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Guest Post: The Coming Rout

Tyler Durden's picture





 

Submitted by Chris Martenson

The Coming Rout

There's a scenario that could play out between May and September in which commodities (including my beloved silver) and the stock and bond markets could all sell off between 20% and 40%.  The trigger will be the cessation of QE II and a multi-month pause before QE III.

This is a reversal in my thinking from the outright inflationary 'buy with both hands' bent that I have held for the past two years.  Even though it's quite a speculative analysis at this early stage, it is a possibility that we must consider. 

Important note: This is a short-term scenario that stems from my trading days, so if you are a long-term holder of a core position in gold and silver, as am I, nothing has changed in my extended outlook for these metals.  The fiscal and monetary path we are on has a very high likelihood of failure over the coming decade, and I see nothing that shakes that view.

But over the next 3-6 months, I have a few specific concerns.

It's time to build on the idea I planted in the Insider article entitled Blame the Victim (February 28, 2011) where I speculated on the idea that the Fed might be forced to end its quantitative easing programs, almost certainly because of behind-the-scenes pressure.  

Here's what I said:

How I read [the Fed's recent propaganda tour] is that the Fed is taking some heat for its inflationary policies, mainly behind closed doors, and it is trying to do what it can -- with words -- to soothe the situation. Perhaps China is making noises, or perhaps Brazil's finance minister is making the phone lines feeding the Eccles building smoke ominously, or perhaps it is internal pressure coming from politicians with restless voters. Or all three.

The big risk here is that the Fed will be forced by this rising pressure to discontinue the QE program in June at the normal ending of the QE II efforts. Couple that with a possible federal showdown over the debt ceiling right at the same time, and you have the makings for a massive fireworks display, possibly involving derivative mortars bursting in air.

At the time, I speculated that all of the Fed's pronouncements about inflation being almost nonexistent were actually signs that the Fed was taking some behind-the-scenes heat for the inflation its policies was creating.  And I worried about what would happen if the Fed were to end the QE program in June.

Let's just say it won't be pretty.

Everything would tank.  Stocks, bonds, and commodities.  All of the risk assets that have been unnaturally supported by a flood of liquidity, too-low interest rates, and thin-air base money would give up those ill-gotten gains.  Gold might behave a bit differently, because along with these market declines will come an enormous amount of uncertainty about the financial system itself, usually a condition for higher gold prices.  So I expect gold to correct somewhat, but not nearly as much as everything else, and it could even gain.

The story is, admittedly, getting more confusing by the week, with some calling for hyperinflation and some calling for massive, outright deflation.  I am trying to surf the probabilities and stay one step ahead of whatever curve balls are coming our way. 

The basic idea is this:  The Fed has been dumping roughly $4 billion of thin-air money into the US markets each trading day since November 2010.  The markets, all of them, are higher than they would be without this money.  $4 billion per trading day is an enormous amount of money.  It's gigantic by historical standards.  As soon as the QE program ends, the markets will have to subsist on a lot less money and liquidity, and the result is almost perfectly predictable.

Hello, downdraft.

The markets are quite substantially elevated due to the efforts of the Fed.  T, and then some, is quite likely to be rapidly eliminated as soon as the QE program has ended. 

It's really that simple.

To make the story even more difficult to follow, the Fed has been sending out teams of PR agents in an effort to guide the markets with their words. 

First, on March 2, 2011 Bernanke said this:

Bernanke Signals No Rush to Tighten When Asset-Buying Ends

March 2, 2011

Federal Reserve Chairman Ben S. Bernanke signaled he’s in no rush to tighten credit after the Fed finishes an expansion of record monetary stimulus, seeing little inflation risk and still-slow job growth.

A surge in the prices of oil and other commodities probably won’t generate a lasting rise in inflation, Bernanke told lawmakers yesterday in semiannual testimony on monetary policy. A “sustained period of stronger job creation” is needed to ensure a solid recovery, and the Fed’s benchmark rate will stay low for an “extended period,” he said.

The "no rush to tighten credit" statement is a signal that the Fed will neither raise rates at the end of the QE program nor perform reverse POMOs where it reels cash back in and pushes MBS and/or Treasury paper back out. 

Upon the cessation of the QE efforts, and the cessation of $4 billion a day in Treasury buying pressure, it's a safe bet that market interest rates will rise.  Bernanke is at least on record as saying that if this happens, it won't be because the Fed has taken the lead. 

Bernanke was being a little bit sloppy in his statements, because stopping QE will serve to tighten credit simply because there will be a lot less liquidity sloshing around the system.  It's a situation where the absence of excess is the same as the presence of tightness, if that makes any sense. 

Then on March 5th, a much stronger and clearer signal was given, confirming my worries:

Fed Policy Makers Signal Abrupt End to Bond Purchases in June

March 4, 2011

Federal Reserve policy makers are signaling they favor an abrupt end to $600 billion in Treasury purchases in June, jettisoning their prior strategy of gradually pulling back on intervention in bond markets.

“I don’t see a lot of gain to reverting to a tapering approach,” Atlanta Fed President Dennis Lockhart told reporters yesterday. “I don’t think that is necessary,” Philadelphia Fed President Charles Plosser said last month. 

Whoa.  This is important news.  Not only a cessation of QE, but the possibility of a sudden stop is being telegraphed.  This will change everything.

The old saying 'sell in May and go away' might never be truer than this year, although with this sort of a warning, the cautious investor may want to get a head start on things and sell in March or April.

For some time there have been rumors that the Fed has been splitting into factions, with some of the inner team becoming increasingly uncomfortable with the QE program and its effects.  But so far they've either spoken in code to reveal their displeasure or quietly resigned.  So we're pretty sure there's an admirable level of support within the Fed for ending QE, and it has now bubbled to the surface and reached the public arena.

Of course, there's some form of gobbledy-gook reasoning being floated to justify the plan for a sudden stop rather than a gentle wind-down, and it involves the distinction between 'stocks and flows' (from the same article as above):

Fed staff members, such as Brian Sack, the New York Fed official in charge of carrying out the bond buying, have argued the total amount, or stock, of securities the Fed has announced it will make has more impact on longer-term interest rates than the timing of those purchases. That’s a view now held by several members on the Federal Open Market Committee, including the chairman.

“We learned in the first quarter of last year, when we ended our previous program, that the markets had anticipated that adequately, and we didn’t see any major impact on interest rates,” Fed Chairman Ben S. Bernanke told the Senate Banking Committee during his March 1 semiannual monetary-policy testimony. “It’s really the total amount of holdings, rather than the flow of new purchases, that affects the level of interest rates.”

Fed Vice Chairman Janet Yellen supported that perspective, saying at a monetary policy forum in New York last week that “the stock view won out over the flow view.”

The idea that Brian Sack, a 40-year-old economist with a PhD from MIT, is winning the day in the argument of "stocks over flows" is somewhat troubling to me.  MIT is a quantitative shop, home to some very brilliant people, but how markets will actually respond is another specialty altogether, one that requires a bit of on-the-street experience.  Markets have a bad habit of not being logical, not fitting neatly into tidy formulas, and ignoring things like 'stocks and flows.'

I'll go even further. I'll take the other side of that bet and opine that the flows are much more important than the stocks, because it is the flows that support the continued budget deficits of the US government — which, it should be noted, will still be with us each and every month long after June 2011.  Those deficits are baked into the cake and will require in excess of $125 billion in new Treasury sales each and every month.

Who will buy all the Treasury bonds after the Fed steps aside?  That is unclear.  If there are not enough buyers at these artificially inflated prices, then the price will have to fall until sufficient buyers can be found.  Falling bond prices are at the other side of the financial see-saw from rising bond yields; one goes down while the other goes up, and the Fed has been pressing firmly down on yields for a while via the QE II program.  When that's over, pressure will be reduced and yields will rise.

So what to do? For those concerned enough about this possible scenario to consider taking action, please see Part II of this article (free executive summary; paid enrollment required to access). In it, I predict the extent to which stocks, commodities, Treasury bonds and precious metals prices may be impacted in the near term.  I also detail the key indicators to look out for in order to determine if and when this scenario is unfolding - as well as recommended strategies to preserve capital during this corrective phase.

Click here to access Part II

 


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Tue, 03/08/2011 - 11:07 | Link to Comment hugovanderbubble
hugovanderbubble's picture

Good Job Chris,

Tue, 03/08/2011 - 11:41 | Link to Comment 66Sexy
66Sexy's picture

The FED is clearly setting up the markets with an expectation of QE3.

People forget the FED is not our 'freind'; their interests are not ours. They are a private institution. Yet people are still shocked and scornful of Bernakes actions.

Imo they will announce they will 'Hold Off' on further stimulus, all rights reserved. Certainly a cessation of QE will precede any rate hikes. We are seeing rate hike pressures emerge from europe and china.. and the IMF (arguably the same folks as the FED) aknowledging inflation just yesterday..

Nothing says they have to do QE3 right after QE2; and that way they can get commodity prices down. They probably want to 'experiment' with how the markets will take a cessation of QE; they will have to, sooner or later. Why not give their buddies a discount at the same time?

