Front page News Hiding Within The Stream of Headline Noise

Below is a classic example of front page news hiding within the stream of headline noise. Damn straight another crisis is coming. Nothing has changed. As long balance sheet valuation fibs pass as facts, time and greed will spawn another crisis within a series of interconnected crises.

Headline: Mobius Says Fresh Financial Crisis Around Corner Amid Volatile Derivatives

Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven’t been resolved.

“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan in Tokyo today in response to a question about price swings. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”

The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mobius, who oversees more than $50 billion. With that volume of bets in different directions, volatility and equity market crises will occur, he said.

Source: bloomberg.com

Real Estate Is Not Recovering

Headlines and media outlets have interpreted the resiliency in home prices since 2009 as a sign of recovery in the battered sector. Investors and potential home owners rushing to secure great deal will only find themselves squeezed by another round of bad information. While U.S. dollar (nominal) prices have stabilized, they have not kept pace with the rate of currency devaluation since 2001. The charts below illustrate the severity of this decline.

Either follow the message of the market or get out of the way.

U.S. Median Home Price (MHP) And MHP to Gold Ratio


S&P Homebuilders Index (HB) AND HB to Gold Ratio


Headline: Home-price index at lowest point since 2006 bust

Home prices in major areas have reached their lowest level since the housing bubble burst in 2006, driven down by foreclosures, a glut of unsold homes and the reluctance or inability of many to buy.

Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor's/Case-Shiller 20-city index. And prices in a dozen markets have reached their lowest points since the housing crisis began. Prices in March rose only in the Seattle and Washington, D.C., metro areas.

The nationwide index fell for the eighth straight month.

A record number of foreclosures are forcing prices down, and they are expected to keep falling through this year.

Source: finance.yahoo.com

Sell In May And Go Away Poll

So far only 16% of the poll respondents voted no in “Stocks: Sell in May and go away” trading poll. Nearly 70% either voted yes or preferred to remain on the forecasting fence.

My response to the 16% minority is I’m with you. Leveraged money flow setups illustrate a classic transition from the bond to equity market this summer/fall. In others, those that “sell in May and go away” are likely to be disappointed by surprising equity strength.

US Treasury Bond 20YR+ (TLT) And Bond Diffusion Index (DI)


SP 500 And Equity Diffusion Index (DI)

Spreading Activity Helps Establish Duration of Paper Operations

The study of spreading position of non-commercial traders can be most useful futures and options market analysis. Statistical analysis of spreading activity can provide insight to the duration of paper market ‘operations’ in the precious metals markets

Spreading positions attempt to profit from the difference between contract prices. Non-spreading positions are taken based on a future expectation of price. Trend following and hedging activities tend to reflect the bulk of non-spreading activities.

Paper operations through leverage and media coordination will beat the grass to startle the snakes. The process of beating the grass creates uncertainty. This uncertainty can often be gauged by non-commercial spreading activity.

The headlines and media are pushing the bearish consensus on gold and silver, but the growing statistical concentration of spreading activity suggests the opposite. Tired of being beaten like rented mule in the leverage paper game? They key to success is knowledge and discipline.

Gold London P.M Fixed And Spreading Diffusion Index (DI)


Silver London P.M Fixed And Spreading Diffusion Index (DI)

Nothing Has Changed!

Jim,

A pause in a secular up trend, regardless of the spin and political rhetoric, does not represent change. Change cannot be averted by talk and meaningless dog-and-pony show style actions. The flow of funds report reveals that domestic non-financial credit resumed its upward trend in late 2010. Financial credit creation, see Jim’s chart below, will likely turn in 2011.

History suggests that real (meaningful) change rarely comes without pain and sacrifice. Ignore the headlines. There’s simply no returning to the old financial and economic paradigm. In short, that lifestyle is dead. Recognition, protection, and profit should be the focus of public that tends to wait until the last minute to act.

Credit Market Debt by Sectors: Domestic Nonfin. Sector, Rest of the World, And Financial Sector As A % GDP


It is madness.

Eric

When will they ever learn? They use a Weapon of Mass Financial Destruction, an OTC derivative, the Credit Default Swap (CDS), to rate creditworthiness. Madness!

Jim

Goldman Is Now A Bigger Credit Risk Than Citigroup

Spidey Senses Tingling In The Bond Market

1970's cartoons rock!

It appears that Fred's spidey senses are tingling. A quick glance at the computer analysis reveals statistical concentration by ‘deep pockets’. Perhaps Fred is really Peter Parker?

US Treasury Bond 20YR+ (TLT) And US Treasury Bond Diffusion Index (DI)


Timing the bond short, however, will be a process rather than a singularity. This means timing the trade of the decade will test one’s skill, patience, and discipline. Fred's comments below support this view.

Ignore the headlines, follow the money, and use TA to time the entry. The first push into statistical concentration doesn’t necessary reflect the optimal entry point. Lack of conentration in Bond Diffusion Index and technical divergences within the trend suggest patience over action. The setup and action, nevertheless, warrants very close attention for those without spidey senses.

US Treasury Bond 20YR+ (TLT) And Bond Diffusion Index (DI)

Hi Eric,

Love the blog.

I got "skooled" recently with an option play on the idea to short the
long bond. I'll hedge it better and get out faster next time. I
agree with him that shorting the long bond can be lucrative if you can
get it to work. A retired trader told me a story of how they used to
front run central bank trades the run up to the '97 asian currency
crisis, but with shorting currencies rather than the bonds.

I couldn't help but notice Friday that the long bond went up, but
oddly enough TLT puts didn't go down (I was watching the Jun TLT 90
Put). I immediately thought to myself that "smart money was quietly
taking their positions", as you would probably say.

Thanks for opening my eyes as to how this thing really works. It
seems like whatever the press is trying to scare you out of, that
should generally be the place that you should go.


Cheers,

Fred

Revaluation vs. Remonetization of Gold

John,

Which came first the chicken or the egg? Evolution suggests the chicken, but that's another discussion.

The re-monetization of gold will occur at higher price, so technically, it’s still nothing more than a revaluation within a decaying monetary system. The revaluation will likely be defined as a re-monetization once the process is complete.

Gold is rising because of debt and the policies enacting to combat its ever increasing burden. I’ll leave the lawyers to argue the semantics while the game unfolds. Right now, the rules of game demand recognition, profit, and protection.

Thanks for the comments,

Eric

Fine blog that you have, Eric.

Your Thursday article talks about gold being accepted as collateral for loans and to be used as backing for debit cards in UT. I think the better title is not, ‘Gold’s Revaluation Underway,’ but is ‘Gold’s Remonetization Underway.’

The public and policy makers are coming to view gold as money, again.

Keep up the fine work, Eric!

Sincerely,

John

Gold's Equilibrium Price Is Rising

Gold's equilibrium price is rising. The movement of capital suggests that 'smart money' knows why.

