EurAnalysis

Eurjpy h4 - gbpjpy h4

post reason :Getting a handle on what is in the future

Consuelo Mack interviews James Grant "Grants Interest Rate Observer"
Lays it on the line about Fed policies
Suggests investment strategies going forward based upon fading Fed created distortions
2 minutes of advertisement and upcoming shows then gets down to business.

show aired 09/28/2012

http://www.wealthtrack.com/

http://www.moneyandmarkets.com/what-...50586?FIELD9=2

What a German Departure Could Mean for Currency Investors
JR Crooks | Saturday, September 29, 2012 at 7:30 am

http://images.moneyandmarkets.com/2539/JR-crooks.jpgWe all remember the term “Grexit.” It was coined when investors began thinking Greece might soon exit the euro zone. Not long after came similar headwinds in Spain. And analysts began talking of Spain possibly leaving the euro zone, too.

At about that time I looked hard at whether Germany might in fact be the first country to bow out. I wondered if they would take their ball and go home. And I wondered if the lackluster potential of Germany’s intra-euro trade partners was worth the headache.
Now …

Others Are Wondering
Those Same Things

I came across an article in the Financial Times this week written by Martin Wolf, who is widely considered to be one of the world’s most influential writers on economics. He was expounding upon a Centre for European Policy Studies (CEPS) working paper suggesting German exposure to its fellow euro-zone members is not as substantial as feared.

Wolf mostly agrees. But Wolf and the CEPS go their separate ways at the bottom line.

The Euro Zone Is Looking
Worse and Worse Each Day

http://images.moneyandmarkets.com/2539/image1.jpgWill Germany be the first one to exit the euro zone?

The IMF continues to scold Greece for not meeting its budget goals. And they continue threatening to withhold the latest promise of bailout funding. The Greek political scene is a mess, and the people aren’t too happy either. But Greece is small potatoes.

Take Spain, where everything is going wrong …

Spanish 10-year note yields are back above 6 percent. Every step above this level adds pressure to Spain’s debt obligations. Capital is rapidly fleeing the banking system. Regional governments are requesting bailout money from the central government. Catalonia, by output the largest of Spain’s 17 autonomous regions, is considering breaking off and seeking independence from Spain.

Italy isn’t in much better shape. France is laying low because they can’t afford assisting the least of these euro-zone countries. The relatively better off countries maintain significantly more exposure to the periphery nations than Germany does.

Still, Germans bear most of the responsibility for bailouts. But remember: there are all kinds of conditions on the ECB bond buying and the upcoming European Stability Mechanism (ESM). It’s already been determined that Germany can’t legally be required to front more cash than what has already been decided.

I suppose we should expect more meetings, more decisions, and more can kicking … to find a solution. We could be talking years of this stuff. And for what end? It changes nothing.

CONCLUSION

A German Exit Leads the Way …
to Competitiveness

A German exit means Germany abandons the euro and adopts its own national currency, say the deutschemark. Since Germany’s economy is far more solid than remaining euro-zone members, the deutschemark would appreciate relative to the euro.

A stronger deutschemark brings about a higher standard of living in Germany. It helps them avoid inflation and better balance their economy.

A cheaper euro makes the producers in periphery nations more competitive. That then gives them a growth outlet to escape more quickly the grip of deflationary recession.

Seems like a decent compromise.

If things stay as they are now, the periphery becomes desperate for German assistance; Germany becomes insistent upon the periphery forfeiting sovereignty; at best, the current economic imbalances are perpetuated and lead to deeper recession for the periphery as well as greater internal and external headaches for Germany.

So is it time for Germany to go?

We’ll have to wait and see. But if Germany goes, there is no doubt in my mind that the euro will fall off a cliff … a very deep one.

Best wishes,
JR

Could you Post a similar Chart for USD/JPY ?

There is CORRELATION between EUR/USD and EUR/JPY as we can all see.

USD/JPY leads the way along with Risk On and Risk Off as funds are parked in US Bonds with Risk Off and also in USD/JPY.

Thank You...

Hi again,
You're welcome and thx for the voucher.
USDJPY H4 - USDJPY H1
BTW ..you got my coffee cold:-)

Whats up with the Euro?

The undecided have the vote for now, pending this weeks big news events.
Price is sitting right between the big weekly support at 1.2700 and the major monthly resistance at 1.3000

The market is event driven and it will require some event to give it life.
Until some direction is chosen it is range bound between the prior levels.

