Archive

Posts Tagged ‘elections’

Election Fraud: Accounts Of Voting Machines Turning Mitt Romney Votes Into Barack Obama Votes

November 17th, 2012

Michael Snyder: Why is the mainstream media saying nothing about election fraud even though there are eyewitness reports from all over the country of voting machines turning Romney Read more…

Economy, Government

22 Signs That Voter Fraud Is Wildly Out Of Control And The Election Was A Sham

November 13th, 2012

Michael Snyder: After what we have seen this November, how is any American ever supposed to trust the integrity of our elections ever again?  There were over 70,000 reports of voting Read more…

Economy, Government, Markets

Michelle Obama: “We Are In The Midst Of A Huge Recovery”

October 17th, 2012

Mac Slavo: Today we are fortunate enough to be provided with an economic analysis from an unlikely source. She may not be a trained economist or nutritionist, but given that she knows what our children should be eating for school lunches you better bet she knows what Read more…

Economy, Government

20 Senators Who Are Protecting Your Portfolio by Fighting the Deficit

December 30th, 2010

20 Senators Who Are Protecting Your Portfolio by Fighting the Deficit

Historians will look back at December 2010 as a watershed moment. At the beginning of the month, a courageous group of bipartisan souls announced a blueprint to stem the runaway tide of red ink. A couple weeks later, Congress and President Barak Obama agreed upon extending the Bush-era tax-cut package for two more years. That took the budget deficit to a whole new level of fiscal insanity.

Progress — in reverse
Ironically, the budget deficit was actually set to shrink in 2011 as the recovering economy boosted tax receipts and the tax reductions enacted during the Bush administration were due to expire. The $1.3 trillion deficit in 2010 was expected to fall to around $1 trillion in 2011. Yet the GOP is so devoted to tax cuts, and the Democrats are so devoted to near-term fiscal stimulus to help keep the economy afloat, that neither party appears especially serious about deficit reduction.

As a result, we've just tacked on another $858 billion to the deficit over 10 years thanks to this tax-cut extension agreement, according to the Congressional Budget Office (CBO). The $374 billion addition to the 2011 deficit and the extra $423 billion in the 2012 shortfall likely means that we'll be above the $1 trillion annual deficit mark until at least 2013. The proverbial ball has been kicked down the road.

The illusory benefit of low interest rates
Last week, I took a look

Uncategorized

The Amphora Report’s 2010 Topics in Review (1 of 4)

December 28th, 2010

In 14 editions of the Amphora Report this year we have covered nearly 30 topics, many of which overlap in some way. What binds them all into a coherent set is our view that the economic policies being implemented in nearly all major countries are not just unsustainable but in some cases outright reckless. These countries include the US, the issuer of the world’s reserve currency. By implication, the dollar is likely to lose its pre-eminent reserve currency status in the coming years. The result is bound to be a period of global economic and financial market turmoil and, for most if not all traditional financial assets, underperformance in real, purchasing-power adjusted terms. What follows below is a list of all topics, including both a brief summary and an update of our thinking for 2011.

FROM “DARTH” TO “CZAR” VOLCKER? VOL 1/1

Imagine that, as in 1979, Paul Volcker is tasked with restoring global confidence in the US dollar and economy generally. We believe that, notwithstanding the best of intentions, it is unrealistic to expect that Mr Volcker, or anyone else for that matter, could possibly succeed at preventing a dramatic relative economic decline of the US in the coming years. To do so would require fundamental economic reform vast scope, far beyond what anyone in Washington, DC is willing to seriously consider or debate.

Our thinking on this topic has not changed one bit. If anything, our conclusions seem largely vindicated by recent developments in Washington, including the growing lack of fiscal discipline demonstrated by the extension of tax cuts and unemployment benefits. There is no serious talk of fundamental economic reform, even following the elections, in which deficit reduction was an important topic. Meanwhile, the Fed has embarked on an increasingly radical monetary course which does nothing to restore confidence in the dollar. The outperformance this year of emerging market economies, many of which are investing heavily in infrastructure and other capital stock, is a clear demonstration of relative US decline. We would expect this outperformance to continue in 2011 although it might well be less pronounced.

