Posted at 3:19 PM (CST) by & filed under Jim's Mailbox.

Greetings Jim,

The powerful rally following the long-term breakout in early April continues to gain strength and the Gold Currency Index closed at a fresh all-time high for a second straight week. Technical indicators are bullish overall on the weekly chart, suggesting that this move can certainly go much higher. Is there any doubt that gold is now the currency of choice around the world? Of course, anyone who has been watching the secular bull market in gold over the past nine years has known this for a while, but it looks like conventional wisdom is finally starting to understand what is happening as well.

Best,

CIGA Erik
Prometheus Market Insight
http://www.prometheusmi.com

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Posted at 2:19 AM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

This week’s Commitment of Traders report details what we have come to expect with gold for the most part but with one exception which merits mentioning.

Front month gold closed at $1162.20 on Tuesday of last week (April 27, 2010). It went on to make a high of $1192.80 on the following Tuesday of this week (May 4) before settling lower on the day at $1169.20.

The translation – the COT report covers the time period during which gold added $30 to its price before a wave of selling shaved off most of those gains when the reporting period came to a close.

If you look at the COT data, the Managed Money side of things increased their net longs over this time frame by approximately 3,400. The other large reportables increased their net long position by roughly 6,100. The public increased their net long stance by 1,000 contracts.

The Producer/User/merchant increased their net short stance by about 11,500 as usual absorbing all of those buys.

Here is where it gets a bit interesting. The swap dealers who are almost always net short in gold, actually DECREASED their stance by approximately 950 contracts. That means they were net buyers on the week.

I am not quite sure what to make of this as of yet and want to see another week’s worth of data but this is a bit unusual behavior for that camp. These banks who originate the swaps and who then look to hedge those generally tend to mirror the funds only in the inverse, selling when the specs are buying and buying when the specs are liquidating longs. As a general rule, they tend to move in sync with the Producer/user/processor/merchant category as can clearly be seen on the chart. I want to add this is not the case in many other markets but definitely it is the rule in gold.

While the latter category is not that far off from its peak net short position (8,400 or so to be a bit more precise), the Swap dealers are nearly 20,000 shy of their largest net short position.

The funds are approximately 24,800 shy of their largest net long position.

Obviously there is still plenty of room for the specs in which to play.

I want to monitor this especially now that gold has taken out $1200 to see what these swap dealers did the last three days of this week. Unfortunately that will have to wait until next week’s release of the COT data.

Again, there is no hard, fast rule set in stone which states that the players cannot exceed these levels. Indeed, when gold really gets cranking these levels will be eclipsed by newer and even higher ones as has occurred throughout the entirety of this now decade long bull market in gold.

Click chart to enlarge this week’s COT data in PDF format with commentary from Trader Dan Norcini

COT 5-7-2010.jpg

Posted at 10:10 PM (CST) by & filed under General Editorial.

Dear Extended Family,

The solution is the problem. To quote Bill Carleton’s album, Squeeze the People, "Main Street is in the hands of a Roulette Wheel." He is so correct.

The name of the "Roulette Wheel" is Credit Default Swaps. It does not matter what the G-7 or the G-20 does. It does not matter what the IMF, ECB and Fed under a beard do. Mrs. Merkel’s foolish political strategy fits right into the equation.

CDS are going to take down every major currency, making trillions for the players. It will in time turn on the USA as it is already operating against the financially weaker Illinois and New York debt.

The dollar, as it gains ground due to the mirror image of the euro, becomes weaker and weaker due to overvaluation with no fundamental legs. The dollar’s time will come.

The OTC derivative credit default swap is about to clean the clock of the world. Der Spiegel is right but the debt is there. It will not go away but only grow bigger. The situation is in the cross hairs of the richest people on the planet hell bent on getting richer. That is the message of the Dow dropping 1000 points regardless of how it happened.

Nothing the G-7 or G-20 does will stop the predetermined avalanche in the world of fiat currency. Armstrong is right in that when it comes time for the great coming apart it will be akin to the Big Bang.

You are either ready now, or there will be no chance of readiness. Right now ready means gold and gold equivalents. The last currencies to be attacked will be the Cando and the Swiss Franc.

It is all over. The fat lady has sung.