I do think an event can well come out of Asia to trigger. So keeping tabs on the two Asian currencies Aussie and Yen are worth the effort. Incorporating them into ones technical view via coorelations, live with equivalent time frame charts. Big events show up in 15 minute/5 day as anomalies in pa.

Next week china Bank holiday for whole week. Any guess that will strentghen EUR a bit?

http://www.streettalklive.com/xfactor-newsletter.html

http://clients.criticalimpact.com/us...ail_header.jpg
Market Finally Corrects
For the last several weeks we have been discussing the extremely overbought, overly complacent and exceptionally bullish conditions that existed in the market. We also warned readers that it would be better to wait for a correction that would increase the risk/reward potential of further equity increases in portfolios. This past week a correction finally occurred.

While the correction was not a large one, as we have been stating that it most likely would not be, it was enough to begin the scale in buying process. This process, that we will review this week, is a cautious approach to increasing equity exposure in portfolios as we approach the seasonally strong time of the year.

However, this does not mean that the “dip” that occurred last week was the bottom. This is why it is not advisable to immediately move to an “all in” position within portfolios. The reason I state this is the month of October has historically been a month of “trick or treat” with the tricks being some of the largest market corrections on record such as 1929, 1987 and 2008.

With the S&P 500 logging an almost 10% advance since the end of June it is entirely possible that October will see additional corrections and consolidation. By scaling into additional positions we can take advantage of a further correction should it occur. This goal is to gradually increase equity exposure in portfolios to to 75%, and eventually 100%, of target allocation goals.

Yes, there are plenty of issues in the world that possibly will derail the markets in the coming months ahead – a resurgence of the Eurocrisis with Spain, Italy and Greece leading the way, a geo-political crisis between Iran, Syria and Israel, or the “fiscal cliff” not getting resolved by the end of the year. These are defined risks that we continue to watch very closely. However, with our “buy” signals firmly in place we must follow the trends of the market until that is no longer the case.

Download the latest version of the X-Factor here.

Hey Rekon....me and you dog! We need to get a life!

Hi Gofer,

I think excellent observation!

But can not do much to improve it. I am away from my family members and no girl friend

http://www.financialsense.com/contri...are-easy-money

Snippet:

Central bankers around the world may be providing a backstop to the financial markets in much the same way Greenspan did during the “Goldilocks” years, but when the short-term euphoria wears off, will the negative repercussions be even more severe? Bernanke’s Federal Reserve (Fed) appears to specifically target equity market appreciation as part of its offensive in bringing down the unemployment rate; expectations are high: every time the market sells off, the Fed might simply print more money. We fear central bankers have overstepped their reach, and the implications of their actions may be much worse than the anticipated benefits.

To an extent, the effects of today’s important monetary policies resemble the “Greenspan Put” (named after former Fed Chair Alan Greenspan) in the years leading up to the crisis. Today’s central bankers have been quite straight forward in communicating their stance: they appear willing to step in with evermore liquidity should the global economy show any signs of further weakness. Bernanke’s Fed has gone even further: the Fed has stated it’s accommodative policies will “remain appropriate for a considerable time after the economic recovery strengthens”. In other words, financial markets will be awash with liquidity for an extended period, even if we see signs of a sustainable economic recovery.

http://imagesize.financialsense.com/...up-the-dow.jpg

One of the things we believe such actions do stimulate are inflation expectations. Indeed, the jump in market-implied future inflationary expectations in reaction to the Fed’s QE3 decision was quite remarkable:

http://imagesize.financialsense.com/...pectations.jpg

In contrast to Bernanke’s views that QE does not cause commodity price appreciation, in our assessment, much of the freshly printed money only serves to inflate the value of assets that exhibit the greatest level of monetary sensitivity: commodities and natural resources. These are essential in the manufacture and production of goods and services purchased by U.S. consumers on a daily basis. As such, inflated commodity and resources prices ultimately pressure consumer price inflation, as the consumer’s “everyday basket of goods” becomes evermore expensive. The ongoing weakness in the U.S. dollar only serves to compound these inflationary pressures. A weak dollar, we believe, is part of Bernanke’s strategy to stimulate the U.S. economy through stimulating exports. While we fundamentally disagree that this is sound monetary policy for the U.S. to pursue, the inflationary ramifications are clear: the U.S. imports a great deal from abroad; every time the dollar depreciates against a currency of a country from which the U.S. imports, the price of those imports rises.