Then, after the market crashes... THEN we will see QE3... of course, the money will have already been spent before you or I know it... before the announcement.

This entire market rally is dependent on QE. No QE, no town.

Tue, 03/08/2011 - 12:17 | Link to Comment MachoMan
MachoMan's picture

If you make your big money on manipulated big swings and said swings keep the market guessing as to the inevitable end game, thus buying more time, then you seek to make as many big swings as possible without spooking the herd.  The last part is what the confidence is all about..  and why it has been so important to paint a picture of an organic economic recovery (despite being total bullshit).  The comment on fixing inflation quickly is correct, it's just that it comes with a caveat, the same caveat in all of the economic tea leaves...  "all things equal"...  the most notable of which is confidence in the currency.  At some point, we'll get whiplash from the see saw and decide to get off.

 

Tue, 03/08/2011 - 12:28 | Link to Comment serotonindumptruck
serotonindumptruck's picture

Unfortunately for everyone, when we decide to get off that see-saw, we'll likely fall into a bottomless pit of biblical proportions.

Tue, 03/08/2011 - 12:40 | Link to Comment MachoMan
MachoMan's picture

Queue ghostbusters jail/mayor scene.

I'm not sure about bottomless pit so much as much more difficult, demanding, and with real consequences.  My only fear is that now we have developed world killing technologies, how long can we keep them in check at a time of global unrest?  Why would america's nuclear stockpile be any more secure than pakistan's?  Designer diseases...  oil wells...  you name it...  all require maintenance and security.  Otherwise, we'll figure out how to redevelop society...  we've done it many times before...  hell, the productive may one day be rewarded again... 

Tue, 03/08/2011 - 13:54 | Link to Comment serotonindumptruck
serotonindumptruck's picture

The USA is the only nation to have used non-conventional weapons in an offensive manner, so you bring up a good point. Nuclear nonproliferation measures have been an abject failure, however that might be expected with 70 year old technology. The question remains, though. Will there be a large scale thermonuclear exchange in the near term future? A "small" exchange would no doubt escalate.

Interesting that you bring up Pakistan in this context. The USA appears to be losing on the diplomatic immunity front. If there is credible evidence that American security contractors have been manipulating the political and military machinations by communicating and coordinating with the Taliban and Al Queda, for whatever nefarious purpose, then Pakistan may truly become a "rogue" and uncontrollable state.

 

Tue, 03/08/2011 - 14:33 | Link to Comment MachoMan
MachoMan's picture

I'm not worried about a conventional nuclear exchange so much as an unconventional.  And by that I mean once the forces securing our world killing technologies, whatever they may be, are no longer in the picture...  or, at least, in a diminished capacity...  then such technologies will undoubtedly fall into the hands of those who desire to and will use them...  at least on a much shorter timescale than their present keepers.

I'm really not worried about pakistan so much as many other countries...  simply because we already have the plans, training, and troops in place to secure the nukes...  at least in some capacity...  however, not so much elsewhere.

Tue, 03/08/2011 - 14:56 | Link to Comment serotonindumptruck
serotonindumptruck's picture

The Russians and Chinese have the market cornered on tactical nuclear strike capability. The introduction of the Moskit class antiship/StS/AtS missile has changed the military dynamic on a global scale, particularly in the area of naval superiority. I can envision several scenarios where WWIII could be initiated. Once Moskit is used against an American naval asset, particularly our aircraft carriers, then all bets are off.

Tue, 03/08/2011 - 15:15 | Link to Comment ibjamming
ibjamming's picture

EVERYONE knows this...that's why a "nation" will never attack the US.  China or anyone doing this...nuking us first...will cease to exist.  It was called MAD for a reason.  You know we'd do it...and the population would approve...I would.  If I go...you go too.  The financial world is run the same.

Tue, 03/08/2011 - 18:15 | Link to Comment Alex Kintner
Alex Kintner's picture

In related news, the Apocalypse is confirmed to occur on May 21, 2011.
http://news.yahoo.com/s/ap/20110103/ap_on_re/us_rel_apocalypse_soon

Sell all that gold now bitchez and spend your winnings quick.

Tue, 03/08/2011 - 18:31 | Link to Comment tmosley
tmosley's picture

Any good Christians looking to lighten the load of their possessions can feel free to stop by my house, and drop off any gold, silver, or other valuables they no longer wish to carry.

Tue, 03/08/2011 - 18:39 | Link to Comment Alex Kintner
Alex Kintner's picture

I have some lead, counterfeit subway tokens. I'll drop them off.

Tue, 03/08/2011 - 15:24 | Link to Comment MachoMan
MachoMan's picture

There are an infinite amount of possibilities for actions which conjure up WWIII...  they're trying to be implemented daily, thus far to no avail...  I am aware of these things...  but, again, it is not the traditional military action that I fear...  when we deal with rational actors (like the MIC) we can anticipate their moves and plan accordingly...  not so much with others waiting in the wings...  nor what kind of power structure will be around at that time.

Tue, 03/08/2011 - 12:38 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Macho, now, I think it's nano swings where they make their money, so big swings are nto even necessary.

Imagine even 10 years ago, with the current geo-political and financial catastrophe unfolding, the VIX would be wayyyy high, stocks would be in the toilet and all "involved" currencies would have been deflating like crazy.

And yet, except the metals complex, you look at the market, interest-rates....mostl things look like they are flatlining. Just light waves on an otherwise calm sea.

Point I'm making is that it's not a confidence in currency game anyomore. Everyone involved knows that explicitly and man on the street can 'feel" it. 

I think the plan is a hard deflationary collapse (they hold most of the currency, whose velocity has nose-dived"), for a huge asset grab...and then kill the dollear. Or let it die, which it will if exposed to market forces.

The old 1-2.

Probably before June.

ORI

http://aadivaahan.wordpress.com/2011/03/08/stunning-art/

Tue, 03/08/2011 - 12:48 | Link to Comment MachoMan
MachoMan's picture

Yes, I know and agree.  Sure, you keep the lights on with the day to day theft of fractional pennies many times over...  but, the stuff legends are made of are the giant pump and dumps.  We've seen quite a few recently...  and I don't think this time is any different.

But, I disagree as to your timeline.  I suspect the downdraft will come from austerity measures discussed in raising the debt ceiling...  it will appear as though we're going to take a little financial medicine.  This will buy more time.  How much more time is anyone's guess.  I do not suspect that QE will ever be totally removed...  it will only be progressively decreased from its origins.  The question is how many more of these rise and falls we care to participate in before finally admitting that the currency is toast.  Essentially, we are inching towards collapse with each wax and wane, but the answer is largely subjective given it requires a guestimation of herd behavior.  I suppose they have the power to direct the herds, but in large part, I think the ultimate loss of faith in the currency is more or less an organic function.  Obviously they create the stimulus, the question is how long we tolerate it.  I'm thinking we still have resolve.  I think the takedown will occur during or before june, but who the hell knows when we finally give up the ghost of the dollar.

Tue, 03/08/2011 - 12:55 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Agree Macho.

But it's the politics that's going to kill it, not the financials. 

Think Wisconsin, clearly a test case for "medicine".

Then the whole ME disaster unfolding. Where is oil going?

So the big levers are growing bigger AND more unstable every day.

Not looking good.

ORI

Tue, 03/08/2011 - 13:02 | Link to Comment JW n FL
JW n FL's picture

everything is fine... go back and get you 3rd masters... buy some gold... and try to figure out how to make the rest of the world trust you enough to maintain a reserve currency...

 

besides, everyone knows all it takes is some fire water and pretty beads and we own Jag and Land Rover again..

Tue, 03/08/2011 - 13:17 | Link to Comment Oh regional Indian
Oh regional Indian's picture

You want those white-elephants back JDub?

I'll tell Mr. Tata someone has some fire-water and beads (made in china) to trade for them.

And I though you were an Amrkn. Why all touchy about two british dodos? White solidarity and all?

Very good.

You do come across as a good soldier type.

ORI

Tue, 03/08/2011 - 14:40 | Link to Comment MachoMan
MachoMan's picture

In the end, the unions in wisconsin capitulated on the important aspects, i.e. pay.  In an environment of scarce jobs that do not require any particular magical skill or training, unions (or anyone else) have no bargaining power.  While there will be grumbling and much consternation, there will be capitulation to austerity.  The question is how long we will take it.  And, if our inflationary chin is any indication, we can sure as hell take an austerity punch before throwing in the towel.  In the end, the conditions will become too punitive and we will repudiate our debt...  again, how long this takes is anyone's guess.

Tue, 03/08/2011 - 18:41 | Link to Comment DosZap
DosZap's picture

A 100% TOTAL default is the only way to survive this.

Open and honest.Re-Start a new system.......period.

The Jubilee, or all Hell really breaks loose.