IS MONEY A STORE OF VALUE? VOL 1/2

We generally take it for granted that cash in a government-guaranteed bank deposit account is a risk-free store of value. But is it? The fact is that the dollar, and all fiat currencies for that matter, tend to lose purchasing power over time, occasionally abruptly in a sharp decline or, even worse, in a hyperinflation. Given current global economic conditions, we believe that investors should be particularly wary of currencies as stores of value and should seek ways to preserve wealth outside of cash.

It is not surprising that, as policymakers have resorted to ever more desperate means to get their economies going, currencies in general have declined in value relative to commodities this year, including the historical cash substitutes, the precious metals. We are confident that this trend of rising commodities prices, not just in dollars but in most currencies, is going to continue in 2011, although quite possibly at a slower pace than in recent months, in the event that the global economy slows somewhat, as we expect.

HOW MUCH FREE LUNCH WOULD YOU LIKE, SIR? VOL 1/2

As diversification is rightly considered to be the only “free-lunch” in economics, in this topic we explore how, in a world of both low interest rates and high uncertainty, investors should be inclined to seek rather more diversification than would ordinarily be the case. However, as financial assets are increasingly highly correlated with each other–a consequence of artificial monetary stimulus–diversification through financial assets alone is unusually limited. As such, investors should consider increasing their allocations to alternative investments, including liquid commodities.

Commodities have outperformed this year, most probably for a variety of reasons. There were some supply issues at times, in particular with grains and certain other agricultural commodities, but the strength was in fact quite broad-based and demonstrates both good demand from the more dynamic emerging markets but also, importantly, that global inflationary pressures are rising. While 2011 may not be as good a year for commodities as 2010–in part because there are signs that emerging market demand is now cooling–we nevertheless expect investors to continue to seek diversification in alternative assets.

THE REAL LESSON OF THE GREEK DEBT CRISIS | VOL 1/2

Greece now finds itself under attack from the financial markets and unable to refinance its debt. We believe that Germany and France will not come to Greece’s rescue absent a dramatic fiscal consolidation. While Greece is certainly trying to reduce its deficit, success is far from assured and some sort of debt restructuring is probably inevitable. In any case, the Greek crisis has kicked off a round of general euro-area fiscal consolidation. This demonstrates that the euro-area can respond positively to market pressures. In time, this could be supportive of the euro.

The sovereign debt crisis that began in Greece earlier this year has spread to Ireland, Portugal and Spain. In all four countries, governments are desperately trying to reduce deficits in return for financial assistance from France and Germany and also temporary funding support from the European Central Bank (ECB). Interestingly, however, notwithstanding the ongoing and widening crisis, the EUR/USD exchange rate, at 1.32 today, is essentially at the same level it was when the crisis broke in April this year. While we are not particularly optimistic for the economic future of the euro-area which, absent Germany and a few other pockets of regional strength, does not have a great deal going for it, we nevertheless think it is important to make a fair comparison between the euro-area and the US. This requires investors to look at the overall US fiscal situation, which continues to deteriorate amidst federal tax cut and unemployment benefit extensions. But don’t forget the brewing debt crisis in state and local governments either. California, New York and Illinois are all at risk and collectively are of comparable economic size to the entire euro-area periphery. Indeed, the US economy in aggregate, when evaluated according to the size of the public sector, the overall tax base and fiscal and current account balances, bears a far greater similarity to the euro-area periphery than to the core.

FINANCIAL CRISES AND NEWTON’S THIRD LAW | VOL 1/3

Policymakers tend to react to financial crises in ways that contribute to an even greater crisis down the road. Indeed, the reactions of policymakers and regulators are consistently disproportionate to the actions of financial markets. In sinister dialectical fashion, the powers assumed and mistakes made by policymakers tend to grow with each crisis, thereby ensuring that future crises become progressively more severe.