Not only have the Fed’s actions heightened inflationary risks, but we also believe it implicitly heightens the risk that the Fed gets monetary policy wrong. For instance, Fed Chair Bernanke believes that the Fed’s non-standard policies since 2008 may have helped lower 10-year Treasury yields by over 1.5%. In so doing, the Fed has taken away a key metric used to gauge the economy and thus set appropriate monetary policy: free market interest rates. The Fed has historically relied on long-term yields, such as the 10-year and 30-year Treasury yield, as part of its assessment of the overall health of the economy. In manipulating those same yields, the Fed can no longer rely upon them to provide valuable information on the health and trajectory of the economy. In other words, the more the Fed meddles in the market through non-standard measures, the more the Fed is in the dark regarding the appropriateness of monetary policy. Such a situation inherently creates an additional level of uncertainty over the U.S. economy, U.S. monetary policy, and may continue to underpin weakness in the U.S. dollar.

http://www.oftwominds.com/blogsept12...ation9-12.html

Snippet:

"Beautiful deleveraging" is the policy goal, but what we might get is "ugly inflation."

In a world of rising sovereign debts and an overleveraged, over-indebted private sector, history suggests there are only three possible ways out: gradual deleveraging, defaulting on the debt, or printing enough money to inflate away the debt.

Ray Dalio recently described the characteristics of a “beautiful deleveraging” in which equal doses of austerity, write-downs, and inflation gradually lighten the load of impaired debt. This might be called the Goldilocks Deleveraging, as the key feature of this “beautiful” solution is that each component is “not too hot, not too cold” – inflation is modest, write-downs of bad debt are gradual, and austerity is not too severe. Given enough time, the leverage and debt are worked off without requiring any structural change to the Status Quo.

Understandably, the Status Quo has embraced this solution for the appealing reason it doesn’t change the power structure at all.

Everyone currently in charge remains in charge, and everyone who owns outsized wealth continues owning outsized wealth. Rather than falling onto the politically powerful “too big to fail” banking sector, the pain of deleveraging is spread over the entire economy. There is no such thing as painless deleveraging, so the “solution” is to distribute the pain over hundreds of millions of people. That’s what makes it “beautiful” to the Status Quo: It doesn’t cost them either their power or their wealth.

The Status Quo in Japan has pursued this strategy for 20 years, and the Status Quo in Europe and the U.S. have pursued it for the past four years, ever since the global financial system imploded in 2008.

Unsurprisingly, the conventional view is that it’s working "beautifully". Housing has bottomed, stocks have doubled since their March 2009 lows, households are slowly deleveraging, inflation is modest, and growth is sluggish but steady. All we need to do, we’re told, is stay the course for a few more years, and the stage will be set for a return to the rapid growth of the bubble years.

Central Banks to the Rescue

The core mechanism of this “leave the Status Quo intact” solution is that central banks conjure money out of thin air (i.e., “print money”), which they use to then buy impaired bank debt (such as delinquent mortgages) and sovereign debt (such as the bonds of Spain, Italy and the U.S.)

This transfers impaired private-sector debt and sovereign debt to the central banks’ balance sheets, where they are safely sequestered from price discovery. The central banks keep these questionable assets on the books at full value, and the Status Quo is happy. The banks trade their risky impaired assets to the central bank for cash, which they can use to speculate or originate new loans, and governments can continue to run monumental deficits because the bonds they issue are purchased (i.e., “monetized”) by central banks.

Central bank balance sheets swell with phantom assets, but nobody cares, as the debt no longer burdens private banks and governments are free to borrow and spend.

It all seems too good to be true, and so skeptics ask: If this deleveraging is so 'beautiful', why are the developed economies sliding into recession? If this deleveraging has worked so well, why are governments still running unprecedented deficits even as hiring, production, and lending all weaken?

Skeptics of the official “happy story” see plentiful evidence that the beautiful deleveraging of central-bank monetization is simply papering over the structural rot at the heart of the financial/political Status Quo – the shadow banking system, the risk-laden derivatives trade, the “fraud-is-our-business-model” mortgage securitization industry, and so on.

