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http://www.moneyandmarkets.com/why-t...49288?FIELD9=3

Why the U.S. dollar may be in a sweet spot … a place it hasn’t been for a long time

Jack Crooks | Saturday, March 24, 2012 at 7:30 am

http://images.moneyandmarkets.com/2197/jack-crooks.jpgEveryone is rightfully excited over the potential for a strong rebound in the U.S. economy. And there is nothing short of the potential of global recession at stake should U.S. growth sputter. What is the key risk to U.S. growth going forward?
A Balance Sheet Recession
You may not be familiar with the term “balance sheet recession.” The reason is because we haven’t seen one in the U.S. since the 1930s Great Depression.
So what qualifies as a balance sheet recession, how is it triggered, and why is it so dangerous?
In a balance sheet recession individuals and businesses are more concerned about paying down existing debt than taking on new loans. That increases the demand for cash from individuals and businesses; so even higher levels of cash injected into the economy do not deliver the same punch.

The U.S. Is the Only One
Pulling the Wagon!
Europe is heading into a deep recession it seems, and China’s growth is deteriorating a lot faster than the consensus expected. Thus a slowdown in the U.S. means the global economy could quickly head back into recession.

Global stocks have been screaming higher thanks to all the money flowing from governments and central banks. But all that will likely come crashing down on a U.S. growth disappointment.

Liquidity bidding up those stock prices have pushed up many risk asset classes in correlation (commodities, junk bonds, etc.) even though global growth has not materialized yet. In effect, stocks are bid higher on expectation of good things to come. This tells me key commodities (and commodity currencies) are extremely vulnerable given China’s now precarious condition.

The U.S. dollar seems to be in a very good spot; it can rally on growth or disappointment …

The U.S. is growing faster relative to the primary dollar-competitor nations, and market interest rates are starting to reflect this reality. Thus, the dollar is now getting some growth and yield coverage; neither of which it has had for a long time.

But interestingly, if U.S. growth disappoints, the dollar will likely get what is called, “a major risk bid.”

That happens when money is moving back into the U.S. capital markets — U.S. Treasuries — for safe haven. And the dollar benefits because these big pools of safe haven flow must first convert their holdings into U.S. dollars to buy Treasuries.

So the jury is still out on the U.S. recovery given the negative impact of a balance sheet recession that can take years to overcome. But either way, the U.S. dollar may be in a sweet spot, a place it hasn’t been for a long time.

Best wishes,
Jack

http://www.goldmoney.com/gold-resear...en-future.html

Asia’s golden future

2012-MAR-24

http://www.goldmoney.com/images/thum.../2001panda.jpgFor most of the last century the default currency for international settlements has been the US dollar. This has given America ultimate power over international trade. In recent months, the US wielded this power against Iran, making life extremely difficult for all Iranians. Importantly it has interrupted oil trade with India, China and Japan. Furthermore SWIFT, the Belgian-based international banking settlement agency, has halted all Iranian interbank transfers.

The sharp lesson for nations in Asia is that their own trade security is best served by having an alternative settlement medium to the dollar and other Western currencies. This function historically belongs to gold, but that is a last resort for central banks, and besides, many Asian central banks are gold-poor. This plays into China’s hands.

China is increasingly keen to provide her own currency for trade settlement purposes. She sees the dollar-monopoly as an important security threat, which is why she has in the past sought alternatives. She is now cautiously promoting her own currency for this role and is developing an offshore renminbi capital market in Hong Kong. At the same time she is evolving from manufacturing consumer goods towards capital goods, for which Hong Kong is the natural financing centre.

Her targeted growth-markets are other rapidly developing economies, as well as the whole Asian continent, and no longer the US and Europe. One of her key strategies through the Shanghai Cooperation Organisation is to build a pan-Asian security and trade bloc in partnership with Russia, and the last element of this 10-year old plan is to settle cross-border trade without using the West’s financial system. China expects to play a major part with her currency, which explains why she is adding to her gold reserves. The relevance of gold is that China will have to show to the people of Asia that her currency has better long-term prospects than the dollar, which goes some way to explaining why so many of the countries associated with the SCO are now also accumulating the metal. This analysis is confirmed by a leaked cable from the US Embassy in Beijing as long ago as April 2009 that can be seen in GATA’s database. As Iran and India also have SCO Observer status they are part of China’s grand strategy, and they have also been buying gold.

At some stage China will need to restate her gold reserves, and given this has to be credible rather that actual, she will probably release a suitable figure showing her to be the second largest holder behind the US.

However, she is treading carefully, because she has to extricate herself from monetary relationships with the West, which ideally should be a gradual process: a sudden withdrawal could lead to a global systemic collapse and undermine her own dollar investments.

The question now arises as to whether an escalation of US pressure on Iran and her oil-trading partners will provoke an announcement from China about her gold. In any event there is bound to be a growing realisation of why gold is central to the economic futures of China, Russia and the whole of Asia. China’s financial and economic objectives will completely wrong-foot the major central banks that are committed to the demonetisation of gold.

http://www.actionforex.com/action-in...0120324162116/


Dollar attempted a rebound last week on selloff in risk markets on global slowdown worry but failed towards the end of the week. Even though S&P 500 suffered the largest weekly decline since last December, it pared much loss on Friday with help from quarter end window dressing buying.

Dollar index has indeed closed the week lower at 79.345. Meanwhile, EUR/USD now looks set to take out 1.33 level this week and could be heading back to 1.35. We'd maintain that equities remain vulnerable to a deeper pull back and that should exert certain pressure on commodity currencies. European majors could benefit more from risk aversion than dollar this time as European/commodity crosses short positions unwind but that's far from being certain. Yen would possibly rebound further with help from repatriation. Dollar would be mixed. So, we'd favor long in European/commodity crosses and short in commodity/yen crosses in near term.