Respectfully,
Jim

The Mother of All Bubbles
Huge National Debts Could Push Euro Zone into Bankruptcy
Greece is only the beginning. The world’s leading economies have long lived beyond their means, and the financial crisis caused government debt to swell dramatically. Now the bill is coming due, but not all countries will be able to pay it.
By SPIEGEL staff.

Savvas Robolis is one of Greece’s most distinguished economics professors. He advises cabinet ministers and union bosses. He is also a successful author and a frequent guest on the country’s highest-rated talk shows. But for several days now, it has been clear to Robolis, 64, the elder statesman of Greece’s left-wing academia, that he no longer has any influence.

His opposite number, Poul Thomsen, the Danish chief negotiator for the International Monetary Fund (IMF), is currently something of a chief debt inspector in the virtually bankrupt Mediterranean country. He recently took three-quarters of an hour to meet with Robolis and Giannis Panagopoulos, the president of the powerful trade union confederation GSEE. At 9 a.m. on Tuesday of last week, the men met behind closed doors in a conference room in the basement of the Grande Bretagne, a luxury hotel in Athens. The mood, says Robolis, was "icy."

Robolis told the IMF negotiator that radical wage cuts would be toxic for Greece’s already comatose economy. He said that the Greeks, given their weak competitive position, primarily needed innovation and investment, and that a one-sided fixation on cleaning up the national budget would destroy the last vestiges of economic strength in Greece. The IMF, according to Robolis, could not make the same mistake as it did in Argentina in the early 1990s. "Don’t put Greece on ice!" the professor warned.

But the tall Dane was not very impressed. He has negotiated aid packages with Iceland, Ukraine and Romania in the past, and when he and his 20-member delegation landed in Athens on April 18, they had come to impose a rigorous austerity program on the Greeks, not to devise long-term growth programs.

Thomsen’s mandate is to save the euro zone. And any Greek resistance is futile.

Time to Foot the Bill

Robolis versus Thomsen. For the moment, this is the last skirmish between the old ideas and ideals of prosperity paid for on credit and a generous state, against the new realization that the time has come to foot the bill. The only question is: Who’s paying?

The euro zone is pinning its hopes on Thomsen and his team. His goal is to achieve what Europe’s politicians are not confident they can do on their own, namely to bring discipline to a country that, through manipulation and financial inefficiency, has plunged the European single currency into its worst-ever crisis.

If the emergency surgery isn’t successful, there will be much more at stake than the fate of the euro. Indeed, Europe could begin to erode politically as a result. The historic project of a united continent, promoted by an entire generation of politicians, could suffer irreparable damage, and European integration would suffer a serious setback — perhaps even permanently.

And the global financial world would be faced with a new Lehman Brothers, the American investment bank that collapsed in September 2008, taking the global economy to the brink of the abyss. It was only through massive government bailout packages that a collapse of the entire financial system was averted at the time.

More…

Posted at 9:47 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Two so far.

Bank Closing Information – May 7, 2010
These links contain useful information for the customers and vendors of these closed banks.

Access Bank, Champlin, MN
The Bank of Bonifay, Bonifay, FL

http://www.fdic.gov/

 

Jim Sinclair’s Commentary

The night is young. We might still get a better number for the weekly score of failed banks.

FDIC shuts banks in Fla., Minn., Ariz., Calif.
Regulators shut down banks in Fla., Minn., Ariz., Calif.; brings total failures to 68 in 2010
Ieva M. Augstums, AP Business Writer, On Friday May 7, 2010, 8:25 pm

CHARLOTTE, N.C. (AP) — Regulators on Friday shut down banks in Florida, Minnesota, Arizona and California, bringing the number of U.S. bank failures to 68 this year.

The Federal Deposit Insurance Corp. took over The Bank of Bonifay, based in Bonifay, Fla., which had $242.9 million in assets and $230.2 million in deposits; and Access Bank, in Champlin, Minn., with $32 million in assets and $32 million in deposits.

The agency also seized Towne Bank of Arizona in Mesa, Ariz., with $120.2 million in assets and $113.2 million in deposits; and 1st Pacific Bank of California in San Diego, with $335.8 million in assets and $291.2 million in deposits.

First Federal Bank of Florida in Lake City, Fla. agreed to acquire Bonifay’s deposits and about $78.1 million of its assets. The FDIC will keep the remainder for eventual sale.

