Still on the Brink is the economy, write Sandy Lewis and William Cohan... "Mr. Obama thinks that the way to revive the economy is to restore confidence in it. If the mood is right, the capital will flow. But this belief is dangerously misguided... the storm is not over, not by a long shot... many of the fixes that the Obama administration has proposed will do little to address them and may make them worse"... http://www.nytimes.com/2009/06/07/opinion/07cohanWEB.html

"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin" - Ernest Hemingway (1898-1961) American Writer.

Trends Forecaster Gerald Celente discusses his trends & predictions...says the Great Depression will seem mild compared to what will happen beginning in 2011 - the force of a Katrina financial hurricane... http://www.humanevents.com/article.php?id=32152

Commodities...Frank Holmes (minutes 3:15 to 15:00) sees negative interest rates driving gold... likes commodities & emerging markets, but foresees short-term correction because a short-term US$ rally is overdue...Mark Parr (minute 15:30 to 27:00) discusses iron ore & steel & Chinese demand for these commodities... click on image above to activate...

Looking Good..Indicator Goes Up - the Baltic Dry Index, a measure of freight rates to ship iron ore & dry bulk commodities, has been going up, this is a traditional indicator for demand & health of global trade ... Source: Plexus Asset Management (based on data from I-Net Bridge)

Nouriel Roubini (Cliff Küle M-AA*) thinks the recession will last 6 - 9 months more, sees yellow weeds not green shoots, W-shaped recovery...foresees oil at $200/barrel (minute 2:15)...13 minutes in length... click image above ...

cartoon courtesy of Dave Granlund

"We must not let our rulers load us with perpetual debt" - Thomas Jefferson, 12 July 1816

US$ Oversold?... Clive Maund comments on the US$ technicals... chart - click to enlarge - courtesy of Clive... says this could affect commodities markets also... http://www.clivemaund.com/article.php?art_id=1971

Behavioral Economics... Nobel Prize-winning psychologist Daniel Kahneman addresses the Georgetown class of 2009 about the merits of behavioral economics... deconstructs the assumption that people always act rationally, and explains how to promote rational decisions in an irrational world.

Oil Will Make World Small

Jeff Rubin foresees the world getting very small, once the price of oil begins rising to hundreds of dollars per barrel... points to the necessity to grow our own food locally and to manufacture our own products locally once the price of oil goes so high as to make it extremely expensive for China and other exporters to import resources from long distances and then to make things and ship them again at long distances to importing countries like the US... video interview about 8 minutes - click on image above to activate...

Revenge of the Nerd

Paul Wilmott is "quant" - a math wizard on Wall Street and the financial markets... he can figure out the value of toxic assets... Quantitative finance isn't going away, but it is in desperate need of reform - Paul thinks he knows where to start... says he is surprised by the lack of outrage on the economic crisis - "Where the hell was everybody? If people aren't angry now, they'll never be"... http://www.newsweek.com/id/200015/page/1

Market Predicting Big Jump in Fed Funds Rate... check out the Fed Funds derivative contracts in the attached link and notice the June 2010 is pricing in a Fed Funds rate of about 1.25% or so, much higher than today's 0.25%.... Cliff Note: is the market sensing rising inflation and/or a depreciating US$? or is it forecasting an enormous sell-off in the bond markets?... http://futures.tradingcharts.com/marketquotes/ZQ.html

Preventing Another Global Crisis...

Worried about Balooning Deficits and Debt is Fed Chairman Bernanke... says " As a consequence of this elevated level of borrowing, the ratio of federal debt held by the public to nominal GDP is likely to move up from about 40 percent before the onset of the financial crisis to about 70 percent in 2011. These developments would leave the debt-to-GDP ratio at its highest level since the early 1950s, the years following the massive debt buildup during World War II"... link below includes 5 minute video clip discussion on the potential of this debt to turn into hyperinflation... http://finance.yahoo.com/tech-ticker/article/259145/Bernanke-Freaks-Out-About-Obama

chart - click to enlarge - courtesy of chartoftheday.com

Who Will Buy all this US Debt? asks Pimco co-CEO Bill Gross... foresees two possibilities - either interest rates and yields on US bonds will go much higher to attract investment in the bonds (but this would pressure on mortgage and corporate rates and represents a threat to recovery) or the US Fed will continue to buy the bonds (but this would ultimately be highly inflationary and cause a huge loss to the purchasing power of the US$)...

