John Mauldin (Cliff Küle M-AA*) says "December 1974 to 1982 was a very, very tough period. What we got was compressing price /earnings ratios & that's what I think we're going to see"...

US Consumer Demand Off A Cliff As Crisis Deepens...

http://jessescrossroadscafe.blogspot.com/2009/08/us-consumer-demand-off-cliff.html

S&P 500 Index - Bespoke: "If the index manages to meaningfully break above 1,005, there is little in the way of resistance for the next 95 points..." http://bespokeinvest.typepad.com/bespoke/2009/08/melting-up-in-the-summer-heat.html

Recession is Over says Dennis Gartman (Cliff Küle M-AA*) "We saw it happen two weeks ago -- it's over"... Dennis looks at 2 indicators - a spike downward in the number of weekly jobless claims, & the percentage of coincident economic indicators to lagging indicators... "Every time can be different, but they very rarely are. Every time you bet on something being different, you pay dearly for it"... http://money.cnn.com/2009/08/06/news/economy/economy_over_economist.fortune/index.htm?postversion=2009080612

"Whoever controls the volume of money in our country is absolute master of all industry and commerce" - James Garfield, 20th President Of US (1831-1881)

Mother of All Bear Market Rallies?

Berkshires Print Own Currency

Risk Index at Europhoric Levels Again...

AAA Credit Ratings For Sale ?

Visit msnbc.com for Breaking News, World News, and News about the Economy

http://www.stockhouse.com/Columnists/2009/Aug/6/Transitioning-from-a-bear-market-to-a-bull-market (click image to enlarge)

Is Speculation a Big Factor?

BIG:

Not BIG:

Campfire Meeting in Maine

"There obviously is a real pent-up demand in America ... people love to buy cars, and we've given them the incentive to do that. I think the last thing that any politician wants to do is cut off the opportunity for somebody who's going to be able to get a rebate from the government to buy a new vehicle." - U.S. Transportation Secretary in yesterday's NYT (page B3) ... Cliff Note:- if citizens are this happy to get a few thousand $ from the government, imagine how happy the banks were to get hundreds of billions of $ from the citizens.

Peter Schiff & Rand Paul On Fox Business...

"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson to Edward Carrington, 1788

September Seasonally Good for Gold... with an average gain of 2.6% for the month since 1970... Chart Courtesy of Plexus Asset Management

Central bank gold sales may be lowest since 1994... "The low net official sector sales number registered in the first half was primarily driven by falling sales from Central Bank Gold Agreement (CBGA) signatories," metals consultancy GFMS says... combined sales from the group amounted to 92 tonnes for the period, a drop of 43 percent year-on-year... http://economictimes.indiatimes.com/Cenbank-gold-sales-may-be-lowest-since-1994/articleshow/4853702.cms

Oil Supply & Demand

Concrete Crisis... The Economist article explores the next potential problem for banks - commercial property... "Here too loans were bundled together to make complex securities, known as commercial mortgage-backed securities (CMBSs), on which defaults are now rising. And here too prices were driven higher by the use of borrowed money"... http://www.economist.com/opinion/displayStory.cfm?story_id=14126527&source=hptextfeature

Apocalypse Tool... by Josh Levin... lets you determine various financial & geo-political crisis & disaster scenarios... click on Launch above to activate... http://www.slate.com/id/2223285/#sb2223286

"By Q1, 2011 a projected 48% of total mortgage borrowers will have negative equity." - Deutsche Bank (click to enlarge chart above)

Oil

China to Meltdown?...Martin Hutchinson says some factors are pointing to a meltdown... "Shares are trading at 35 times earnings. Banks in the last six months have lent more than the entire Gross Domestic Product for the period. Interest rates are below the inflation rate, while monetary growth is far above it. The seven largest bond transactions in the world in 2009 were domestic deals in this country... Looks like a bubble to me, and bound to end in tears... If China's run of apparently miraculous immunity from normal economic forces is finally about to end, the result will not be pretty for any of us"... http://www.prudentbear.com/index.php/thebearslairview?art_id=10256