PrinsBank of Prinsburg, Minn. will assume Access’ deposits and assets.

Commerce Bank of Arizona, based in Tucson, Ariz., agreed to assume all of the deposits and assets of Towne Bank, and City National Bank of Los Angeles will assume all of 1st Pacific Bank’s deposits and assets.

More…

Physical market has smashed gold paper, Sinclair tells King World News
Submitted by cpowell on 06:46PM ET Thursday, May 6, 2010. Section: Daily Dispatches
9:40p ET Thursday, May 6, 2010

Dear Friend of GATA and Gold:

Eric King of King World News today got a most incisive 12-minute interview out of Jim Sinclair, proprietor of JSMineSet.com, and America’s "Mister Gold," in which Sinclair remarked, among other things:

– Physical demand for gold has overwhelmed paper gold selling five times in the last two weeks and the cash market will run the gold market
– Gold is now the leading currency.
– While the bankruptcy of Greece is convulsing the financial markets, the bankruptcy of California is four times worse.
– All states and nations will be bailed out by central banks with "quantitative easing to infinity."
– The continuing pessimism about gold’s prospects is a guarantee of higher prices.
– The decline of currencies may produce a "Weimar effect" on equities, pushing them up.
– Confidence in government currencies can evaporate overnight.

You can find the interview with Sinclair at the King World News Internet site here:

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/5/6_Ji…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Jim Sinclair’s Commentary

Any time you have a major statistic come out that you need to understand, subscribe to shadowstats.com

- Happy Assumptions and Census Hiring Help Payrolls 
- April Unemployment: 9.9% (U.3), 17.1% (U.6), 22.0% (SGS) 
- Real Annual Money Supply Contraction Deepens 
- Worst Is Ahead for Economic and Solvency Crises

"No. 295: April Employment/Unemployment, Systemic Risks"
http://www.shadowstats.com/

Jim Sinclair’s Commentary

You have to admit two things.

1. The Federal Deficit is hopeless.
2. This is totally nuts.

House approves $6 billion ‘cash for caulkers’
By Hibah Yousuf
May 6, 2010: 7:42 PM ET

NEW YORK (CNNMoney.com) — House lawmakers on Thursday approved a $6 billion measure that aims to provide rebates to homeowners who invest in energy efficiency improvements — but not without a fight from Republicans.

The bill, officially known as the Home Star Energy Retrofit Act but better known as "cash for caulkers," has been touted by President Obama since December as one of the signature pieces of his administration’s larger job-creation strategy.

The act "is a common-sense bill that will create jobs, save consumers money, and strengthen our economy," President Obama said after the House passed the measure. "We have workers eager to do new installations and renovations, and factories ready to produce new energy-efficient building supplies."

House Speaker Nancy Pelosi, D-Calif., estimates that the legislation will create nearly 168,000 jobs in construction, manufacturing, and retail.

The House vote of 246-161 went through with support from the Democrats and overwhelming rejection from the Republicans. The vote simply authorizes the creation of the program; it does not appropriate the funds needed to run it.

The Senate is expected to take up the legislation this summer and determine how to pay for the program, which is likely to be controversial.

More…

Jim Sinclair’s Commentary

You invented the bulls**t to obtain exchange paybacks and increase exchange volume without merit, so now live with it and stop whining.

Markets nosedive in ‘flash crash.’
It happened so quickly that traders could barely keep up, but in a span of about five minutes yesterday, the Dow tumbled more than 550 points. Before staging a partial recovery, the Dow lost a total of nearly 1,000 points, wiping out $700B of stock market value at the market’s low and marking the Dow’s largest intraday percentage loss since 1987. Several factors may have contributed to the rout, including overall negative sentiment, concerns about a European debt contagion and the possibility of erroneous trades (media reports pointed to Citigroup (C) as a possible culprit, which Citi and futures market CME Group denied). Another contributing factor was the system of trading computers that run on algorithms; as markets fell through trading limits, the algorithms intensified the sell-off, sending orders to venues with no investors willing to match them. A shutdown among some high-frequency trading firms may have further exacerbated the problem. The SEC and CFTC said they’rereviewing “unusual trading” that contributed to the fall; lawmakers have already scheduled a hearing on the issue for next week; and Nasdaq plans to cancel trades of 286 securities that fell or rose more than 60% from their prices at 2:40pm. The Dow pared some of its losses by the end of the day, closing -3.2% to 10,520.32. S&P -3.2% to 1,128.15. Nasdaq -3.4% to 2,319.64.