If you are stuck in a hole, so the old saw goes, you had better first stop digging. Well try telling that to the US government, which has just decided to accelerate the ongoing deterioration in its finances with a broad tax cut extension as well as extended unemployment benefits. Meanwhile, the Fed has embarked on another round of monetary expansion. This is yet another example of policymakers contributing to an even greater crisis down the road. Rather than get out of the way and let the economy restructure and rebuild in a natural, undistorted fashion by allowing asset prices to adjust lower to more sustainable levels and banks and corporations to be sensibly downsized and, where necessary, restructured, policymakers continue to dig an ever deeper hole, the legacy of multiple asset bubbles and busts.

WHY FINANCIAL GENIUS FAILS | VOL 1/3

Believe it or not, well prior to the great financial crisis of 2008, it was widely known among the educated financial elite that the standard risk management models and methods used by the major banks were woefully inadequate, with the consequence of systematically underestimating risk. But rather than take appropriate action to protect their firms with sensible risk management policies, senior executives chose instead to focus on short-term profitability: A healthy balance sheet became of secondary importance to a healthy income statement which, of course, justified healthy bonuses.

Much has been written this year about how the risk management culture on Wall Street was a key ingredient to the crisis of 2008. It is increasingly clear that most if not all financial executives were aware of the risks they were taking but were unwilling to confront the short-term, bonus-driven culture which had come to dominate a once conservative, partnership-based industry. Now that the industry has been bailed out and has returned to profitability–at least for a brief time–another important lesson has been learned: The more risks you take, the better, as policymakers will see to it that in the event of yet another crisis, the taxpayer comes to the rescue. Events this year have done nothing in our opinion to change this. Those firms already too big to fail in 2008 are now even bigger. The moral hazard of the system has grown. The seeds of the next crisis have been sown. Recent developments in Ireland should serve as an example of what happens to a country that underwrites the risks of its financial sector.

IS CHINA BEING TAKEN FOR A RIDE? VOL 1/4

Back in the spring we noticed that inflation rates were picking up just about everywhere, including in China. However, as China is a huge importer of raw materials, rising global commodities prices implied that Chinese inflation was likely to increase further. As much of China is still a subsistence economy, food price inflation would most likely turn into wage inflation, which in turn would push up prices for Chinese manufactured goods generally and possibly lead China to revalue its currency versus the dollar. Eventually, as the US imports a huge amount from China, this would also push up prices in the US.

Chinese inflation has continued to rise all year. The spike in food prices over the summer has played a part, to be sure, but the underlying pressures were already in place. Additional fiscal and monetary stimulus in the US is most probably going to contribute to still more inflationary pressure in China and other more dynamic economies around the world. Indeed, China is just one of many countries which is now taking action to cool growth and keep prices under control. China and India have both recently raised interest rates. Brazil and South Korea are taxing foreign capital flows. These trends are likely to continue in 2011 and will contribute to “stagflationary” conditions in the US.

To be continued…

Regards,

John Butler,
for The Daily Reckoning

[Editor's Note: The above essay is excerpted from The Amphora Report, which is dedicated to providing the defensive investor with practical ideas for protecting wealth and maintaining liquidity in a world in which currencies are no longer reliable stores of value.]

The Amphora Report’s 2010 Topics in Review (1 of 4) originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Amphora Report’s 2010 Topics in Review (1 of 4)




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

The Amphora Report’s 2010 Topics in Review (1 of 4)

December 28th, 2010

In 14 editions of the Amphora Report this year we have covered nearly 30 topics, many of which overlap in some way. What binds them all into a coherent set is our view that the economic policies being implemented in nearly all major countries are not just unsustainable but in some cases outright reckless. These countries include the US, the issuer of the world’s reserve currency. By implication, the dollar is likely to lose its pre-eminent reserve currency status in the coming years. The result is bound to be a period of global economic and financial market turmoil and, for most if not all traditional financial assets, underperformance in real, purchasing-power adjusted terms. What follows below is a list of all topics, including both a brief summary and an update of our thinking for 2011.

FROM “DARTH” TO “CZAR” VOLCKER? VOL 1/1

Imagine that, as in 1979, Paul Volcker is tasked with restoring global confidence in the US dollar and economy generally. We believe that, notwithstanding the best of intentions, it is unrealistic to expect that Mr Volcker, or anyone else for that matter, could possibly succeed at preventing a dramatic relative economic decline of the US in the coming years. To do so would require fundamental economic reform vast scope, far beyond what anyone in Washington, DC is willing to seriously consider or debate.