PMI data from China and Eurozone were a major source of worry in the global economy. The HSBC/Markit manufacturing PMI in China dropped from 49.6 to 48.1 in March, staying in contraction region and was the lowest number since last November. An HSBC economists noted that growth momentum in China could slow further on sluggish export new orders and softening domestic demand. Eurozone manufacturing PMI unexpectedly dropped from 49.0 to 47.7 in March while services PMI dropped from 48.8 to 48.7. Germany manufacturing PMI dropped from 50.2 to 48.1 while services PMI services dropped form 52.8 to 51.8. French manufacturing PMI dropped from 50.0 to 47.6 while services PMI was unchanged at 50. The set of data triggered worry that recession in the Eurozone could be worsening.

PBoC announced, in order to boost credit, a reduction of reserve requirement ratio in 379 more branches in rural areas of the Agricultural Bank of China. The scheme was initially applied to 563 branches in 8 provinces. The reduction of the ratio by 2% is expected to free up RMB 23B. The impact to market was mild though as it's seen as part of the targeted fine-tuning of policy with the use of so called "differentiated reserve ratios".

Fed Bernanke said that the threats from the debt crisis eased recently as developments has lowered the risks. He hailed the exchange of bailout support and deeper budgets by Greece while acknowledged the PSI debt swap deal. Nonetheless, he warned that "a significant expansion of financial backstops" is still needed to safe guard the Eurozone from contagion. And "full resolution of the crisis will require a further strengthening of the European banking system." And contagion risks remained a concern for U.S. financial firms and money market funds, U.S. financial firms and money market fund and their supervisors and regulators. Regarding US, Bernanke said economic recovery still lacks sustainable strength. Bernanke remained cautious on the economic outlook, citing consumer spending, currently taking up 70% of the US GDP, is not robust enough to sustain growth. He stated that "every country needs to have an appropriate balance of consumption, capital formation, exports and government spending, and that's an important task for us going forward... In terms of debt and consumption and so on, we're still way low relative to the patterns before the crisis'.

Technical Highlights
Dollar index's rebound failed last week and even extended the fall from 80.73 on Friday. Momentum also turned weak with daily MACD crossed below signal line. Focus is back on 79.07 support. Break there will indicate completion of the rebound form 78.09 and in that case, fall from 81.78 would likely be resuming for another low below 78.09. And such development will shift favors back to the case that dollar index has already topped out at 81.78 in medium term. Nonetheless, strong support from 79.07, followed by break of 80.73 will revive the case that another high above 81.78 should be seen before reversal.

http://www.actionforex.com/images/st...20120324w1.gif

The Week Ahead
Quarter end window dressing in stock markets and technical developments will be the major focus this week. In particular, a major focus will be on whether EUR/USD could take out 1.33 level and in that case, deeper selling pressure would be seen in dollar in near term. Meanwhile, the strength of recovery in stocks would be watched. This week's data are important, but might not be market moving. Japanese CPI would be watched especially to affirm the view on further QE from BoJ ahead.

1. Monday: German Ifo; US pending home sales
2. Tuesday: German Gfk consumer sentiment; UK CBI reported sales; US S&P/Case Shiller house price, consumer confidence
3. Wednesday: German CPI, Eurozone M3; UK GDP final; US durable goods
4. Thursday: Japan retail sales; German unemployment; UK M4, mortgage approvals; Canada RMPI, IPPI; US jobless claims, GDP final
5. Friday: Japan CPI; German retail sales, Eurozone CPI; Swiss KOF; Canada GDP; US personal income and spending, Chicago PMI

EUR/USD Weekly Outlook

EUR/USD attempted to end the recovery from 1.3003 last week but downside was contained at 1.3138 and such recovery resumed. Initial bias is mildly on the upside this week and break of 1.3290 will target a test on 1.3486 resistance. Break there will confirm resumption of whole rebound from 1.2625 and should target 61.8% retracement of 1.4246 to 1.2625 at 1.3627 next. On the downside, below 1.3138 minor support will flip bias back to the downside. Further break of 1.3003 will extend the fall from 1.3486 and should revive the case that 1.2625 is finished.
In the bigger picture, price actions from 1.6039 (2008 high) are treated as a long term consolidation pattern and there is no clear indication of completion yet. That is, price actions could remain corrective and relatively unpredictable. Current development suggest that the falling leg from 1.4939 is not finished yet and break of 1.2625 should pave the way to 1.1875 low. On the upside, we'd prefer to see sustained trading above 55 weeks EMA (now 1.3540) to indicate the start of another rising leg inside the pattern.
In the long term picture, EUR/USD turned into a long term consolidation pattern since reaching 1.6039 in 2008. Such consolidation is still in progress and we'd expect range trading to continue for some time between 1.1639 and 1.6039. The range sounds a bit uselessly large but yes, it's that large. For long term traders, anywhere below 76.4% retracement of 1.1639 to 1.6039 at 1.2677 could be treated as a buy zone while above 23.6% retracement at 1.5001 is a sell zone, until there is clear indication of breakout.

http://www.actionforex.com/images/st...20120324w1.gif

March 24, 2012
I've Never Seen a Confluence of Negative Factors Like This

Since August I've been calling for a collapse in Europe. Obviously I'm way early here, largely due to intervention from the ECB. I also underestimated the extent to which leaders would push to hold things together.