http://www.citywire.co.uk/professional/-/news/fund-news/content.aspx?ID=343129

Global Recession Likely to Persist, says Morgan Stanley's Economist Stephen Roach... global economy "still contracting" and "in a difficult state", - regardless of second or third derivatives of some indicators getting less worse... everywhere Stephen travels, people are asking "how are you [US] going to get out of this without inflation" with runaway debt, massive money printing, and 0 interest rates... about 7 minutes audio in length...
http://www.bloomberg.com/avp/avp.htm?N=av&T=Stephen%20Roach%20Says%20Global%20Recession%20Likely%20to%20Persist&clipSRC=mms://media2.bloomberg.com/cache/v42gq9qAIDck.asf

What's Driving Gold... US Global Investors explores the causes and effects of factors influencing the price of gold today and in the future... includes different perspectives and links to webcasts...

http://www.usfunds.com/docs/pdf/WDG_Report_05292009.pdf

The Perfect Storm... timeline and factors converging and leading up to the current economic crisis... chart - click to enlarge - courtesy of Jess Bachman and Barry Ritholtz...

"I am for a government rigorously frugal & simple, applying all the possible savings of the public revenue to the discharge of the national debt..." - Thomas Jefferson, 26 January 1799

4 Warning Signs... Tony Sagami details 4 warning signs that investors should pay attention to align their portfolios...$ hits 2009 low, Gold nears $1,000/ounce, Oil jumps to $68 a barrel, & Treasury bond yields skyrocket... Tony recommends:- slash your dollar-denominated assets, chop your maturities in bonds to shorter maturities,& add some tangible assets (gold, oil companies, or other natural resource companies)... "Real assets, not paper assets, will hold their value and perhaps even appreciate when things get ugly...& the one region of the world where corporate earnings are still rising is in Asia & India"... http://www.howestreet.com/articles/index.php?article_id=9712

Inflation vs Deflation Debate...

Shared Sacrifice?... As though market risk and credit risk were not enough, bondholders have a new risk to contend with - the Obama Administration's policy of "shared sacrifice" - an unstated policy in which bondholders are "told to give up legal rights, and cash, as part of a government-mandated tradeoff that favors a politically connected special-interest group"... http://bloomberg.com/apps/news?pid=20601039&sid=a9HNldyokP.M

"To contract new debts is not the way to pay old ones" - George Washington, 7 April 1799

Betting the Farm on inflation...Julian Robertson (Cliff Küle M-AA*): Julian is leveraging on a "steepener" trade that basically is shorting long-term US government bonds, betting on rising inflation... "I ask anyone to give me an example of an economy beefed up by huge amounts of quantitative easing that did not inflate tremendously when or if the economy improved"... he also likes natural resource stocks & says "Zinc would also seem to me to be a very good inflation hedge"... http://seekingalpha.com/article/141286-julian-robertson-bets-the-farm-on-inflation?source=article_sb_picks

US and UK Central Banks Have Gone Too Far proclaims German Chancellor Angela Merkel in fighting the economic crisis... suggests they are laying the foundation for another financial crisis... German officials are traditionally more conservative, partly because of the painful memory of the country's hyperinflation of the 1920s...

http://online.wsj.com/article/SB124398546796379239.html

cartoon courtesy of Eric Lewis

Change We Can't Believe In

"We have no coins, please pay with exact change" is the motto in Argentina,...New Yorker article compares this coin shortage with America's economic crisis, both dealing with loss of confidence... "the chaos of last year both led to and has been exacerbated by a shortage of its own: credit... if fear has left the Argentines with too few coins, it has left us [Americans], paradoxically, with too much cash (and too little credit). This isn’t to say that financial crises are all in our head; certainly our own was sparked by problems that were very real. But there is an irreducible psychological dimension to both crises and recoveries. And if it’s hard for people in Buenos Aires to give up their pennies, think how much harder it will be for Americans to start taking risks again"...

http://www.newyorker.com/talk/financial/2009/06/08/090608ta_talk_surowiecki

Asset Class of Choice?

Global Equity Strategist Chris Wood on the financial markets, says US markets remain in a bear market rally while Asia & India in a secular bull market...thinks Asia & emerging markets (EMs) will be the biggest beneficiary of the Fed’s monetary easing, liquidity could lead to massive asset bubbles in Asia and EMs... "Asian markets and EMs have become the asset class of choice in global equities"... click on image above to activate video - about 5 minutes in length...

Thoughts on the Economic Crisis, the Fed, and the future of America by Congressman Ron Paul... click on image above to activate audio - begins at minute 15, ends at minute 48...