Gold equilibrium without Mainland China Adjustment is $16,679

Federal Debt Held by Foreign & International Investors (FDHBFIN) and the Equilibrium Price (FDHBFIN/OZ)


Gold equilibrium without Mainland China Adjustment is $14,476

Federal Debt Held by Foreign & International Investors (FDHBFIN) Less Mainland China Treasury Holdings and the Equilibrium Price (FDHBFIN/OZ)


The chart below illustrates the rate of expansion of foreign liabilities in comparison to national income. The ever-increasing angle of ascensions of FDHBFINGDR during the liquidity phases provide little doubt as to why capital has moved into gold since 1970's. The speed of gold's ascent will only increase as the pressure (angle of ascension) on the financial system intensifies.

Federal Debt Held by Foreign & International Investors As a % of GDP (FDHBFINGDPR) and the London P.M. Fixed Price of Gold (GOLD)

Any comments on John's figures?

Jim,

Using the methodology you specified in your article today, I get a target price for gold of: $15,600

Most current TIC report, http://www.ustreas.gov/tic/mfh.txt

Total Foreign Holdings of Treasury Securities $4,479.2 Billion
Less : China - mainland (1,144.9)
Plus: 50% of China - mainland 572.5

Adjusted Foreign Holdings of Treasury Securities $3,906.8 Billion

Number of Fine Troy Ounces held in Custody by the US Mint for the US Treasury
http://www.usmint.gov/downloads/about/annual_report/2010AnnualReport.pdf
Note to Financial Statements 6, "Custodial Gold and Silver Bullion Reserves", page 59

Statutory value @ $42.2222 per FTO $10,574,053,000
Number of FTO 250,438,229

Valuation of Gold required to equal Adjusted Foreign Holdings of Treasury Securities

Adj Fgn Holdings $3,906,800,000,000
Number of FTO Gold at US Mint 250,438,229

Gold price Valuation $15,600


Regards,
John M.

Gold Is Debt

Excessive debt creation leads to currency debasement, either through a reduction of percentage fineness and/or the weight of gold or silver coin or excessive fiat money creation. This, in turn, causes an upward revaluation of sound money (gold) via hoarding.

In other words, gold is debt. Our readers know it. The central bankers, once sworn enemies of gold as described by the media, know it and will soon openly embrace it. This leaves the public following historical precedent as the bag holders of currency devaluation.

Headline: Rising prices a symptom of inflation, while debt is cause

Q. This sounds like a simple question, but we have argued over it for weeks: What is inflation? The dictionary says it is rising prices, but I think it has something to do with all our debt.

A. Well, you’re both close. Rising prices are a symptom of inflation — the visible way we measure the impact of inflation. And lately, our debt has become a cause of potential inflation — because of the way we’re dealing with it. Let me give you a fuller explanation. Technically, inflation is just the creation of too much money. That makes it a phenomenon created by the Federal Reserve, our central bank, which is in charge of our money supply.

Think of it as a giant game of Monopoly, with the “banker” passing out money. Remember those $500 bills in the old Mono­poly board game? Well, suppose the banker wanted to get the game moving and decided to pass out more money. And suppose, like in real life, when you landed on a property, everyone could bid for it.

If you had been saving one of those $500 bills to buy Boardwalk or Park Place, suddenly with more money in the game, your savings would have less value. And the price of those two prime properties would be bid higher, not because of any inherent change in their value — but simply because there’s more money in the game. That’s inflation!

Source: suntimes.com

Gold's Revaluation Underway

Gold's great revaluation continues to progess without a hint of understanding from the public.

Headline: Bid to Use Gold as Collateral Advances

Investors are closer to being able to use gold as a trading security after a European parliamentary committee approved a proposal to allow clearing houses to accept gold as collateral, the World Gold Council said Wednesday.

The European Parliament's Committee on Economic and Monetary Affairs Tuesday agreed unanimously to allow clearing houses to accept gold. The proposal, under the under the European Market Infrastructure Regulation, will be passed to the European Parliament and the Council of the European Union for another round of voting in July.

Source: online.wsj.com

Headline: Gold, silver coins to be legal currency in Utah

Utah legislators want to see the dollar regain its former glory, back to the days when one could literally bank on it being "as good as gold."

To make that point, they've turned it around, and made gold as good as cash. Utah became the first state in the country this month to legalize gold and silver coins as currency. The law also will exempt the sale of the coins from state capital gains taxes.

Craig Franco hopes to cash in on it with his Utah Gold and Silver Depository, and he thinks others will soon follow.

The idea is simple: Store your gold and silver coins in a vault, and Franco issues a debit-like card to make purchases backed by your holdings.

Source: google.com

Morning Silver Comments

It's options expiration week in the precious metals. This suggests volatility, particularily for silver.

Observations:

• Physical demand for silver remains hot



• The silver futures market remains in backwardation. Jim Turk explains it best, Markets (silver market) are not designed to work that way, the higher price is supposed to entice people to sell their physical and hold dollars instead. I think the market is quite clearly sending the signal that people would rather hold silver instead of paper money.
  



• Retail money, as known as chronic tail chasers, will likely be herded to the short side by fear in the coming weeks.
  
  It's simple. Retail money follows headlines. The headlines communciate fear when smart money wants to buy. The chart below illustrates that smart money is buying aggressively. Retail money, however, has yet to be concentrated, or as we say in America taken to the cleaners. Paper operations are extremely efficient at rebalancing control of the trend into the right hands.
  
  Silver London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest
  
  

Watch the game of control change into June.

Demand for Long-Lasting Goods Falls by the Largest Amount in 6 Months

Real or constant currency new orders of durable goods - ex. defense and aircraft have contracting consistently since 2001. The real economy remains weak and highly dependent on currency devaluation, commonly known as QE, to maintain the illusion of growth.

Gold-Adjusted New Orders of Durable Goods ex. defense and aircraft (BCCSGLDR) and YOY Change:


Headline: Demand for Long-Lasting Goods Falls by the Largest Amount in 6 Months

Businesses cut back on their orders for heavy machinery, computers, autos and airplanes in April, reducing demand for long-lasting manufactured goods by the largest amount in six months.

Orders for durable goods fell 3.8 percent, the Commerce Department reported Wednesday. And an important category that is an indication of business investment — orders for nonmilitary capital goods excluding aircraft — was down 2.8 percent.

The weakness was widespread across a number of industries and was probably influenced by supply chain disruptions stemming from the Japanese earthquake in March. Demand for motor vehicles and parts, an industry heavily dependent on Japanese component parts, saw a decline in orders of 4.4 percent in April, the biggest drop since last August.

Jennifer Lee, senior economist at BMO Capital Markets, said the April durable goods report was just another sign that ”the U.S. economy is encountering its fair share of speed bumps” at the moment.