Jim Sinclair’s Commentary

This is more apt to cause contagion than to heal it. Sometimes I wonder about things being too dumb to be dumb.

G-7 holds contagion conference call.
The G-7 plans to hold a conference call today to discuss the Greek debt crisis. Japanese Finance Minister Naoto Kan said he expects European members "will probably explain" the steps taken to help Greece, but "I don’t think we will be asked to take specific action, such as currency intervention.” The fact that the G-7 nations have scheduled the call at all indicates leaders see growing risks to the global economic recovery, especially as Europe continues to struggle with contagion worries (see more below). The call comes ahead of a eurozone summit later in the day where leaders will finalize the Greek rescue plan, among other issues on the agenda.

Jim Sinclair’s Commentary

They have to settle with the SEC or their litigation outcome risk will go ballistic

Goldman talks settlement with the SEC.
Goldman Sachs (GS) lawyers met with SEC representatives this week to discuss a potential settlement, but sources said the two sides still remain far apart and the preliminary talks haven’t yet covered any specific settlement terms. However, Goldman’s willingness to even engage in the talks suggests the firm is scaling back the aggressive defense it launched following the SEC’s charges.

Posted at 2:04 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

There was a great deal of volatility in gold today although you could not tell it by just looking at the daily chart. The five minute chart shows a market bouncing back and forth between $1194 on the downside and $1206 on the upside. Volume picked up every time the market dipped down towards $1194 with buyers coming in and taking it back above $1200. When it got back above that level, it seemed as if they lacked the conviction to take it up through $1206. Finally, about 45 minutes before the close of the pit session trading, the longs were able to take it up through the barrier erected at $1206 and off she went carrying the shorts out with it. Once the pit session closed, the sellers came back in and tried pushing it back below $1206. The battle rages on.

Technically the gold bulls have cleared a significant hurtle and coming on a Friday in front of a weekend in which anything is possible, that was no mean feat. There looks to be a bit of light resistance just above $1220 which if cleared should give the market the necessary momentum to take on the old lifetime high. Depending on what transpires over the weekend, it could do that in Monday’s session.

Open interest increases reveal that managed money is pouring steadily into gold which is healthy. We will get a glimpse into the composition of the market internals this afternoon when the COT numbers are released. Sadly they will tell us NOTHING about what occurred internally the last three days of this week which is exactly what we really would like to see. Still, it is a given that managed money, the public and the CTA’s were on the long side with the commercials and swap dealers (banks) on the short side. What else is new…

There was some chatter that perhaps over the weekend the G7 comic book characters would come up with some sort of plan to stabilize the situation in Europe that is rapidly spiraling out of control although what that might be remains unclear. They of course could purchase Greek bonds as well as those of Portugal and/or Spain but the ECB still seems reluctant to do that. Any such plan would have a temporary effect but would not deal with the root of the problem at hand, to wit – too many countries that make up the Euro Zone have a dynamic that is going to require a great deal of pain and seemingly few of the political leaders have the intestinal fortitude to do what is required.

Several of these countries have established a Nanny State with cradle to grave benefits which are increasingly being funded by a smaller and smaller group of producers and being milked by an ever increasing group of recipients. The problem is that which Margaret Thatcher summed up so succinctly many years ago:” The problem with socialism is that eventually you run out of other’s people money”.

On top of that there is the sacred cow which it seems very few are willing to address and that is the declining birth rate in many of these countries. You end up with a growing group of retirees and other wards of the state being funded by a declining group of producers. That is simply not sustainable in the long run. The smart aleck Keynes quipped “that in the long run we are all dead”, but the truth is policies have consequences and the long term effects of the nanny state are now reaching a critical level. Until government spending is sharply reduced, and major policy changes are effected, any bailout or fix is only going to put a Band-Aid on a festering problem which will again return to haunt the Eurozone. With the citizens of Greece intent on burning down their own country as they take to the streets to riot and protest any cuts whatsoever in the lavish benefits which they are grown addicted to, one wonders how many politician are going to be statesmen with long term views or poll readers with short-term priorities. If you want to get a taste of where the US is eventually headed, barring an abrupt about-face on current policies, take a good long look at Greece.