After all, Greece had already received bailouts in excess of 150% of its GDP and still posted a GDP loss of 6.8% in 2011. It's hard to believe they'd want to accept more austerity measures and more debt.

Moreover, political tensions between Greece and Germany had reached the point that Greeks were openly comparing German Chancellor Angela Merkel and Finance Minister Wolfgang Schauble as Nazis while the Germans referred to Greece as a "bottomless hole" into which money was being tossed.

Looking back on it, the clear reality was that Germany wanted to force Greece out of the EU but didn't want to do it explicitly: instead they opted to offer Greece aid provided Greece accepted austerity measures so onerous that there was no chance Greece would go for it.

Well, Greece surprised many, including myself, and went for it. And so the EU experiment continues to exist today. However, before the end of this issue I will make it clear precisely why this will not be the case for much longer and why we are on the verge of a systemic collapse in Europe.

For starters, unemployment in Greece as a whole is now over 20%. For Greek youth (aged 15-24) it's over 50%. The country is in nothing short of a Depression.

Indeed, Greece has now experienced five straight years of contraction bringing the total contraction of Greece's GDP to 17%. To provide some historical perspective here, when Argentina collapsed in 2001 its total GDP collapse was 20% and this was accompanied by full-scale defaults as well as systemic collapse and open riots.

With new austerity measures now in place there is little doubt Greece will see a GDP contraction of 20%, if not more. I expect we'll see other "Argentina-esque" developments in the country as well. Put mildly, the Greek issue is not resolved.

The one thing that would change my views here would be if Greece staged a full-scale default. While the political leaders and others view a total default as a nightmare (and it would be for Greek pensions, retirees, and many EU banks), it is only a total default that could possibly solve Greece's debt problems and allow it to return to growth.

Defaults are akin to forest fires; they wipe out all the dead wood and set the stage for a new period of growth. We've just witnessed this in Iceland, which did the following between 2008 and 2011:

 

1. Had its banks default on $85 billion in debt (the country's GDP is just $13 billion).
2. Jailed the bankers responsible for committing fraud during the bubble.
3. Gave Icelandic citizens debt forgiveness equal to 13% of GD.

Today, just a few years later, Iceland is posting GDP growth of 2.9%: above that of both the EU and the developed world in general. In plain terms, the short-term pain combined with moves that reestablished trust in the financial system (holding those who broke the law accountable) created a solid foundation for Iceland's recovery.

Now, compare this to Greece which has "kicked the can" i.e. put off a default, for two years now, dragging its economy into one of the worst Depressions of the last 20 years, while actually increasing its debt load (this latest bailout added €130 billion in debt in return for €100 billion in debt forgiveness).



Iceland staged a REAL default, and has returned to growth within 2-3 years. Greece and the Eurozone in general have done everything they can to put off a REAL default with miserable results. I'll let the numbers talk for themselves:

https://phoenixcapital.infusionsoft....nload?Id=33549

The point I'm trying to make here is that defaults can in fact be positive in the sense that they deleverage the system and set a sound foundation for growth. The short-term pain is acute (Iceland saw its economy collapse 6.7% in 2009 when it defaulted). However, a combination of defaulting and debt forgiveness (for households) can restructure an economy enough for it to begin growing again.

However, EU leaders refuse to accept this even though the facts are staring them right in the face. The reason is due to one of my old adages: politics drives Europe, NOT economics.

And thanks to the Second Greek Bailout (not to mention the talk of a potential Third Bailout which has already sprung up), we now know that EU leaders have chosen to go "all in" on the EU experiment.

Put another way, EU leaders will continue on their current path of more bailouts until one of two things happens:

 

1. The political consequences of maintaining this strategy outweigh the benefits
2. The European bond markets force EU leaders' hands.

I firmly believe that we will see one of these happen in the May-June window of time. We have a confluence of political, fundamental, technical, and monetary factors occurring in that time period make the possibility of a banking Crisis in Europe higher than at any other point in the last three years. Indeed, I've never seen such confluence of factors like this before. And it all makes for a very ugly situation in Europe.



Graham Summers
Chief Market Strategist

http://www.larsschall.com/2012/03/24...gold-reserves/


Keiser Report: Selective Amnesia for Brokers & Murderers. In the second half of the show Max talks to independent journalist, Lars Schall, about his recently published investigation into insider trading around the 9-11 terrorist attack as well as his pursuit of Germany’s elusive gold reserves.


By Lars Schall
Keiser Report: 9-11 Insider Trading and Germany’s Elusive Gold Reserves

http://www.larsschall.com/2012/03/05...gold%e2%80%9d/

Related to his new oil report for Erste Group Bank, Vienna based commodity analyst Ronald Stoeferle answered in this exclusive interview some questions with regards to supply and demand; the demise of the petrodollar; the repercussions of Quantative Easing for the oil price; and the so called “skyscraper index.”


By Lars Schall

Ronald Stoeferle, who is a Chartered Market Technician (CMT) and a Certified Financial Technician (CFTe), was born October 27, 1980 in Vienna. During his studies in business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign in the USA, he worked for Raiffeisen Zentralbank (RZB) in the field of Fixed Income / Credit Investments. After graduating, Stoeferle joined Vienna based Erste Group Bank (http://www.erstegroup.com), covering International Equities, especially Asia. In 2006 he began writing reports on gold. His five benchmark reports on gold such as “A Shiny Outlook” and “In Gold We Trust” drew international coverage on CNBC, Bloomberg, the Wall Street Journal and the Financial Times. Since 2009 he also writes reports on crude oil. The latest oil report by Stoeferle, titled “Nothing to Spare?”, was published today.

