Archive - Nov 2010

Oh but aint that America for you and me--Aint that America we're somethin' to see baby--Little subprime pink houses for you and me...

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.

We are entering the slowest growth period in US history. Distressed state and local finances are pushing the public sector into 20 years of cost cutting that is sending education spending plummeting, leading to the great “dumbing down” of America. No productivity gains here. This is why I have been urging traders and investors to get their money the hell out of the US. They must be laughing in Beijing.

We are entering the slowest growth period in US history. Distressed state and local finances are pushing the public sector into 20 years of cost cutting that is sending education spending plummeting, leading to the great “dumbing down” of America. No productivity gains here. This is why I have been urging traders and investors to get their money the hell out of the US. They must be laughing in Beijing.

This Foreclosuregate deposition was taken on November 4, 2010 in Pinellas County, Florida, by attorney Christopher Forrest of The Forrest Law Firm and has to be one of the most damning yet. The reason I say "yet" is because Bryan Bly's video deposition is coming up next...

It would be a hoot if it turns out like this...

Last week's Op-Ed du semaine was Ben Bernanke's WaPo glowing endorsement of the Fed market put, whose sole purpose was to remind stocks, which ended up drooping on the day QE2 was announced, that Bernanke will stop at nothing to achieve his now primary goal (as loosely interpreted under the Fed's broad, and unsupervisable, mandate) - surging stock prices. This week, however, may likely belong to Fed Board Governor, and former member of the President's working group on capital markets, Kevin Warsh. In an Op-ed just released in the WSJ, Warsh, whose series of accomplishments include being the youngest ever appointee to the Fed BOD at 35, and being married to Jane Lauder of Estee Lauder fame, writes "Lower risk-free rates and higher equity prices—if sustained—could
strengthen household and business balance sheets, and raise confidence
in the strength of the economy. But if the recent weakness in the
dollar, run-up in commodity prices, and other forward-looking indicators
are sustained and passed along into final prices, the Fed's price
stability objective might no longer be a compelling policy rationale. In
such a case—even with the unemployment rate still high—we would have
cause to consider the path of policy. This is truer still if inflation
expectations increase materially." Translation: if gold continues to exhibit a beta > 1 w/r/t ES, then we are screwed, and all Fed policies will have failed. Elsewhere, look for most commodities to open limit up again tomorrow for the n^th day in a row as inflation expectations continue to "increase materially" and more and more Fed members understand just what Warsh is saying.

One of the most serious condemnations of the race to the currency bottom to date comes not come from some peripheral media, but from the head of the World Bank itself, who in a just released Op-Ed in the Financial Times says that since the system of floating currencies established by the 1971 Bretton Woods II system, has broken down, it is time to look to a new international system of commerce, one which "should also consider employing gold as an international reference point
of market expectations about inflation, deflation and future currency
values." In other words, welcome back gold standard 2. Of course, this proposal will never attain more than a casual academic reference, as even a partial gold standard will immediately establish a lower bound on how much any given monetary authority can debase its (and, by retaliation, others') currencies. What, however, if very curious, is why this proposal is being floated precisely 3 short days after the Fed has launched its most ambitious attempt to reflate global asset prices and devalue fiat paper. And as is well-known, the IMF has also been quietly proposing a return to an ven more powerful version of the SDR.... Just what will take for the scales to tip, and for the dollar to remain a reserve currency just in retrospect.

This week brings the China trade balance for October, where a widening in the trade surplus is expected. Given the G-20 summit this week and the discussion over indicative target ranges for current account surplus countries, this number will be widely watched. We also get the usual activity and inflation indicators (per GS). Most importantly for market participants, tomorrow is the last POMO of the year at about $6.5 billion, and November 10th will see the first QE2 POMO schedule released.

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We are officially in an inflation trade melt-up.

Everything that is an inflation hedge has exploded since late August. Gold is up 15%. Silver is up 48% (courtesy of the manipulators finally getting taken to court). Agricultural commodities are up 25%. Oil is up 20%.

Against this backdrop, stocks’ 17% rally becomes slightly less insane. That’s right, stocks are up 17% since late August. What happened in late August? The Fed announced QE lite and promised QE 2 was coming. Almost to the day of this announcement, the US Dollar rolled over and dropped some 8% (it’s down nearly 15% since June).

The Maestro speaks at Jekyll Island ...

William Black ratchets his campaign for putting an allegely insolvent Bank of America into conservatorship by several notches, following up on Jonathan Weil's argument presented a few days ago that there is massive "book cooking" by Moynahan's henchmen, and that it is about time that BofA truly opens it books for all to evaluate just how undercapitalized the mega bank truly is.

Diapason's Sean Corrigan is out in full force for the second week in a row, this time looking at the consequences of a QE2, in which as he explains, the very premise of cause and effect has been inverted by the Federal Reserve, and which will result in even more dire consequences bequeathed by the launch of the HFRBS QE2. Yet in the last ditch effort to preserve a crumbling system, Bernanke is willing to sacrifice it all: the middle class, the dollar, and now logic. Here is how... and why.