Jim Rogers

Equities internationally and bonds in Greece, Ireland, Spain and Italy have fallen this morning while gold rose to new record nominal highs in euros and pounds (over EUR1,118/oz GBP980/oz respectively). The Italian 10 year rose above 6% for the first time and the Spanish 10 year yield rose to 6.12%. US stock futures are pointing to losses on the U.S. opening. Irish government bonds have reached a new euro era record high with the 10 year rising to 13.57% - up from 11.6% only 5 days ago. Ireland’s “bail out” is clearly not working as contagion deepens in the eurozone.

All you need to know by www.thetrader.se

All you need to know by www.thetrader.se

On a very slow trading day, some big picture observations from Russ Certo of Gleacher: "Good afternoon. The S&P 500 slid for a sixth straight week, its longest swoon since July 2008. The Dow closed below 12,000 for the first time since March, and 6.7% off the highs and has been bantering around all day today. Declining stocks outpaced advancing ones by 4-to-1 ratio on Friday. Stock, money market and muni funds had a weekly net outflows averaging $4.2 billion, $1.1 billion and 141 million respectively, in the latest four weeks. Investment grade corporate issuance fell to its slowest pace of the year last week spooked by a host of global, sovereign and geopolitical items. Just $6.3 billion in new investment grade bonds were sold last week in this climate. The “Sell in May and walk away” mantra is on trader’s minds as last year the Dow receded nearly 14% from late April through early July. Remember the calls to attention to the Hindenburg formations which cast a cloud over markets before they climbed a wall of worry since?"

Gold is marginally lower while silver is showing strength again today after yesterday’s 'worst ever' OPEC meeting ended in disarray and saw oil prices surge. Markets await today’s ECB rate decision and signs as to whether interest rates are set to rise sooner rather than later. Signs of an interest rate rise in July should see the euro and gold rally versus the dollar. The precious metals are also likely to be supported by further sharp falls in peripheral markets bonds, particularly Greece, this morning. While all eyes are on the ECB today, there was a reminder late yesterday that it is not just the Eurozone that is struggling with debt. Fitch Ratings said it would put US debt on watch in early August if Congress fails to raise the federal debt limit. OPEC, the oil cartel’s increasing impotency was seen yesterday when Libya, Iraq, Angola, Ecuador and Algeria sided with increasingly influential Iran and Venezuela rather than Saudi Arabia and its allies Kuwait, Qatar and United Arab Emirates. Also, Japan’s nuclear crisis is leading to a decline in nuclear energy production, possibly long term in nature, and China’s massive drought has led to marked decline in hydroelectric energy production. There is increasingly the real risk of an oil crisis especially given the very tense geopolitical situation in North Africa and the Middle East. Separately, Iran announced it planned to treble its capacity to produce highly enriched uranium which alarmed western powers and was deemed ‘provocative’ by one international relations analyst. Oil prices have risen over 10 times since 1999. For gold prices to just catch up with the price increases seen in ‘black gold’, gold would have to rise over $2,500/oz (10 X $250/oz).

Jim Rogers spoke to a very dramatic and even more hoarse Bartiromo, touching on old and well-known themes, namely that the administration is essentially using up its last stimulus bullet with the current recession: "When the problems arise next time what are they going to do? They can’t quadruple the debt again. They cannot print that much more money. It’s gonna be worse the next time around." Alas, as Obama appears to be preparing, "they" will simply do more of the same: the same payroll tax that was supposed to cure all evils in December. The fact that nobody anticipated something so stupid is probably indicative of the administration's genius. Or lunacy. Followed by more dollar printing of course. On what needs to be done to avoid the debt ceiling breach which will shut down the government, Faber believes that nothing short of Draconian measures will be relevant: "We’ve got troops in 150 countries around the world. They’re not doing us any good, they’re making enemies. They’re costing us a fortune." On the other hand he acknowledges: "we can never pay off these debts." As usual, Rogers saved the best for Bernanke: "Since the first day Mr Benanke went to Washington I knew he was going to be a disaster. He has never been right about anything in the 7 or 8 years he has been there. I hope he doesn't come back with QE3 but that's all he knows. The only thing he knows to do is to print money. He doesn't understand finance, he doesn't understand currencies, he doesn't understand economics. He understands printing money. It's the wrong thing to do but that's what he'll do... They're gonna bring QE back because he will be terrified and Washington will be terrified," he said. "There's an election coming in November 2012. Washington's gonna print more money." Lastly, in terms of investments, Rogers is long the dollar but only "for a rally", and also owns Chinese stocks and commodities, would be buying more gold and silver if the price were to go down, and is short tech stocks and JP Morgan. Like we said nothing new. With one addition: the republicans will now get tax cuts, so democrats get QE3. As we have been saying - 2011 is nothing other than 2010 all over again.