Greek Commissioner warns about leaving euro

Capital anticipates while politicians talk of possibilities. Euro gold at new highs reflects capital voting with their feet about the future of the EU. The same can be said for U.S. dollar gold.

Euro Gold:

A Greek EU Commissioner warned that the country's participation in the euro was under threat, though the prime minister insisted Wednesday his government would see through new austerity measures and keep Greece in the joint currency.

The EU's Fisheries Commissioner, Greece's Maria Damanaki, warned that "The scenario of removing Greece from the euro is now on the table."

"I am obliged to speak openly. We have a historical responsibility to see the dilemma clearly: either we agree with our borrowers on a program of tough sacrifices with results ... or we return to the drachma," she said in a statement on her personal website.

Source: finance.yahoo.com

Mark Haines Dies: CNBC Anchor Dead At 65

Mark Haines Dies: CNBC Anchor Dead At 65

Bearish Setup In U.S. Dollar Underway

Bullish setups in gold, silver, stocks, and commodities are confirmed by a bearish count (setup) in the U.S. dollar.

Ignore the newswire and follow the money.

U.S. Dollar Index and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


The long-term chart provides a better perspective of downside targets and forces.

U.S. Dollar Index

Court Orders New Jersey to Increase Aid to Schools

Public spending deemed a constitution right in NJ. QE cannot stop because the system is utterly dependent on it. The late run in gold and silver suggests the market understands this reality.

Headline: Court Orders New Jersey to Increase Aid to Schools

The New Jersey Supreme Court ordered the Christie administration on Tuesday to increase state education aid by $500 million in the coming school year, saying it had failed to meet its constitutional obligation to provide adequate educational resources for poor and minority children.

In a 3-to-2 ruling, the court directed that the additional aid be distributed among 31 school districts in historically poor cities like Camden, Newark and Paterson — the so-called Abbott districts at the heart of a school financing case, Abbott v. Burke, that has roiled state officials and courts for three decades.

Source: nytimes.com

Coffee price hikes will bring tough wake-up calls

The seeds of hyperinflation have been sown. Soon the public will have to deal with the harvest.

Coffee drinkers are facing a tough wake-up call: Retailers are finding it increasingly difficult to hold the line as rising commodities prices percolate through the system.

At the Coffee Tree Roasters shops in metropolitan Pittsburgh, Pa., prices have just increased for the first time in at least two years.

"We held out to try to see where the market was going to settle out," said Bill Swoope, co-owner of five coffee shops as well as Iron Star Roasting Co., a wholesale roaster in West Mifflin.

Source: eastvalleytribune.com

Things Not As They Appear In Equities

Flavor-of-the-day experts cite "Sell in May and Go Away" trading logic as the motivation for turning bearish.

My personal rebuttal to this argument would be hogwash!

Retail money, chronic tail chasers, has become increasing bearish into weakness (see table below). This counter-intuitive, negative swing in sentiment is bullish.

AAII Survey


A detail study of market internals also supports the bullish thesis. Statistical concentration of breadth, as illustrated by the red painted stick, tends to be generated at or near tradable bottoms.

NYSE Composition and Breadth Analysis:


Let’s not forget the bullish money flows into stocks.

Source: aaii.com

Retail Money Chases Its Tail

Retail money chases its tail while connect players setup the market. Yesterday's commentary, Invisible Hand of Control In Crude Oil, discussed the setup well ahead of the newswire flash.

Headline: Crude Oil Rises as Dollar Slips, Goldman Sachs Boosts Brent Price Forecast

Oil rose the most in almost a week in New York as the dollar declined, boosting commodities’ appeal as an alternative investment, and Goldman Sachs Group Inc. and Morgan Stanley increased their oil-price outlooks.

Oil jumped as much as 2.3 percent as the Dollar Index, which tracks the currency against six major counterparts, slipped from a seven-week high and U.S. equities advanced. Goldman Sachs and Morgan Stanley raised their estimates for Brent oil futures, saying the prolonged conflict in Libya is eating into OPEC spare capacity.

“The dollar’s under pressure and you’re having a bit of an equity market rebound,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The upward revisions to some of the investment-bank oil forecasts may be lending a certain positive sentiment to this market.”

Source: bloomberg.com

Words of Wisdom Found Within The Daily Noise

Great observations form Dow Theory Letter’s Richard Russell,

Last Saturday Faye and I had coffee at the Pannikin, one of our local coffeehouses. A cup of decaf sells for two dollars. The place was busy with people eating lunch, talking or just drinking coffee. I asked Faye, "Does this look like people are cutting back because of the Great Recession?" Faye shook her head, "Hardly," she smiled.

I reminisced, the Great Depression ended around 1942. That was about 60 years ago. Three or four generations have elapsed since 1942. So it's been three or four generations since Americans have experienced what I call "hard times." Only old codgers like Richard Russell remember what it was like during the Great Depression. Those were the days when people clung to every nickel and dime they could scrape together.

In 1940, if I wanted some coffee, I probably already had it in the thermos bottle that I was cramped into my lunch box. Or I could go to the nearest drug store or maybe to an Automat and buy a cup of coffee for a nickel. Actually, I'd probably prefer Woolworth's because there coffee was always a nickel, and there'd be no charge for "refills" (as many as you wanted).

It occurred to me sitting there with Faye at the Pannikin coffee house that people today have no idea or concept of cutting back and saving money. Here were kids buying cups of coffee for two dollars a cup and ordering sandwiches or salads for 5 to 8 dollars a pop. "Well," I thought, "If the government isn't cutting back, why should the people? It's the way of the world today." But I have this feeling, this creepy feeling, that it isn't going to last. Somewhere ahead I believe the Great Recession could turn in to the second Great Depression.

Russell, a prolific straight shooter, nails it. The distinction between the Great Recession and Depression is mostly semantics. Another great trading box, similar to that of 1873, 1929, and 1971, formed in 2000. This suggests that real (constant currency) stock prices and standard of livings have been falling since 2000. It will take decades before the 2000 highs are breached to the upside.

Russell’s observation suggests that most of the public remains oblivious to the reality that excessive debt-based consumption is dead. A public weaned on reality-based television and bubble gum economic analysis is always the last to know. Russell’s pragmatic observations be viewed as prophetic anyone willing to study history after 2025. I say why wait to send him compliments? He’s right today.

U.S. Large Cap Total Return Index (LCSTRI); S&P 500 Total Return Index to Gold Ratio

Fear Sees Only The Obvious In Copper

Screaming sell when prices are falling is comparable to yelling fire in a crowded movie theater. This technique is effective in the trading world because the flight or fight response is difficult to suppress. Discipline supported by knowledge is critical to acting without emotion. The following chart illustrates a classic weak to strong hand transfer into weakness in copper.