The study is covering the following highlights:
* High liquidity, low interest rates, and QE should create a positive environment for oil
* Does the skyscraper index signal a weaker oil price?
* Excursus: Oil price development from the perspective of the Austrian School of Economics
* Petrodollar exiting through the back door?
* Break-even oil price (BEOP) suggests rising “floor”
* Sharply rising oil consumption in the exporting countries could trigger shortages in the long run
* US natural gas has a attractive risk/reward profile
* ”Clean fracking” will make shale gas production more efficient, cleaner and cheaper
* Neo-Malthusians vs. Cornucopians
* Economic consequences of the high oil price
* The aorta of the oil business – How likely is a blockade of the Strait of Hormuz?
* Technical analysis: Sentiment does not (yet) signal any extreme form of optimism

Mr. Stoeferle, how do you see the stress ratio between the rather flat global oil supply and the rising demand?

Gold closed at $1,662.80 spot...up $17.90 on the day. Net volume was on the lighter side...around 112,000 contracts.

http://www.caseyresearch.com/gsd/sit...68-470x299.gif

Silver's chart looks more or less the same as the gold chart...but the rally during the Comex trading session in New York was far more substantial on a percentage basis...and the high tick of the day [$32.41 spot] came either shortly before, or just after, the close of Comex trading at 1:30 p.m. Eastern time. From that high, silver gave back a bit of its gain going into the weekend.
Silver closed at $32.24 spot...up 65 cents on the day. Net volume was pretty light...around 31,000 contracts.

http://www.caseyresearch.com/gsd/sit...53-470x298.gif

The dollar index traded mostly flat during early Far East trading, with the high tick [79.74] coming shortly after 3:00 p.m. Hong Kong time...less than an hour before London opened on their Friday morning.
Less than three hours later...and a few minutes after 10:00 a.m. in London...the dollar index had fallen 50 basis points. Three hours after that...8:00 a.m. in New York...the dollar index had gained back 30 points of that decline...but continued to fall after that, closing almost on its low of the day. When all was said and done, the dollar index was down 43 basis points from Thursday's close.

If you examine the major dollar index inflection points against the major deflection points in gold and silver prices, you'll find a perfect match but...as I've said for the last three days...the match is almost too perfect.
It looks suspiciously like the same traders buying gold/silver and selling the dollar simultaneously...or doing the exact opposite...selling gold/silver and buying the dollar. There's no lag time at all, as the inflection points in both are either simultaneous or within minutes...and the only people who would know the exact price direction of either the dollar index or the precious metals, would be those who are doing those trades at the same time.
Talk about insiders gaming the system! I wish I was making their money.

http://www.caseyresearch.com/gsd/sit...13-470x307.gif

But, as I've said before, maybe I'm looking for black bears in dark rooms that aren't there.
Even though both gold and silver were up a decent amount at the open of the New York equity markets, the HUI opened flat...but began climbing from there...reaching it's high tick a few minutes after 12 o'clock noon Eastern time. It held that level until about 1:45 p.m...and then declined a few basis points going into the close at 4:00 p.m. All in all, the gold stocks pretty much mirrored the gold price. The HUI finished up 1.74% on the day.

I got a monster e-mail from Nick Laird late last night...and thought all the charts, plus everything had to say in association with them, was worth posting....so here goes.

"The gold oscillator is indicating that the latest move up by gold is a breakout.

"There is good probability that gold has finished it's decline and the next wave should be up and taking out the recent highs at $1,780.

http://www.caseyresearch.com/gsd/sit...-1-470x338.jpg
(Click on image to enlarge)

"On a larger scale, the impending move up - if it is strong enough i.e.. takes out $1,800 & then $1,900 - will then trigger a massive rise out of the triangle shown in the chart below.

"This is indicative of a major rise coming in gold - something strong enough to take us up to the mid $2,000's.

The chart was sent to me by reader Phil Barlett...and shows just how much monetary pumping at all levels is currently going on at the moment. It's already showing up in the real inflation numbers...and certainly before the end of the year, monetary inflation will be noticeable to all...even if official government figures don't show it.

http://www.caseyresearch.com/gsd/sit...-1-470x281.png
(Click on image to enlarge)

In his latest blog, reader Scott Pluschau points out that the Commitment of Traders short/long ratio for the U.S. dollar is now greater than 10 to 1. I would suggest that his short blog is worth the read...and the link is here.
Since it's Saturday, I have a huge list of stories for you that I hope you have the time to plow through in what's left of the weekend.

Friday, March 23, 2012

Commercial traders are now greater than 10-1 short the Dollar Index



The commercial traders in the Legacy Commitments of Traders Report went NET short during the latest reporting week 2,075 contracts in the Dollar Index. Their total long position is now 4,153 contracts and their short position is 47,444 contracts. This is greater than ten to one short.

At the same time in gold, the commercial traders went NET long 25,550 contracts. Just a couple weeks ago in the Legacy COT report they went NET long approximately 45,000 contracts. The trend in the COT report recently in gold is very bullish from my perspective.

Should gold break away to the upside on a surge in volume from the upper extremes of the recent balance area on the 30 minute chart (approximately $1,670 per ounce), it will have me focused on identifying bullish patterns or continuation patterns that develop on the smaller degree timeframes. I added a comment on Friday morning to my most recent post on gold in regards to the balance area and current value here: http://scottpluschau.blogspot.com/20...scription.html

The battle between the bulls and the bears at the 80.00 level in the Dollar Index has been quite impressive. The index is now at the lower extremes of the balance area. A breakdown from here on a surge in volume may add a boost to gold.

