Crisis Caused by Government

Marc Faber, a Cliff Küle M-AA* (Most-Admired Adviser) explores several different options for the US banks - letting them go bankrupt, or taking the good assets from them into the government hands... the current financial and economic crisis is a direct result of US government intervention into the economy through fiscal and monetary policies...

http://tinyurl.com/afpyna

Shock and Awe

Chief investment officer of Pimco,Mohammed El-Erian, a Cliff Küle M-AA*(Most-Admired Adviser), says this financial crisis is not just a synchronized global recession, people are going into preservation mode... he emphasizes that the crisis is deteriorating and that government "shock and awe" is needed now...(he means government should spend a trillion or more)... and says the world is looking to the US for leadership ...

Cliff Küle's Note: the crisis has developed because too much debt turned into garbage...how much more debt is required to turn that garbage back into money? As critical as that may sound, Cliff does not disagree with Pimco...but Küle readers should understand the ramifications and consider the economic and philosophical differences to Marc Faber and other wise advisers.

http://www.cnbc.com/id/15840232?video=1023949939&play=1 (about 8 minutes in length)

Asians Give Better Value

Marc Faber, a Cliff Küle M-AA* (Most-Admired Adviser) says that US markets are not cheap. Asian markets have better value ... Marc thinks we could easily have a 30% rebound here for commodities and emerging markets... about 7 minute clip:

http://www.cnbc.com/id/15840232?video=1023077934&play=1

"Shake Hands with Uncle Sam"

Bond king Bill Gross of Pimco, manager of the world's largest bond funds, discusses the need for governments to spend $Trillions (not hundreds of $Billions) to avoid Depression....Bill says you should buy what governments are buying (or should be buying)..."shake hands with Uncle Sam!"

Cliff Kule's Note: Our "system"depends on rising asset prices...it is the "model" that has been followed for decades. Capitalism should not require rising asset prices, but our "model"(with fractional reserve banking and a Federal Reserve and a $reserve currency) does. We could tear down our structures and start over, but if we want to keep what structure we have...Bill Gross and Pimco are making a very good point...
About 17 minutes in length... http://tinyurl.com/cwykf4

Who Blames the United States ?

Martin Wolf discusses the economic crisis and reflects on the recent World Economic Forum in Davos, Switzerland..(on Charlie Rose)....says that both China and Russia blame the United States for the economic calamity...but hope the United States will fix it..
Video clip above..about 21 minutes..courtesy of www.charlierose.com/

Consumer Staples Outperforming

Chart showing consumer discretionary divided by consumer staples -

consumer staples now outperforming consumer discretionary..Cliff's Note: spending is on necessities and not luxuries

Chart - click to enlarge - courtesy of Bespoke Investment Group

Russia Defends Ruble & Attacks Ruble

Russia’s central bank is helping to attack its own currency in a bizarre way that resembles a left and right hand working against one another.... as it fights to defend the currency exchange rate, it is also providing loans to banks that are "short-selling"its own currency. Banks used “almost all” the money to bet against the ruble, said Natalia Orlova, chief economist at Alfa, Russia’s largest non-government bank.“A significant amount, if not all, of the speculative attacks on the ruble are funded by the central bank itself,” said Vladimir Osakovsky, Moscow-based economist for UniCredit....Cliff Kule's Note:sometimes it is amazing to see how dysfunctional governments can be. Thomas Paine,one of the founding fathers of the United States, said "that government is best which governs least"...too bad no country on earth follows that principle...

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeJppBjRiLVc

Prechter: 3 Deflation and Recession Myths

Technical Analyst and well-known deflationist Robert Prechter discusses 3 myths of deflation and recessions:
Myth 1: "War Will Bail Out the Economy"Myth 2: "Deflation Will Cause a Run on the Dollar, Which Will Make Prices Rise"Myth 3: "Consumers Remain the Engine Driving the U.S. Economy

...has also formulated a 60 page e-book on how to survive in an deflationary environment. The discussion of these myths is found in that e-book... http://www.safehaven.com/article-12515.htm .... deflation e-book: http://www.elliottwave.com/r.asp?acn=sh&rcn=aa17&dy=aa020409&url=/deflation-survival-guide.aspx