Monroe Doctrine to Mao Doctrine is what is happening in South America as the Chinese court South America in their insatiable quest for natural resources...
Paul Starobin writes of the economic, social, and cultural ties and transformation between China and South America...http://www.theatlantic.com/doc/200905u/china-chile

Big and Rising Budgetary Deficits concerns Pimco co-CEO Bill Gross... says the government must keep “writing checks” to keep the US growing... thinks lower yields on investment portfolios are the future, especially on US treasury bonds that may lose not only from inflation but also from currency depreciation... worries that the US Government will not be able to exit and unwind from all of these aid programs for many years... audio about 10 minutes in length... http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/v3XNbq3tQvtk.asf

Budget Deficits Threaten Financial Stability, says Fed Chairman Ben Bernanke... declares the government can’t continue indefinitely to borrow to finance the deficits... emphasizes the need to begin planning now to restores fiscal balance... thinks there are still risks of a relapse into a deepening financial crisis even as credit markets show green shoots of stability ... http://www.bloomberg.com/apps/news?pid=20601087&sid=agmj05AcqWHo

2009's Sleeper Commodity ?

"low prices bring high prices"is the old adage..Travis Steward presents a comprehensive technical & fundamental review of natural gas...price has broken above 50 day moving average with high volume...

http://www.financialsense.com/fsu/editorials/steward/2009/0602.html

Bond Concerns from Budgetary Deficits...

Bearish US$ Technicals

Adam Hewison of INO presents technical indicators showing the US$ to be in a very bearish downtrend...click on image or below to activate video:

http://broadcast.ino.com/education/dollar_index_200906/?campaignid=3

The Housing Mirage

Whitney Tilson details with excellent charts and graphs the on-going US real estate crash - concludes that "we are only in the middle innings of an enormous wave of defaults, foreclosures and auctions that is hitting the United States"... and Mark Henson referenced in presentation says "Our data shows that the mid-to-upper end housing market is on the precipice of the exact cliff that the market fell off of in 2007, led by new loan defaults. What happens to the economy when you hit the mid-to-upper end earners the same way the low to mid end was hit with the subprime implosion? We will find out soon enough"...
T2 Partners

Publish at Scribd or explore others: Research Business & Economics Finance Non-fiction fraud bailout

"The more things change, the more they remain the same", says veteran money manager Stanley Nabi... sees rise in stocks over the next year... says 2006-2012 the US national debt will double & if interest rates rise, cost of the interest on this debt will be $500-600 Billion/yr - this is an inflation threat... likes energy stocks long-term, recommends buying on correction... also likes commodity-related and fertilizer companies...
http://watch.bnn.ca/#clip178899

If Andrew Carnegie Only Knew...Doug Wakefield points out "While our political and financial leaders keep telling us that the capacity for debt production is eternal, Andrew Carnegie disagrees"...says Carnegie's book Triumphant Democracy, written in 1886, is relevant today... Carnegie wrote "Our great advantage, which the Democracy has secured for itself in America, is its comparative freedom from debt"... http://www.bestmindsinc.com/documents/TheNextLandslide_LessonsFromAndrewCarnegie.pdf

Matt Simmons presentation on energy independence & security in a world of "peak oil"... http://www.simmonsco-intl.com/files/Oklahoma%20State%20University.pdf

Repercussions... John Hussman (Cliff Küle M-AA*): "You simply cannot have an economy lend out trillions of dollars in bad debt, then make the lenders whole with public funds (while still facing a massive second wave of probable mortgage defaults) without destructive repercussions. There is very little chance, in my view, that the current downturn is over"... http://www.hussmanfunds.com/wmc/wmc090601.htm

Capitalism needs neither propaganda nor apostles. Its achievements speak for themselves. Capitalism delivers the goods. - Ludwig Von Mises (1881-1973)

"Bernanke-Geithner Bubble" Philosopher Paul Sandison overviews where we are & where we are going in the economy... sees a synchronized global recession, except for China... most developed economies to experience deflation... China to cease investing in US Treasuries in order to use its savings to continue to finance its internal expansion... in the worst case "The US will coax its own population to invest in Treasuries to finance its deficit spending"...concludes the 3 major risks to a global economic recovery are hyperinflation, protectionism & war... http://www.investmentpostcards.com/wp-content/uploads/2009/05/2009-06-01-corrected-article-for-investment-postcards-on-fiscal-spending.pdf

Geithner's Sales Trip to China... Axel Merk points out US Treasury Secretary Geithner's recent trip to China is a sales trip to entice the Chinese to continue buying US Treasury bonds to finance America's growing deficits... warns "If the Fed prints too much money and/or artificially lowers the yield on U.S. Bonds, Americans and foreigners alike may flee the currency [US$]"... China indicates that "it wants to deploy its foreign exchange reserves by buying assets abroad" to fund its growth... http://news.goldseek.com/MerkInvestments/1243948908.php

Go Bankrupt and Get $30Billion!