A brief comment on yesterday’s severe meltdown in the US equity markets – I found it rather amusing listening to the financial TV folks yesterday attempting to come up with reasons to explain the 1000 point plunge in the DOW in minutes only to see it recapture more than half of its losses coming into the closing bell within minutes as well.

One guy noted that the sun came up in the West this morning and that startled investors who feared that the universe was being turned inside out by the “waves” coming from high frequency traders. That is obviously my poor attempt at some humor but the real problem is that which we have been talking about for at least 4 years here at the site now, namely, the computer algorithms that have all but taken over the US financial markets. I have quipped that SkyNet is now in control of our markets and if there is any doubt of that after yesterday’s debacle, that should be settled by now. These damn machines and their cursed algorithms front run every single order coming into the pits as fast as they hit the screen (faster actually). They are all doing the same thing at the same millisecond in time meaning that there is literally no one to take the other side of the trade, either going down or, as what happened when the market reversed, going back up. The end result – huge air pockets devoid of bids when the market is selling off or huge vacuums devoid of offers on the way up – just look at silver today and try explaining a market that dropped over 1000 points on Tuesday of this week followed by another drop of 800 or more points on Wednesday and then goes back up over 1000 points during the session today. That is an example of what is wrong with our markets.

These damn funds have got to be throttled in, exchanges bitching, kicking and screaming notwithstanding, or else the general public is going to walk away completely from them as will the commercial interests in the commodity markets. When that occurs, all that will be left is hedge funds trading against themselves which each of them trying to spend millions to see whose algorithm will rule them all (with apologies to Sauron). That will not be price discovery but rather an extremely expensive version of the World of Warcraft. Many of the battered hedge funds will end up needing more than “a Healer” to then fix what ails them.

Euro gold set a brand new all time high at the PM fix today at €949.045 as did British Pound priced gold which cleared £800 coming in at £818.581.

There is an element of the election returns in the British Pound priced gold fix. There was no clear winner even though Cameron’s conservatives won the majority of seats they did not win enough to have clear control of the government. Investors wasted little time in punishing Sterling as a result since it will be extremely difficult for the government to come to a consensus and tackle the many problems that now threaten its fiscal house. This, in conjunction with continued concerns with the stability of currencies related to Europe, allowed gold to push past the £800 level in British Pounds.

Bonds went on one huge, wild ride today after their wild ride of yesterday. I am not even going to attempt to give an analysis on that market other than to say those who think US Treasuries are any sort of safe haven for “wealth preservation” when they can purchase gold instead are sorely deluded. Technically, bonds have not been able to manage a weekly close much above 123 since April 2009 and that was on the way down. It would appear that sellers are more than obliging to unload them above 123. We will see what they do next week because for all the violent motion of the past two weeks, they have done nothing more but reach the top side of a trading range that has been in effect for the 7 months or so. An upside breakout would have significant meaning.

Crude oil is getting hammered again and threatening to sink all the way back down towards $70 if it cannot soon manage a weekly close above $78.

I am not going to comment further on the equity markets because at the rate they are going and the wild swings that they are making, any commentary would be obsolete 15 minutes after I write it. See the chart I sent up yesterday for a bigger picture view.

Same comment on the HUI as yesterday– until the hedge fund ratio trades get lifted, the miners are still more heavily influenced by the broader equity markets than the bullion price. That strategy is going to blow up in their faces eventually but for now it is a function of their infernal algorithms. Far too much money has been siphoned out of the mining shares by that Trojan Horse called a gold ETF. Keep in mind that what drives stock prices are profits and well managed gold miners with good properties and low debt levels are going to see those profits increase as gold powers higher. That is the Achilles heel of the hedge fund ratio trades.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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Posted at 1:37 PM (CST) by & filed under Jim's Mailbox.

Hi Jim,

The numbers below are reported by the US Census Bureau!

It appears the 635,000 positions hired for door to door follow up have all been filled at this time and the new employees began hitting the streets on May 1, 2010.