Tue, 03/08/2011 - 19:33 | Link to Comment MachoMan
MachoMan's picture

No.  I think you're overlooking something which cannot be defaulted away and for which there have been little or no prosecutions...  and that is the wealth gap.  While in many ways it has been derived through what I consider to be "fair" exploitations of the system, there are still many parts which have been obtained through complete chicanery, deceit, manipulation, fraud, duress, threats, intimidation, and in some cases murder.  If the merry-go-round stops now, there are too many people with ill-gotten gains that get to keep them.  This is the question no one wants to answer.  How do we claw back the ill-gotten gains in a "fair" manner?  How do we differentiate between the people just playing the game and the people changing the rules as they go along?  The court of pitchforks will not be so kind as a court of law...

I think your notion of just defaulting, resetting the system, and everything being OK is not only naively optimistic, but completely antiquated...  more suited for decades ago.  The power vacuum will have to be filled and I hope it's not filled by another bleached mr. potatohead looking motherfucker.  It's going to take solidarity with fellow citizens not seen for many, many decades, if ever.  I'm not incredibly optimistic.  Life will go on, sure, but it may go on with a dick in our face and a whip to our back.  It will be a treacherous tightrope over the next years... 

Tue, 03/08/2011 - 14:41 | Link to Comment packman
packman's picture

Side note about this:

People forget the FED is not our 'freind'; their interests are not ours. They are a private institution. Yet people are still shocked and scornful of Bernakes actions.

This isn't Starbucks, son.  The Fed has a legal monopoly on our nation's money supply.  As such, the ruler of this institution deserves every bit of scorn (and praise - if he ever does something right) he gets.

 

Tue, 03/08/2011 - 18:34 | Link to Comment Alex Kintner
Alex Kintner's picture

Right.  A "private institution" with rights to print infinite dollars even if it's a madman running the presses. And since it's TBTF, we'll have to sell off everything (to China, et al) to pay back the madness -- the national parks, all national oil rights, all govt real estate, you name it. Hell, they have already sold the next two generations into indentured servitude just to pay the interest on the debt.

Oh well, at least the yachts are still sailing from the Hamptons.

 

Tue, 03/08/2011 - 18:55 | Link to Comment asteroids
asteroids's picture

The crash will happen at 2AM when everyone is asleep. The market will be down 3% and then gap down 5% or so at the open. Then, all hell breaks loose.

Tue, 03/08/2011 - 11:21 | Link to Comment spartan117
spartan117's picture

If QE stops, we have massive deflation, which is NOT good for the US Dollar.  The USD is the biggest risk asset in the world.  That means PMs go through the roof.  QE actually staves off PMs going vertical.

People need to get it through their thick heads that the Dollar is not a safe-haven in a deflationary collapse.  It's a death-trap.

If you want to know more, please buy my book and subscribe to my newsletter.  Or at least click on my website so I get paid....

Tue, 03/08/2011 - 11:46 | Link to Comment DosZap
DosZap's picture

What PAPER instrument frommthe US Gv't is not a death trap?.

Thanks, I will take my chance w/something of VALUE.

Tue, 03/08/2011 - 12:11 | Link to Comment spartan117
spartan117's picture

That's basically what I said, but nevermind...

Tue, 03/08/2011 - 11:59 | Link to Comment yipcarl
yipcarl's picture

listen to you, buy your book, F off. 

Tue, 03/08/2011 - 12:12 | Link to Comment spartan117
spartan117's picture

Read into the sarcasm.  Try, I know it hurts your brain, but just try.

Tue, 03/08/2011 - 12:22 | Link to Comment traderjoe
traderjoe's picture

+1

Tue, 03/08/2011 - 12:40 | Link to Comment gorillaonyourback
gorillaonyourback's picture

lolololololol

Tue, 03/08/2011 - 12:54 | Link to Comment gmrpeabody
gmrpeabody's picture

+100

Some days you just can't win. LOL

Tue, 03/08/2011 - 13:10 | Link to Comment ConfusedIdiot
ConfusedIdiot's picture

Clever, Spartan. Applause (golf clap). CI

Tue, 03/08/2011 - 13:32 | Link to Comment hamurobby
hamurobby's picture

+1, I thought it was a beautiful shot when it left the tee.

Tue, 03/08/2011 - 16:23 | Link to Comment Lord Koos
Lord Koos's picture

That's what you get for being too hip for the room...

Tue, 03/08/2011 - 17:57 | Link to Comment spartan117
spartan117's picture

Seriously.  16 junks and counting for the original response.  I'm getting monkey hammered by deflationists, people without a sense of humor, or by Chris' followers. 

Tue, 03/08/2011 - 18:06 | Link to Comment downrodeo
downrodeo's picture

killing spree!

Wed, 03/09/2011 - 02:26 | Link to Comment Hook Line and S...
Hook Line and Sphincter's picture

Spartan, it was a great read. However, I did buy it used for .76 cents on amazon. I sent my copy to you last week, so would you hurry up and send me back my signed copy.

Tue, 03/08/2011 - 14:08 | Link to Comment cbxer55
cbxer55's picture

yipcarl, did you, by chance, read the last paragraph of the OP? Might go back and do that before making stupid, inane comments.

Tue, 03/08/2011 - 17:04 | Link to Comment CIABS
CIABS's picture

that's right.  yipcarl, did you notice that there was no link in spartan's post?  what do you think that means?

Tue, 03/08/2011 - 12:01 | Link to Comment Long-John-Silver
Long-John-Silver's picture

The 2008 downturn of PM was a result of investors seeking safety in the US Dollar. What sane person would dump PM's for the US Dollar this time? I agree with your prospective. PM's will be the instrument of safety WHEN the second economic crash hits. This is the exact same pattern as the First Great Depression and the results will mirror the the coming of the second of many downturns. In the initial crash of the Great Depression people attempted to "cash out" in US Dollars. After the second down turn everyone was going for PM's which lead to FDR attempting to confiscate Gold.

Tue, 03/08/2011 - 12:32 | Link to Comment ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

"What sane person would dump PM's for the US Dollar this time?"

 

Anyone with margin calls to meet.

 

I'm wondering if maybe next time around, the PTB will create plenty of dollar liquidity to relieve the pressure when everyone suddenly realizes they urgently need dollars again.

 

In the absence of a squeeze on dollars caused by margin calls, I could easily see gold skyrocket during the next panic.

Tue, 03/08/2011 - 13:06 | Link to Comment dracos_ghost
dracos_ghost's picture

Yeah, I am thinking the same.

There are debates everywhere as to how the Fed is going to unwind QE2 (if they do). I've been wondering how the hedgies are going to unwind this Dollar carry trade.

Tue, 03/08/2011 - 16:32 | Link to Comment GoinFawr
GoinFawr's picture

Margin calls don't come only in USD flavour: currencies are fungible.

IE This 'the whole world is priced in dollars' meme is wearing thin.

I think Long John's point was not what those who were losing would need to do, but where those who have been winning would be looking to call their 'safe haven' home next crisis around.

Sorry sunshine, with all of their failings being exposed and understood by an ever-expanding global demographic, fiats in general are looking more and more like a foolish place to try and park wealth, of which the soon-to-be-former world reserve currency has proven itself to be the absolute worst 'anti safe haven' around...

I don't know if you've noticed, but lately almost everytime the USD gains some strength against it's equally valueless peers, especially when the eastern markets are open, the real money like Ag and Au move up too, rather than moving inversely. Don't believe me? Look at last night's (EST) charts.

It's called 'divestment while the divesting is still good', or 'divesting while the divestment is still good', or, 'divestment while the divestment is still good', or,'divesting while the'... you get the idea.

Tue, 03/08/2011 - 12:34 | Link to Comment dryam
dryam's picture

+1

Tue, 03/08/2011 - 14:46 | Link to Comment packman
packman's picture

In the initial crash of the Great Depression people attempted to "cash out" in US Dollars.

In the initial crash perhaps, but not going forward.  The whole reason for executive order 6102 was because people were cashing in their dollars for gold.  This is also why Britain and many others left the gold standard in 1931; their gold reserves were being bled dry due to people trading in their fiats for real money (gold).

 

 

Tue, 03/08/2011 - 18:25 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

Let us not forget that the Fed spends 10% of their time deciding what they are going to do and the other 90% deciding how they are going to jawbone.

I will believe a 'short short suspension of QE' when I see it happen.

All else is rumor and speculation.

Tue, 03/08/2011 - 12:07 | Link to Comment CrazyCooter
CrazyCooter's picture

Which is what he said, at least that was my read. He was pointed in saying "the selloff" that will commence should QE2 end without an immediate QE3 will be broad and include metals.

Near term versus long term.

A.K.A. BTFD.

Cooter

Tue, 03/08/2011 - 12:19 | Link to Comment spartan117
spartan117's picture

He still believes PMs to be "risk assets", and thus implies that the USD is anti-risk.  He's completely wrong.

Tue, 03/08/2011 - 13:06 | Link to Comment JW n FL
JW n FL's picture

U!! S!! A!!

U!! S!! A!!

say it with me.