Copper (JJC) And Copper Diffusion Index (DI)


Headline: Low China Imports, Strong Dollar Pressure Copper

Copper futures fell nearly 4% as another sharp decline in China's copper imports and a stronger dollar pressured prices.

In recent months Beijing's tighter monetary policy has forced many factory managers to use up inventories without replenishing them. Companies that use copper to make electrical wiring and other products—the main source of copper demand in China—are struggling to get credit, and many are relying on "hand-to-mouth" purchases to feed production lines.

China is the world's top copper consumer, accounting for 30% of demand, but imports have been on a steep decline in recent months. On Monday, China reported its imports of the metal in the first four months of this year were 756,199 metric tons, 29% less than the same period last year. April refined copper imports fell 48% from a year earlier and down 17% from last month to 160,236 metric tons.

Source: online.wsj.com

Invisible Hand of Control In Crude Oil

The invisible hand of control is not restricted to the gold and silver market. The well-defined and recognizable money flow footprint can be found in the crude oil market.

Crude Oil (WTI) and Crude Oil Diffusion Index (DI):


Prices will continue to climb once the fuel is exhausted.

Headline: Oil slides and pump prices drop

Oil dropped more than 2 percent Monday as the dollar strengthened and an energy research group said it expected growth in Chinese demand for oil to slow later this year.

At the pump, gas prices continued to fall as oil retreated.

Benchmark crude for July delivery lost $2.44, or 2.4 percent, at $97.66 per barrel on the New York Mercantile Exchange in afternoon trading. In London, Brent crude gave up $2.62 or 2.3 percent, at $109.77 per barrel on the ICE Futures exchange.

Crude dropped as the dollar rose against other currencies. Oil is priced in dollars, and it tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money. The U.S. Dollar Index, which measures the dollar against other major currencies, rose 0.8 percent amid concerns about Europe's debt crisis.

Source: finance.yahoo.com

Empty Your Pockets With A Handshake And Smile

If you feel like a dog chasing its tail in gold, silver, even stocks, it’s time for a new strategy. Certain players will empty your pockets while you shake their hand in gratitude for 'good' information. You’re either a buyer or seller. Fence sitters make for easy targets.

Russell 2000 (IWM) and the Commercial (C) Less Nonreportable (NR) Traders COT Futures And Options Stochastic Weighted Average of Net Long As A % of Open Interest


SP 500 And Equity Diffusion Index (DI)


Sell in May and go away? Unfortunately, the game is not that simple.

Headline: Stocks: 'Sell in May' likely to continue

Investors have taken the old Wall Street adage of "Sell in May, then go away" to heart this year, and the stock market's slump is likely to persist during the last week of the month.

The Dow (INDU), S&P 500 (SPX) and the Nasdaq (COMP) have each lost more than 2% during the past three weeks, pressured by the latest round of economic and corporate news, which are suggesting that the economic recovery may be slowing.

355Print Last week, reports on housing starts and existing home sales came in weaker than expected, and regional manufacturing activity slowed to the lowest level since October.

Source: money.cnn.com

A More Detailed Analysis of Silver Money Flows

Denny,

Short answers, no and no.

Follow the money and watch the cycle dates. Silver is an extremely wild market, so the base formation will be bumpy.

Connected money has been aggressively long buying into weakness despite constant headlines pushing fear and doubt. This aggressive buying is illustrated by the mini flagpole in the L%WA (green line) in the chart below.

Silver London P.M Fixed and the Commercial Traders COT Futures and Options ZScore Weighted Average of Long & Short As A % of Open Interest


The inflows into silver are already the fifth strongest since 2001 (see chart below). In other words, this is no minor push into silver by connected players. The public will once again come to realize that money does not move like this without substantial expectations.

Silver London P.M Fixed and the Commercial Traders COT Futures and Options ZScore Weighted Average of Net Long As A % of Open Interest


Regards,

Eric

Eric,

Silver:

1. Does the diffusion index have to rise above 38 to have a bottom?

2. If the DI goes higher into mid June does that mean silver has to
decline in price?

-------

Looks to me like silver has hit its bottom but needs more up and down
to complete the process. I can see some big swings in here over the
coming 4 weeks!

Thanks,Denny

Illinois on the Brink of Financial Disaster

Illinois, California, Wisconsin, New Jersey, New York, etc. are all near brink of financial disaster. Cutting spending as the economy rolls over is political suicide. This means the economic can will be kicked down the road, i.e. issuing more debt through support of QE(n), despite a growing number of voices suggesting change. The public will once again come to realize that the market will force the necessary changes, and it won’t be pretty.

States shorten duration for unemployment benefits

Yet another reason QE(n) will continue.

Some of the states that have drained their unemployment insurance funds are cutting the number of weeks that a laid-off worker can count on those benefits. Legislators are trying to limit tax increases for businesses to replenish the pool and are hoping the federal government keeps stepping in when the economy slumps.

Michigan, Missouri and Arkansas recently reduced the maximum number of weeks that the jobless can get state unemployment benefits. Florida is on the verge of doing so. Unemployment in those states ranges from 7.8 percent in Arkansas to 11.1 percent in Florida.

The benefit cuts come as legislatures deal with the damage that the recession inflicted on state unemployment insurance programs. The sharp increase in the number of people who lost their jobs drained the reservoir of money dedicated to paying out benefits.

Source: finance.yahoo.com

Major Cycle Date Approaching & Money Is Moving

As long as the public embraces flavor-of-the-day analysis as explanation for short-term price action, they will never acquire the vision to anticipate trend inflections. Trend inflections are a study of TIME and movement of money despite loud, consensus lip-flapping.

Today, I have decided to reveal the entire COT data money flow data because of the scope, strength, and clarity of the message coming from the markets. The information contained within this table (or the next few subsequent tables) have the potential to be the most important of 2011.

The composite message is parsed as follows:

• Silver (P), gold (P) and most industrial metals (IM): Impressive and decisive inflows, poetry in motion for those that analyze operations of control, reflect the market's true bullish intentions.




• Bonds (b): The concentration of bonds towards the bottom of the table with extremely low DI readings suggests the severity of the bearish setup. Watch this one close, because this will become a problem for the perpetual bond bulls in 2011-2012.

COT Money Flow Data Table:


Stay tuned for the possibly of further comments on individual markets within the table.

The Correlation Between Gold and Gold Stocks Breathes Over The Short-Term

Thanks for sharing Noah

The only opinion that matters is the message of the market. The market is bullish on gold and miners. This means I am bullish on gold and miners until that message changes.

TA’s “three taps and out” has been complete. This suggests that the breakout is already underway. While geometry suggests that the shortest distance between two points is a straight line, this truism often does not see practical application within the markets. Fear and greed, i.e. emotional states combined with leverage, create ebb and flow despite the technical breakout and clear up trend.

