Americans may be fleeing from stocks in droves, but they sure aren't shy about rotating the resulting meager liquidation proceeds into weaponry. According to Gallup, "Forty-seven percent of American adults currently report that they have a gun in their home or elsewhere on their property. This is up from 41% a year ago and is the highest Gallup has recorded since 1993, albeit marginally above the 44% and 45% highs seen during that period." Considering the social situation "out there", and the fact that the world is one badly phrased or translated headline away from a complete HFT-facilitated market collapse, this is hardly all that suprising.
We are far enough away from the onset of the Great Recession that another down-wave in the depression (or a new recession if you go by NBER) is either here or due soon. It may not be a severe downturn, as housing and autos would be falling from first- or second-floor windows in that case, but it would be occurring on the backdrop of a weakened structure, and thus the financial effects could be more severe than the economic effects (which could be severe or mild). Here is what you need to do.
The most comprehensive summary of the main bullish and bearish events in the past week.
If the “Occupy” Movement and Tea Party Join Together, We Can End the Malignant Partnership Between Big GovernmentSubmitted by George Washington on 10/20/2011 17:21 -0500
Forget the false left-right divide ... we're ALL Americans and we're ALL fighting the merger of BIG government and BIG business
The reason the liberal mainstream corporate media demonized the Tea Party is because it threatens the status quo. The reason the conservative corporate mainstream media demonizes Occupy Wall Street is because it threatens the status quo. These are textbook divide and conquer strategies being used on the American people. Do not fall for it. Yesterday I read a really interesting gallup poll that stated: “Not surprisingly, Americans who consider themselves supporters of the Occupy Wall Street movement (26% of all Americans) are more likely to blame Wall Street than the federal government for the nation's economic problems. Supporters of the Tea Party movement (22% of Americans) are overwhelmingly likely to blame the government.” What is most compelling to me is that 26%+22% = 48% so basically almost a majority. All we need to do is teach people that Washington D.C. and Wall Street are now the same corrupt entity. They are one gigantic rogue trader sucking the lifeblood out of America. If we can unite these forces, which I can say with certainty agree on the important issues, we can put an end to the status quo and free ourselves of this bondage.
Despite all the negative news, markets are hanging tough. Why? I believe financial markets continue to have a "Moral Hazard" premium priced-in. The idea that governments will step in to save the day remains entrenched in the minds' of investors. There are signs, however, that this premium may soon be re-priced. Indeed, this week's rally has left much to be desired. Copper, nor the credit markets, have confirmed the move higher in equity markets. Breadth has lagged as well. These are signs that this latest rally isn't healthy. Should government authorities fail to come through and Eurozone contagion takes hold, financial markets would begin to compress this premium. A strong break of 1120 would signal that a re-pricing is ongoing. Overall, the global economy is at a crossroads. Until the Eurozone issues are structurally taken care of, I remain very cautious. Capital preservation remains the name of the game.
Three key metrics which strongly suggest that silver remains far from a bubble if not undervalued. The first is silver’s real price today adjusted for the inflation of the last 31 years. Silver’s real high in 1980 was $130 per ounce – more than double the price today (see chart above). The second is the gold silver ratio which has averaged 15 to 1 throughout history due to geology and the fact that there are 15 parts of silver to every 1 part of gold in the earth’s crust. The third metric is comparing silver’s current bull market to that of the 1970’s. Silver has risen by a factor of 10 in the last 9 years – from near $4 in 2001 to over $41 today. In its bull market from 1971 to 1980, silver rose by over 3,199% or by a factor of more than 32 in just 9 years culminating in the blow off top in 1979. Today, the physical supply of silver bullion is much less than in the 1970’s. Also there is the ‘Asian factor’ and 3 billion people with growing incomes, many of whom see silver as a store of value against currency depreciation. Demand for silver in Asia has been increasing and in China alone silver demand is increasing from a near zero base. The demand was not present in the 1970’s.
Following Obama's departure for a much needed vacation the day the market had its most recent 400+ point drop, it was somewhat expected that that the general public will not be too happy with the president. Sure enough, according to Gallup which traditionally has the most representative polls (in this case 1500 random strangers, +/- 3% margin of error) the president's approval rating has just taken out last week's record low of 39% and was at 38% in the past few days. Obviously those disapproving hit an all time high of 54%. We are confident that Obama is well aware of this disturbing trend in popular opinion. What we have no clue about is what he will do to reverse it.
The only place where slop is being dished in abundance ...
Today's economic docket includes retail sales and consumer sentiment and business inventories. Bill Dudley makes more remarks on iPad edibility although he may provide some critical insight as to what we may expect two weeks from now at Jackson Hole.
Your one stop summary of all the bullish and bearish events of the past week.
Japan Launches Campaign to Weaken Yen (WSJ)
ECB to protect Europe by buying bonds (Telegraph)
Silent Scream of Swiss Franc Shows Great Distortion Amid Great Moderation (Bloomberg)
Pressured by White House, Treasury Secretary Is Expected to Stay at Post (NYT)
The U.S. Economy Feels the Pull of Gravity (BusinessWeek)
ECB Sees Lenders Rush to HoardCash (FT)
Groupon’s Strikeouts Reveal an Unspoken Truth (BusinessWeek)
Americans' Spending Increases in July (Gallup)
Pentagon’s First Installment on Cutting Debt May Be $28 Billion (Bloomberg)
Amid Debt Battle, More Americans Say Economy Getting Worse (Gallup)
Treasury Faces Pressure to Detail Backup Plan (WSJ)
Debt-Increase Dispute Tests Boehner’s Power (Bloomberg)
U.S. Economic Growth Probably Slowed (Bloomberg)
IMF Board Holds Informal Board Meeting On EU's Greek Financing Deal (WSJ)
Why are we in this debt fix? It’s the elderly, stupid (WaPo)
France Seeks Rapid Adoption of Greek Bail-Out (FT)