Our thinking on this topic has not changed one bit. If anything, our conclusions seem largely vindicated by recent developments in Washington, including the growing lack of fiscal discipline demonstrated by the extension of tax cuts and unemployment benefits. There is no serious talk of fundamental economic reform, even following the elections, in which deficit reduction was an important topic. Meanwhile, the Fed has embarked on an increasingly radical monetary course which does nothing to restore confidence in the dollar. The outperformance this year of emerging market economies, many of which are investing heavily in infrastructure and other capital stock, is a clear demonstration of relative US decline. We would expect this outperformance to continue in 2011 although it might well be less pronounced.

IS MONEY A STORE OF VALUE? VOL 1/2

We generally take it for granted that cash in a government-guaranteed bank deposit account is a risk-free store of value. But is it? The fact is that the dollar, and all fiat currencies for that matter, tend to lose purchasing power over time, occasionally abruptly in a sharp decline or, even worse, in a hyperinflation. Given current global economic conditions, we believe that investors should be particularly wary of currencies as stores of value and should seek ways to preserve wealth outside of cash.

It is not surprising that, as policymakers have resorted to ever more desperate means to get their economies going, currencies in general have declined in value relative to commodities this year, including the historical cash substitutes, the precious metals. We are confident that this trend of rising commodities prices, not just in dollars but in most currencies, is going to continue in 2011, although quite possibly at a slower pace than in recent months, in the event that the global economy slows somewhat, as we expect.

HOW MUCH FREE LUNCH WOULD YOU LIKE, SIR? VOL 1/2

As diversification is rightly considered to be the only “free-lunch” in economics, in this topic we explore how, in a world of both low interest rates and high uncertainty, investors should be inclined to seek rather more diversification than would ordinarily be the case. However, as financial assets are increasingly highly correlated with each other–a consequence of artificial monetary stimulus–diversification through financial assets alone is unusually limited. As such, investors should consider increasing their allocations to alternative investments, including liquid commodities.

Commodities have outperformed this year, most probably for a variety of reasons. There were some supply issues at times, in particular with grains and certain other agricultural commodities, but the strength was in fact quite broad-based and demonstrates both good demand from the more dynamic emerging markets but also, importantly, that global inflationary pressures are rising. While 2011 may not be as good a year for commodities as 2010–in part because there are signs that emerging market demand is now cooling–we nevertheless expect investors to continue to seek diversification in alternative assets.

THE REAL LESSON OF THE GREEK DEBT CRISIS | VOL 1/2

Greece now finds itself under attack from the financial markets and unable to refinance its debt. We believe that Germany and France will not come to Greece’s rescue absent a dramatic fiscal consolidation. While Greece is certainly trying to reduce its deficit, success is far from assured and some sort of debt restructuring is probably inevitable. In any case, the Greek crisis has kicked off a round of general euro-area fiscal consolidation. This demonstrates that the euro-area can respond positively to market pressures. In time, this could be supportive of the euro.

The sovereign debt crisis that began in Greece earlier this year has spread to Ireland, Portugal and Spain. In all four countries, governments are desperately trying to reduce deficits in return for financial assistance from France and Germany and also temporary funding support from the European Central Bank (ECB). Interestingly, however, notwithstanding the ongoing and widening crisis, the EUR/USD exchange rate, at 1.32 today, is essentially at the same level it was when the crisis broke in April this year. While we are not particularly optimistic for the economic future of the euro-area which, absent Germany and a few other pockets of regional strength, does not have a great deal going for it, we nevertheless think it is important to make a fair comparison between the euro-area and the US. This requires investors to look at the overall US fiscal situation, which continues to deteriorate amidst federal tax cut and unemployment benefit extensions. But don’t forget the brewing debt crisis in state and local governments either. California, New York and Illinois are all at risk and collectively are of comparable economic size to the entire euro-area periphery. Indeed, the US economy in aggregate, when evaluated according to the size of the public sector, the overall tax base and fiscal and current account balances, bears a far greater similarity to the euro-area periphery than to the core.