CurrencyMan: Read On For The Rest Of This Excellent Analysis...

http://www.actionforex.com/action-in...0120930175399/

Markets were basically staying in consolidation mode last week. S&P 500 extended the pull back from 1474.51 high but received some support from 1430 level. CRB commodity index drew support above 300 psychological level to close at 309.3. Spanish 10 year year breached 6% last week but managed to close below this level. Dollar continued to recover but faced some pressure from 80 psychological level. In the currency markets, European majors and commodity currencies attempted a rebound against dollar but failed to reverse recent decline and has indeed closed quite weakly. One thing to note was what while gold range bounded against dollar, XAU/EUR, gold on Euro, has indeed spiraled to new record high of 1381.18, after ending a year long consolidation.

Technically, there was no significant development over the week. Though, there were two things to note. Firstly, USD/JPY's recovery was, at this point, more due to strength of dollar then weakness of the yen. And, whether other yen crosses will follow this week would provide much insight into underlying strength of dollar in near term. Secondly, expect versus sterling, Euro's retreats in EUR/USD, EUR/CAD, EUR/AUD and EUR/JPY are corrective looking. While, XAU/EUR made another record high, the weak rally looks terminal. Thus, we'd still expect the common currency to gather momentum again soon. So overall, we'd slightly prefer to long EUR/JPY in near to medium term.

The ECB, the BoE and the RBA will hold monetary decision meetings next week. While all of them are expected leave their policy stances unchanged in October, further easing would be carried out before the year end.

Spain was a major focus last week. The Spanish government confirmed in the 2013 Budget that the deficit targets are 6.3% of GDP this year and 4.5% next year, down from 8.9% in 2011. In order to achieve this goal in the face of economic contraction and sluggish employment condition, the government announced additional fiscal tightening measures which mainly focused on reduction in spending rather than tax increase. While the market remains skeptical over whether the target can be achieved, the plan should ease the process for the Spanish government to request financial assistance from the EFSF/ESM. More in Spain Pledges To Reduce Spending Further To Meet Fiscal Target. The Budget Ministry said that Spain will borrow EUR 207.2b in 2013. That compares to EUR 192b target for this year. The will push Spain's debt to 90.5% of GDP in 2013.

Results of an independent bank stress test in Spain showed that there is a capital deficit of EUR 59.3b. That's the amount of extra capital needed to ride out a serious economic downturn. And, such amount was slightly lower than June's estimate of EUR 52b. Taking merges and tax effects into considerations, the needed capital would be further reduced to EUR 53.7b. Under the worse case scenario, Spain's GDP would contract -4.1% in 2012, -2.1% in 2013 and -0.3% in 2014. Unemployment would also jump to 27.2% in two years' time. Among the 14 banks tested, Bankia group has a deficit of as much as EUR 24.7b while 7 out of 14 showed no deficit. Prime Minister hailed that the stress tests were the "biggest transparency exercise ever done" and he emphasized that Spain will pay back the needed money. ECB also hailed the stress tests as "stringent and the asset quality review as thorough".

Unlike Spain, France's 2013 Budget focused on tax hike on business and the rich, rather than spending cut. The government pledged to narrow the deficit to 3% of GDP in 2013 from 4.5% this year and eventually to 0.3% by 2017, compared with 0% in previous estimates. Prime Minister Jean-Marc Ayrault described the budget plan as "a fighting budget to get the country back on the rails". Yet, with record unemployment rate and sluggish macroeconomic data, the government faces challenges even on meeting the newly announced deficit target. More in France's Budget Plan Focuses on Tax Hike on Rich and Business.

Greece's coalition government also agreed a plan to cut spending over the next two years by EUR 11.5b. Finance Minister Yannis Stournaras said that the agreement gives me a basis for "stronger negotiation" with the international creditor for easing the conditions on fiscal reforms. Pasok leader Evangelos Venizelos said that the European parts are undoubtedly aiding Greece but "not as much as they could" and he urged European leaders to "acknowledge the achievements of the Greek people", as shown in the elections. Greece has yet to secure the next tranche of bailout fund from EU/IMF and Prime minister Antonis Samaras is seeking a two year extension on fiscal reforms. Stournaras will meet with the troika again on October 1.