U!! S!! A!!

the dollar is the flight to safety that everyone needs to take.. gold is for suckers who think that $14 trillion dollars in flight to safety is bad.. these same people see the stock market going down.. http://www.newyorkfed.org/markets/tot_operation_schedule.html how in the fuck it the stock market going down? with POMO crammed up the NYSE's ass? how?

gold / silver is heavy.. paper is lite... be smart, dont hurt your back carrying all that metal.. get some paper instead... just think.

Flight to Safety.. Flight to Safety.. Flight to Safety.. Flight to Safety..

then click your heals three times and you are home...

besides can you see throwing gold / silver up on stage with the strippers... you could put a girls eye out that way.

Tue, 03/08/2011 - 13:15 | Link to Comment ConfusedIdiot
ConfusedIdiot's picture

Not so, Clever Spartan. As a Mex Ex-Pat with boots on the ground sensitivity be prepared at the first sign of "rout" to see the d denominated assets sky. Regards CI

Tue, 03/08/2011 - 13:24 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Sounds very interesting CI, but not clear. 

Are you saying dollar denominated assets will skyrocket? 

Do clarify. Thanks. Boots on the ground is the best kind of feedback.

ORI

Tue, 03/08/2011 - 12:10 | Link to Comment masterinchancery
masterinchancery's picture

 On the contrary, it would be good for the dollar.

Tue, 03/08/2011 - 12:18 | Link to Comment spartan117
spartan117's picture

No it won't.  End of QE equates to a default on debt, as there would be insufficient bond purchases to continue deficit spending.  That or we cut expenditures to the bone, which results in massive lay-offs, and thus declining tax-receipts.  This process would feed on itself, and you get your dollar death spiral.

Tue, 03/08/2011 - 12:49 | Link to Comment The Ponz
The Ponz's picture

+3 to infiniity

Spartan is dead on.  There is no option to end QE.  The options are QE3-infinity or default.  In either case the dollar (read: paper assets) is the trap.

Tue, 03/08/2011 - 13:08 | Link to Comment JW n FL
JW n FL's picture

BULLSHIT!!!!

 

QE InfiniTimmy and Beyond you Bitchez!!!!

Tue, 03/08/2011 - 13:09 | Link to Comment B9K9
B9K9's picture

You boys need to polish off your history books.

First of all, for thousands of years, bankers have made money pumping the market with credit, fiat or hard backed notwithstanding. (During the most recent iteration of this ancient trick we saw mortgages, then gov bonds as the chosen vehicles.) Next, we experience a coordinated pulling of credit (after they get out first ie liquefying), then they swoop back after the crash buying real assets for pennies on the dollar.

Second of all, war always ensues - always.

And last, the state/king always wins - always. The bankers are forced to relocate to some new, virgin territory where they once again set up shop offering their special blend/brand of "services".

We are currently still in the first phase of the game. Limiting oneself to the silly inflation/deflation debate, or "I wanna trade the market" play is ignoring the larger picture. Think about how this plays out - we are witnessing in real-time the end of a colossal empire & global trading scheme.

What comes next is the Strong Man who will default the debt & push the country into some kind of emergency re-positioning (if at all possible). The Fed is dead - they still have the power to make news, but they are done. What they do/don't do with regard to QE is like debating angels on a pinhead. Where this ends up is anyone's guess, but not thinking about/preparing real life skills is suicidal.

Tue, 03/08/2011 - 13:47 | Link to Comment Sean7k
Sean7k's picture

I would suggest a different scenario: we had our 1929 crash of Lehman and the subsequent boom back up to 1932 with all the accompanying we are not in a depression speeches and recovery is around the corner, aka Mellon. 

Except, the market didn't catch fire like they hoped. An interesting thing happened, people decided to stay out of the market. The climb they did get was a result of their own pumping (bankers and hedge funds) and in order to tank it- they have to stab each other. 

By taking all the FED largesse and keeping it to recapitalise or invest for earnings to spruce up the balance sheets, the bankers failed to provide a real rainbow for the people- the same people they need to buy back in, if they are transfer their earnings.

Now, they are forced to continue printing in hopes the market will reflate, but it is stalling. The bankers must find a way to resolve this or else they chance taking some of their own out- and the Elites don't lose well.

While I think history has a lot to show us here, the game is playing out differently this time. Perhaps because of the extent of the globalization or food and commodity needs globally or the rise of an Asian power base. I suspect,they haven't done the proper testing and they are getting results that are at odds with their planning.

Gold and silver may be complicating the game as well. It is merely a commodity this time around, instead of a standard. I'm not sure if all the CB's trust each other and most have to keep their reserves out of country. 

Until the markets rises to a level the banks and funds can dump it without losing their shirts- we still have a game to play.

Tue, 03/08/2011 - 14:10 | Link to Comment centerline
centerline's picture

Alot of cash being pumped into the banks without banging velocity.  That can't be a mistake or oversight.  

Also, there doesn's seem to be any real significant pressure to get the foreclosure process started again in earnest.  Internesting in that foreclosures are in effect deflationary.  Real asset values are found.  So, if deflation is the enemy of the banks, it makes sense for them not to push hard on foreclosures IF you are preparing for something bigger... something more important to deal with.

Just thinking...

Tue, 03/08/2011 - 14:01 | Link to Comment centerline
centerline's picture

I don't disagree with your general premise.  But, just adding that the "crash" can accomplished via deflation, or inflation.  Argentina per se experienced something entirely different than say Zimbabwe or Wiemar.

To create the deflationary collapse, just let Austerity take hold.  That's it.  Budget cuts, Federal and State, will do nicely.

Alternatively, we could go the way of an inflationary blow-off-top.  Herein, politicians would play the "spending cut" card while at the same time pushing the Fed to keep the spigots wide-open so that bond rates don't explode.

In fact, it might be a bit of a taste of deflation that is the play at hand.  Forcing the politicians to open demand the Fed step up to QE3.0 - and ultimately taking the blame of course.

Financial crisis = soveriegn crisis = political crisis = peoples crisis / currency crisis seems about right and provides the smoke and mirrors necessary for the bankers to pull off the crime.

Tue, 03/08/2011 - 14:01 | Link to Comment Bartanist
Bartanist's picture

Hmmm, I don't know whether to hope you are right or wrong... and it seems that the unwind can take up to 20 years, with "real" war lasting at 3 to 5 years.

So, are the moneychangers relocating to China? Are they already there? Or, are they going somewhere else?

They always need an excuse the reduce the weight of man on the world ... and creating a financial crisis or a thinly justified war has always served the trick.

We shall see.

Tue, 03/08/2011 - 16:28 | Link to Comment Lord Koos
Lord Koos's picture

Dubai, the money laundering capital of the world, new home of Halliburton.

Tue, 03/08/2011 - 21:50 | Link to Comment calltoaccount
calltoaccount's picture

infested


Dubai Buys 20 Percent Stake In NASDAQ Edited on Thu Sep-20-07 09:57 PM by mahatmakanejeeves Source: Nightly Business Report, Washington Post

Nasdaq Strikes Deal With Borse Dubai

By KARL RITTER
The Associated Press 
Thursday, September 20, 2007; 12:27 PM 

STOCKHOLM, Sweden -- The Nasdaq Stock Market is selling a nearly 20 percent stake to Borse Dubai and is taking control of the Nordic exchange operator OMX as part of a sweeping settlement of their battle for control of OMX. 

In a global stock market shakeup, Borse Dubai and a group from Qatar also moved to become the largest stakeholders in the London Stock Exchange. 
....

In exchange, Nasdaq will pay Dubai 11.4 billion kronor ($1.72 billion) in cash and give it a 19.99 percent stake in Nasdaq. Dubai will also acquire a 28 percent stake in the London Stock Exchange from Nasdaq, which failed to take over the LSE earlier this year. It wasn't clear what would happen to its remaining 3 percent stake in the London exchange. 

Read more: http://www.washingtonpost.com/wp-dyn/content/article/20... 

Tue, 03/08/2011 - 13:14 | Link to Comment ColonelCooper
ColonelCooper's picture

++++

Tue, 03/08/2011 - 13:16 | Link to Comment ConfusedIdiot
ConfusedIdiot's picture

Not so, Clever Spartan. Many on this board underestimate the volume and rapidity that will accompany rush to UST if interest rates rise. Regards, CI

Tue, 03/08/2011 - 14:13 | Link to Comment spartan117
spartan117's picture

If rates rise here in the US, that means inflation coming home to roost.  Hot money pouring into the US from sovereigns chasing yield will push up prices here in the US.  That would collapse our housing market and other capital expenditures dependent on cheap credit.  Economy slows due to high prices and lack of credit.  That still equates to lower tax receipts and the need for even further deficit spending and Fed monetization.  Which all adds up to being dollar negative.  We can't win one way or another.  QE kicks the can down the road; deflation results in overnight gold to $12,000.00 an ounce.

Tue, 03/08/2011 - 14:34 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

I could handle a $12,000 / oz gold price.

Tue, 03/08/2011 - 18:29 | Link to Comment Mad Mad Woman
Mad Mad Woman's picture

You're right, we can't win one way or another. And we have the Bernank to thank.

"This is a fine mess you've gotten us into this time Ollie (Bennie)!"