The recent correction in the commodities markets may be providing Bernake, Geithner and their easy money acolytes with a sense of relief given the relentless run up in prices of raw materials since the announcement of QE back in 2008, but they should not sleep tight just yet. As anyone in the markets will tell you, when any underlying has a price move so vertical in its trajectory it’s bound to face a correction as the smart money, having gotten in for fundamental reasons much earlier along the trend line now wait for the panic buyers or the Johnny-come-lately’s to give the rally that last unsustainable spike to unload their longs and leave the suckers holding $40.00 silver in their purses. So one must step back and take a long view. Although it would appear that those of us who warn that inflation is not just a threat but very much a fact of life now were knee-jerk pontificators jumping on the commodities rally trend for political (read: Fed/Obama bashing) reasons, the analysis is quite sound. Most important, it is methodical not emotional as price surges tend to make investors and analysts from time to time. Here are some facts: even with the inevitable correction in commodities, as of this writing crude oil is 35% more expensive than it was a year ago…advancing with ups and downs along the way from as low as $17.50/bbl in November of 2001 to its current level of over $100/bbl or around a 19% annual appreciation in a decade since the Fed started giving away dollars. Silver 93% Wheat 84% Cotton 100% Coffee 55% Cattle 10% etc etc. Gold is up 22% for the year. More revealing, it is up an astonishing 450% since 2001. In that same decade the USD index against all currencies shed 40% of its value.

Inflation is “the most pressing problem” facing China, Vice Premier Wang Qishan said at the Washington talks. Hey - they should all move over here - our Fed Chairman says we don't have any inflation at all!

And so the Bill Gross juggernaut begins rolling.  Reuters reports that "Influential investment veteran Jim Rogers said on Tuesday he plans to short U.S. Treasuries as soon as this afternoon as he expects the end of quantitative easing to pressure government bonds." Odd. Where have we written/heard that before. But of course, who listens to Bill Gross (the largest bond manager in the world) and Jim Rogers (the co-founder of Quantum) - surely they are no-nothing fools (who just happen to agree with our initial assessment that in the absence of QE2 all bets will be off). Reuters adds: "Rogers said he expects the U.S. dollar to rally when the Federal Reserve's unconventional monetary measure ends in June. "I'm not short bonds yet but I plan to short bonds - maybe this afternoon if I get around to it," Rogers told Reuters Insider television." Recently Jim Rogers correctly pointed out that silver is not in a bubble (a finding confirmed yesterday by Zero Hedge when we demonstrated that non-commercial spec longs in silver are at 2 year low) and continues to be long precious metals until such time as silver really hits the parabolic phase, well north of $100 (by which point the dollar will likely be confetti anyway). So as ever more influential asset managers turn outright hostile on rates, just how much longer will the Fed's vol selling yield suppression scheme work for?

Contrary to very popular opinion, buying U.S. Treasuries could be one of the best investments of 2011. Few times in history has an investor been able to invest with a major price trend and simultaneously be a contrarian. When these opportunities arise, they must not be overlooked.