First chart below is gold, on the left hand side a 30 minute chart with this well defined balance area highlighted with a blue rectangle, and the right hand side a daily chart. The next chart is the Dollar Index with a well defined balance area as well, where I drew grey trendlines, and it is below major resistance on the daily chart.

(Click on charts to expand)

http://1.bp.blogspot.com/-2BWkg3bvEY...s320/Blog1.png

http://3.bp.blogspot.com/-ysW3evGCDa...s320/Blog2.png

http://www.financialsense.com/contri...hft-nasdaq-slv

Here’s a chart of the second by second market activity in SLV where you can see the massive lightning-quick spike occurring at 13:22:33.

http://imagesize.financialsense.com/...-htf-spike.jpg
Source: Nanex

Ted Butler Explains the Whole Process

"What's happening is that these commercials [or large traders], through HFT, can set the price suddenly down. It didn’t go down because there was massive selling from the commercials, they just set the price down. They know how to do it with their computers by putting in actual orders, and faking it, and spoofing, canceling them right away; but what happens is when the price moves down then the selling comes, which is the intended effect and result. Commercials basically put the price down in order to set off stops because everybody seems to be some type of technical trader in the market that reacts to prices."

(Click here for interview and full transcript)

Snippet:

Ted Butler 17:04
Agreed. But again, I would, if I had to impart any particular message about the mechanics of all this, I can guarantee you without any fear of contradiction, that today and on the close and all day long, that the commercials were buying the heck out of the silver and gold markets today on the COMEX. It was not the commercials selling. The commercials rig the price first lower to induce that speculative long liquidation or new speculative short selling. The commercials are buying every contract that they can get their hands on and it is this dominance and control of the market that`s so patently illegal. This is price-fixing and distortion of the markets. Certainly nobody would suggest either on February 29th or today that there were any legitimate, fundamental developments in silver or gold that would account for the tremendous decline in price. Instead what evidence would show clearly, is that this was all a price rig job on the COMEX and which was run so the commercials could buy as many contracts as they could. The only way that the commercials can buy that many contracts is if other people are selling.


So the trick for the commercials is to find a way of getting the other people to sell, the longs to sell, and the way they do that is because the they know everybody's a technician, looking at the charts and following moving averages. Just put the price down through the moving averages and bingo you are going to get as many contracts sold to you that you can buy, that you can handle and that`s the recurring theme of the silver and gold markets and it`s probably been you know, one of the things I've tried to point out the most over the years. The other thing being the true concentration on the short side that I claim is held by J.P. Morgan. That`s the other; it’s like a Joe Lewis illegal one-two punch. You’ve got the concentration on one hand and then you have the collusive behaviour of the commercials putting this whole thing into play and you know, why the government doesn't or can`t see this after I explained it to them and it's it right there in front of all of our faces, that is beyond me. I don't have a good answer for that.

So what is going on here you might ask? Like the premise of Robert Harris' new fictional sci-fi thriller, The Fear Index, it appears that mathematicians have figured out a way to human emotion. Then again, this really isn't anything new. One very old trick for doing this, as Ted Butler mentions, is by triggering sell-stops. As it turns out, millions of investors around the world reveal their emotional tolerance for how far a stock can vary before automatically buying or selling at a set price. With access to such highly valuable information, one could make a killing by simply preying on the emotional levels of human greed and fear revealed by investors tipping their hand, so to speak, to the market. Of course, analyzing such data with pattern recognition software has advanced light-years since stop-losses were born. That's kindergarten compared to what they're doing now.

As Robert Harris says regarding the technology he imagined, "What they've done in my book is developed an algorithm that can predict the markets by analyzing the incidence of fear related words on the internet—trends on Facebook, Twitter—a sense of the mood. I thought I was making this all up but, of course, I then discovered this is yesterday's news—they've been doing this for years! There's nothing you can invent that these guys, very clever, haven't thought up before you."
Whatever that is, let's just hope it hasn't read his book yet. Pretty frightening if you ask me...

Of course, this isn't just limited to the extremely emotional gold and silver markets. A new released last month, Financial Black Swans Driven by Ultrafast Machine Ecology, looked at 600 different markets around the world and found that these sort of events happen routinely. Over the most recent five years of market data analyzed, 18,520 crashes and spikes occurred at a speed far exceeding human origin.

http://www.rollingstone.com/politics...ealed-20120313


In a story that should be getting lots of attention, American Banker has released an excellent and disturbing exposé of J.P. Morgan Chase's credit card services division, relying on multiple current and former Chase employees. One of them, Linda Almonte, is a whistleblower whom I've known since last September; I'm working on a recount of her story for my next book.

One of the things we were promised by the lawmakers who passed the Dodd-Frank reform bill a few years back is that this would be a new era for whistleblowers who come forward to tell the world about problems in our financial infrastructure. This story now looms as a test case for that proposition. American Banker reporter Jeff Horwitz did an outstanding job in this story detailing the sweeping irregularities in-house at Chase, but his very thoroughness means the news may have ramifications for Linda, which is why I'm urging people to pay attention to this story in the upcoming weeks.

The Cliff's Notes version of the story goes something like this: Late in 2009, Chase's credit card services division sold a parcel of nearly $200 million worth of credit card judgments to a debt collector at a discount. This common practice in the credit-card industry is a little like a bookie selling the outstanding debts of his delinquent gamblers to a leg-breaker for 25 cents on the dollar. If the leg-breaker gets half the delinquents to pay, the deal works out for both sides -- the bookie gets 25 percent of money he wasn't going to collect, and the leg-breaker makes a 100 percent profit.