Hedge Fund Manager Dan Loeb

FDIC Is in Trouble writes Bud Conrad: " the FDIC insures 8,246 institutions, with $13.5 trillion in assets. Not all of them are going bankrupt, of course. Yet as of late July, a disturbing 64 banks had gone belly up this year – the most since 1992 – costing the FDIC $12.5 billion. At the end of Q1, the agency was already asking for emergency funding....Much worse is likely to come... exposure of the FDIC is close to $6 trillion... currently covers each dollar on deposit with a trivial 2/10ths of a penny"... http://www.howestreet.com/articles/index.php?article_id=10352

Pimco on the Markets & Economy

Why are company insiders selling?... asks Michael Brush... Insider sales are at levels not seen in almost 2 years, suggests there's still a bear out there... "History shows that insiders are worth paying attention to, because they're the ones on the front lines"... explores several specific companies & why insiders are selling... http://articles.moneycentral.msn.com/Investing/CompanyFocus/why-are-company-insiders-selling.aspx

Oil Outperforming Oil Stocks... since bottoming at the end of 2008, oil (the commodity) has outperformed oil stocks significantly - chart courtesy of the Bespoke Invesment Group

"Gold is a treasure, and he who possesses it does all he wishes to in this world, and succeeds in helping souls into paradise." - Christopher Columbus (1451-1506)

Joseph Stiglitz says Ben Bernanke, Tim Geithner & Larry Summers championed the deregulatory & easy money policies that helped cause the crisis & none seems to have learned from past mistakes... time for a "serious national debate" ?...

‘Clunkers’ ... Four of the top five models sold so far under the US “cash for clunkers” program are made by foreign automakers... http://www.bloomberg.com/apps/news?pid=20601087&sid=am1mj6R6tAcg (cartoon courtesy of Nate Beeler, The Washington Examiner)

Korea: BRIC to be "BRICK"? Gary Dorsch: the Korea Kospi Index has rebounded by 72% above its November low, emerging as the most favored market among global investors. "In a world where G-7 central banks are pegging rates at record low levels, it does not take much imagination to envision the Federal Reserve, the ECB, and the Bank of Japan underwriting rallies in the emerging currencies of Brazil, Russia, India & Korea, just as Tokyo pumped massive liquidity straight into New Zealand and Australian dollars during its flirtation with the hallucinogenic drug - "Quantitative Easing" (QE) ....."

http://www.safehaven.com/article-14101.htm

Natural Gas - Down, Out & Unloved... writes Technical Analyst Frank Barbera...natural gas as a "contrarian play"?... in the above chart natural gas is historically oversold - "we plot the annual rate of change for Natural Gas, which is currently just starting to improve... is coming off some of the most extreme values ever seen. Typically, following these kinds of excessive oversold values, prices have a marked tendency to snap back & that implies a bounce could lie directly ahead"...

http://www.financialsense.com/Market/barbera/2009/0804.html

Joseph Stiglitz says America is at "Serious Risk of Extended Malaise"... recommends the government should plan on additional stimulus packages focused on improving technology, education and infrastructure...

Bernanke’s Exit Dilemma... Does anyone really believe the Fed will contract money supply when the economy starts to grow? asks George Melloan... the Fed has assured us it has an exit strategy; tools to "prevent the huge reserves... pumped into the banks from generating an inflation that would abort an economic recovery"... But does the Fed have the guts to use those tools? ... concludes: "there are very good reasons to doubt that the Fed can cope with the political problems of avoiding inflation. The technical problems don’t look very easy either"...
http://online.wsj.com/article/SB10001424052970203517304574306401079643202.html

Commodity Prices May Rise in 2010... says Nouriel Roubini (Cliff Küle M-AA*)... “As the global economy goes toward growth as opposed to a recession, you are going to see further increases in commodity prices especially next year... There is now potentially light at the end of the tunnel"... http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aUZbo8LjO3kw