The Ascent of Money

Harvard history professor Niall Ferguson and PBS have produced a 2-hour documentary on the history and development of money and credit. The show is highly recommended by Cliff Küle since it provides a foundation to understanding our world and its money...Cliff's Notes are intended to bring insightful reflections on our world and its money to those who are interested in learning the influences "behind" the investment markets. The program examines how credit, in our system, "turns into" money. This helps Cliff Küle to make the point that our current malaise can be understood as: too much credit "turned into" garbage instead of money. Above is just a preview and below is a link to the first of the 6 parts.All 6 parts are recommended and can be found on the AOL Video site once you have linked into part 1....
http://video.aol.com/video-detail/the-ascent-of-money-part-16/4162708638

Meredith Whitney: No Bad Bank Please

Meredith Whitney gives a great interview for those who want to understand the problems with getting the banks to do their job of creating new credit.She does not like the "bad bank" approach that is under consideration...saying that bad assets with a bad bank does not solve the main issues of solvency and lending. The future of banking?..she says: local lenders making local loans - deposits funding loans, the way banking was done for centuries (before we "improved" it by turning every loan into a marketable security)... Clip about 19 minutes:...

http://www.bloomberg.com/avp/avp.htm?N=av&T=Whitney%20Says%20Bank%20Bonuses%20Necessary%20to%20Retain%20Talent&clipSRC=mms://media2.bloomberg.com/cache/vVLSGmxf63Po.asf

Bill Gross: Stop The Decline !

In his monthly letter, Pimco's Bill Gross stresses that the remedy for deflation and depression is simple: stop the decline in asset prices (sounds easier said than done to Cliff). Bill believes the "benevolent hand of government is required and Keynes is reincarnated in an attempt to plug the dike via fiscal spending and imaginative monetary policies that support asset prices." Bill says that commercial real estate, corporate bonds, and municipal bonds need to be propped up to help bring about an economic recovery. Pimco’s advice to policymakers is as follows: "you can’t bail out everyone, yet economic recovery is not possible unless certain critical asset sectors are not only reliquefied, but rejuvenated in price"... worth reading:

http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/IO+Feb+2009+Gross+Beep+Beep.htm

Chart above is courtesy of Pimco and shows the relation of contraction in household debt to the decline of the "securitization" market (creating securities from bundling together smaller assets such as mortgages, loans, and other debt forms).

Chart of the Day: Vehicle Sales Plummeting

Chart courtesy of Calculated Risk shows monthly vehicle sales (autos and trucks) reported by the US Bureau of Economic Analaysis (BEA) at a Seasonally Adjusted Annual Rate (SAAR). Based on the sales reports today from Ford, GM, Toyota and Chrysler, vehicle sales were below 10 million units, the first time since the early 1980s...

Sprott: Buy Gold and Short Stocks

Eric Sprott, a Cliff Küle M-AA*(Most-Admired Adviser), of Sprott Asset Management, says gold prices may top $2,000 an ounce in coming years amid a series of financial catastrophes... he favors buying gold while selling the collective stock market short. Most at risk in the current climate are banks, discretionary consumer stocks and any companies needing to refinance debt, he says...

http://www.bloomberg.com/apps/news?pid=20601087&sid=acQ4RaOnhRK4&refer=home

Can Countries Go Bankrupt?

"There's a rumor going around that states cannot go bankrupt," German Chancellor Angela Merkel said recently at a private bank event in Frankfurt. "This rumor is not true."

Spiegel discusses the whole issue of country risk in the current economic crisis. Can countries go bankrupt? Will countries default on their government's bonds? Many countries have already been downgraded in their credit ratings, and are still issuing a growing number of bonds to help finance the mind-boggling stimulus programs and monetary stimulation. Ultimately the currencies of these countries could be negatively affected - see the above chart showing the massive drop in the British currency; chart courtesy of Spiegel and Thomson Financial Datastream... "The country [UK] is on the brink of financial ruin"...

http://www.spiegel.de/international/world/0,1518,604523,00.html

Peak Gold?