Driving the Bond Markets to Ruin... Written on Friday before the GM bankruptcy but still relevant, James Glassman worries the Obama administration appears to be "trampling decades of legal precedent regarding owners of corporate debt"... James heads a nonprofit group that encourages developing nations to adopt policies that will lead to prosperity, but says "the Obama administration reminds me of an irresponsible third-world regime, skirting the law and handing economic prizes to political cronies"... worries that the Chinese could be thinking: "If the United States is willing to skirt the law to help some of the president’s closest political supporters gain large pieces of two of the world’s biggest companies, will Washington necessarily stand behind any Treasury securities we own when it becomes politically inexpedient?"... http://www.nytimes.com/2009/05/30/opinion/30glassman.html

US Energy Company Shares... are mostly held by American pension funds, endowments, individual investors & asset managers with mutual funds, according to a study by former Clinton economic advisor Robert Shapiro... this means that a key part of restoring investments of American retirees & union members is in how the US Government views & treats US energy companies... Cliff Note: are investors better to heed Dennis Gartman as posted last week in "Buy Oil Outside of the US" ? http://www.energytomorrow.org/media/resources/r_477.pdf

"Chinese assets are very safe," Tim Geithner said in response to a question at Peking University. This drew loud laughter from the student audience, reflecting skepticism in China about accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home...

http://www.reuters.com/article/usDollarRpt/idUSPEK14475620090601?pageNumber=1&virtualBrandChannel=0

"To save our economy from destruction & from the eventual holocaust of runaway inflation, we the people must take the money supply function back from the government. Money is far too important to be left in the hands of bankers & of the Establishment economists & financiers." - Murray Rothbard (1926-1995), Austrian School Economist, 1995

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
Henry Ford (1863-1947)
Who's Right ?

USA: Drowning in Debt

Selloff Soon?... Chart-courtesy of Barry Ritholtz- click to enlarge- shows the inverse (opposite) correlation between the S&P stock index & the difference between yields on 2-yr treasury bills & 10-yr treasury notes (2/10)...Notice the runup in 2/10 and how it leads the stock market... Cliff Note: does this mean a stock market sell-off is likely ?

Wanna Play Offense or Defense ?...

Kate Kelly, author of Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street & William Cohan, author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Street share insights with Charlie Rose.

Vigilantes Are Back... Mark MacQueen of Sage Advisory Services : -“The vigilante group is different this time around … It’s major foreign creditors. This whole idea that we need to spend our way out of our problems is being questioned" - bond vigilantes is the term given to those who sell traditionally-safe US government long-term bonds... central banks appear to be buying less of these long-term bonds & more of the shorter-dated US treasury bills instead - "if central banks believe that the only acceptable, safe alternative to long-term Treasury notes is short-term Treasury bills, they will end up lending to the US at incredibly low rates so long as the Fed keeps rates low...US policy makers have to worry about the weak foreign bid for long-term bonds, & the risk that a rise in mortgage rates will choke off recovery. At some point, foreign central banks will have to worry about the lack of interest income of their (once again growing) foreign portfolio"... http://blogs.cfr.org/setser/2009/05/29/record-demand-record-angst/

The Dubai Multi Commodities Centre (DMCC) is open for business... Gold dealers in Dubai say that it's "only natural" for the central banks in the region to store their gold in DMCC instead of London... DMCC is now waiting for delivery of gold bullion from London - apparently there is a delay due to a "difference in gold specification between London and Dubai"... CliffNote:(?)... http://www.business24-7.ae/articles/2009/5/pages/12052009/05132009_4d115a2aa5da4d69b8e7350a8875bd9d.aspx

Chart - click to enlarge - showing

strong performance of emerging markets (BRIC)

Cliff Note: are emerging markets decoupling now?
Chart courtesy of Bespoke Investment Group

A Conversation with Neel Kashkari, Fmr Asst Sec of the US Treasury... about 19 minutes in length hosted by Wharton...