The correlation between gold and the gold shares also ebbs and flows. While the historical correlation between the two is strong, fear and greed will stretch it over the short-term. Smart money, possessing the nerve and discipline to act against the consensus, knows that these divergences provide excellent buying opportunities.

The following charts reveal how the correlation between gold and the gold shares breathes over time

Historical Correlation: Gold Stocks and Gold

2009:12


2010:12


2011:04


Best Regards,

Eric

Eric,
I really like your site because no matter what you maintain your bullish position, especially with respect to the miners. I think we're at a critical juncture here once again with the whole sector. I too believe in much higher prices for the metals and I still feel that the mining stocks should be much higher. Recently you did a great piece on the historic undervaluation of the stocks versus the metals themselves. Right now the mining stocks (GDX for example) are riding above a major support line going back from the peak from before 2008. The GDX broke through that level around 54 last year, ran up and hit 64, then got smashed by the shorts down to 53 in January. Now here again, we got another beat down to around 53 again and got support. We are still oversold. I did liquidate some big positions but held core positions. My mistake was getting back in too early, but I'm reloaded now and I still feel that these stocks need to ramp up in a big way. It seems way, way overdue. I like your historical analysis that we could be pushing away from shore after a 30 year consolidation! What I'd like you to do is periodically post the GDX to Gold ratio even more often, especially now as we enter into what could be a huge rally in the shares as I do believe in your "Three taps and out" thesis. Once we get this rally up to 64 in GDX again, and then through that mark as I anticipate, this is where your posting of the ratio will be very helpful as next time I will be selling into that big rally as I would like to miss out on some of these selloffs! It's unbelievable how they can beat these shares down! The manipulation is just crazy. I think that part of this bull market that will drive these shares higher is the day that some of the big ETFs like GLD and SLV start having some big issues that J.S. speaks of in his book. If that happens, it will first and foremost be wonderful but it will also possibly be a key to unlocking the miners into a new phase of their bull market. You've been a great help and I look forward to more great info. Do you think we're on the cusp of the big breakout rally at long last in the shares?
Sincerely,
Noah

Home Sellers Provide Last-Resort Loans

An increasing number of desperate buyers and sellers are reaching agreements that traditional, non-securitized lending conduits would not touch. Signs of credit strain are everywhere to be seen for those willing to look.

Sue and Douglas Reed knew no bank would give them a mortgage -- not with a bankruptcy and two foreclosures fresh in their credit history. They turned to Hilarie Walters, whose childhood home on 15 acres in Marshall, Mich., had been on the market since 2009, a year after she inherited it. Walters agreed in December to sell the property to the Reeds for $105,000. She also consented to a risky payment plan that in effect makes her the couple's mortgage lender. "They're paying me interest every month, but I'd rather have the money and be done with it," says Walters, an unemployed single mother who is using their payments to cover the mortgage on her Battle Creek (Mich.) residence. "It does make me nervous."

Source: finance.yahoo.com

Hey Gold Bugs There's Strength In Numbers

1.3 billion Chinese and 1.1 billion Indians are buying physical gold. The game of perception uses labels such as gold bugs and ‘out-of-touch morons’ (read between the lines on F-TV or similar) to create an emotional response despite the message of the market. It’s an effective game that discourages physical ownership through the human tendency/desire for group acceptance.

Emotions have nothing to do with interpretation the message of the market. Often the difference between connected and retail money is knowledge and discipline. The later lacks both.

The trend is up and there’s Chinese and Indians are providing new meaning to the old phrase strength in numbers.

Headline: China Is Now Top Gold Bug

Chinese investors are snapping up gold bars and coins, buying more than ever before in the first quarter of 2011 and overtaking Indian buyers as the world's biggest purchasers of the metal.

China's investment demand for gold more than doubled to 90.9 metric tons in the first three months of the year, outpacing India's modest rise to 85.6 tons, the World Gold Council said in its quarterly report on Thursday. China now accounts for 25% of gold investment demand, compared with India's 23%.

The report underscores the rising appetite for gold among the growing middle-class in China. Fears of the country's soaring inflation, as well as a search for new investments, is luring investors to gold, and marketing of the precious metal has also increased in recent months.

"I think people will be surprised by the strength in the Chinese demand, but we think this is a trend that is set to continue," said Eily Ong, an investment research manager at the gold council.

Source: finance.yahoo.com

Mailbox - Unlimited FDIC Insurance

Hello Eric - I always read your emails.

For your information, there is unlimited FDIC insurance on all checking and non-interest bearing accounts in US banks through December 31, 2012:

On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. The unlimited insurance coverage is available to all depositors, including consumers, businesses, and government entities. This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to a depositor’s other deposit accounts held at an FDIC-insured institution.

fdic.gov

I believe that, in the summer or fall of 2010, the US authorities came to the same conclusion you did. Thus, the insurance limit for these accounts has been upped from $250,000.00 to infinity.

Never mind that the FDIC is bankrupt. The Fed will print and cover all deficiencies. What that paper money will be worth is another topic for discussion. But, at least all consumers and business will be able to continue to function when the big banks are officially or un-officially declared to be insolvent.

Regards,

Peter

Silver Will Rise To Throw Hands Again

Critical support tends to be tested as resistance.

As expected, a technical kiss of previous support as resistance is underway in the gold to silver ratio (GSR). Silver transformation from investment darling to pariah in the eyes of many traders, experts, and various flavor-of-the-day analysts has been swift and decisive. Fear not, the seeds of hyperinflation have been sown. After some technical repair (and quiet repositioning of money by strong hands) silver will rise to throw hands with them. Money flows and TIME will push retail money to the short side and setup the next advance.

Gold to Silver Ratio (GSR), Monthly Average Price:


Silver London P.M Fixed and the Silver Diffusion Index (DI2)

Fed considers tighter credit as economy improves

Key word here is considers. Debate and action are two separate issues. Enacting policies to tighten credit while recent data reveals a broad based contraction would be politically unwise.

The Federal Reserve last month began debating how it should start reversing policies that pumped billions of dollars into the economy during the recession. Some members said the Fed might need to start boosting interest rates this year to guard against inflation.

Fed policymakers didn't commit to taking any action at the April 26-27 meeting, according to minutes released Wednesday. But they agreed the economy was improving and if that continued the Fed would need to remove its massive to prevent consumer prices from getting out of control.

A majority of participants said the best method for tightening credit would be to lift the federal funds rate, which is now at a record low near zero. The federal funds rate is the interest banks pay each other on overnight loans. Raising that rate would likely precede sales of mortgages or Treasury securities in its vast portfolio.

Source: finance.yahoo.com

US Housing Starts Supports Continuation of QE(n)

QE(n), either direction or indirect, will continue well after June 2011. The sharp and unexpected deterioration in US housing starts trend illustrates why.