Cartoon Courtesy of Randy Bish,

Pittsburgh Tribune-Review

U.S.$ Exit Manual

Warren Pollock on how China is quietly getting out of the $

The Great Global Rebalancing... Alhambra Investments (picture of the Al Hambra above) emphasizes the big global transformations taking place... makes the point that the economists were right in the US-China import-export relationship not being sustainable, but "rather than the rebalancing causing a major economic disruption, it is the economic disruption that is driving the rebalancing"... foresees China investing their surpluses in emerging economies, "consumption in the emerging economies is already 65% of the US and could surpass the US in the next few years. This emerging market consumption along with increased Chinese consumption will keep Chinese and other Asian economies factories humming and their economies on track"... http://alhambrainvestments.com/the-great-global-rebalancing/

"The fate of the nation and the fate of the currency are one and the same." - Dr. Franz Pick, International Currency Analyst

Top Strategists Talk “Buy-and-Hold”... The Financial Times recently interviewed top strategists about “buy-and-hold” investing, & found some espousing more of a “buy-cheap-and-hold” approach... “In a challenge to the received wisdom of holding stock market investments for 20 years or more, to smooth out short-term volatility, some suggest that measures of cheapness can be used to make buying decisions and enhance performance,” writes the Times‘ David Stevenson... James Montier says “If you could buy a set of stocks today and bury them for five years, you would be laughing!”... http://theguruinvestor.com/2009/07/28/top-strategists-talk-buy-and-hold/

Lots of Room to Go Up... Peter Boockvar notes GOLD is the best performing asset over the past year & is near its all-time high despite "all this deflationary talk"...

"The way I see it, gold is headed over $1000 an ounce, probably much higher. At anywhere near current prices, it's the lowest risk, highest potential investment I can think of." - Doug Casey, Casey Research

Can China Save the World?... asks Bill Powell... explores the Chinese economy & whether it can pull the world out of its downturn... "If Beijing can come through the global crisis without an economic meltdown of its own, its leaders' reputation & confidence will be boosted. An economic model that survives the worst downturn since the Great Depression will appeal to the developing world, at a time when Washington's model is shot. Beijing, before the crisis, was already rising, its global reach & influence expanding. As the rest of the world falters, that is truer than ever. China is not yet the leader of the global economy. But it's getting there"...

http://www.time.com/time/magazine/article/0,9171,1913638,00.html

Fed Won’t Raise Interest Rates Until 2011... says Paul McCulley of Pimco... since the threat of deflation remains for the US, Benchmark rates will not rise “before 2011 and I’m not only forecasting that as a professional forecaster, but positioning portfolios on that proposition as well... What I’m worried most about is simply a shortfall in global....demand relative to supply potential"... http://www.bloomberg.com/apps/news?pid=20601087&sid=aPZx5kGyDavA

Gartman on commodities - volatility, speculation, asset diversification issues with Richard Bernstein...

"Nothing beats a little cash in a bear market, of course, and the oldest form of cash is gold." - James Grant (Cliff Küle M-AA*)

Bond Worry: Will China Keep Buying?... Liz Rappaport & James Areddy: China is worried that the US will inflate or devalue the currency to address its massive debt obligations. "We worry about the devaluation of the U.S. $, but not at this stage"... http://online.wsj.com/article/SB124896282178793797.html

They're Winning... Zachary Karabell: - China's stimulus is working much better than America's stimulus... China does not have to negotiate the challenges of the "labyrinthine American system"... when China decided to spend money, within a few months money was being put to work on infrastructure projects & on stimulative measures to encourage consumer spending... China's stimulus also accelerated the long-term goal of China to focus more on internal demand & interior development... less on exports... whereas in the US, of the hundreds of billions allocated, little has been distributed, & Americans have tended toward saving... less than a $100 billion have been spent on "shovel ready" projects, with funds tied up in "a bureaucratic nightmare"...
http://www.tnr.com/story.html?id=29b9b3e0-1bd8-4c77-8642-35dc5abe6d9a

Be "normally-weighted" in equities says Richard Bernstein...