Tue, 03/08/2011 - 15:33 | Link to Comment Bananamerican
Bananamerican's picture

"Many on this board underestimate the volume and rapidity that will accompany rush to UST if interest rates rise"

In a rising rate environment where's the buy-in point? 5%? 6%?----14%?

Tue, 03/08/2011 - 16:11 | Link to Comment trav7777
trav7777's picture

uh...if people rush to USTs rates will then fall as that is how bonds work

Tue, 03/08/2011 - 16:53 | Link to Comment A Proud Canadian
A Proud Canadian's picture

Exactly.  And if the buyers don't come the Fed will because the game is lost if they don't hold down interest rates.  They don't have to announce that they are buying bonds...they didn't announce that they were buying stocks, did they?

Tue, 03/08/2011 - 13:44 | Link to Comment chubbar
chubbar's picture

I don't think the posters above (don't want to speak for them but this is my take on it)mean a permanent cessation of QE. I interpret them to mean that the Primary dealers will have enough cash on hand to support the treasury auctions for several months while QE 2 is ended. During that time frame the markets will have the rug pulled out from under them from lack of POMO and eventually crash. Driving down commodities (on the FED wishlist).

This could result in a public clamor for QE3 (which is on the political wishlist) and/or a stampede into the dollar (also on the wishlist). It would also open a window of opportunity for elites to complete the purchase of whatever spoils they have their eye on at steep discounts, potentially even gold, which also has to be on the wishlist for the elites.

Gold/silver could get hit depending on margin calls and naked short selling by TPTB. I would expect Silver to get hit harder because of the hard move up as well as because of the mixed use it represents(industrial & investment, but if the economy is seen to be faltering the industrial use is diminished).

Of course the PM dip would be fairly short lived, if it happened at all, probably measured in days as opposed to weeks.

Assuming it happened, it'd be the last best buying opportunity for PM's, assuming you could find them and the premiums hadn't gone through the roof (circa 2008 silver debacle when premiums were like 50% when silver hit 9$ or so after dropping from 20ish, iirc). Of course we should all be cognizant of the fact that TPTB are losing their ability to manipulate silver down and should physical deliveries force a default prior to this scheme being implemented, all bets are off. If you see them stopping QE2 prematurely perhaps that would be an indication they need the crash sooner than later because of an impending comex default? I'm not too excited about this potential default happening prior to June (end of QE2) because of the number of cash settlements comex has coaxed out of the folks who are standing for delivery in March so far to date.

At any rate, it is all unknowable so the best position is one split between PM's and treasuries. That isn't my personal position but that is probably the safest course for the short term. If the crash happens I'd go 100% gold/silver immediately, holding back just immediate expense FRNs.

Tue, 03/08/2011 - 19:28 | Link to Comment Creed
Creed's picture

Spartan is correct.

 

That doesn't mean 'they" won't end QE officially but direct the hose of cash through another nozzle.

Tue, 03/08/2011 - 12:11 | Link to Comment reachsb
reachsb's picture

+1. While I'm a big fan of Chris Martenson, the timing of the release of this controversial piece dents the credibility of his argument. It appears to be a guerilla marketing ambush to push his upcoming book.

This is a very one-sided article. He conveniently side-steps the issue of deficits and the debt ceiling. Is he expecting the deficit to be sharply curtailed from May-Sept? Feb's deficit numbers are a disaster. Are they not going to raise the debt ceiling? What happens to all their Wall Street cronies when QE stops? It could lead to massive unemployment in Wall Street because it won't be able to peddle the toilet paper to the world.

Tue, 03/08/2011 - 12:21 | Link to Comment spartan117
spartan117's picture

Yup, at least somebody here gets it.  Unlike the junkers who can't read into the sarcasm, and have little to no ability to think for themselves.

Tue, 03/08/2011 - 13:02 | Link to Comment Goldust
Goldust's picture

Aren't April & June two of the "peaks" in terms of Treasury receipts?  And the tightest two together?  Seems to me that immediately following this time period would be the best option for a gap in QE...  The big banks pick up some slack at Treasury auctions in return for the gifts received over the past few years... then when the cash gets low again it's QE3?  I'm just saying, if there is a gap in QE, the matter of the deficit has been thought of and there's a plan on how to deal with it until QE resumes.

Tue, 03/08/2011 - 12:57 | Link to Comment tarsubil
tarsubil's picture

I'm sorry, my head is especially thick on this one. If a deflationary collapse happens, doesn't that mean that the value of currency (and dollars) increases? Why does this make dollars a death trap? I'm missing something here important.

Tue, 03/08/2011 - 13:56 | Link to Comment spartan117
spartan117's picture

Deflation will occur when the government stops spending more than it takes in order to balance the annual budget deficit.  A drop in spending (government), results in a drop in spending in the private sector (which was happening in 2008).  A drop in spending, results in a drop in tax receipts.  A drop in tax receipts, results in further cuts to government expenditure.  Repeat several times over and eventually the government is unable to service the interest on the debt, as the debt itself is never paid off.  That equals debt default, and everyone rushing out of dollar denominated assets, including the dollar. 

 

Tue, 03/08/2011 - 14:24 | Link to Comment centerline
centerline's picture

Forget the dollar!  Population deflation is the change that is coming.

Tue, 03/08/2011 - 17:38 | Link to Comment cougar_w
cougar_w's picture

If you actually believe that is the case, then you are saying you think the global economy is toast.

Because without more people showing up every year you have no new markets, no new middle-class anywhere to parasitize, and no new buyers for goods. Industrial production falters, unemployment soars, and the deflationary death spiral begins. There is no other outcome, and there is no escape.

Growth forever --- or die --- is the shape of things and has been for a long time.

At the end of the deflationary spiral though is simple living, not actual death, for individuals not embroiled in regional wars. Except that industry and organized labor do die on earth, probably forever. Without cheap access to fossil fuels and a means to leverage them a Second Industrial Revolution will never amount to much and the triumph of the West will have finally ended.

Tue, 03/08/2011 - 22:42 | Link to Comment decon
decon's picture

Bingo centerline,

What's going to happen is the same for any species in a finite system that has too many natural selective/mortality pressures diminished.  The human yeast colony has banged up against the sides of the petri dish.  You better be ready for the harsh side of natural selection.

Tue, 03/08/2011 - 14:27 | Link to Comment tarsubil
tarsubil's picture

Why does a drop in government spending cause a drop in private sector spending? What if companies decide that a little bit more financial sanity by the government is the green light to spend more?

Tue, 03/08/2011 - 15:08 | Link to Comment spartan117
spartan117's picture

Because our government is spending an extra $1.5 trillion a year to keep our government running.  How much of that do you think corporations are getting?  Heck, the USG just bought $35 billion in Boeing refuelers.  How much of that corporate cash disappears if the USG stops spending?  If corporations don't get sweet government orders, how much will they spend to retool and reinvest?  Corporations are said to have about $1.9 trillion in cash (not all of it free).  Link here:  http://www.startribune.com/business/117427078.html

If they spent all of that, it'd barely make up the difference for one year if the USG balanced its annual budget.  Saved cash will only go so far.  Then what happens?  Remember, 70% of GDP is consumption.  That is a huge part of our tax receipts.

If Government stops spending, that means government employees get major haircuts to their salaries.  They stop spending at private businesses.  Those business cut back.  Private sector employees cut back or lose their jobs.  And tax receipts fall further, which means more government cut backs.  Death spiral caused by a bubble economy based on debt expansion that doesn't want to expand anymore.  Government comes in the fill the gap.  That means death by hyperinflation, polar opposite of what we have been discussing, and exactly what is occurring today.

So QE won't stop because it can't stop.  The Fed knows this.  Big corporations know this.  That's why everyone is BTFD.  Threat's of ending QE will result in everyone waiting to BTFD.  And if the Fed does implement QE 3, then we can only expect 4, 5, 6, and so on where further threats to end QE will be laughed at.

Tue, 03/08/2011 - 15:47 | Link to Comment Ludwig Von Miso Soup
Ludwig Von Miso Soup's picture

That extra $1.5 trillion the government spends per year comes with a cost: inflation. All those new dollars pumped in by the government give people holding dollars less money to spend on discretionary goods and services in the private sector. Your argument is flawed.

Tue, 03/08/2011 - 18:01 | Link to Comment spartan117
spartan117's picture

I don't think so.  That is where the other side of my argument comes in.  The USD is the reserve currency of the world.  The Fed can pump cheap money into the system indefinitely, as other countries are forced to follow in step.  Therefore, for the last 30 years or so, we have been exporting inflation to countries like China.  Our standard of living remains relatively unchanged (perhaps declining), until the dollar is rejected by sovereigns, and sold en masse.  That is why I believe the US is the biggest currency manipulator in the world.  It gets away with printing, because other countries have no choice but to buy our paper.  Again, exporting inflation.  If the USD ever fails to stay as the reserve currency of the world, then all the inflation comes rushing back to our shores, and we experience hyperinflation overnight. 

