“If once [the people] become inattentive to the public affairs, you and I, and Congress and Assemblies, Judges and Governors, shall all become wolves. It seems to be the law of our general nature, in spite of individual exceptions.” Thomas Jefferson (1743-1826), 3rd US President
“If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered.” Thomas Jefferson (1743-1826), 3rd US President
[Corruption in high places would follow as] “all wealth is aggregated in a few hands and the Republic is destroyed.” Abraham Lincoln (1809-1865), American 16th US President (1861-65)
“When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.” Frederic Bastiat (1801-1850), French economist
“Inflation made here in the United States is very, very low.”Ben Bernanke, Fed Chairman, Thursday, February 10, 2011
Let us begin with some macroeconomic indicators of reference.
· At $1350, gold shows a break down on the P&F chart below. $1300 will be the next stop. (Chart source: Stockcharts.com)
· If it drops below $1248 then according to the second chart below, it can get to $1,076 (still above the rising trend line) (Chart source: Stockcharts.com)
· Fourth chart below shows that bullish investor sentiment is starting to waiver. (Chart source: Decisionpoint.com)
· Fifth chart below (30 year yield) shows tightening attitude to credit (Chart source: Stockcharts.com)
· Sixth chart below (10 year yield) shows breakout – with 5.8% as destination (Chart source: Stockcharts.com)
· Seventh chart below (10 year yield with scale adjusted to exclude noise) shows destination of between 4.87% and 5.2% depending on technique (The rock) (Chart source: Stockcharts.com)
· Eighth chart shows that oil is headed for $135 – $141 a barrel (The hard place) (Chart source: Stockcharts.com)
· Table at bottom shows that domestic house prices in China are grossly overpriced in terms of affordability (Source: http://www.numbeo.com/property-investment/rankings.jsp ). If you scroll through you will see that parts of India and the old USSR are basket cases.
(It’s been a while since we heard from Cam Fitzgerald, an occasional contributor to Rick’s Picks, but with the essay below he returns to these pages with both guns blazing, argumentatively speaking. Cam sees a world on the brink of financial, economic and political disaster. If the global economy and trade were to collapse – hardly a longshot bet at this point –Cam notes that there is no “Plan B.” We had better come up with one soon, he says, or we could all wind up wallowing in feudal darkness for decades. RA)
The T-Bond market is groaning. Like a great, creaking ship lurching to one side, the sounds of shifting portfolio positions have grown louder and more ominous by the hour, accompanied by the clamor of bailout pleas and a mad scramble for the life rafts. Rates are on the rise and prices falling. Bonds are dead, long live Bonds!
The pirates off the stern, meanwhile, smell blood and are sizing up the opportunity to take down one of the fattest, easiest targets they have seen in all their sorry lives. They know they can take this craft down with words alone. If only they can spread fear above board and on the decks, they know the crew and its passengers will rush for safety, setting off a panic that sees all hands clinging to the rails on one side, capsizing the ship. But there are not enough life preservers! Blimey! It’s a salty, seafaring epic in the making.
Meanwhile, back in the landlubber’s world there seem to be quite a few asset classes that are being stretched and distorted. Equities in domestic markets have virtually regained their pre-recession highs in the absence of any real buyers other than high-frequency computer traders. Most other investors, insiders, mutual funds and individuals have abandoned equity markets in fear already. And yes, that is a bit of an exaggeration, because many people do remain invested. But we all know the big picture has changed. There are nagging doubts about the sustainability of markets. Who is really interested in buying stocks anymore when markets are looking overbought by computers alone?
Couple the increased likelihood of an extension of the Bush tax cuts with a new Congress that has at the least put on a front of opposing further bailouts, and you get the kind of municipal bond performance we’ve seen in recent days. After drifting lower from late August to early November, the National Municipal Bond ETF (MUB) has tanked this week. The California Municipal Bond ETF (CMF) has tanked as well. So far the investment world hasn’t paid much attention to this big move lower in the muni-bond market, but it’s likely to get coverage soon if the declines continue.
Equity futures are higher this morning following the largest yet POMO yesterday, a pittance of only $6.8 Billion! The dollar is down after being up the past two days, oil is back above $87 a barrel, and gold is setting record after record now above $1,422 an ounce!
Below is a daily chart of oil futures on the left, and gold futures on the right. Both of these charts are of great concern – oil is targeting $95 a barrel, and gold appears to have shifted into a parabolic climb that you can see is now proceeding straight up. That move in gold is classic, I’ve underlined three slopes… it starts out climbing, moves into a steeper climb, and then finally enters a parabolic climb, moving farther away from the primary uptrend line. Parabolic moves can go a long way, especially in precious metals, but eventually this latest move will be erased as it is simply not sustainable on this path. Be careful if you are playing with gold or silver here:
let me try to put it in perspective; the announced QE2, which amounts to a total purchase of $600 billion in 2-10 year Treasuries, represents roughly a 25% increase in Fed assets; that’s only about a third of the size of the first QE, which came 2 years ago at the height of the crisis, when the Fed almost tripled its balance sheet assets from around $875 billion, to near the current $2.3 trillion (here’s a graphic of that)…we went thru all this hyperinflation hype back then, too, and what has materialized so far? while at $75B a month plus reinvestments they may be covering most of the treasury issue over the planned 8 month effort, they’re not hardly monetizing the total publicly held debt, which is $8.6 trillion…
Quants are the math wizards and computer programmers in the engine room of our global financial system who designed the financial products that almost crashed Wall st. The credit crunch has shown how the global financial system has become increasingly dependent on mathematical models trying to quantify human (economic) behaviour. Now the quants are at the heart of yet another technological revolution in finance: trading at the speed of light.
What are the risks of treating the economy and its markets as a complex machine? Will we be able to keep control of this model-based financial system, or have we created a monster?
A story about greed, fear and randomness from the insides of Wall Street.
We predict that within a week, all banks will halt every foreclosure currently in process. Within a month, all foreclosures executed within the past 2-3 years will be retried, and millions of existing home sales will be put in jeopardy.
And like that, mortgage fraud goes global. JPM stock down on the news, as the American foreclosure process is now effectively shut down. More as we get it.
Finally…snip: Warning…requires an unclogged brain to understand…loll
FDIC = Underfunded..in other words your money is NOT secured!!!~jude
While everyone in the risk community focuses on the question of what will emerge in the way of capital requirements for financial institutions under Basel III, the key to the future of finance is emerging now with the implementation by the EU of something called “Article 122a.”
The first thing to notice is that the EU rule is a direct challenge to the U.S. regulatory community. The degree of disclosure required of both issuers of securities and the EU institutional investors who purchase them is greater than that currently in the U.S. or proposed under the SEC rules on Reg A/B. Now our friends at the SEC will understand our comments on same, where we asked the SEC to mandate that issuers supply all material data on ABS transactions. To do any less means that the U.S. will become a second-class market compared with the EU.
