Weekly Fundamental Preparation of Currencies

[US STOCK CLOSE] Dow, other key indices rose 2% as investors looked past grim Q1 GDP drop (-6.1), betting record inventory decline will clean deck for some needed restocking with consumer spending up better than f/cast. Some last hour selling pushed the indices off their best lvls. The FOMC meeting left rate policy unchanged but noted pace of recession slowing and outlook a bit better. Financials and tech did best among the major sectors, followed by energy with oil near $51. Latter like tech rose with recession-bottom hopes. Lagging sectors were more defensive and rate sensitive as telecom and utilities as 10-yr Tsy yield rose further above 3% amid with supply concerns and easing risk aversion as stocks gained.

NEW YORK (CNNMoney.com) -- "Chrysler LLC filed for bankruptcy Thursday. But a deal has been reached to combine the company with Fiat in order to allow Chrysler to stay in business . . ."

Full story:

http://money.cnn.com/2009/04/30/news...ptcy/index.htm

May 6 (Bloomberg) -- "The yen and the dollar rose against the euro on concern U.S. regulators will say Bank of America Corp. needs $34 billion in new capital, boosting demand for the relative safety of the currencies . . . "

Full story:

http://www.bloomberg.com/apps/news?p...refer=currency

NEW YORK (CNNMoney.com) -- "The government announced its plan in late February to look under the hoods of the nation's largest financial institutions to gauge their ability to withstand losses. The results are now in . . ."

Full story:

http://money.cnn.com/2009/05/07/news...able/index.htm

May 8 (Bloomberg) -- "Treasury Secretary Timothy Geithner is betting that U.S. banks can do something their Japanese counterparts were unable to accomplish in that country’s “lost decade” of the 1990s: earn their way out of trouble . . . "

Full story:

http://www.bloomberg.com/apps/news?p...g1U&refer=home

BOE minutes was less than spectacular but did provide a bounce in the falling pound.

http://www.kathylien.com/site/wp-con...09/07/jobs.gif

the legitimacy of the recent rally in stocks
http://education.wallstreetsurvivor....he_thinker.jpg
I would like to remind readers that the last great find of easy to recover oil was the North slope of Alaska in the early 1980’s. No other potential source of “easy” oil can match the size of the North Slope, including the shale oil of Wyoming, the Tar Sands of Alberta or the “locked away” oil sitting under the ocean on the U.S.’s continental shelf.

As for “renewable” sources of energy, they are like putting a band aid over a bullet hole – nice gestures, but they can’t save a dying patient. Bio-fuels have a very low EROEI (Energy Returned on Energy Invested) making them a dubious solution when you consider someone has to go hungry in order to produce them.

Wind and Solar also have a low EROEI when you consider how energy intensive windmills and solar panels are to create, install and maintain. Even if fantastic advances were made in solar or some other technology, there would still be enormous energy needed to convert our current fleet of cars and trucks to the new technology.

Barring a miracle of Biblical proportions (“Free Energy” technologies like Cold Fusion or Zero-point energy becoming readily available), the Western way of life, including the Bull markethttp://images.intellitxt.com/ast/adTypes/2.gif in stocks, is over.

The oil we need to keep the fractional reserve banking system alive just doesn’t exist on a scale that Faith Birol says that we need when he says, “the world would have to find the equivalent of 4 Saudi Arabias to maintain production and 6 to meet future demand.”

Pretending or wishing that this major shift in the world due to Peak Oil is not occurring is just wishful thinking at best, and outright delusional at worst. So, let’s accept the facts that we see in front of us and move on to what we can do to make the best of this predicament…

Because the centuries old fractional reserve banking system is collapsing, you need a new investing mind-set. It’s time to think of investing in a new way with new ideas. But first, let’s review the old model of investing in a Bull market:

In the Bull market that ran from 1983-2007, investors merely had to invest their money in S&P 500 index mutual funds or ETFs to capture the majority of the stock market’shttp://images.intellitxt.com/ast/adT...lass_10x10.gif huge gains. See the chart below of the incredible performance of the broad stock market which returned 792% 1983-2007:

The old adage used to be: “If you aren’t Long, then you’re Wrong.” This meant that if you simply bought stocks and held them, you would make money over the long-term (more than 5 years time horizon). And as you can see, this strategy of buying just about any broad diversified group of stocks and holding them for long periods of time was a very good strategy to make gobs of money.

But that was then, it is different now. We need new ideas of how to make money in stocks where simply buying the broad market will blow up in your face.

Sure, the stock market has had a wonderful rally this Spring and Summer. As of today, August 4th, the S&P 500 has risen 50% since the March 2009 lows. This rally reminds us of the “good old days” when UP was the only direction stocks could go over prolonged periods.

But this rally is an illusion. It is the classic “bear trap” that will suck in the majority of investors thinking that the “good old days” are back and life will go on as we used to know it with cheap beer, free TV and sports on the weekends.