Tue, 03/08/2011 - 13:07 | Link to Comment Sedaeng
Sedaeng's picture

+1  :)

Tue, 03/08/2011 - 13:07 | Link to Comment barkingbill
barkingbill's picture

the dollar might go up in a deflationary environment. don't get your logic there. look at 2008

Tue, 03/08/2011 - 15:40 | Link to Comment bdrichards
bdrichards's picture

Yes, we must remain open-minded. No one really knows the future, and considering the enormous changes happening before our eyes, nothing should be ruled out absolutly. We all know the dollar will strengthen as the "go to" asset during deflation. Maybe it would be wise to really think about that "certainty".

Tue, 03/08/2011 - 11:42 | Link to Comment Eternal Student
Eternal Student's picture

Yes, it's good to see that he's finally figured this out. I guess the other hand must've started clapping.

Tue, 03/08/2011 - 11:51 | Link to Comment Sean7k
Sean7k's picture

Lousy analysis Chris. Hope the Part Deux sells for you.

It could be just as likely that the banks are having a hard time making any money from their pomo inflows into the market. Maybe, they need some volatility? What would create more volatility than having buyers on the edge and confused- scared of which way to jump, while you front run every statement of uncertainty?

What part of ever increasing debt and the need to finance bonds creates a scenario where the FED can stop selling and buying bonds? Why would we need POMO if other countries were willing to buy our debt? Heck, their busy buying their own debt.

Interest rates can not be allowed to rise, it would light up the board advertising our relentless printing for all to see. We can't pay now, how do we pay later? At higher rates?

QE is now the status quo everywhere, The US, Europe, China, Japan- all printing and expanding their money supplies ad infinitum. No one can stop. So, why the indecision? 

Further, the only thing keeping Americans off the streets is their market and 401k earnings. It is the lie to the recovery. Are you going to declare "depression"? I think not. 

More obfuscation for the masses.

Tue, 03/08/2011 - 12:08 | Link to Comment romanko
romanko's picture

Accuracy 100.

Tue, 03/08/2011 - 13:03 | Link to Comment Judge Judy Scheinlok
Judge Judy Scheinlok's picture

"sells for you"....

Martenson is one of these guys who had a flash of brilliance but like all firefly's his life cycle has come to an end.

It so hard to find consistency.

MORE Meredith Whitney, please Tyler. Less of this 'guest'.

Tue, 03/08/2011 - 15:17 | Link to Comment AndrewJackson
AndrewJackson's picture

Honestly people, its a short term call. Thats it. In the long term cm is still on board the precious metals - hyperinflation extravaganza. We all know that the government can not exist without QE. Chris is just suggesting that a possible gap in between QE2 and QE3 could be a mighty sell off including precious metals. Remember when silver went down from 21 to 9 bucks in 2 months. Why couldn't a move like that happen in the short run, if QE has to stop for a month or two?

Tue, 03/08/2011 - 17:28 | Link to Comment Sean7k
Sean7k's picture

Because, it would endanger a default, which would make the run to PM's even more certain. Commodities would become more valuable, not less. 

Equities would fall, because there would not be the constant POMO meltup money. However, who would buy bonds from a country with a defaulting currency?

Where would the money go? Foreign buyers wouldn't want it,they already have too much. 

It would go to the safest place available. Gold and silver would be bid up, especially silver as the supply is diminishing. Oil would be in a no man's land, being priced in dollars, but too expensive to be bought by Americans.

Short term volatility is a possible outcome, but they cannot allow anything to fall too far, as even the banks and hedgies would be collapsed. May be one reason Hedge funds are beginning to refund and disappear.

There are too many reasons to NOT stop QE and very few to shut down the feed. Historically, governments have always chosen inflation to resolve fiscal problems. There is no good reason to think they will change their minds here.

Tue, 03/08/2011 - 17:48 | Link to Comment cougar_w
cougar_w's picture

 Historically, governments have always chosen inflation to resolve fiscal problems.

IMO this is the only dynamic at work now, globally.

I think that in a situation where nobody has any ground experience, you go with what worked once before. If it works again then you are a hero, if it doesn't work then historians will praise your conservatism. That at least seems to be the thinking this time.

The whole mess is a black swan, 10 years or longer in the making. Nobody saw it coming, they were blinded by the money.

Tue, 03/08/2011 - 11:55 | Link to Comment tempo
tempo's picture

Calling an end to QE+++ is the same as calling the market top.  Its impossible.  Also QE+++ is the only alternative with 80% of spending in entitlements, defense and interest (all of which are underbudgeted); no chance to increase revenues and world instability hanging by a thread.   Just buy  and buy some more if prices decline.  QE+++ creates instability and inflation so precious metals are winners; peak oil makes energy a winner; and a less than perfect growing season makes agr commodity winners.  

Tue, 03/08/2011 - 12:20 | Link to Comment 6 String
6 String's picture

It's easy; for the next 6 months or so these strategies will work:

Long Gold/Short Market

Long Gold and Silver/Short market and copper

Long Gold and silver/buy puts on market and copper

Long gold and silver/short market, t-bonds, and copper

Long gold and silver/short everthing else.

 

It's too risky to take off long-term gold and silver gains if the market collapes. As rosie pointed out, at the end of QE lite, Gold went up. We're also seeing safe-haven mentality shift away from dollar. Of course, the brain-washed and brain-dead money managers will liquidate on margin calls and go to......

CASH! Idiots. That will put some bid on Treasuries if the govt. despots are lucky. But not enough....

As commodity prices collapse, the economy goes into heroine withdrawl, tax revenues plummet....the next round begins. This time, the entire world will be on to the Great Ponzi Scheme, and Gold will hit 6300 an ounce by this time next year. Which is why, gents, don't play games with your core holdings. It's simply not worth the risk. Just hedge accordingly.

Tue, 03/08/2011 - 15:18 | Link to Comment AndrewJackson
AndrewJackson's picture

LOL, I like the way you think. Throwing copper to counteract the volatility in silver is genious.

Tue, 03/08/2011 - 17:36 | Link to Comment 6 String
6 String's picture

Exactly on the copper comment, Andrew. I think the Fed has tipped their hand:

Bernake has said he's starting to see a "self-sustaining economy." What more do we need? Plus, it's all about incentives. The Chairsatan is going to try to save face by temporarily ending QE II. The markets will fall apart, Congress will be eating shit as bonds go bidless, the economy will start to death spiral.....

Bernak will be playing the "see I told you we needed that QE heroine shit, while he starts the next round of QE III because he will claim Congress can't get their shit balanced and if it were up to him he wouldn't do it." In other words, total abdication of reponsibility.

Until any new information comes out, thats the way to start prepping your portfolio in the next month or so....

BTW, days like this I've decided are pure desperation hail mary's to try to sucker every last sheep into it....so the TBTF''s can begin the dump game.

It's gonna get ugly.

Tue, 03/08/2011 - 18:44 | Link to Comment Mad Mad Woman
Mad Mad Woman's picture

But you can't keep doing QE, at some point it will be ineffective. I think we're starting to see that a little bit now. The problems in the Middle East could throw us all for a loop & then we're really in uncharted territory. Or, one of the European countries could default.

It doesn't matter much anymore, we are so close to game over that any bump in the road could cause collapse. PM's are going to be the place to be.

Tue, 03/08/2011 - 11:10 | Link to Comment TWORIVER
TWORIVER's picture

Copper chart says you are right.

Tue, 03/08/2011 - 11:23 | Link to Comment Don Birnam
Don Birnam's picture

Copper has retreated briskly from its highs of barely ten days ago. 

And lest we all forget, as silver continues to hover above $36, a certain shop is in a rather uncomfortable position at current...

http://www.zerohedge.com/article/jpm-corners-copper-market-lme-says-not-...

Tue, 03/08/2011 - 11:39 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

And JPM is up 25% since that story first broke on ZH, bears ect ..... I guess the smart money wiped their ass with that news ....

Tue, 03/08/2011 - 11:46 | Link to Comment tmosley
tmosley's picture

Yeah, you're right.  I'm sure POMO and TBTF had nothing to do with it.

I guess you missed the news.  The smart money is long gone from the equities markets.  All that are left are hedge funds, mutual funds, momo traders, and small idiot specs.  Dumb money all.

Tue, 03/08/2011 - 12:04 | Link to Comment Long-John-Silver
Long-John-Silver's picture

Unfettered greed leads to economic blindness.

Tue, 03/08/2011 - 18:45 | Link to Comment Mad Mad Woman
Mad Mad Woman's picture

+ 1

Tue, 03/08/2011 - 11:10 | Link to Comment Scottj88
Scottj88's picture

It is going to get interesting....

Troubled times ahead...

Buy physical silver... as it is being manipulated

http://thehardrightedge.com/troubledwater/

--

As I have been saying....

http://thehardrightedge.com/50-physical-silver-by-april-2011/

50$ physical silver by april (from January)

Tue, 03/08/2011 - 12:16 | Link to Comment Hearst
Hearst's picture

I agree.  Any 'cessation' of QE activities will be short lived.  The US is clearly displaying their inability or unwillingness to even reduce the debt or defecit levels.  This is a cash flow issue plain and simple.  