FINANCIAL CRISES AND NEWTON’S THIRD LAW | VOL 1/3

Policymakers tend to react to financial crises in ways that contribute to an even greater crisis down the road. Indeed, the reactions of policymakers and regulators are consistently disproportionate to the actions of financial markets. In sinister dialectical fashion, the powers assumed and mistakes made by policymakers tend to grow with each crisis, thereby ensuring that future crises become progressively more severe.

If you are stuck in a hole, so the old saw goes, you had better first stop digging. Well try telling that to the US government, which has just decided to accelerate the ongoing deterioration in its finances with a broad tax cut extension as well as extended unemployment benefits. Meanwhile, the Fed has embarked on another round of monetary expansion. This is yet another example of policymakers contributing to an even greater crisis down the road. Rather than get out of the way and let the economy restructure and rebuild in a natural, undistorted fashion by allowing asset prices to adjust lower to more sustainable levels and banks and corporations to be sensibly downsized and, where necessary, restructured, policymakers continue to dig an ever deeper hole, the legacy of multiple asset bubbles and busts.

WHY FINANCIAL GENIUS FAILS | VOL 1/3

Believe it or not, well prior to the great financial crisis of 2008, it was widely known among the educated financial elite that the standard risk management models and methods used by the major banks were woefully inadequate, with the consequence of systematically underestimating risk. But rather than take appropriate action to protect their firms with sensible risk management policies, senior executives chose instead to focus on short-term profitability: A healthy balance sheet became of secondary importance to a healthy income statement which, of course, justified healthy bonuses.

Much has been written this year about how the risk management culture on Wall Street was a key ingredient to the crisis of 2008. It is increasingly clear that most if not all financial executives were aware of the risks they were taking but were unwilling to confront the short-term, bonus-driven culture which had come to dominate a once conservative, partnership-based industry. Now that the industry has been bailed out and has returned to profitability–at least for a brief time–another important lesson has been learned: The more risks you take, the better, as policymakers will see to it that in the event of yet another crisis, the taxpayer comes to the rescue. Events this year have done nothing in our opinion to change this. Those firms already too big to fail in 2008 are now even bigger. The moral hazard of the system has grown. The seeds of the next crisis have been sown. Recent developments in Ireland should serve as an example of what happens to a country that underwrites the risks of its financial sector.

IS CHINA BEING TAKEN FOR A RIDE? VOL 1/4

Back in the spring we noticed that inflation rates were picking up just about everywhere, including in China. However, as China is a huge importer of raw materials, rising global commodities prices implied that Chinese inflation was likely to increase further. As much of China is still a subsistence economy, food price inflation would most likely turn into wage inflation, which in turn would push up prices for Chinese manufactured goods generally and possibly lead China to revalue its currency versus the dollar. Eventually, as the US imports a huge amount from China, this would also push up prices in the US.

Chinese inflation has continued to rise all year. The spike in food prices over the summer has played a part, to be sure, but the underlying pressures were already in place. Additional fiscal and monetary stimulus in the US is most probably going to contribute to still more inflationary pressure in China and other more dynamic economies around the world. Indeed, China is just one of many countries which is now taking action to cool growth and keep prices under control. China and India have both recently raised interest rates. Brazil and South Korea are taxing foreign capital flows. These trends are likely to continue in 2011 and will contribute to “stagflationary” conditions in the US.

To be continued…

Regards,

John Butler,
for The Daily Reckoning

[Editor's Note: The above essay is excerpted from The Amphora Report, which is dedicated to providing the defensive investor with practical ideas for protecting wealth and maintaining liquidity in a world in which currencies are no longer reliable stores of value.]

The Amphora Report’s 2010 Topics in Review (1 of 4) originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Amphora Report’s 2010 Topics in Review (1 of 4)




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Australia and India Raise Rates

November 2nd, 2010

Yesterday was busy here on the desk, with the normal flurry of Monday trading combined with a number of calls to the desk regarding our MarketSafe CD which will be closing out shortly. But the currency markets were fairly quiet ahead of the elections today. But as I pointed out yesterday, trading yesterday was nothing more than the quiet before the storm, as the currency markets were rocked overnight with surprise rate announcements by both Australia and India. I warned you that this week was going to get interesting.

