Only The Strong Survive or The Meek Shall Inherit the Earth?

Those with hedges maintain their purchasing power, i.e. live kings, while the vast majority of the people on the planet struggle to eat and survive. A book called "Origin of Species" proposed a theory of natural selection that states "only the strong survive". Unfortunately, there's also another famous book that suggests that the meek shall inherit the earth.

Headline: Super Rich love to bet on commodity inflation

Nobody wants to hear the truth. Not Big Oil. Not Big Ag. Not Wall Street. Not the Super Rich. Not China’s billionaires. Not Washington insiders on the take. They do not want to hear the relentless warnings of a Cassandra Chicken Little Crying Wolf about the “End of the World as We Know It.”

Forget the truth. In their minds all that matters is that they’re getting more powerful and richer and richer.

Nothing else matters in their upside-down world: Wealth increases at the top. Global poverty balloons everywhere else where living on $2 a day is it for a third of the world. Easy pickings. The rich only see more opportunities to make more money when they read in Foreign Policy Journal that “in the United States, when world wheat prices rise by 75%, as they have over the last year, it means the difference between a $2 loaf of bread and a loaf costing maybe $2.10,” warns Lester Brown in “The New Geopolitics of Food … Inside a Hungry Planet.”

Source: marketwatch.com

Gold to Silver Ratio (GSR)

Morning Observations:

(1) Critical support tends to be tested as resistance.
(2) Silver has become an explosive market.
(3) The lower magnet is not done pulling.

Gold to Silver Ratio (GSR), Monthly Average Price:

Currency Devaluation And Confidence Are Interconnected

The seed of inflation were sown long before the "I can't eat an iPod" response. The ‘dance’ between currency devaluation and confidence tends to tenuous and volatile within a purely fiat system. The transition between prices are rising (mild inflation), wow things are expensive (strong inflation), and throw those bills into the fire to keep me warm (hyperinflation) is usually swift and unexpected. When confidence breaks, it does so very quickly.

Headline: Sticker Shock

The Fed may deny it, but Americans know that prices are rising. In this week’s Newsweek, Niall Ferguson takes a look at the Great Inflation of the 2010s.

“I can’t eat an iPad.” This could go down in history as the line that launched the great inflation of the 2010s.

Back in March, the president of the New York Federal Reserve, William Dudley, was trying to explain to the citizens of Queens, N.Y., why they had no cause to worry about inflation. Dudley, a former chief economist at Goldman Sachs, put it this way: “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful. You have to look at the prices of all things.” Quick as a flash came a voice from the audience: “I can’t eat an iPad.”

Dudley’s boss, Ben Bernanke, was more tactful in his first-ever press conference on Wednesday of last week. But he didn’t succeed in narrowing the gap between the Fed’s view of inflation and the public’s.

Source: news.yahoo.com

Personal Consumption Continues to Soar

Personal consumption as a percentage of gross domestic product (GDP) has risen to an all-time high to 71.2%. The US economy continues to be a debt-based, consumption driven economy. The great consumption trend of 1981 and bubble of 2000 has yet to pop. In other words, nothing has changed.

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


Headline: Dollar Weakens, Treasuries Gain as U.S. GDP Growth Slows; Stocks Advance

The Dollar Index slid to the lowest level since 2008, Treasuries rose and gold rallied to a record after economic growth slowed. The Standard & Poor’s 500 Index climbed an almost three-year high as rising earnings and takeovers overshadowed the report on gross domestic product.

The Dollar Index tumbled 0.6 percent at 4:10 p.m. New York time after slumping to 72.871, an almost three-year low. It declined for an eighth straight day, its longest slump since 2009. Ten-year Treasury yields lost five basis points to 3.31 percent, gold jumped as much as 1.4 percent to $1,538.80 an ounce and silver rose for a second day. The S&P 500 climbed 0.4 percent to 1,360.48 while the Russell 2000 Index of smaller U.S. stocks rallied to a record for a second straight day.

Source: bloomberg.com

U.S. gets C credit rating, lower than Mexico

Capital understands the importance of ratings from large houses. There’s a big difference between perception and reality in many of the debt-laden economies across the world. The smaller domestic and various international rating agencies often distinguish the two with little media attention.

Weiss Ratings, based in Jupiter, Fla., has rated the creditworthiness of financial institutions for several years, but the firm launched sovereign- debt ratings of 47 countries on Thursday. The U.S. rating of C (Fair) ranks it 33rd, Weiss noted in a statement.

A C from Weiss is roughly equivalent to a BBB rating from the big rating agencies like Moody’s Investors Service, Standard & Poor’s and Fitch. That’s about two notches above non-investment grade, or junk, status.

Source: marketwatch.com

From Bob

Gold-Buying Central Banks May Signal Bullion Extending Record Price Rally

The once sellers are becoming big buyers.

Central banks that were net sellers of gold a decade ago are buying the precious metal to reduce their reliance on the dollar as a reserve currency, signaling demand that may extend a record rally in prices.

As developing countries accelerate purchases, gold may reach $2,000 an ounce this year, compared with a record of $1,569.80 today in New York, said Robert McEwen, the chief executive officer of producer U.S. Gold Corp. Euro Pacific Capital’s Michael Pento, who correctly predicted gold’s highs for the past two years, forecasts a 2011 high of $1,600.

Source: bloomberg.com

Accumulation In Key Soft Commodities - Opinion vs Message of Market

A growing number of experts are beginning to suggest that the commodity rally is beginning to show signs of excess. Be wary of general conclusions based on broad asset class that ignores the movement of leverage money.

The message of the market, much different than opinion, illustrates a picture of accumulation and rotation within the commodities. Soft commodities such as cotton and sugar have been quietly accumulated by connected players into weakness as retail money runs for cover. This quiet accumulation is reflected by high DI readings.

COT Money Flows:

Messsage of the Markets

Cotton


Sugar


Opinion

Headline: Commodities start to show signs of excess
'China may be the riskiest pressure point'

Signs of excess are starting to accumulate in commodity prices according to BCa Research, and if you pay attention to the four "sweet spots" fuelling the rally, you can plan ahead for a bearish reversal.

The four sweet spots are tied to the fundamentals currently behind the extraordinary rise in commodity prices. they include:

- A U.S. economy that is growing steadily without generating inflation;

- Oil prices balanced between being high though not economically damaging;

- A global economy able to absorb the weak U.s. dollar; and

- Chinese authorities finetuning their economy for a soft landing.

A glitch in any of these four would pull out a key support from the commodity rally, and signal a bearish reversal.

"It is easy to sustain the broadly-based uptrend as long as the four sweet spots are intact," David abramson, managing editor for BCa Research, wrote in a note. "But it is prudent to plan for the inevitable shift in one or more of them."

Source: montrealgazette.com