 

Silver is better owned today than Gold.  Still extremely undervalued, in strong demand and rightly so.  To much attention has ben brought to the table about the Silver story.  JP Morgue has to now defend itself against a slew of class action lawsuits.  The Silver manipulation story has circled the globe with the MSM finally paying attention.

 

I will BTFD of any significant pull back in Silver come June's cessation of the funny money and then laugh when it quickly retraces any 'correction' to the dismay of all those who still believe wealth and value can be created from nothing.   

Tue, 03/08/2011 - 11:11 | Link to Comment MGA_1
MGA_1's picture

Certainly a sell off could happen, but isn't deflation a thorn in the side of our fed chairman ;-)

Tue, 03/08/2011 - 11:16 | Link to Comment silvertrain
silvertrain's picture

 Sounds like he may have to thread a needle..

Tue, 03/08/2011 - 11:30 | Link to Comment JW n FL
JW n FL's picture

all the debt that China bought before "The Ber-Nake" added 30%+/- in new monies to the overall.. thusly de-valuing the debt held by China.

The fact that the poor are suffering around the globe?

The fact that the middle is getting crushed again?

Who cares, its big picture time.. relieve the debt burden by 30% and if Food goes up, Oil goes up and Everything else goes up...

Who fucking cares!

Not! "The Ber-Nake!!"

"Mr. Super-Printerman Can!!!"

Starve the already Starving.. its not like they werent hungry before he started printing, they are used to being hungry.. just like we (the U.S.) is used to adding new debt.. $14 Trillion and counting, who cares its all imagined debt to supress "We the People".

No matter the Sheepeople are to Fucking stupid to see it.. thusly the duely elected idiots run all over the stupid masses and me too.. becuase I was to lazy to make sure that everyone in my Country was educated.

http://www.youtube.com/watch?v=dW3WVPwRQ-8

http://www.youtube.com/watch?v=O-tRivbrYGk

Tue, 03/08/2011 - 12:19 | Link to Comment Abitdodgie
Abitdodgie's picture

The 2008 global crash was caused by high oil prices not the sub prime like they try to make us think , dont get me wrong we have lots of oil , just not the $40 dpb , there is lots of $200-300dpb if you have the money to pay for it , this "global economy" is dieing because of the price of oil it is never going to be cheap again , there has been 3 years since 1983 when demand for oil did not increase 1983,2009,2010 the last 2years was because of the intentional stalling of the world economy, we cannot let the world economy start again or it will die very quickly, when you think that a carrot travels 2000 miles to get to you .We need that oil just to keep status quo . Think about this a cargo ship uses 40,000 gallons of fuel a day they run 24 hours a day for 280 days a year and there is 90,000 cargo ships operating at any given time , this does not include any other type of ship so now you see why china is focusing on domestic markets., and why the global economy is over, NOTE this could be great news for America because everything will start to be made local again look at the steel industry its booming.

Tue, 03/08/2011 - 12:58 | Link to Comment Almost Solvent
Almost Solvent's picture

++++

Tue, 03/08/2011 - 13:00 | Link to Comment JW n FL
JW n FL's picture

if the Goobermint doesn’t raise the debt ceiling... OOPS!! Default.

if the FED does NOT! continue QE InfiniTimmy... OOPS!! Default.

if the Price of Oil gets out of control due to any number of Country’s (with more ballz than the US) says “Fuck the BankersIMAGINARY DEBT PRINTED OUT OF THIN AIR... OOPS!! Default.

if China stops buying US debt and goes public against the dollar... OOPS!! Default. *** (not really “The Ber-Nake” would just use his paper weight to keep the print button depressed) ***

 

Really, if you think about it... there are more ways we are fucked.. than not.

 

Got Ammo?

Tue, 03/08/2011 - 14:46 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Guns & ammo?  Check

Au and Ag?  Check

...

The Bearing kicked his version of The Popular Revolt to Stage Two today.  I went to two banks and bought $40 worth of NICKELS.

$40 * 0.39 (premium of metal value over face) = $15.60 (paper) profit.  Took 15 minutes, tops.

Beats working!

www.coinflation.com

Tue, 03/08/2011 - 16:38 | Link to Comment JW n FL
JW n FL's picture

NICE!!!! everyone take note of Brother Bearing... sharing the wealth with his Fight Club Family!!!

God Bless You and Yours Brother Bearing!!!!

May Your Kindness come back a trillion fold in physical Gold / Silver and Love from Hawt Strippers!!!

Tue, 03/08/2011 - 18:32 | Link to Comment MrSteve
MrSteve's picture

Whoa!  Don't get thrown in jail for melting small change, it is hard on your family.  Per this USA Today news story cited below, with URL. The problem with melted coins is proving the metal content and value of the resulting ingot where any buyer is going to want a discount for an assay charge, a shipping charge and his profit on top. You get a lot less out of this deal than you think you will. It is far, far better to just the store the pre-1982 cents and all your nickels as rolled or bagged coins, then there is no doubt about their metal content and value. Deal in bags of coins, which are divisible and not in questionable ingots.

In a genuine deflation, every cent of cash will be valuable and in an inflation, every ounce of metal will have value, so holding small coins is a win-win.

 

There is a school of thought that says when the eventual revaluation of the dollar comes around, it will be too costly for the government to reissue all new devalued coins and so for a short time at least, the old coins will be upvalued in the new paper currency, then they will be culled from circulation or outlawed, as was silver-content coins after the exchange window closed. The big volume coin counters have electrical circuits that detect the good conducting precious metals and those coins get diverted to the Fed's melting pot. That's why you don't find silver coins in bank rolls any more, they've been scanned. The very low dollar values in this law, $5, means it will be used to control border crossings, justify body scans, etc. Don't step over legal lines that are easily avoided to your profit.

 

http://www.usatoday.com/money/2006-12-14-melting-ban-usat_x.htm

Under the new rules, it is illegal to melt pennies and nickels. It is also illegal to export the coins for melting. Travelers may legally carry up to $5 in 1- and 5-cent coins out of the USA or ship $100 of the coins abroad "for legitimate coinage and numismatic purposes."

Violators could spend up to five years in prison and pay as much as $10,000 in fines. Plus, the government will confiscate any coins or metal used in melting schemes.

The rules are similar to those enacted in the 1960s and 1970s, when metals prices also rose, the Mint said.

Tue, 03/08/2011 - 18:34 | Link to Comment MrSteve
MrSteve's picture

Whoa!  Don't get thrown in jail for melting small change, it is hard on your family.  Per this USA Today news story cited below, with URL. The problem with melted coins is proving the metal content and value of the resulting ingot where any buyer is going to want a discount for an assay charge, a shipping charge and his profit on top. You get a lot less out of this deal than you think you will. It is far, far better to just store the pre-1982 cents and all your nickels as rolled or bagged coins, then there is no doubt about their metal content and value. Deal in bags of coins, which are divisible and not in questionable ingots.

In a genuine deflation, every cent of cash will be valuable and in an inflation, every ounce of metal will have value, so holding small coins is a win-win.

 

There is a school of thought that says when the eventual revaluation of the dollar comes around, it will be too costly for the government to reissue all new devalued coins and so for a short time at least, the old coins will be upvalued in the new paper currency, then they will be culled from circulation or outlawed, as was silver-content coins after the exchange window closed. The big volume coin counters have electrical circuits that detect the good conducting precious metals and those coins get diverted to the Fed's melting pot. That's why you don't find silver coins in bank rolls any more, they've been scanned. The very low dollar values in this law, $5, means it will be used to control border crossings, justify body scans, etc. Don't step over legal lines that are easily avoided to your profit.

 

http://www.usatoday.com/money/2006-12-14-melting-ban-usat_x.htm

Under the new rules, it is illegal to melt pennies and nickels. It is also illegal to export the coins for melting. Travelers may legally carry up to $5 in 1- and 5-cent coins out of the USA or ship $100 of the coins abroad "for legitimate coinage and numismatic purposes."

Violators could spend up to five years in prison and pay as much as $10,000 in fines. Plus, the government will confiscate any coins or metal used in melting schemes.

The rules are similar to those enacted in the 1960s and 1970s, when metals prices also rose, the Mint said.

Tue, 03/08/2011 - 18:39 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Thanks for pointing out that it is illegal to melt or export them.  I will just hold them as they are and see if in the future they sell in bags as "junk nickels", like the way old silver coins are sold as junk silver.

If the Mint does make a valueless nickel, be assured that the current nickels will disappear and be saved by SOMEONE!

Tue, 03/08/2011 - 18:55 | Link to Comment MrSteve
MrSteve's picture

Sorry for the double post. You bet the old coinage will have value. Old worn, dateless buffalo nickels today sell retail for 7x to 10X face value, just as curiosities. Jewelry artisans stamp them into curved buttons or concho-style medallions. If you price out stainless steel washers at the local hardware store, you'll see how drilling out an old nickel will save you 20 to 30 cents right now. Nickel coinage was suspended during WWII because the nickel was needed to make stainless, rust-resistant steel for naval ships and gun barrels. They used silver for coinage instead of nickel in the US and "tombac", a yellowed bronze-zinc, in Canada.