The big news overnight was the Reserve Bank of Australia’s announcement that they would add another quarter point to their benchmark interest rate in order to steer their economy clear of inflationary pressures. The move pushed the Aussie dollar (AUD) to above parity for the first time in nearly 30 years. I pulled a chart of the Aussie dollar which shows that it moved through $1.00 on July 30, 1982 and hasn’t revisited this level since. 1982 was a great year for yours truly, as I was enjoying my last year in high school, listening to Billy Squier and watching MTV. For those of you who don’t believe the Aussie dollar can move above parity, it had traded all the way up to 1.49 back in 1973 (when Chuck was enjoying his senior year in high school!) But we will have to wait a while before we see those kind of levels again as the Aussie dollar couldn’t hold the $1.00 level last night and moved back just below parity as of this morning.

This was the first move by the RBA in 6 months, and caught most economists off guard. RBA Governor Glenn Stevens said the economy has “relatively modest amounts of spare capacity” and citing risk of inflation rising again over the medium term in his statement following the rate increase. Australia’s economy has been enjoying what looks like a very sustainable level of growth with unemployment at just 5.1% and inflation running at a modest 2.8%. But pressure on commodity prices has the RBA worried about inflation risks, and prompted RBA Governor Stevens to take action. This is one reason the Aussie dollar has been such a long-time favorite of the desk; the RBA has done a fantastic job of being proactive, and steering their economy through the global downturn.

The move by Australia also helped their sister currency, the New Zealand dollar (NZD), which moved solidly above 0.77 cents. The kiwi was also helped by a report which showed wages in New Zealand increased which could force a move on the part of New Zealand’s central bank. The kiwi may be a good alternative for those investors who feel they already have too much of their portfolio invested in the Aussie dollar. Both countries look to continue raising their rates, and commodity prices should stay strong with the growth in the Asian region.

Shortly after Australia announced their interest rate move, India joined in with a similar 0.25% move. India’s move was squarely aimed at reducing what is the fastest inflation rate among developed nations. Consumer prices rose just under 10% in India during the month of September. Reserve Bank of India Governor Duvvuri Subbarao said he expects inflation to slow to just 5.5% during the first quarter of 2011 and the economy to expand 8.5%. But he also sounded a word of caution to currency speculators, throwing cold water on any expectations of further rate tightening in the immediate future. The Indian rupee (INR) has gained just 4.8% versus the US dollar in 2010, versus an 11.52% jump by the Aussie dollar. Part of the reason for the lagging performance of the rupee is that interest rates in India remain well below those offered in Australia and Brazil. But growth rates in India, and the sheer size of their economy has many investors comparing it to China instead of Brazil or Australia. And when you make the comparison between China and India, interest rates in India do look attractive.

The moves by Australia and India highlight something that I touched on yesterday: the global economy is on two very distinct paths right now. Countries in Asia are back on a growth path (many never left it!!) and have clearly entered a tightening mode in order to prevent inflation from growing out of control. The economies of the US, Japan, and parts of Europe are still languishing in a no-growth mode with policymakers looking to start another round of stimulus efforts. So where would you rather put your money: in economies that are growing and where you can get higher interest rates; or in economies that are stagnant with interest rates near zero. It is a pretty easy question to answer, isn’t it? This obvious answer is what is propelling the higher yielding currencies of Australia, New Zealand, India, and Brazil up versus the US dollar and euro (EUR).

But the rush into these currencies is a bit worrisome, as “hot money” is never stable and is starting to inflate what could eventually turn into a bubble. Nouriel Roubini, the NY University professor who correctly predicted the housing crash, highlighted this growing bubble in a conference early today. Roubini said, “Prices may be running ahead of economic fundamentals” but also said the “party” can go on for a while. Interest rate differentials will continue to flood these markets with cash, and their central banks will need to try and keep their currencies from appreciating too quickly. One way these central banks can try to control the currency is by building up reserves, which can be used in currency interventions, and as I pointed out yesterday, India has done just that. But Chuck has always warned that currency intervention only works in the short-term, and even countries with some of the largest reserve pools (Japan) have trouble fighting the currency markets. While I appreciate where Roubini is coming from, I agree that the party can go on for a while, and we might as well participate (I’ve never been one to miss a good party!!)