Housing Starts And Change YOY


Headline: U.S. Housing Starts Unexpectedly Fall to 523,000 Pace



Source: washingtonpost.com

Fed Easing Policy Driving Rates Lower-Ironically

The market, not the Fed, sets interest rates.

Interest rates are heading lower, counter to what many in the bond market thought might happen as the Federal Reserve reaches the end of its quantitative easing program.

The 10-year yield Tuesday slipped below 3.1 percent, just above a key technical level of 3.05/3.07 percent and the psychologically important 3.0 percent level. Treasury yields fall in an inverse move as buyers push bond prices higher.

Strategists say there are several catalysts moving bonds, including a series of weaker economic data; reinvestment from accounts that were in cash; and the flight to safety on concerns about European sovereign debt.

Source: finance.yahoo.com

Gold Shares Are Raising Dividends

Gold companies from emerging to major producers, unbeknownst to most investors – even within the dedicated gold community, have slowly begun the process of issuing and raising dividends. Investors, often blinded by fear and emotions generated by ebb and flow within the trend, tend to ignore the impact of dividend on total return. Smart money recognizes a growing number of inaugural issuances and payout increases, i.e. the movement of money, despite headline ‘talk’ that encourage doubt and fear. As the old saying goes, talk is cheap, but the movement of money is dear.

Long-term gold indices such as S&P Gold (Formerly Precious Metals Mining)* illustrated below do not include the distribution of dividends into its trend. This means capital appreciation indices severely understate total return during periods of skyrocketing dividend payouts.

S&P Gold (Formerly Precious Metals Mining)*
*S&P Gold from 1945, Barron's Gold Stock Index from 1939-1945, 1922-1939 Homestake Mining


Headline: Nevsun Declares Inaugural Semi-Annual Dividend

Nevsun Resources Ltd. (TSX:NSU - News)(AMEX:NSU - News) is pleased to announce that the Company's Board of Directors has approved a semi-annual cash dividend of US$0.03 cents per common share (US$0.06 per common share annually). The dividend is payable on July 15, 2011, to shareholders of record as of the start of business on June 30, 2011.

"The successful startup of the high grade, low cost Bisha mine is the start of significant cash flow for the Company. We are focused on significant internal reserve expansion at Bisha, as we strive to double our reserves this year, while also reviewing additional opportunities for Nevsun," said Cliff Davis, Chief Executive Officer. "With $103 million cash at quarter end and significant ongoing cash flow, Nevsun is well positioned to fund this growth and provide a dividend return to our shareholders."

Source: finance.yahoo.com

Competition To Change The Landscape of Control

Competition always changes the landscape of control. It will be interesting to see how the COMEX money flows will adjust to this news.

Headline: Hong Kong Mercantile Exchange Receives Trading Authorisation From Securities and Futures Commission

The Hong Kong Mercantile Exchange (“HKMEx”) announced April 27 that it has received authorisation from the Securities and Futures Commission to operate as an automated trading services (“ATS”) provider. Approval has also been given for its trading debut on May 18, 2011.

The ATS authorisation grants HKMEx the right to offer market participants, through its member firms, the use of its state-of-the-art electronic platform to trade commodities. The Exchange will begin trading with at least 16 members including some of the world’s largest financial institutions and trading firms as well as several well-established brokerages in Hong Kong.

“We are very excited about this historic day. It allows us to establish a liquid and vibrant international commodities exchange based in Hong Kong, linking China with the rest of Asia and the world,” said Barry Cheung, chairman of HKMEx. “Global demand for core commodities has in recent years been driven by Asia, especially China and India. However, market participants in the region have had to rely on Western exchanges for price discovery, bearing the basis risk exposure in the process. Our new platform will offer Asia a bigger say in setting global commodity prices. It will also enable market participants to more actively manage their risk exposures, using products tailored to Asian market needs.”

HKMEx’s broking members at launch include BOCI Securities Ltd, Celestial Commodities Ltd, CES Capital International Co. Ltd, Chief Commodities Ltd, ICBC International Futures Ltd, Interactive Brokers LLC, KGI Futures (Hong Kong) Ltd, MF Global Hong Kong Ltd, Morgan Stanley Hong Kong Securities Ltd, OSK Futures Hong Kong Ltd, Phillip Commodities (HK) Ltd, Tanrich Futures Ltd and TG Securities Ltd. Its three clearing members are Interactive Brokers (UK) Ltd, MF Global UK Ltd and Morgan Stanley & Co International Plc.

The first product to trade on the Exchange will be a 1-kilo gold futures contract offered in US dollars with physical delivery in Hong Kong. Trading hours will run between 0800 to 2300 Hong Kong Time, overlapping commodity markets in Europe and the US. “This helps to promote cross-continent trading and boost liquidity,” said Albert Helmig, president of HKMEx. “It also offers participants extensive opportunities for hedging, arbitrage and effective risk management.”

Source: asiaetrading.com

Liquidity-Based Rather Than Fixed Gold Standard

A fixed gold standard will not stop the boom/bust cycle of credit and debt that accompanies economic expansions and contractions. People often forget that the gold standard did not prevent the Great Depression. This is why any 'gold standard' must be liquidity based. Any system that lack flexibility will be repealed during the crisis. Roosevelt quickly learned this lesson in 1932.

Headline: The Gold Rush: Conservative Economists and States Push for Gold Standard

In a move that reflects growing anxiety over rising inflation and a weak economy, South Carolina became the newest state to propose a bill that would make gold and silver coins a form of legal tender in the state.

Utah started the trend, becoming the first state on May 9 to recognize gold and silver coins minted by the U.S. government as legal tender. More than a dozen other states are considering similar moves.

Gold is increasingly taking the spotlight as worries about inflation and a debt crisis grow.

Publisher and one-time presidential candidate Steve Forbes this month joined the chorus of noteworthy economists and businessman predicting a return to the gold standard.

Source: abcnews.go.com

Public Confidence Is Fickle, Be Prepared

Public confidence is fickle. One minute everything seems ‘normal’ and the next all hell is breaking loose. Yes, the dominoes that started falling in 2008 have not stopped. Does the public recognize the severity of the risks (leverage within the financial system)? Absolutely not!

In the past, bank runs materialized when depositors (the public) sensed impending insolvency. Today that sense has been dulled by deposited insurance backed by the printing press. So far the relatively slow and orderly loss of purchasing power in the US dollar, i.e. higher food and energy prices, has yet to rattle confidence to the point of decisive action. In other words, the public has yet to seek alternatives to fiat en masse.

What happens if, more likely when the loss of purchasing power transitions from slow and orderly to fast and chaotic? FDIC deposit insurance and other carrot-on-a-stick programs won’t be enough to prevent bank runs. This is the clear lesson from history unless millions of years of human evolution and behavior designed to ensure survival suddenly disappears in the next five years.

