At Its Disposal To Halt The Oppression Of The People Of Bahrain"

Eventually investors' attention will turn towards the developments in the Middle East. This is serious.

The Bahrain proxy conflict and the actual conflict continue after yesterday's shocking violence.

Iranian lawmaker Hossein Naqavi tells Press TV: “The Saudi's should know for a fact that Tehran will use all the power and potentials at its disposal to halt the oppression of the people of Bahrain.”

Source: businessinsider.com

From Bob

Stocks open higher on drop in jobless claims

A good example of "economic noise" used to explain price action. Utter nonsense, but the association works on an emotional level, so it sells.

Stocks are opening higher, a day after suffering their worst losses in seven months.

Before the market opened Thursday, the government said first-time applications for unemployment benefits dropped last week. Claims fell to 385,000, a slightly bigger fall than economists had expected.

A separate report showed consumer prices edged higher in February. The Consumer Price Index rose 0.5 percent last month, slightly stronger than forecasts.

Source: finance.yahoo.com

Liquidity vs Hemorrhage Cycle Revisited

Liquidity (currency devaluation) has always been the solution to all crises. The Japanese have little choice after a devastating disaster. Unfortunately, the economic illusion provided by liquidity phase vaporizes like fog in the early morning sunshine with the inevitable transition to the hemorrhage phase (liquidity vs hemorrhage cycle). Have no doubt, it's coming again.

Headline: Japan sprays more cash over jittery markets

Japan's central bank sprayed more cash over jittery money markets Thursday as a major bank's ATMs suffered a two and a half hour outage nationwide and the yen shot to a record high.

The Bank of Japan injected an additional 6 trillion yen ($76.7 billion) in same-day funds after the dollar hit 76.25 yen in the morning -- an all-time low for the greenback in the aftermath of Friday's earthquake and tsunami that killed thousands and triggered an unfolding nuclear crisis. With same-day funds, banks in need can access cash immediately.

Source: finance.yahoo.com

Debt Cannot Be Ignored

A problem ignored is a problem solved has been the political solution in regards to debt for many years. The debt market has reached a point where the 800lb gorilla within the room can no longer be ignored; currency devaluation occurs under the back drop excessive money printing, debt issuance, and failing confidence.

The market is forcing its own solution to debt.

Total Credit Market Debt As A% GDP


The issuance of new debt is follow the law of diminishing returns.

Annual Gross Domestic Product (GDP) per Annual Total Credit Market Debt (TCMD):
Annual Income Growth per Debt Creation


Gold is acting appropriately to this development. Gold will continue higher when the fuel for the paper selling has been exhausted or swamped by incoming demand by new group of investors (stronger hands) that realize a problem ignored is NOT a problem solved.

Headline: Geithner says Congress must raise debt limit

Treasury Secretary Timothy Geithner said on Wednesday that there was no alternative except for Congress to raise the debt ceiling so that the government can keep borrowing.

"Congress has to do it. There's no alternative," he said in response to questions at a House of Representatives appropriations subcommittee.

He repeated a warning that it would be have "catastrophic" consequences for the economy if the debt ceiling was not raised and the country defaulted on its debt obligations.

Source: reuters.com

U.S. warns Japan spent fuel pool may have run dry

The top U.S. nuclear regulator warned on Wednesday that one pool holding spent fuel at Japan's stricken nuclear plant may have run dry and a second could be leaking, something experts say could accelerate the release of radiation.

"We believe at this point that Unit Four may have lost a significant inventory, if not lost all, of its water," Gregory Jaczko, head of the U.S. Nuclear Regulatory Commission, told lawmakers at a House energy and commerce subcommittee hearing.

Officials in Japan have not said how much water remains in the pool.

The dangers of an exposed fuel pool are explained as follows:

DANGEROUS POOLS

The pools are dangerous for two reasons: being outside a containment wall protecting the nuclear core, they are more easily exposed to the atmosphere; and the building housing the No. 4 reactor's pool has suffered hydrogen gas explosions.

They also hold radioactive elements that could quickly heat up again if water burns off. Experts worry that this could expose the used nuclear fuel and start a fire that would release more radioactivity.

"There is no water in the spent fuel pool and we believe that radiation levels are extremely high, which could possibly impact the ability to take corrective measures," said Jaczko, making his first appearance before Congress since the crisis began.

Source: au.news.yahoo.com

World QE to Infinity

The deal is done. World QE to Infinity

As long as the Japanese keep their US treasury sales to modest or none, the Fed will join in providing QE to Japan.

This is not what I think, but rather what I hear.

Jim

I agree with Jim.

Capital is clearly anticipating another liquidity blast. This viewpoint is supported noticeable changes in several long-term secular trends. For example, the downward trend in the small to large cap ratio is beginning to accelerate. The rate of acceleration, trend illustrated below, will increase once the 2006 lows have been breached. This trend is highly sensitive to currency devaluation.

U.S. Large Cap Stocks Total Return Index (LCSTRI) to U.S. Small Cap Total Return Index (SCSTRI) Ratio:


Marc Faber: QE8 on the Way?

Timeline: Anti-government protests in Bahrain

It's proxity to Saudia Arabia warrant close attention. This is what the oil market is saying.

Protesters demand release of Sheikh Ali Salman, a Shi'ite Moslem cleric arrested after distributing leaflets calling for restoring parliament dissolved in 1975.

January 1995 - Bahrain deports Sheikh Salman and two other clergymen.

April 1995 - Three Shi'ite Moslem clergymen are arrested including the influential Sheikh Abdul-Amir al-Jamri, triggering clashes with police that residents said led to at least one man being killed and 16 injured.

Source: reuters.com

Problem Denied Is Not A Problem Solved

Very often a problem denied is a problem solved. While denial works within some aspects of society, it finds little practical use in the world of money. Capital in a state of denial does not hang around long.

Smart money knows that a rubber band stretched too far inevitably breaks. Debt, despite the talk of reform and change, continues to skyrocket well beyond historical norms. The rising price of gold reflects capital's concern, but very few are listening because many still believe that problem denied is a problem solved.

Federal Debt Held by Foreign & International Investors (FDHBFIN) and the Equilibrium Price (FDHBFIN/OZ)


Federal Debt Held by Foreign & International Investors As a % of GDP (FDHBFINGDPR) and the London P.M. Fixed Price of Gold (GOLD):


Source: research.stlouisfed.org