Profiting from the Tooth Fairy... writes John Hussman (Cliff Küle M-AA*)... says "To remove our hedges here in anticipation of a sustained economic recovery and bull market would be to assume that the events in the economy since 2007 have been psychological and temporary, that there will be no material effects from continuing delinquencies and foreclosures (not to mention the second wave of reset pressures due to begin later this year), and that the Fed can create more base money in one year than in the entire history of the nation, without any consequence. If we could treat the recent downturn as a “standard recession,” that might be possible. But little is standard about this downturn, and the fundamental difficulties have deeper roots than trend-following investors seem to assume."... http://www.hussmanfunds.com/wmc/wmc090803.htm

Mark-To-Market Is Back. With A Vengeance!...... Daniel Indiviglio in the The Atlantic: "This may be the single most important piece of news regarding the financial industry you will read ....... The Financial Accounting Standards Board (FASB) is in the process of making banks very unhappy. In a complete reversal from their revised policy released in April, it is considering vastly tightening mark-to-market requirements to include virtually all securities on a bank's balance sheet. Yes, it even wants the very, very illiquid stuff marked-to-market"... http://business.theatlantic.com/2009/07/mark-to-market_is_back_--_with_a_vengeance.php

Robert Shiller interviewed by Charlie Rose,.. "need for better regulations - not more government-based regulations" about 37 minutes long...

"You want to own commodities in the ground, not derivatives at Citigroup." - Marc Faber

Why commodities just keep on getting hotter...Peter Koven suggests traders missed the boom last time & building positions so they don't miss a boom this time... points out the Chinese government has been buying massive amounts of commodities, using their currency reserves to buy commodities instead of US government bonds... quotes MF Global's Aaron Fennell: "When Tim Geithner goes over there [to China] and tells them, ‘Don't worry about the $ falling,' they probably think there's a problem"... Peter warns that experts believe China has stockpiled enough material that "it can slow down its buying for the rest of 2009"... http://www.financialpost.com/most-popular/story.html?id=1850372

Cartoon Courtesy of Ed Stein

Distressed ?... How to invest in distressed companies after bankruptcy... what factors to consider when valuing distressed companies... financial innovation, new laws & regulations..author Martin Whitman is interviewed about his book "Distress Investing".. audio about 30 minutes ... Windows Version: http://www.netcastdaily.com/broadcast/fsn2009-0801-2.asx & MP3 Version: http://www.netcastdaily.com/broadcast/fsn2009-0801-2.mp3

"By common consent of the nations, gold and silver are the only true measure of value. They are the necessary regulators of trade."- Hugh McCulloch (1808-1895)

China's Liquidity Trap

John Mauldin (Cliff Küle M-AA*) Interview: - Part 1 with King World News... discusses the economic crisis, why it happened, inflation vs. deflation, US housing market, earnings comparisons, U.S. savings rates, expected stock market returns... about 19 minutes, click on image above to activate...

"The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register." - Hans F. Sennholz (1922-2007)

Positive Proof Peak Oil is Here... says by Bill Powers..."we are in a secular bull market in oil due in large part to one of the most significant economic events of the 21st century – the peaking of worldwide oil production"...says: according to the US Energy Information Agency, the peak occurred in May 2005... http://www.financialsense.com/editorials/powers/2009/0731.html

Deficit Spending & GDP
Click to Enlarge
Courtesy of Heritage.org

US Stimulus & Manufacturing in the Crisis... Caterpillar CEO discusses differences between US stimulus & Chinese stimulus, the possibility of a 2nd stimulus, how US manufacturing has fared in the crisis, competition posed by low-cost manufacturers abroad, protectionism & the US economy... sees growth & opportunities in emerging markets outstripping developed markets, driving demand for commodities in the process... 3 segments by the Financial Times... click on image above to activate...

"You cannot strengthen the weak by weakening the strong. You cannot help the wage-earner by pulling down the wage-payer. You cannot help the poor by destroying the rich." - Abraham Lincoln (1809-1865)

New Bull Market?

Rob Boeckh Investment Letter - sees a weak but recovering US economy, deflationary price enviroment, & "pretty good asset and commodity markets"...this letter is the focus of John Mauldin's Frontline Thoughts for this weekend...The Great Reflation Experiment