Headline: Savers may flee U.S. banks

Eric Sprott, the Canadian money manager who in 2008 predicted banking stocks would collapse, says U.S. savers will eventually pull their money out of banks that are carrying too much leverage on their balance sheets.

Banks are leveraged 20 to one and their portfolios are mainly composed of government bonds and mortgages, the founder of Sprott Asset Management Inc., said Friday at the SALT, or SkyBridge Alternatives, conference here.

"House prices keep going down, the number of people under water keeps getting worse," said Sprott, 66, who is chief executive officer of the Toronto-based firm.

Source: theprovince.com

From Bob

I Haven`t Shorted Bonds Yet. I Am Going To Start Shorting Soon, Jim Rogers

Perhaps Jim Rogers 'sees' the formation of another bearish setup in the bond market.

I haven't shorted bonds yet, but you have a very good memory. I'm going to start shorting bonds soon. In fact, maybe when we finish this I might go over and short some bonds now that you've reminded me. - Jim Rogers in The Street.com

Source: jimrogers-investments.blogspot.com
Video: bcove.me

Unusual Credit Trends In Commercial Banking

Fractional reserve banking is like a shark, credit must continue to expand (swim) or it faces death. This explains the unprecedented panic, as reflected by the speed and magnitude of the coordinated quantitative easing, to unclog the credit markets and restart lending process.

Credit creation is clearly stumbling. Commercial banks are beginning to hoard cash and treasury securities while critical sub sectors such real estate (including home equity) and consumer loans’ contribution to total bank credit continues to shrink. The red boxes below illustrate new swing lows in their percentage contributions since the onset of the crisis in 2008.

Why are commercial banks still aggressively hoarding cash assets (equivalents) and treasury despite the end of the Great Recession in 2009? Perhaps, there’s more or less to this economic recovery than advertised.

Total Bank Credit, All Commercial Banks.

Debt limit reached, US halts 2 pension investments

Headline gives new meaning to Alan Parson's Project song entitled Games People Play, 1980.

Treasury Secretary Timothy Geithner said Monday that he will immediately halt investments in two big government pension plans so the government can continue to borrow money.

Geithner informed Congress of his decision in a letter stating that the government had officially reached its $14.3 trillion borrowing limit. He repeated a warning that if lawmakers do not increase the borrowing limit by August 2, the government is at risk of an unprecedented default on its debt.

The debt limit is the amount of money the government can borrow to help finance its operations. The nation has reached its debt limit because the federal government has grown accustomed to borrowing massive amounts of money. The latest estimate is that it borrows 40 cents for every dollar it spends.

Source: news.yahoo.com

Never Say Never, Shorts Are Concentrating In Bond Market

The debt issuance game is so important that semantics matter. The parsing of Bill Gross's words represents a sign of respect for being one of the best of the best in the debt market. The message of the market, however, supercedes the words of any individual, fund, or firm.

The message of the market reflects the actions of capital. Capital stalks the market in size away from the headlines. What's it doing? It's beginning to concentrate on the short side despite the semantics game.

US Treasury Bond 20YR+ (TLT) And Bond Diffusion Index (DI)


Headline: PIMCO's Gross says firm "never" short U.S. Treasuries: report

PIMCO's Bill Gross, manager of the world's largest bond fund, said on Monday it was a "misconception" the firm was short on U.S. Treasuries, saying the fund never actually bet against U.S. Treasuries.

Gross told CNBC the firm was "very underweight" the U.S. Treasury market and holds other bonds that are doing better than Treasury securities.

The company's website in May showed PIMCO's $240 billion Total Return fund (NASDAQ:PTTRX - News) was short U.S. government-related debt -- this includes Treasuries, TIPS, agencies, interest rate swaps, Treasury futures and options, and FDIC-guaranteed corporate securities.

Source: finance.yahoo.com

Gold and Oil Playing A Similar Game

Another weak to strong hand transfer to reestablish control of the trend. This transfer will create another professional entry point soon.

CrudeOil (WTI) and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Quick-click (hitter) headlines are tools designed to support the short-term trend (i.e. money). If the trend is down, they reinforce doubt and fear. If it's up, they support confidence and greed. The direction of the trend reverses when retail money is concentrated to the wrong side of the trade.

Headline: Oil falls below $98 as traders eye US crude demand

Oil prices fell below $98 a barrel Monday as the dollar strengthened against the euro and investors worried that soaring U.S. fuel costs were undermining crude consumption.

By early afternoon in Europe, benchmark crude for June delivery was down $1.75 to $97.90 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled at $99.65 per barrel Friday, up 68 cents.

In London, Brent crude for June delivery was down $1.38 to $112.45 a barrel on the ICE Futures exchange.

A stronger dollar weighed on oil prices by making commodities like crude more expensive for investors trading in other currencies.

Source: finance.yahoo.com

Gold Market, "Stealing Candy From A Baby" Setup

I have used idioms like "stealing candy from a baby" to describe the money flows during paper operations in gold.

(1) Price decline creates fear
(2) Headlines reinforce the fear
(3) Control of trend is transferred from weak to strong hands
(4) Repeat (1) until all the candy is relieved from the weak hands.

Here's the visual representation of the four step process:

Gold London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Gold London P.M Fixed and the Commercial Traders COT Futures and Options ZScore Weighted Average of Long & Short As A % of Open Interest


Below illustrates a composite look at the paper operation and the growing bullish setup.

Gold London P.M Fixed And Gold Diffusion Index (DI)

Jim Rogers Says Dollar Is Long-Term ‘Total Disaster’

While certain interests continue to talk up the dollar to shape perceptions, there’s little they can do to alter economic reality. Currency debasement (printing) has never provided the foundation for stable, long-term economic growth. History will repeat as the status quo decision-making is never preemptive. That’s why real change arises from chaos rather than order.

The U.S. dollar is going to be a “total disaster” in the long term because of the country’s position as the world’s largest debtor and the policies being pursued by Federal Reserve Chairman Ben S. Bernanke, according to investor Jim Rogers.

The Chinese yuan is likely to be a “safe” currency, although it is difficult for investors to buy, Rogers, the chairman of Rogers Holdings, told a conference in Edinburgh.

“The situation is getting worse and I expect to see severe problems in the U.S.,” Rogers said today. “Dr Bernanke doesn’t understand economics, he doesn’t understand finance, he only understands printing money and we can’t quadruple the amount of money in the next slowdown.”

U.S. government debt is currently 93 percent of gross domestic product compared with 60 percent before the financial crisis and is set to rise further in the next few years. The dollar has fallen over the past year against every currency in a basket of 16 major currencies. The euro has gained about 7 percent against the dollar this year. It traded at $1.4311 as of 3:20 p.m. in London.

Source: bloomberg.com

Bullish Setup in Copper

Analysts have been using words such as “troubling” and “ominous” to describe copper's recent decline.