Respectfully,
CIGA Bernie

Reach of 2010 Census: Mail back and Door-to-Door

134 million
Approximate number of total housing units in the U.S. that have to be contacted for the census, either via mail or in person, to collect a form or determine if vacant.

1.4 million
Approximate total number of positions to conduct the 2010 Census.

Recruiting and Staffing

3.8 million
Approximate number of people that were recruited to fill positions for 2010 Census operations between 2009 and 2010.

635,000
Approximate number of positions hired for door-to-door follow-up phase in 2010.

More…

Door-to-Door Visits Begin for 2010 Census
Census Takers to Follow Up with About 48 Million Households Nationwide

About 635,000  2010 Census takers across the nation begin going door to door tomorrow to follow up with households that either didn’t mail back their form or didn’t receive one. An estimated 48 million addresses will be visited through July 10.

More…

Dear CIGAs,

Yra has a good comment on MOPE lower in his article.

Politician love markets when they support and blame speculators when markets cream their intentions.

Notes From Underground: Employment numbers were robust … YADA YADA YADA
By Yra Harris

Both Canada and the U.S. reported strong job numbers and the market paid heed for a very short period of time. We are focused on credit for that is where the markets are focused. The global markets are enamored with the possibility of combined action by the G7 members, especially with the ECB leading the way by providing a massive dose of short-term liquidity to remove the pressure on the LIBOR rate–European Banks are having funding problems on the overnight markets.

The equities and all risk-based trades are bouncing around as rumors arise about the potential liquidity package being approved. When Obama said he had been in contact with German Chancellor Angela Merkel, the S&Ps immediately went bid but that rally lasted for a very short period. The Japanese gave the rumors some substance when it added ¥2 trillion ($22 billion) into the financial markets last night. We warned last night that Japan is very uncomfortable with YEN strength as the country battles deflation.

The markets will remain on edge as the financial system wonders about the presence of ECB liquidity providers and on this side of the pond we are curious as to the whereabouts of Larry Summers and  Tim Geithner. Adding to the uncertainty is the statement made by Merkel, as reported by Bloomberg News:

“In some ways,it’s a battle of the politicians against the markets”and “I’m determinedto win. The speculators are our adversaries. That’s why we have to weigh our words more carefully than everand stand united.”

Herein lies the problem: When the markets are supportive of the political elites, they are noble and honorable but when the markets act to reveal the absurdity of some policies, it is always wanton and irresponsible speculators. The Eurocrats’ obstinacy and the markets are on a collision course. Historically, the markets have held the upper hand except in repressive, autocratic states. The markets cannot afford the luxury of not hearing and therein lies the rub.

More…

Jim,

I listened to David Rosenberg today being interviewed by Tom Keene. It was by far one of the most gripping discussions I have heard in a long time.

Rosenberg is laying out his theory of econometrics in our new world order which is very similar to John Williams with the exception of how inflation will play into this. Mr. Williams sees our future as hyper-inflationary and Mr. Rosenberg sees just the opposite.  I am totally intrigued.

Myself, I see it as a hyper-inflationary/deflationary event.  It just depends on the commodity in question.  If you want to buy titanium, it will cost you less since not too many people will be using it. If you wish to buy a home, it will cost you much less since there will be little credit available to make the purchase and it will come down to a cash deal; and who will have the available funds? If it’s energy, it will cost you more since it will be a world based commodity traded in some form of new world currency and what do YOU have to trade for it?

Today marked an inflection point in financial markets from my point of view. The machines took control and we saw a 1000 point drop in minutes. Finally the machines are smarter than the MOPEsters. They have been programmed to react to human events in real time and they did just that. And everyone was quick to react in term of calling it a glitch.  I call it calling a spade a spade. Bravo Mr. computer.

CIGA Bruce

CIGA Bruce,

When will David learn? They are both right.

Jim

 

Jobs up 290,000; jobless rate rises to 9.9 pct.
CIGA Eric

Capital flows, not economic perceptions, are driving the markets. The direction of the stocks market does not always equal the direction of economic activity. The violence within the trends, however, illustrates this confusion.

More confident employers stepped up job creation in April, expanding payrolls by 290,000, the most in four years. The jobless rate rose to 9.9 percent as people streamed back into the market looking for work.