GoldCorp submits: "Gold and silver are tentatively higher after their 2% and 8% falls yesterday. In silver, speculators on the COMEX continue to liquidate en masse after margin was increased a massive 84% and various stop loss levels are hit, leading to further falls in the futures market. Absolutely nothing has changed regarding the fundamentals driving the gold and silver markets and this will likely be another correction in gold and another sharp correction in silver. Silver’s sell off has been vicious but value buyers continue to accumulate silver bullion. Jim Rogers, who arguably has a better track record than Soros in recent years, remains bullish on gold and silver and told CNBC, “if it goes down I hope I’m smart enough to buy more silver." Also, there are reports this morning from the Wall Street Journal and Mitsui that there was decent buying of silver from China at these price levels overnight."

"In the long run, as decades of capital misallocations and inefficiencies in the global economy get shaken out, there’s going to be a redistribution of the wealth. And I think the wealth is going to go to where it’s treated best. And at the end of the day, that’s really what I’m looking for: the places that have the most solid fundamentals and the best growth potential." So states Simon Black, who travels the world (over 20 countries in the past 3 months) in order to assess and report on the investment and lifestyle opportunities offered by various international destinations for the readers of his blog, SovereignMan.com. His boots-on-the ground observations lead him to conclude that there are a number of resource-rich and fiscally-sound developing nations that are much better positioned to meet the future than the US and its developed counterparts. Smart investors, in his opinion, can't afford to ignore the stability and returns (both financial and lifestyle) these countries offer. They should be asking themselves: do I have sufficient exposure to these opportunities?

In this podcast, Axel explains:

• Why Ben Bernanke is hell-bent on debasing the US dollar to spur economic growth
• How the politics of the Fed work, where the power lies and which arguments and actions are likely to carry the day
• Why inflation expectations actually matter more than actualy inflation, and why the Fed will not rest until it is satisfied the market expectations for inflation are higher
• That the US is on its way to a fiscal trainwreck - a reality our political leadership continues to lack to backbone to address honestly
• The Fed's powers are prodigious, but not as great as the market. If and when the market moves against policymakers, nothing will stop it. The growing risk is we quickly tip into the inflation the Fed wants, which then quickly leads to runaway prices
• His outlook for gold and why he thinks this "ultimate currency" can go much higher from current levels
• How the US is caught in a Catch-22: our loose monetary policy continues to encourages credit consumption that makes us increasingly vulnerable; but we're so indebted already that if the Fed tightens rates, the economy could easily fall into a full-blown depression

On one hand we have Goldman (and various other novices) telling us there may be a small blip at most in Treasurys when the Fed stops buying bonds. On the other, as has been much discussed, we have the world's biggest bond manager disagreeing. Now he gets some popular company. Jim Rogers, formerly of the Quantum Fund, who traditionally comments more on the commodity space has chimed in and pledged his allegiance to Team Gross. In a release to Reuters Insider Rogers said: "If the bond goes up another 3 or 4 points, I for one am going to sell it short." He also said what we have been saying since about October of last year: "I mean the market is just going to give up. Once (the Fed) ... stops buying bonds I'm not sure who's left to buy bonds at that point." The right question is who are Primary Dealers going to flip their bonds to, especially once the marginal increase in excess reserves ends.

A few days ago Jim Rogers prudently warned that silver had entered parabolic mode and the the only case which would not lead to a collapse in silver prices (once silver hit $100 that is) is if the Federal Reserve note, or the liability to all those uber-valuable Fed assets known as Treasury Bonds (and of course Agencies, thank you QE1) became "confetti." Well, confetti is what we have. As of tonight, the dollar has just taken out the 2009 lows, and only the extreme carry trade which sustained the overall market into the biggest market crash ever, back in 2008 is now a lower point in the DXY index. In other words only a complete market wipe out, or an exogenous external event such as war, now that the market does not even blink at such black swans as civil wars, bankrupt European countries, nuclear catastrophes, and record earthquakes, can lead to some restoration in the purchasing power of the US currency. Incidentally, as the long term DXYchart below shows, the current dollar cash is by now means the most pronounced one. A far bigger one occurred in the mid 80s, when the dollar was cut in half from over 160 to 80, in a move that, as everyone who was alive back then and not merely some derivative of gaseous gallium metal and arsenic trichloride, recalls culminated with Black Friday. Oh yes, gold just hit another record high.