In recent weeks, metals of all sorts--precious and industrial--have taken a beating in a major selloff in the commodities market. Experts cite a number of reasons, including speculation, increased margin requirements (how much collateral investors have to put down), and concerns that the economic recovery may not be as strong as previously thought. But experts say the losses in copper are the most troubling.

Source: edegrootinsights.blogspot.com

The message from the market provides a much different perspective than the headlines. Money flows reveal the distinctive ‘footprint’ of a weak to strong hand transfer. Retail money flows have registered statistical concentration on the short side while connected money slowly builds their long positions into weakness. In other words, these are the money flows of a classic bullish setup.

The yellow and green shadow boxes illustrate retail trader’s bullish and bearish concentrations (setups), respectively. The chart below illustrates how they tend to bullish at the trading tops and bearish at the bottoms. The blue spot shadow reveals retail traders’ recent short side play into the decline. This action, while not necessary a bullish signal yet, suggests a tradable bottom is under construction.

Copper (JJC) and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


The Diffusion Index reveals the strength of the bullish setup in the copper market.

Copper (JJC) And Copper Diffusion Index (DI)


As of May 10th, the weak to strong hand transfer (operation) is underway. Retail money trades with emotion; it is their mortal enemy. Connect money uses this weakness to beat the grass to startle the snakes. It’s a game that’s repeated over and over in every leveraged market (Copper, silver, gold, crude oil, US long bonds, etc). This is why I always follow the money and ignore the headlines.

Debt Ceiling More Like Line In The Sand Than Fixed Structure

The ‘debt ceiling’ is more like a line in the sand to be casually stepped over than a fixed overhead structure.

Headline: Treasury Auctions To Take US Over Debt Ceiling On Monday

The Treasury Department auctioned $56 billion in new debt Tuesday and Wednesday, enough to take the U.S. over its federal debt ceiling when the three- and 10-year notes settle on Monday.

Treasury officials last month flagged May 16 as the day the government would hit the $14.294 trillion debt limit.

The U.S. is selling $72 billion in new debt over three days this week. The Treasury auctioned $32 billion in three-year notes Tuesday and $24 billion in 10-year notes Wednesday, and will sell $16 billion in 30-year bonds Thursday. All of the auctions will settle Monday.

Source: nasdaq.com

Headline: Bernanke: Raise debt ceiling now

Federal Reserve chief Ben Bernanke reinforced his call on Thursday for Congress to raise the cap on U.S. borrowing, saying a failure to do so could lead down the same risky path that the failure of Lehman Brothers did.

During a Senate Banking Committeee hearing, Bernanke reiterated catastrophic consequences should Congress either fail to raise the limit on borrowing or edge too close to that limit.

"The worst outcome would be one in which the financial system would be again destabilized, which we saw in Lehman, which would have extremely dire consequences for the rest of the economy," Bernanke said, referring to the period following the failure of the Wall Street bank Lehman Brothers at the height of the financial crisis in 2008.

Source: finance.yahoo.com

Dr. Copper? More Like Dr. Liquidity

"Dr. Copper" is one of most over-hyped economic indicators out there. The real economic is far too complex to be simplified into follow Dr. Copper. Besides, copper like stocks, industrial and agricultural commodities are being driven more by Dr. Liquidity than supply and demand dynamics. Copper’s real trend looks a lot different than its nominal (fiat money) trend. Those that adhere to the Dr. Copper theory better be able to distinguish the difference between the two trends.

The nominal trend broke above the 2008 high in 2011.

USD Copper ETN (Nominal)


The real, constant current trend, paints a completely different picture. Real price remain well below the 2008 high. Why? Liquidity is driving copper more than supply and demand fundamentals. Don't look for the angle to get pushed much as 2012 approaches. This explanation lacks voter appeal.

Oz Copper ETN (Real)


Headline: Why Copper Is the Metal to Watch

In recent weeks, metals of all sorts--precious and industrial--have taken a beating in a major selloff in the commodities market. Experts cite a number of reasons, including speculation, increased margin requirements (how much collateral investors have to put down), and concerns that the economic recovery may not be as strong as previously thought. But experts say the losses in copper are the most troubling.

While scarce precious metals like gold and silver are often perceived as safe havens or inflation hedges because of their inherent value, copper is an industrial metal that's seen as a leading indicator for the future of global economic growth. It's often called "Dr. Copper" because of its past success in forecasting the direction of the economy.

"Oftentimes, the price action in copper indicates what's going on in the global economy because it's used so much for so many industrial purposes," including electrical wiring, says Sean Brodrick, small-cap and natural resource analyst for the blog Uncommon Wisdom Daily. "The breakdown we're seeing in copper right now looks quite ominous."

Source: finance.yahoo.com

Fundamentals: Money Out > Money In

The sell off in gold and silver is nothing more than a transfer of control from weak to strong hands. These markets will turn, unexpectedly so in the headlines, once the paper fuel has been exhausted and concentration of funds emerges.

Why?

The fundamentals debt and socialism, thus, gold and silver have not changed. For example, yesterday's federal budget reveals that heavily hyped spending cuts proposals are merely crumbs of a very large and growing deficit pie.

Jim's formula illustrates yet another rollover within a secular downtrend. This rollover will be addressed with classic lip service, but behind the scenes massive, largely quiet, liquidity injections will be the solution.

US Federal Budget (Surplus or Deficit As A % of GDP, 12 Month Moving Average) and Gold London P.M. Fixed:


Real (constant currency) revenues or the money government receives to pay the bills, continue to contract faster than real outlays. In other words, the government, like the post office is hemorrhaging red ink.

Real or Gold Adjusted Federal Total Receipts 12-Month Moving Average (TR12MA) AND Federal Total Receipts 12-Month Moving Average Year-over-Year Change (TW12MA12LN)


Real or Gold Adjusted Federal Total Outlays 12-Month Moving Average (TO12MA) AND Federal Total Outlays 12-Month Moving Average Year-over-Year Change (TW12MA12LN)


As Jim has said numerous times, gold is all about debt (and the solutions to mitigate it). Deficit spending cannot be cut without Depressionary consequences, so it won’t. History suggests that governments pay their bill through devaluation rather than discipline. The chart below illustrates only a portion of those bills; the appropriate expression should be GASP! This is why capital is buying gold.

Total Credit Market Debt As A% GDP


Headline: Spending cuts not expected to dent $1.5T deficit

The $38 billion in spending cuts agreed to last week won't prevent this year's budget deficit from setting another record high, estimated at $1.5 trillion.

Most of the agreed-to spending cuts either affect future budgets or amount to accounting gimmicks that won't reduce actual spending.

The Treasury Department reported Tuesday that the deficit already totals $829.4 billion through the first six months of the budget year -- a figure that until 2009 would have been the biggest ever for an entire year. For March alone, the government ran a deficit of $188 billion.

Source: finance.yahoo.com
Source: fms.treas.gov