Archive - Jul 11, 2011 - Blog entry

For the week ended June 27, the Fed flooded the financial system with $76 BILLION in liquidity. Bill King of the King Report puts that number into perspective noting that it’s BIGGEST increase since September 22, 2008 right after Lehman Brothers collapsed. That’s right, the Fed just juiced the system as much as it did when Lehman Brothers went under. While a shockingly large single money pump, the Fed’s generally been flooding the system with liquidity at a pace equal to that of 2008 since the beginning of the year.

Our collective insanity will only provide us with answers that sustain and validate our insanity. To assume that we can apply the same thinking processes and so-called logical train of thought to unravel the insanity is to believe that the insanity itself has the capability to be sane, an obviously insane conclusion. So what do we do?

As long as unemployment remains high and economic activity remains no better than flat there will be pressure on the Fed to meet its full employment mandate. QE is the only trick left in their bag. That will lead to further price inflation, a shot in the arm for the financial markets, but it will not lead to a boom in industrial activity or the estimated 250,000 new jobs a month that must be created over the next five years to create "full employment."

From the ancient cradle of pure debt genius...

I have to tell you some terrible things.

Politicians who have all been bought out by the banks have fallen for this charade so far. But it won’t last much longer. Banks may get you elected… but they can’t keep you safe from a populace that is rioting outside your door. So the banks will all be taking a BIG hit in the future. This in turn will kick off another 2008 episode along with food shortages, civil unrest, outbreaks in crime, bank holidays, and the like. It will, in short, be like what’s going on in the Middle East today (though NATO won’t be bombing us).

Now it could be time to look at charts on the EUR again. the natural fundamental trade is not EUR against USD or JPY, but to find a currency in a country will little or no debt. despite their own real estate bubble, from what i read, CAD or much better AUD and NZD might be candidates. CHF despite UBS and CSFB should be as well. notice how the Swiss authorities have tightened the management of these 2 institutions, pressing them to recapitalize as much as possible and targetting higher capital ratios than Basel III.

I love Italy. Bondholders don't.

China's inflation battle would be a vertical battle climb for Beijing, and is nowhere close to "have peaked in June" as many analysts have predicted.

Yes, BoeHNeR

How bad must things be getting that Geithner, a man who has lied and swindled the American people with impunity, and has never once suffered the consequences of his actions, is voluntarily “getting out of Dodge”? The answer: BAD.

More ideological warfare on public-sector pensions...

Italy has clearly recently broken the 5% support, and if on a tech point of view, a quick 40bp is guaranteed, to 5.4% (the previous range was 4.6%-5% so 40bp wide), given the context, and given that German yields are going DOWN, this is the sign of something much much bigger, like what happened to Spain and perhaps Portugal. You've seen the info as well on the recent volatility in Italian banks, and headlines shifting to Italy, I now believe the big move is happening right now.

S&P 500, Dow Jones, Nasdaq, Russell 2000, Nymex Crude Oil, Comex Gold, EURUSD, GBPUSD, USDJPY