In US, Philly Fed Plosser's comment was taken as a reasons for the deeper pull back in risk sentiments. Plosser stated his strong opposition and said that "increasing monetary policy accommodation is neither appropriate nor likely to be effective in the current environment." And he warned that "by greatly expanding the size of the Fed's balance sheet, the new asset-purchase program will exacerbate the challenges that the Fed will face when it comes time to exit." Plosser said that additional asset purchases are "unlikely to reduce long-term interest rates by a significant amount" and "we are unlikely to see much benefit to growth or to employment from further asset purchases". Plosser also said that "conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed's credibility". Plosser expects US economy to grow at 2.0% in 2012, and around 3% in both 2013 and 2014.

On the other hand, Dallas Fed Fisher warned that US is "drowning in unemployment," its economy is running at stall speed and inflation is "not a problem. Fisher defended Fed's QE and said no one could fault Bernanke for "using every tool at its disposal to get the economy up and running again." Chicago Fed Evans urged Fed to "do as much as we can" to bolster the resiliency and vibrancy of the economy." And, he continued his push for "explicit state-contingent policy rule" that commits to further easing till unemployment dropped below 7% or inflation shoots above 3.0%. And Evans warned that "modest, cautious, safe policy actions" could risk Japan style lost decade.

In UK, Fitch said over the weekend that while the AAA rating was affirmed, outlook was also kept unchanged at negative. The rating agency said that the negative outlook "the very limited fiscal space, at the 'AAA' level, to absorb further adverse economic shocks in light of the UK's elevated debt levels and uncertain growth outlook". And it warned that "weaker than expected growth and fiscal outturns in 2012 have increased pressure on the UK's AAA rating."

http://www.actionforex.com/images/st...20120930w1.gif

The Triffin Dilemma & Gold

September 30, 2012

“This tension – the Triffin dilemma – was linked to the specific modalities of the gold-exchange standard in 1960, when hisGold and the dollar crisis was first published. Today we are in a much more flexible system, where the demand for global liquidity can be more easily accommodated. But even if the mechanics have changed, the dilemma is still valid if we capture its essence and formulate it in broader terms, as I will do in the first part of my comments today. In second place, I will briefly recall how the dilemma came into being and was addressed in Triffin’s times. This will allow me to better identify the main differences and similarities compared with our times, which will lead me to conclude that it is indeed correct to talk about a ‘Triffin dilemma revisited’. Finally, I will look ahead and ask whether and how it is possible to escape the dilemma today.”


Source: Speech by Lorenzo Bini Smaghi, Member of the Executive Board of the ECB, at the Conference on the International Monetary System: sustainability and reform proposals, marking the 100th anniversary of Robert Triffin (1911-1993), at the Triffin International Foundation, Brussels, 3 October 2011.

See:http://www.ecb.int/press/key/date/20...111003.en.html . The link does not always open; so, you may have to go to the ECB website and separately pull up the Bini Smaghi speech.


Robert Triffin saw the inherently destabilizing effects that originate from global reserve currency status. He perceived the tensions between short-term and long-term effects, in terms of trade deficits. He never imagined that the tension would be exacerbated by extraordinary monetary policy of the type we see implemented by central banks today.


Triffin’s observations were made in the 1960s. He saw how gold rose to trade at $40 per ounce after the official $35 price gave way to the incipient anti-dollar pressure of the ’60s. By the 1970s, the Bretton Woods fixed currency exchange regime had collapsed. The gold exchange standard ceased when President Nixon revalued the dollar to $42 per ounce of gold and then closed the “gold window” by stopping the exchange of gold for dollars. In its official accounting, the US Treasury still values its gold hoard in Fort Knox at $42 per ounce. The Federal Reserve’s gold certificates are similarly valued.


Until his death in 1993, Triffin watched the trade deficit grow and the reserve currency status of the US dollar slowly erode. His warnings about the Triffin dilemma were unheeded by policy makers.

The speculation around Triffin’s work was about how the US dollar’s world reserve currency status would evolve (unwind) and what the catalyst would be for its demise. Second-derivative questions were about whether the unwinding would be orderly or violent. Lastly, there was speculation about what would replace the dollar. Many proposals about a global central bank and a global reserve were offered. None have materialized in any serious way.


Fast forward to today.


The dollar maintains its reserve currency status because it is the least worst of the major four currencies – the US dollar, the British pound, the Japanese yen, and the euro. All four of these currencies are now suffering the effects of a stimulative, expansive, and QE-oriented monetary policy.