Tue, 03/08/2011 - 21:55 | Link to Comment WaldenPondzi
WaldenPondzi's picture

Now the question is how to convert that $55.60 into silver...

Tue, 03/08/2011 - 11:12 | Link to Comment Rogerwilco
Rogerwilco's picture

The bottom line is getting Obama reelected. To make that happen they need $1.75 gasoline and 4% mortgage rates, and crashing commodities and equities will do it. After the election they can turn the QE pump on again.

Tue, 03/08/2011 - 11:33 | Link to Comment Pladizow
Pladizow's picture

A puppet can easily be replaced by another.

The US President is irrelevant to what the Fed will do to protect its masters - the banks.

Tue, 03/08/2011 - 11:54 | Link to Comment Sad Sufi
Sad Sufi's picture

Yes, and the question is whether "the banks" prefer slight deflation to protect what they do own (notes on others' property) or the banks prefer to "save" the US balance sheet with controlled inflation.

Tue, 03/08/2011 - 12:02 | Link to Comment yipcarl
yipcarl's picture

exactly.  These people that spend time writing about the 'presidents' are fools.  The president is a figure head who is told what to do.  What the F up. 

Tue, 03/08/2011 - 12:10 | Link to Comment Long-John-Silver
Long-John-Silver's picture

 ????   Meet the new Boss ???? Same as the old Boss

Tue, 03/08/2011 - 13:29 | Link to Comment Bay of Pigs
Bay of Pigs's picture

No shit. Assholes like Mitt Romney are already being trial ballooned to the Sheep via the MSM brainwashing system. Obama will to tossed overboard if another face is needed.

Tue, 03/08/2011 - 14:29 | Link to Comment centerline
centerline's picture

Yup.  The illusion that we have a voice... that we have a vote.  Just another scam.  At one point, it might have been true... in the day of statesmen.  We don't have statesmen anymore.  We have politicians.  Bought and paid for.

Tue, 03/08/2011 - 15:48 | Link to Comment Bananamerican
Bananamerican's picture

Romney is a fucking android....

Tue, 03/08/2011 - 21:58 | Link to Comment WaldenPondzi
WaldenPondzi's picture

Dick Morris for President

Tue, 03/08/2011 - 11:39 | Link to Comment reachsb
reachsb's picture

Oil crashed from its lofty levels in 2008 only after we went through a financial crash. If we were to engineer a similar crash now it would instantaneously lead to a 20% unemployment rate (not good for the re-election efforts). An induced commodity selloff can have many unintended consequences which could further exacerbate the problem that you are trying to solve. Commodities just don't sell off on their own - you need to create conditions to facilitate that (like spreading fear and panic about the direction of the economy).

In order to drive interest rates lower, they would have to engineer a crisis in the world which in turn, would lead to money rushing into USTs (perceived safe haven). The last time around, they engineered a crisis in Greece sovereign bonds to drive interest rates lower. 

The Fed's in a quandry now - turn on the deflationary spigot too much and unemployment will get out of control. On the other hand its efforts to bring the unemployment rate lower is leading to all these hyper-inflationary pressures.

 

Tue, 03/08/2011 - 11:57 | Link to Comment EscapeKey
EscapeKey's picture

Oh please oh please oh please take silver back down to $20, and I have a good £10k ready to be plowed into physical.

Tue, 03/08/2011 - 13:33 | Link to Comment Hooter Shaker
Hooter Shaker's picture

No shit.  I hope they do crash Silver.  If it happens I am jumping in with both feet.

Wed, 03/09/2011 - 02:26 | Link to Comment JW n FL
JW n FL's picture

I will hold your hand and jump with you.. I wouldnt want you to get lost once you go there... buddy system, Fight Club Style!

Tue, 03/08/2011 - 13:34 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

 

here, EK, smoke summa mine...i'd offer you some of my slewie blend coffee, but there is risk of white hair...

this "author" will never be accused of being unwilling to pull a punch...

the FED this, the FED that...here, the goobermint hasta try to lose a few pounds so the FED can stop printing and the Treasury checks we all love so much won't freaking bounce!   the FED will then hafta decide what tf to do with all the "liquidity" the FED is, at present, paying its robobanksters to control.  apparently this will be used to provide fractional banking products to people who have no jobs and no money, but who are armed up the ass and active in the local militia.  the goobermint will hafta guarantee these loans so they can be packaged and sold to to foreign investors who are waiting for silver to go back to $20.

i like earl gray tea.  with a taste of maple syrup, a drop of fresh lemon, and a little sprinkle of ginger.

Tue, 03/08/2011 - 15:11 | Link to Comment EscapeKey
EscapeKey's picture

Heh, thanks for the offer, but I think you might need it more than I. I'll have a pint or two instead.

Wed, 03/09/2011 - 02:28 | Link to Comment JW n FL
JW n FL's picture
by slewie the pi-rat
on Tue, 03/08/2011 - 12:34
#1030079

 

i like earl gray tea.  with a taste of maple syrup, a drop of fresh lemon, and a little sprinkle of ginger.

***********************************************************************

Try Chai tea.. the orange box.. I will look at the label in the morning.. FANTASTIC!!! with half and half with vanilla syrup... watch out! nector of the Gods!

Tue, 03/08/2011 - 12:32 | Link to Comment SheepDog-One
SheepDog-One's picture

Obama is completely irrelevant. Any puppet on a string is easily replaced.

Tue, 03/08/2011 - 11:14 | Link to Comment schoolsout
schoolsout's picture

This is one thing I've been thinking about lately...

they can't continue QE without a pause to let things settle

- Prices are getting too high and the people are starting to catch on

Tue, 03/08/2011 - 13:35 | Link to Comment Calmyourself
Calmyourself's picture

That is a distinct possibility.  The entertaining part will be the MSM / Administration spin on the reasons and how they set up their puppet "bammy" with the save and win as qe3 begins..

Tue, 03/08/2011 - 11:21 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

 

which commodities (including my beloved silver) and the stock and bond markets could all sell off between 20% and 40%. The trigger will be the cessation of QE II

It will take Turd 3 days to find all the egg whites in his mustache .... But,but,but ....

 

Like Lebron James counting championships before they happen.... not 3,4,5, not 6, not 7 .... Lol' 

 

He's lucky enough the middle east blew up over the last few weeks ....

 

Tue, 03/08/2011 - 11:47 | Link to Comment tmosley
tmosley's picture

Bet your life on the end of QE on schedule.

"Book it" lol.

Tue, 03/08/2011 - 12:00 | Link to Comment EscapeKey
EscapeKey's picture

Subtracting whiny noise; post content = 0.0

Predictably, you're still not short PMs, right?

Tue, 03/08/2011 - 12:39 | Link to Comment ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

What I enjoy most about your trolls is that you not only give yourself credit for being right in advance, you ask how other people can show their faces after being "pre-wrong"

Tue, 03/08/2011 - 12:47 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

I have been saying for months, no QE to infinity ... Was blasted for this.

 

Turd said he would not post on ZH if gold did not hit 1,650 by mid summer. And he would shut down the blog. We will seeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee .....

Tue, 03/08/2011 - 13:03 | Link to Comment ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

And QE hasn't stopped yet and it is not yet mid summer.  Do you see how that works?

Tue, 03/08/2011 - 13:24 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

What about the great fall of the Keynesian Experiment he sells ?

 

What about the new ice cream parlor he started during the great dollar crash ?

 

His retirement as a serial entrepreneur ? How does this jive with said crash calls on his part ? The end is near ....

Tue, 03/08/2011 - 14:54 | Link to Comment Bay of Pigs
Bay of Pigs's picture

You need some help. Please. Go see a shrink.

 

Tue, 03/08/2011 - 13:34 | Link to Comment ColonelCooper
ColonelCooper's picture

Attacking him BEFORE he is wrong only makes you LESS right, Spalding.   Right now he's spot on.  You also seem to ignore the fact that Turd is trading these markets, not JUST long PM based in his faith in fundamentals as he reads them.  Your comments are as absurd as blasting someone for playing Blackjack because you play Roulette.  He says when he's gonna buy and sell in advance, and he confirms after.  He admits when he misses, and he doesn't charge anyone Jack Shit for his opinions. 

Ironically, he also doesn't spend a lot of time posting about how wrong he thinks you are.

Maybe you should try a SpaldingSmailes.blogspot.com...  See how it works out for you.

Your monniker is projecting himself onto you.  And you wonder why you get junked even when you have something valid to offer? 

 

Tue, 03/08/2011 - 13:43 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Hey did he tell all to sell before the 25% crash in miners a few weeks back, nope? No, he was selling gold to 1,650 with daily links to his blog on every ZH thread. Does Tyler want his gold / silver readership moving on ?

 

How many readers had stops blown out at a loss. But your dead on, he's a trader. Selling the downfall of the USA for personal gain., sorry if I do not agree with his tactics

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