In the case of credit cards, of course, you're selling the debts to collection agents, not leg-breakers, but aside from that unpleasantly minor distinction the process is the same. The most valuable kinds of sales in this world are sales of credit card judgments, in other words accounts in which the debtor has already been successfully brought to court. That, ostensibly, is what this bloc of accounts Chase sold in 2009 involved.
Almonte came to Chase in the summer of 2009 as a mid-level executive in the credit card services division's offices in San Antonio, and was quickly put in charge of preparing the documentation for this enormous sale of credit card judgments. When Chase regional offices from places like southern California and Illinois began sending in the papers for these "judgments," Almonte very soon found out that something was seriously wrong. From Horwitz's piece:

Nearly half of the files [Linda's] team sampled were missing proofs of judgment or other essential information, she wrote to colleagues. Even more worrisome, she alleged in her wrongful-termination suit, nearly a quarter of the files misstated how much the borrower owed.
In the "vast majority" of those instances, the actual debt was "lower that what Chase was representing," her suit stated.

Linda subsequently found an enormous range of errors. Some judgments, she told me, were not judgments at all. In some cases, she said, Chase actually owed the customer money.

When she brought these concerns to her superiors, what do you think their response was? They told her and others to shut up and just sell the stuff anyway. Her boss, Jason Lazinbat, allegedly told her "she had better go along with the plan to sell the misrepresented asset."


Read more: http://www.rollingstone.com/politics...#ixzz1q4fnvx26

http://dollarcollapse.com/short-sell...of-the-decade/


For years now, US government bonds have looked like terrible investments, what with those trillion-dollar deficits and multiple wars and all. But Treasuries just kept rising, earning their owners nice returns and making their critics seem like financial illiterates who didn’t know a AAAA credit when they saw one.

Check out the chart for TBT, a 2X negative long-term Treasury ETF (in other words, a fund that bets against Treasury bonds). In case the price numbers are hard to read, this fund peaked at 70 in 2008 and has since fallen steadily if irregularly to less than 20. Far from being the short of the decade, Treasuries, especially if you were using leverage to bet against them, have been a sound-money investor’s nightmare.
http://dollarcollapse.com/wp-content...012/03/TBT.jpg
But two things are true of bubbles always and everywhere: They tend to go on longer than a reasonable analyst believes possible. And they burst when fundamentals finally win out. Treasuries will go the way of all bubbles someday and, just maybe, today is that day.

The eurozone can has been kicked way down the road and the US economy seems to be improving, which lessens the urge to hide in safe havens. Risk on, in other words. And today Treasuries got absolutely smacked, with TBT jumping by 5%, a huge move for any bond fund. Here’s a take on the market action from Forbes:

Treasury Market Exuberance Leads To Violent Sell-Off
A violent Treasury sell-off began after Tuesday’s FOMC statement, as bond markets reacted to an improved economic environment, a more optimistic Fed, and the reduced possibility of QE3 in the immediate term, at least for now. While Treasuries appear to be more “fairly” priced, according to Nomura, the possibility of a flare up in Europe, along with a worsening of the domestic outlook, could see fearful investors jumping right back into Treasuries.

Yields on 10-year Treasuries finally broke free from a tight trading range and jumped to 2.27% by 2:50 PM in New York on Wednesday, hitting their highest levels since October.

The trigger was Tuesday’s FOMC statement, where the Fed acknowledged an improvement in labor markets, the continuing economic recovery, and the temporary uptick in inflation (on the back of rising oil prices). Shortly after the Fed statement, JPMorgan said in a press release it had passed the stress tests with flying colors, prompting the bank run by Jamie Dimon to announce a dividend hike and a big buy-back.

Jamie Dimon’s ratification that the economy is indeed better was the final straw, exacerbating the sell-off, according to Barclays. As market players factored in the diminished possibility of a third round of quantitative easing, along with the increased possibility of a rate hike coming earlier than expected, Treasuries plummeted. Gold fell in tandem while the U.S. dollar rallied.

“A new dynamic has been set in motion [as] complacency was widespread,” explained Nomura’s fixed-income strategist, George Goncalves. USAA’s Didi Weinblatt, VP of mutual funds and a fixed-income expert, added that “rates were artificially low,” helping make the move that much more violent. “Everybody that was riding with the Fed got out at the same time,” she added.

Weinblatt warned that markets remain schizophrenic, oscillating between risk-on and risk-off on any headline. Fundamentally, she believes, rates should be a lot higher, but “the Fed is still doing the Twist, Bernanke has QE3 in the backburner, and Europe could still flare up,” once again sending investors scrambling for the safety of Treasuries.

Nomura’s strategists believe Treasuries are now closer to “fair value,” and have a medium-term target of 2.4% for 10-years. While most bond sell-offs start this way, and yields “had no business staying under 2%,” a worsening of the domestic or global environment could dramatically change things in a very short time frame, as Tuesday’s price action illustrates.

Is this the turn for Treasuries? Well, they’re certainly not “fairly valued” on fundamentals. The long bonds of any country with government debt and total debt exceeding, respectively, 100% and 350% of GDP are an automatic short, just on simple math. But the US, as the printer of the world’s reserve currency, is a special case in terms of timing. When trouble strikes elsewhere, people still come here to hide. So even in the face of ridiculous, Greek-like numbers, the dollar continues to function as money and Treasuries continue to find a bid.

There will come a time when shorting Treasuries is the trade that makes fortunes and reputations just as surely as did shorting mortgaged-backed bonds in 2007. But as with any other bubble, it’s best to wait until the market shows clear signs of cracking before jumping in with both feet. Time will tell whether today’s action is that kind of sign, but when such a sign does come, it will look a lot like this.