Job creation, despite the improvement from the lows, continues to lag labor force expansion. I use the job creation histogram (trend) to illustrate the marginal demand for labor relative to the labor force and circumvent the statistical massages that have creep into the unemployment rate data.

Job Creation Histogram (JCH): Net Nonfarm Payrolls Added/(Lost) less Civilian Labor Force Added/(Lost), 12 Month Average:
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This means the unemployment rate, now historically understated due to data revisions (recalculations), will continue to rise.

Historical Unemployment Rate (UR):
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Source: finance.yahoo.com

More…

Posted at 1:12 PM (CST) by & filed under Greg Hunter.

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Dear CIGAs,

In the early days of coal mining, canaries acted as a warning that odorless poisonous gas was present.  If there was a dangerous gas build-up, the canary would be the first to keel over.  You can use the “canary in a coal mine” metaphor to describe the situation in today’s financial world.  Greece is the canary.  The poisonous gas is debt.  Greece has just keeled over, and the rest of the world is running scared.  That’s why the Dow was down 1,000 points at one time yesterday!  Oh yes, there was talk of “unregulated high frequency computerized trading” and “bad trades,” but make no mistake, the market is worried about massive amounts of sour debt at all levels around the globe.   

In a nutshell, Greece borrowed way too much money, and does not want to drive old cars and eat rice and beans for years to pay it back.  That’s why you are seeing riots in Athens.  The problem with Greece is it cannot print money like the United States.  Its debts cannot be simply inflated away.  Bills have to be paid with big cuts to pensions and social programs, and it is not going over well.  That brings us to the other option, and that is to simply not pay the money back and default.  

There is one other option, print money and bail out Greece.  Here’s how investment guru Monty Guild sums up the bailout scenario:“This is happening because if Europe does not support Greece, the government debt contagion that we have been discussing in recent memos will continue and spread. It will spread to Spainand Portugal and later to many countries in Europe includingItaly and possibly France.  Because they fear the spreading contagion, Europe wants to stop the crisis as soon as possible.  In other words, Europe is getting a bailout, not just Greece.” (Click here to read Guild’s full report.)

Greece isn’t the only country to have a bad debt problem, just the first to fall.  America will also need a bailout, and the Federal Reserve has been doing just that by printing more money than the world has ever seen.  This is why gold has been on a steady uptrend.  The smart money already sees the yellow metal as, well, money!

Economist Dr. Marc Faber appeared on Bloomberg yesterday to talk about the market plunge and said, “The governments are all bankrupt.  They can only survive by printing money (to pay debts), and they’ll print money and print money.  That’s why the price of gold went up today when everything else went down.”

Are the Greek people any different than anyone else in the world?  I think not.  Just look at what is going on in the United States.  Americans everywhere are protesting budget cuts.  Is America in the same shape that Greece is in?  You bet, according to Jim Rickards, an investment banking pro and risk management expert.  He said earlier this week on CNBC, “I’m having trouble finding a Greek metric where the U.S. isn’t as bad or worse than Greece or will be shortly.”  Rickards also said, “The dollar is pretty much at the end of the line.”  Listen to the entire interview by clicking below:


So what is it going to take to “fix” the debt mess the world finds itself in today?  Well, first of all, there really is no “fix” because the debt problem is just way, way too huge.  According to the Bank of International Settlements, the debt ball in the world today is $600 trillion.  I wrote about this financial phenomenon in a post last year called “Can The Financial System Really Be Fixed? Some Say No.”

This debt ball is made up of complicated financial instruments calledderivatives.  There are plenty of these instruments in places like Greece and around the world.  These are private debt contracts between individual parties.  There is no public market for derivatives.  That means there are no rules, regulations or guarantees.  Without a public market, there is no way to objectively price this ball of financial crap.  Bob Moriarty of 321gold.com sums up the end game of this enormous mountain of debt this way, “. . . The derivatives market is going to go into a meltdown like nobody’s ever dreamed of because nobody but me and the other nine guys actually understand exactly what $600 trillion dollars is. It’s 10 times the size of the world economy, and it’s been blowing up since June 2007 when those Bears Stearns funds went under. . . . You talk about “if” we have financial collapse. I talk about “when” because no other alternative is possible. Nobody and nothing is going to stop it from happening. It is as absolute as the time and tides.”  (Click here for Moriarty’s complete interview)

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