We must now add the Swiss franc as a major currency, since Switzerland and its central bank are embarked on a policy course of fixing the exchange rate between the franc and the euro at 1.2 to 1.

Hence the Swiss National Bank becomes an extension of the European Central Bank, and therefore its monetary policy is necessarily linked to that of the eurozone. For the balance sheets of the five central banks associated with these currencies, see www.cumber.com.


When you add up these currencies and the others that are linked to them, you conclude that about 80% of the world’s capital markets are tied to one of them. All of the major four are in QE of one sort or another. All four are maintaining a shorter-term interest rate near zero, which explains the reduction of volatility in the shorter-term rate structure. If all currencies yield about the same and are likely to continue doing so for a while, it becomes hard to distinguish a relative value among them; hence, volatility falls.


The other currencies of the world may have value-adding characteristics. We see that in places like Canada, Sweden, and New Zealand. But the capital-market size of those currencies, or even of a basket of them, is not sufficient to replace the dollar as the major reserve currency. Thus the dollar wins as the least worst of the big guys.


Fear of dollar debasement is, however, well-founded. The United States continues to run federal budget deficits at high percentages of GDP.

The US central bank has a policy of QE and has committed itself to an extension of the period during which it will preserve this expansive policy. That timeframe is now estimated to be at least three years. The central bank has specifically said it wants more inflation. The real interest rates in US-dollar-denominated Treasury debt are negative. This is a recipe for a weaker dollar. The only reason that the dollar is not much weaker is that the other major central banks are engaged in similar policies.


Enter gold.


Gold is not money when it comes to functioning as a medium of exchange. We live in a fiat currency world where money is printed (electronically) by central banks. We pay each other in currency, not gold. The US dollar and euro are the two giants when it comes to payments.

We do not use gold as a unit of account. We measure prices in dollars, not ounces of gold.

True, other countries measure their prices and settle their payments in currency like yuan, krona, or rand. But the world’s transactions are still largely executed in dollars, priced in dollars, and paid in dollars. Modern currency hedging allows this practice to continue without much risk to the specific agent making or receiving the payment.


Gold comes into play when we focus on the store of value characteristic of money. The world’s distrust of fiat currencies is rising. Given the policies in place, one would expect that to be the case. One investor, or one agent, at a time decides to reallocate a portion of wealth to gold. That agent also looks at the central banks of the world and sees them buying gold to add to their reserves. He doesn’t see much institutional selling of gold. Individual investors now have vehicles like the exchange-traded products (ETFs and ETNs), which allow them to participate in this reallocation process.


When an investor buys a gold ETF, like GLD or IAU, he may be thinking only of a speculative trade. But given the size of the total gold holdings in ETFs and their turnover, it appears that a growing number of investors are adding to a personal hoard of gold ETFs as a way to store value in other than a domestic currency. Physically backed gold ETPs now exceed 2500 tonnes (source: Barclays) and are steadily growing. That makes the ETF universe one of the largest gold hoards in the world. Very few countries hold more than 2500 tonnes of gold.


Cumberland recognizes this trend and believes it may persist as long as the central banks continue their present policies. Our internal modeling of changes in velocity (GDP divided by M2) suggests that the gold price will move much higher, when measured in the various currencies engaged in QE.

Remember, gold is a long-duration asset, and the central banks are buying long duration from the market. A “deep-pockets,” persistent buyer is likely to drive the price higher.


Cumberland’s Global Multi-Asset Class portfolios hold gold and are routinely rebalanced to maintain the internally determined weight. Relative to the size of gold in a global allocation, we consider these gold positions to be overweight.


Triffin’s paradox did not focus on QE and its effects on reserve reallocation. Triffin did not have to consider a central bank policy of buying long duration from the market. Triffin’s writings disparaged gold as a reserve and also opposed floating exchange rates. Professor Triffin did not foresee the present-day construction.

Today, we have floating exchange rates, gold as reserves, and central banks using QE to buy long duration. One can only speculate what Triffin would write today. Meanwhile, gold prices seem to be headed higher.