From WWW.JSMINESET.COM

Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.
–Mark Twain

http://www.jsmineset.com/wp-content/...001_thumb6.jpg

I had this very same discussion just yesterday haha

http://www.borowitzreport.com/



Cheney Receives Heart Transplant; Bush Still on Waiting List for Brain

Halliburton Performs Reconstruction of Former VP



http://www.borowitzreport.com/wp-con...CheneyBush.jpg FALLS CHURCH, VA (The Borowitz Report) – Former Vice President Dick Cheney received a heart transplant today, but former President George W. Bush remained on a waiting list for a brain, hospital officials confirmed.
As part of a government contract signed while he was still Vice President, Halliburton performed the reconstruction work on Mr. Cheney’s circulatory system at a cost to taxpayers of $14.2 billion.

The doctor who performed the surgery called the procedure “extremely invasive – just the way the Vice President wanted it.”

A hospital spokesman said that Mr. Cheney was expected to make a full recovery, but that he was “somewhat disoriented” coming out of anesthesia: “When we asked him who the President of the United States was, he said, ‘Is it still me?’”

Former President Bush made an appearance at the former Vice President’s hospital, hanging a “Mission Accomplished” banner in Mr. Cheney’s room hours before the operation was completed

http://globaleconomicanalysis.blogsp...ries-both.html


Click on Any Chart in this Post for Sharper Image

$TYX 30-Year Long Bond

http://3.bp.blogspot.com/-GXmZAmeXAQ...ong%2Bbond.jpg


Operation Print-Money-Like-a-Madman

Via email, Steen writes

I think higher interest rates are for real, and not a fluke.

The move down in US yields below its long-term channel was an unusual move - as can be seen in the above chart - 30 year US has been in solid down-ward slopping channel since 1980s. There have now been two breaks to the down-side: One in 2009 when the stock market crashed to 666 in the S&P - and now since 2011, when Fed initiated Operation Print-Money-Like-a-Madman with QE, QEII and Operation Twist plus “low rates forever”.

However, James Grant, publisher of Grant's Interest Rate Observer is willing to state flat out that treasuries are a "Bubble of Modern Banking, a Desert of Value".

In case you missed it, please click on the above link to see an interesting Bloomberg video with James Grant and Deirdre Bolton. Here is a key transcript snip.

Deirdre Bolton: How is a bond investor to deal with this current environment? You are calling actually for a bear market in bonds, am I correct?.

Grant: I have forever. So I am no help there. But it seems to me a bond investor is almost better off in cash. If you were to go out 10 years in a US treasury security you earn yield of approximate 2%. To remain in cash and be flexible you sacrifice those 2%. The bond market is a desert of value.

Deirdre Bolton: What does this mean for gold?

Grant: The price of gold is the reciprocal of the world's faith in the deeds and words of the likes of Ben Bernanke. The world over, central banks are printing money as it has never been printed before. The European Central Bank has increased the size of its balance sheet at the annual rate of 89%. It's amazing. The Fed is far behind at only 15%. The Bank of England 67% over the past few months. These are rates of increases in the production of paper currencies we have never seen in the modern age. It takes no effort at all. They simply tap the computer screen.

Ten Year Treasury Yields

http://2.bp.blogspot.com/-8zcOqLXrrb...treasuries.png

"Operation Twist" Unwinds

Those three charts explain nicely the massive rally in treasuries since 2007. Global central bank printing, various QE and "Operation Twist" moves certainly helped, but "real" yields were far higher than most thought.

For a discussion of "Operation Twist" and the recent rise in treasury yields, please see Treasuries Hammered as "Operation Twist" Unwinds; Another Triumph of the 1% Over the 99%.

Note that HPI-Adjusted rates are still positive on the 10-year treasury note. Is this the making of a bubble?

The answer of course depends on the definition of bubble. That said, Grant is certainly correct that treasuries are devoid of value. Moreover, a 30-year rally in treasuries is quite long in the tooth. There is no value here.

Where to From Here?

Even if the 30-year long-bond does nothing more than rise to the top of that channel shown in the first chart, treasury holders will be massacred.

If the recovery is real (I do not think it is, others do), yields should rise to the top of that channel at a minimum, probably sailing even higher.

Moreover, it's certainly possible rates go sailing even if the recovery is not real. Should that happen, the US dollar will likely strengthen as well. Those are the two key take-aways at this juncture.

One thing is certain. Treasury bubbles sure take a heck of a long time to form, with many premature calls along the way.

http://www.24hgold.com/english/home.aspx

http://www.24hgold.com/english/news-...avid+Bardallis

WASHINGTON – President Barack Obama called on Congress to quickly pass a new fiscal stimulus package that would provide nearly $100,000 trazillion gaquillion frijillion in an effort to revive the U.S. economy, which some experts believe has entered a recession.


"Every economist I've ever heard of agrees what we need now is significantly more government investment to offset the negative effects of whatever it is that is happening," Obama said at his Monday press conference. "Accordingly, I and my team of advisors have developed a comprehensive plan that will shore up our financial institutions, put jobless Americans back to work, allow everyone in a house to keep it no matter what, rescue any failing bank or business, provide a hot meal to anyone who is hungry, improve the well being of all citizens, and give a puppy or kitten to every child who wants one.


"But Congress must put ideology aside and act now in a bipartisan manner before some other even worse stuff happens," he added, wiggling the fingers on both his hands to indicate "scary."


Details of the plan were presented by Lawrence Summers, Obama's top economic advisor and one of the plan's key architects. Using a colorful chart with squiggly lines, Summers estimated that 845 jiggashillion new jobs would be created in the plan's first year, with another 491 dubbadillion to follow over the next four years.


