Phoenix Capital Research's blog

Remember, regardless of short-covering bounces, the Euro HAS violated the trendline that support it from July onwards. This technical damage of that move was severe and makes the odds of additional downside significantly higher.

If, at this point, it’s not clear that the entire financial system is not a disaster waiting to happen, then I don’t know what else to say. Indeed, our entire system is built on fraud and managed by folks who don’t know what they’re doing. And if you think they’ll get us steer us to safety, consider that around the globe we’re already beginning to see signs of systemic collapse.

Like I said, the Euro in its current form is finished. Europe can no longer “kick the can” down the road. SOME KIND of resolution has to happen. And it is likely to happen before the end of February.

I can't help wondering if Ben Bernanke can even read. I realize that sounds harsh, but how on earth can he claim inflation is under control? I mean, does this guy even bother reading anymore? He’s an academic right? Isn’t his entire job supposed to consist of reading and thinking?

How will all of this play out? I don’t know. But one thing I DO know is that German Chancellor Angela Merkel’s political party faces seven state elections in 2011. Losing these could mean no additional term for her in 2013.

Most of the “risk on” trade today hinges on the Euro holding up. If the Euro collapses, then stocks and commodities will follow suit (a weak Euro pushes the US Dollar higher).

With that in mind, the weekly Euro chart shows the currency is very close to making a breakdown below its trendline:

In plain terms, the markets are officially on “borrowed time.” The three key charts for determining when things get ugly again are the Euro, US Dollar, and long-term US Treasuries. At some point one of these is going to breakdown in MAJOR way. When it does, it’s going to drag us back into Crisis mode

In plain terms, the system is broken. Everyone, including the Fed, knows it. The financial world has collectively chosen to ignore this due to political pressure and career pressure. However, this will not last forever.

The reality is that situation in Europe has literally reached a fever pitch. We have now progressed to the “contagion” point in which the entire system is at risk versus individual countries. To whit, Ireland has only just been bailed out and already Spain, Italy, Portugal, and Belgium.

"Most people believe that most oil in the world is produced by the big oil companies, the Exxons, the Shells, the BPs, the Totals of the world... That is not true. Most oil in the world is produced by national oil companies.”

Our esteemed Fed Chairman Ben Bernanke is about to find his policies running face first into a BRIC wall. He’s been exporting inflation abroad to the emerging markets all the while claiming it doesn’t exist. With growing civil unrest due to soaring food and energy prices the emerging markets are now fighting back.

Now, many commentators have pointed out the various ways in which this policy has endangered the US’s balance sheet, economic clout, and currency. However, there’s one element that NO ONE seems to have picked up on. That is…

You, me, and everyone else in the US, is now PAYING the Fed for its insane, anti-Middle class policies.

Remember, we are continually paying the debt via interest payments drawn up from tax receipts. Thus, by buying up US Treasuries, the Federal Reserve is in effect reaping interest payments from the US populace.

This week’s action can be summated in a single question:

Which is stronger, the Euro collapse or the Fed’s Permanent Open Market Operations (POMOs) AKA money pumps to Wall Street?

These are the two primary forces at work on the markets today. Thus, this week’s action will be determined by one of the two:

1) The Euro (the bearish influence)
2) Light volume/ the Fed’s ongoing POMOs (the bullish influence)

One of the biggest misconceptions about inflation is that the US Dollar needs to collapse in order for inflation to occur. While a currency collapse often accompanies periods of heightened inflation, this is not necessarily true.

Possibly the most insane development in a year of nothing but insane developments from a financial standpoint was the idea that somehow the Euro was saved as a currency because the IMF leant even more money to various European countries that were already over-indebted.

Consider that these countries already owed too much money… so the IMF (indirectly the US) leant them even more.