David R. Kotok, Chairman and Chief Investment Officer


Resources:
To sign-up forMarket Commentaries from Cumberland Advisors:http://www.cumber.com/signup.aspx

What you think about that? http://www.debtbombshell.com/ is it true, and worse than US debt clock? http://www.debt-clock.org/

Good morning,
EURUSD H4
NZDUSD H4

Joke gets funnier every day. I wonder when they overthrow Spanish government and send in another puppet.

Rajoy, fight em!

T

The highly correlated Sp500 chart show the possibility of further increases completing a bearish butterfly pattern on M chart and a ABCD pattern on Weekly before a big descent..

Monthly chart


Weekly chart

http://sphotos-g.ak.fbcdn.net/hphoto...06286709_n.jpg

http://news.goldseek.com/GoldenJackass/1348689600.php

Snippet:

The growth of the monetary base has been staggering high since the financial crisis broke in September 2008 with the collapse of Lehman Brothers. Since the end of August 2008, the monetary base has risen from $877 billion to $2,651 billion as of September 2012. That is a giant 3-fold rise. Witness the American Weimar era, its final chapter. The massive increase in new money has done nothing to foster growth in the USEconomy. The main reason is that fiat paper money destroys capital, a concept the hapless corrupted US economists cannot comprehend, either from compromise to their masters or lack of intellect due to years of exposure to the ass backwards preachings. The USEconomy is stuck in a powerful recession based in grotesque insolvency and bond fraud. As the USFed is poised to kick in another round of QE bond monetization, the money supply will ramp sharply up again. Do not expect much of any economic benefit, since the cost structure will rise again, then shrink profit margins. This capital destruction factor is a great blind spot to the hack economists who operate more as marketing harlots for Wall Street and the USGovt than analysts and advisors. The Ponzi Scheme theory dictates that an acceleration in new money is required to keep a constant speed. Expect more wreckage from the stripped gears of the USEconomic engine.

http://67.19.64.18/news/GoldenJackass/2012/9-26gj/1.jpg

The money velocity chart shows a deadly decline since 1980, and a powerful decline since the 2007 outbreak of the absolute bond crisis. The new money is going to the big banks in bond redemption, derivative coverage, and Black Hole (Fannie Mae, AIG) fills under the USGovt supervision. The money is not finding its way into the USEconomy for further circulation. The plague is insolvency, soaked by endless applications of tainted money from central bank fire hoses. The velocity of money has been falling for years, in reflection of an economy that is not turning over much at all. Think of a car missing its cylinders, spinning its gears, burning itself out, going nowhere. The above chart serves as pictorial evidence that the root cause of ruined money was the war. In the current decade, the wars are endless. America chose war over industry.

Snippet:

The USFed mandate on inflation moves next to an absurd mandate on jobs. They will fail on both. Inflation will be permitted by the USFed central bank in order to produce jobs, in the most heretic and misguided folly ever seen in modern times. The 0% rate will stick until economic growth arrives, but it will never arrive, due to the damaging effect from the 0% rate itself. The dog's tail is eating the entire dog in a perverse reverse effect of modern alchemy. The USFed ignores all Weimar chapters, after having rewritten the Great Depression chapter. The nation emerged from the depression only due to the Gold Standard and ample industry. The nation has neither today, and will therefore plunge into a systemic failure. The Third World awaits. Watch for the pressure points of tens of thousands of gasoline stations and food supermarkets, certain to erupt as the frustration and disorder spread.

http://67.19.64.18/news/GoldenJackass/2012/9-26gj/2.jpg

The response in the Gold price has smelled a QE3 in bond monetization since the summer months. The difference is that this time, unlike the deceptive Operation Twist, the bond purchases will be unsterilized with new money injected into the system. That is a Golden supercharge to recognizable inflation. A major intermediate reversal is underway, with a 1570 base, a 1780 top, which indicates a 1990 Gold price target. The kicker in the market is the broad mining industry strike, which extends from South Africa to South America. Gold supply will be inhibited. Expect some regrouping with a pause at the 1720-1770 area, as a critical consolidation takes place before a breakout that captures the world's attention. The right side handle is being formed, carved out. During this time, the doubters are tossed off the train. The new believers join. A recycle process is underway, as the monetary dumb are unloaded and new intelligent soldiers join the ranks. The renewal will permit a run over $2000. Once over 1800 price level, the 1900 resistance will be overrun like a paper fortress by angry mobs bearing torches and sticks. But in the meantime, a big battle is being waged at the right side handle, a consolidation before breakout.