Most have heard of "peak oil"... but "peak gold"?...not comparable..since oil is consumed while gold endures BUT interesting parallels..- a similar situation of lower-quality, diminishing reserves and production. Cliff's Note: gold per person on earth and gold per unit of currency is diminishing at an alarming rate. Russell McDougal of the Resource Windfall Speculator discusses his "peak gold" thesis and counts 40% of the top world producers of gold as peaking already:

1. South African gold production peaked in the 1970s
2. Brazilian production peaked in 1982
3. Canadian production peaked in 1991
4. Australian production peaked in 1997
5. US production peaked in 1998

Russell says we are not "running out of gold"... but suggests:

1. The world's mines are depleting their reserves, particularly their high grade ore
2. The remaining supplies of gold are becoming harder to find
3. On average, new gold discoveries are becoming smaller and of lower quality

Chart above courtesy of Russell and BHP Billiton shows that there were only four world-class discoveries in the 1990s, with none since 1993. This chart stops in 2001. There has been one world-class discovery made since then, a discovery made by Aurelian Resources in 2006.

http://www.investorsdailyedge.com/article.aspx?id=1840

Support for Retail Sector Breaking?

Chart showing the retail group broke through key support, not a good sign for the group or the entire market.... chart courtesy of Bespoke Investment Group

Where Gurus Put Money

Wall Street Journal article on where financial gurus are putting their money... Rob Arnott - TIPS and investment-grade corporate bonds, John Bogle - municipal bonds, Jeremy Siegel - emerging market stocks and junk bonds, Muriel Siebert - dividend paying stocks, and Jim Rogers - select Chinese stocks...
http://online.wsj.com/article/SB123319078518226995.html#printMode
Also another related article on this subject:
http://news.goldseek.com/GoldSeek/1233644700.php
presents hedge fund manager John Paulson's views:...the one Cliff Kule finds intriguing: bargains
in debt securities of distressed companies— “a $10 trillion opportunity”

Howard Ruff:What to Do in This Crisis

Howard Ruff, the legendary author and financial advisor and editor of The Ruff Times financial newsletter, discusses recommended actions in such crisis times - store commodities, reduce spending, stay in modest housing, buy precious metals, and invest in oil income trusts... he likes silver... he says "The day will come sometime in the next few years when gold will be measured in many thousands of dollars per ounce, and silver in many hundreds of dollars per ounce. So it's not just a way to make a great deal of money as measured in cash dollars, but to protect your purchasing power"...

http://www.321gold.com/editorials/ruff/ruff020209.html

Deleveraging Has Only Begun?

Contrary Investor is written, edited and published by a small group of institutional buy-side portfolio managers and analysts with, at minimum, 20 years of individual Street experience. Contrary Investor writes this week about how the deleveraging process has really only just begun... and says that this will likely result in corporate profits and asset values shifting downward to a "new normal"... Chart above courtesy of Contrary Investor...

http://www.contraryinvestor.com/mo.htm

Ron Paul: End the US Federal Reserve

US Congressman Ron Paul in a 25 minute video clip on ending the US Federal Reserve...

Historic Milestone: Gold Crosses S&P 500

Chart above showing the gold price has just crossed the S&P 500 - this is a historical milestone and only happens every 15 years. Click on chart to enlarge. Chart courtesy of the Gold Stock Analyst:

http://www.goldstockanalyst.com/sample/GoldStockAnalystFeb2009.pdf

Foreign Investment Leaving the US

Chart - click to enlarge - courtesy of US Treasury TIC
http://www.ustreas.gov/tic/

1930s Market Now?

Chart - click to enlarge - showing grim parallel of stock market

in the 1930s compared to today - are we on the same track?

Chart courtesy of Wall Street Journal Data Group

and the National Bureau of Economic Research

CNN Zakaria Interviews Ferguson on Crisis

Above - CNN's Fareed Zakaria speaks with the Harvard historian Niall Ferguson, author of the Ascent of Money, about how US President Obama can fix the economy. (about 10 minutes in length)

Below - Fareed comments on the annual summit of global economic leaders at Davos Switzerland, with more interview videos to come later...

Minus 6% Fed Funds Rate ?

Goldman Sachs has a reputation for having the smartest people (the diagram exaggerates the close working relationship between Goldman and the Federal Reserve). Goldman's chief U.S. economist Jan Hatzius (named as one of the most accurate forecasters) says the appropriate monetary policy points to a Fed Funds rate of -6% by the end of 2010 ! check out the 5minute video and understand what he means...

http://www.bloomberg.com/avp/avp.htm?N=video&T=Hatzius%20Says%20Fed%20Will%20Likely%20Buy%20Treasuries%20Eventually%20&clipSRC=mms://media2.bloomberg.com/cache/v7yVayOGVZDY.asf