This rally is an illusion because the major trend has changed from a Bull market to a Bear markethttp://images.intellitxt.com/ast/adT...lass_10x10.gif and it is still in place. For more information on how to identify trends, see GCMan's article "Identify the Trend and Trend Reversals". See below how the upward leaning Bull market trend line (in red) was tested by the crash last Fall and then broken in October 2008?
http://education.wallstreetsurvivor...._1983-2009.png
Then, as the stock market fell below its low of 2002, the Bull market ended, although you never heard about it in the media. Still, the trend has changed from a long-term Bullish trend where stocks inevitably rise, with the occasional correction, to a long-term Bear market where stocks inevitably fall. Here's a closer look of the stock market that shows the decisive break (like a dagger) below the October 2002 market low:
http://education.wallstreetsurvivor...._2001-2009.png
But doesn't this recent revival in the stock market mean the bear market is over? Hardly. For the bear market to be over and for a new bull market to begin, the market must eclipse the high set in October 2007: 14,000 in the Dow and 1,500 in the S&P 500. Until we reach those levels again, we are in bear market - don't let anyone tell you differently.

The sooner you, as an investor, can see how the investing landscape has radically changed from a Bull to a Bear market, the more money you will be able to save and hopefully, earn in the next few years. This lesson is extremely difficult to learn, even for professional money managers.

For example, the gurus who manage the multi-billion dollar investment portfolios at Harvard, Yale and Stanford are learning this the hard way. See "Is the Babe Ruth of Investing Dead?". This article offers important lessons for you in managing your own investments in that shrinking from risk is not a winning strategy for dealing with a Bear market

I know I said I would show you ways to make money in this new environment, but I needed to go over the finer points of Peak oil and to review the prior Bull market and how we got into the Bear market.

The first step for any investor right now is to PROTECT YOUR WEALTH by selling stocks, all stocks and bonds into this current rally. Get into cash, even gold and silver which have historically been considered cash. For the conservative investor, I suggest selling all stocks when the Dow hits 9,500. For the more darling and adventuresome traders, we can wait to see if this Bear market rally continues...

Next, I will show you ways to profit during this long-term bear market downturn. Some will be obvious, some won't.

By
Mark Berger

John Herrmann (featured on Bloomberg) an economist of Herrmann Forecasting thinks the economy is in a traditional V shaped recovery that will put the bears in hibernation for at least 9-12 months. He says production is increasing and employment will start to improve after Halloween. The recovery will be led by sectors such as Manufacturing.
Jobs Report Beats Forecasts as Unemployment Rate Falls to 9.4%


Inside Look: A Deeper Recession?

Fascinating, and insightful.
Thank you.

Oil dips on gloomy consumer sentiment

What analysts are saying: "Consumer sentiment sucked the life out of the market today," said Gianna Bern, president of Brookshire Advisory and Research, Inc., a Chicago-based investment research firm.

"Crude has gotten ahead of itself in the last couple weeks," said Bern. "An $81 a barrel [price] is very generous considering global demand is still fairly low." She added that crude inventories are still above their 5-year averages.

Still, higher demand forecasts this week from the U.S. Energy Information Administration and the International Energy Agency in Paris, as well as a better than expected jobless report, point toward improving economic conditions.

Analysts say the oil rally should continue, barring any surprising economic news with prices piercing a ceiling of about $85 a barrel as early as May.

Looking ahead, traders are keeping an eye on OPEC's semi-annual conference on March 17, where analysts expect oil quotas to remain unchanged. April crude contracts expire on March 22.

Gold falls on fears China may raise rates


Gold in New York fell to the biggest weekly loss in seven weeks yesterday, on speculation that China will raise interest rates to control inflation, reducing demand for raw materials including precious metals.

Consumer prices in China rose 2.7% in February, the most in 16 months, the government said Thursday. The Reuters/Jefferies CRB Index of 19 commodities slumped yesterday, led by energy contracts, and has dropped every day this week. Accelerating growth in China last year and low interest rates helped send gold to a record US$1,227.50 an ounce on Dec. 3.

"There's a lot of chatter that you'll have rate hikes out of China," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. "If China raises rates, that's going to damp demand for raw materials. Gold and oil are going to be sensitive to this."

Read more: http://www.financialpost.com/story.h...#ixzz0i2dsDkrf
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Dollar hurt by weak consumer data

What's moving the market: The Commerce Department's monthly report on retail sales showed a 0.3% increase, following a 0.5% dip in January. That surprised economists who expected sales to fall 0.2% in February, according to Briefing.com.

The dollar initially rallied after the report was released. But the advance faded along with gains in U.S. stock markets following a surprise decline in a key index of consumer sentiment.

The Reuters/University of Michigan index of consumer sentiment fell to a reading of 72.5 in early March from 73.6 in the previous month. Economists had expected the index to climb to 74.

Also weighing on sentiment, government data showed January business inventories were flat, versus a forecasted 0.1% rise.

Meanwhile, the euro and the pound were supported by upbeat economic data from Europe and expectations that E.U. policy makers will keep stimulus efforts in place for a prolonged period of time.

In addition, investors are looking ahead to next week's meeting of the Federal Reserve.

daily usd-cad vs oil.