"Every American will be able to work two, three, four – heck, 10 or 20 jobs if he or she wants to," said Summers. "And the best part is the income taxes generated from all these new jobs will actually pay for the plan."

Obama emphasized that not only will all the new spending not impose any additional burdens on the middle class, the plan actually targets tax cuts toward politically favored constituencies and whomever else it seems most expedient to target.


"The American people have spoken," said Obama. "They demand change, and I promise that I and every one of my former Clinton administration appointees will work hard to deliver that change." He also said something about hope and sacrifice and believing.

Other highlights of the plan include:

 

1. $43 nurpillion for job training
   $89 bibblydefrillion for community reinvestment
2. $505 frappakrillion for infrastructure and public works

Some prominent voices have criticized the plan, however. "It's a good start, but the president doesn't go nearly far enough," Nobel laureate Paul Krugman, Nobel-winning winner of the Nobel Prize in economics wrote today in his New York Times column. "We're talking about the need for another $344 grillion chillion beebopaloobillion, at the very least, to get this economy moving again. Also, tax cuts for anybody: Ick."


Congressional reaction was mixed, as House speaker Nancy Pelosi (D-CA) vowed to pass the stimulus package "even if I have to go around and push the 'yes' button for every member of this chamber myself, and don't think I won't" while some senators cautioned that more debate may be needed.


"A schlopparazillion here, a dreedilyhillion there, and pretty soon we're talking about real money," said Senate Minority Leader Mitch McConnell (R-KY).


But Majority Leader Harry Reid (D-NV) was optimistic about the bill's passage, noting that the Senate has already adopted legislation increasing the national debt ceiling to $4,000 pigglywigglyjibbityjabbityfrippityfroppitybadaboomillion.


When asked what safeguards would be put in place to ensure that none of the unprecedented $100,000 trazillion gaquillion frijillion was lost to waste, fraud, and abuse, Obama pointed behind the press corps, said "Oh my GOD! LOOK!" then quickly exited the room.


David Bardallis

Suds and Soliloquies

http://www.24hgold.com/english/news-...tor=Doug+Casey

Now, I believe, it's out of control. The US is already in a truly major depression and on the edge of financial chaos and a currency meltdown.

The sociopaths in government will react by redoubling the pace toward a police state domestically and starting a major war abroad. To me, this is completely predictable. It's what sociopaths do.


There are seven characteristics I can think of that define a sociopath, although I'm sure the list could be extended.

 

1. Sociopaths completely lack a conscience or any capacity for real regret about hurting people. Although they pretend the opposite.
2. Sociopaths put their own desires and wants on a totally different level from those of other people. Their wants are incommensurate. They truly believe their ends justify their means. Although they pretend the opposite.
3. Sociopaths consider themselves superior to everyone else, because they aren't burdened by the emotions and ethics others have – they're above all that. They're arrogant. Although they pretend the opposite.
4. Sociopaths never accept the slightest responsibility for anything that goes wrong, even though they're responsible for almost everything that goes wrong. You'll never hear a sincere apology from them.
5. Sociopaths have a lopsided notion of property rights. What's theirs is theirs, and what's yours is theirs too. They therefore defend currency inflation and taxation as good things.
   
6. Sociopaths usually pick the wrong target to attack. If they lose their wallet, they kick the dog. If 16 Saudis fly planes into buildings, they attack Afghanistan.
   
7. Sociopaths traffic in disturbing news, they love to pass on destructive rumors and they'll falsify information to damage others.

The fact that they're chronic, extremely convincing and even enthusiastic liars, who often believe their own lies, means they aren't easy to spot, because normal people naturally assume another person is telling the truth. They rarely have handlebar mustaches or chortle like Snidely Whiplash. Instead, they cultivate a social veneer or a mask of sanity that diverts suspicion. You can rely on them to be "politically correct" in public. How could a congressman or senator who avidly supports charities possibly be a bad guy? They're expert at using facades to disguise reality, and they feel no guilt about it.


Political elites are primarily, and sometimes exclusively, composed of sociopaths. It's not just that they aren't normal human beings. They're barely even human, a separate subspecies, differentiated by their psychological qualities. A normal human can mate with them spiritually and psychologically about as fruitfully as a modern human could mate physically with a Neanderthal; it can be done, but the results won't be good.


It's a serious problem when a society becomes highly politicized, as is now the case in the US and Europe. In normal times, a sociopath stays under the radar. Perhaps he'll commit a common crime when he thinks he can get away with it, but social mores keep him reined in. However, once the government changes its emphasis from protecting citizens from force to initiating force with laws and taxes, those social mores break down. Peer pressure, social approbation and moral opprobrium, the forces that keep a healthy society orderly, are replaced by regulations enforced by cops and funded by taxes. Sociopaths sense this, start coming out of the woodwork and are drawn to the State and its bureaucracies and regulatory agencies, where they can get licensed and paid to do what they've always wanted to do.


It's very simple, really. There are two ways people can relate to each other: voluntarily or coercively. The government is pure coercion, and sociopaths are drawn to its power and force.

We are the product of our own environment. All this cultural climate has been built on wrong philosophical values. Earth is a closed system, it took billions of years to create minerals etc that we have today but we created the system where we are using all of our resources to create the economic growth required to sustain employment etc. We have a paradigm now where we have society operationg on idea that we can grow infinitely, therefore we keep buying and consuming, regardless of the resources we actually have. Consumption is the name of the current game. I think I was 16 when I fully realised this system is fucked up but I was thinking maybe i'm just too young and ignorant to see the big picture but more I have studied it more strongly I stick to my first opinion. People still have this kindergarten mentality.