Dear Jim,

This is a compelling read. It is clear that the Fed is underwriting any EU attempts at forestalling contagion. It cannot last forever, maybe even more than a few more months. A gigantic liquidity crisis is unfolding and it is not possible to print or manufacture enough money (promises to spend energy) to satisfy an estimated $1.6 quadrillion derivatives bubble that is imploding.

CIGA Rusty Bayonet

Federal Reserve Extends Its Swap Lines With ECB, BOJ, Other Central Banks
By Caroline Salas – Dec 21, 2010 7:38 AM PT

The Federal Reserve authorized the extension through Aug. 1 of its temporary dollar liquidity swap arrangements with the European Central Bank and the central banks of Japan, Canada, Switzerland and the United Kingdom.

The arrangements had been authorized through January, the Fed said today in a statement. Fed officials voted in May to restart the emergency currency-swap tool to keep Europe’s sovereign-debt crisis from spreading to U.S. markets.

The swaps allow the U.S. central bank to provide the “full allotment” of U.S. dollars as needed to European central banks, the Fed said in a statement in May. The U.S. central bank had closed on Feb. 1 all swap lines opened during the last crisis, triggered by the subprime mortgage meltdown in 2007.

The extension of the swaps reflects the Fed’s desire to “keep all their options open” to ward off systemic risk rather than a sign of increasing threats to U.S. markets, said Ward McCarthy, chief financial economist at Jefferies & Co. in New York. Use of the liquidity swaps declined to $60 million last week from more than $9.2 billion in May, according to the Fed’s weekly reports on its balance sheet.

More… ^[1]

 

Dear Jim,

I hope you recovered well from your trip.

Do we have a Cup & Handle pattern in copper to the SP500? See http://wdinvest.wordpress.com/2010/12/22/copper-divided-by-sp500-a-cup-handle-pattern/ ^[2]

The ratio is at an all time high, and still, statistics show there is no inflation.

I always quote Mark Twain: "There are lies, there are damned lies and there are statistics…"

A Merry Christmas and a happy, healthy and prosperous New year…

Best regards,
CIGA Willem

 

There’s a mini ice age coming, says man who beats weather experts
CIGA Eric

Cold and Wet Cycle. Being right has nothing to do with consensus opinion.

Piers Corbyn not only predicted the current weather, but he believes things are going to get much worse, says Boris Johnson, London’s mayor.

The man who repeatedly beats the Met Office at its own game.

Well, folks, it’s tea-time on Sunday and for anyone involved in keeping people moving it has been a hell of a weekend. Thousands have had their journeys wrecked, tens of thousands have been delayed getting away for Christmas; and for those Londoners who feel aggrieved by the performance of any part of our transport services, I can only say that we are doing our level best.

Source: smh.com.au ^[3]
From Bob

More… ^[4]

The Secular Trends Provide Generational Profits
CIGA Eric

^[5]The message of the tape (market) for gold stocks reflects a contraction of downside force in the short-term trend. The 12/02 breakout gap has been close several times on shrinking volume. The probing and close above support on a contraction in volume illustrates a bullish setup. A market that cannot break support with force will reverse and retest resistance with force. A break of the power down trend line (PDT) in trend energy, REV(E), will confirm a short-term trend inflection.

Gold Miners Index ETF (GDX):
^[6]

Don’t let 5-minute charts and analysis blind you of the secular trends. The Masters Jesse, Richard, D.W., Bart, etc. have passed down "the one lesson" that cannot be ignored.

"Cut your losses, and let your winners run"

Those that live in the world of 5-minute charts and analysis will always be blind to the secular trends. The secular trends provide generational profits.

S&P Gold (Formerly Precious Metals Mining)*
*S&P Gold from 1945, Barron’s Gold Stock Index from 1939-1945, 1922-1939 Homestake Mining:
^[7]

More… ^[8]

2011 Will Be The Year of Economic Acceleration (On Paper)
CIGA Eric

Even the absurd can become believable if it is repeated enough times. Many ‘experts’ and talking heads will suggest ad nauseum the economy is accelerating in 2011. They’ll cite key statistical improvements in centrally generated economic time series. The improvements will be cast as “shock and awe” until year end. Simply be forewarned of the transition from economic recovery to acceleration.

Unfortunately, little has changed since the onset of the crisis other than the magnitude of the debt created.

Personal expenditures, or consumption, still represent over 70% of GDP (national income). Excessive consumption fueled by debt got us into this mess, so only logic would dictate that it will get us out if it, right?

Personal Consumption Expenditures (PCE) As A %GDP and Personal Consumption Expenditures As A %GDP Average from 1947:
^[9]

Ignore the fact that domestic private investment has collapsed levels not seen since the Great Depression. Oops, it’s best we don’t look at that.

Gross Domestic Private Investment (GDPI) As A %GDP and Gross Domestic Private Investment (GDPI) As A %GDP Average from 1947:
^[10]

Government expenditures and investment continue to their upward trend as consumption inevitably weakens under weight of the debt burdens created under shop-til-you-drop mentality created by the illusion of the plateau of economic prosperity.

Government Consumption Expenditures and Gross Investment (GCEI) As A %GDP Average from 1947:
^[11]

The cold reality is that Americans, driven by the instinct of self-preservation, are beginning and to save more. Ultimately, the trend towards thriftiness, while curtailing consumption and redistributing the drivers of economic growth to centralized QE and stimulus, will provide the fuel for the next economic expansion.

Savings (SAV) As A %GDP and Savings (SAV) As A %GDP Average from 1947:
^[12]

Headline: Economy grew modestly in July-September quarter

The economy grew at a moderate pace last summer, reflecting stronger spending by businesses to replenish stockpiles. More recent barometers suggest the economy is gaining momentum in the final months of the year.

Gross domestic product increased at a 2.6 percent annual rate in the July-September quarter, the Commerce Department reported Wednesday. That’s up from the 2.5 percent pace estimated a month ago. While businesses spent more to build inventories, consumers ended up spending a bit less.

Source: finance.yahoo.com ^[13]

More… ^[14]