Back here in the US we have finally arrived at Election Day. Hopefully everyone will take the time to get out and vote. I know I am planning to stop by the polling place on my way home. I may have led many to believe I wouldn’t be voting with my statement yesterday when I said that it really doesn’t matter who has the helm of a rudderless ship; but I feel it is my civic duty to vote, and hope that everyone else gets out to vote also. While I do believe the debt that has accumulated over the past several years is pushing the US economy in a scary direction, which will not be avoidable, I still want folks in congress who will at least recognize that we have accumulated this debt and need to do something about it!! You have to start attacking this debt much like you eat an elephant, one bite at a time. And I would like to see members of our congress push up to the table.

But the elections are still not taking center stage in the markets here in the US. That ground is being held by the FOMC, which is set to announce the size of its new stimulus effort tomorrow afternoon. There is not really any question over whether or not they are going to announce the stimulus measures, but the questions are now just how large the stimulus will be. Most believe they will announce $500 billion of new bond purchases spread out over the next few months, but many (including Chuck) believe the actual amount will be much larger. The currency markets have “baked in” a 500B figure, so if the stimulus is anything less, we could see a rally in the US dollar. If they come clean and announce a number that is closer to what I think it will eventually turn out to be, the dollar will be sent to the woodshed. After all, if the FOMC is flooding the markets with US dollars, the value of every dollar has got to go down (according to the laws of supply/demand).

I would expect the Fed to take a cautious approach with QE2 and just announce a $500 billion package, knowing that they will likely have to come back and announce a further package sometime later. And who knows, if the dollar continues to drop (as I believe it will) our exports may actually turn the economy back around and start to pull us out of this malaise. But that theory would stand a much better chance if we still made things in the US! I think the process will be longer, as we will need innovation and the creation of new products and new markets overseas to really increase our exports enough to make a difference.

Hong Kong’s Monetary Authority was recently granted authority to invest in bonds and stocks on the Chinese mainland, giving them the ability to further diversify their currency holdings. The Hong Kong dollar (HKD) has been pegged to the US dollar for a number of years, and recent moves indicate that this peg may be scrapped in favor of a link to China’s currency. Chuck mentioned this possibility earlier this year, and many investors have been purchasing Hong Kong dollars as a surrogate to investing in the renminbi (CNY). Hong Kong’s financial markets are more advanced than those on the mainland, and there is definitely a possibility that China will decide to let the Hong Kong dollar float prior to releasing the peg on the renminbi. With a peg to the US dollar, Hong Kong’s monetary policies are tied to the US, but their economy is more closely aligned with China. We have seen a tremendous jump in the cost of forward contracts in the Chinese currency, indicating the markets believe the Chinese will take further steps to loosen their grip on the renminbi. A first step could be to let the Hong Kong float.

The metals are largely unchanged from yesterday, but they could be impacted by the election returns here in the US. The metals are seen as “safe haven” buys, and the questions surrounding the elections and the size of the FOMC stimulus efforts could definitely produce some volatility in the metals markets.

To recap, both India and Australia raised rates, starting off what will be several rate announcements in the coming days. US elections will take place today, with a change in the ownership of the house predicted. FOMC will be announcing their rate decision (most likely no move) and the size of the QEII. And finally, China may be looking to let the Hong Kong dollar float prior to releasing their tight grip on the value of the Chinese renminbi.

Chris Gaffney
for The Daily Reckoning

Australia and India Raise Rates originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Australia and India Raise Rates




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Australia and India Raise Rates

November 2nd, 2010

Yesterday was busy here on the desk, with the normal flurry of Monday trading combined with a number of calls to the desk regarding our MarketSafe CD which will be closing out shortly. But the currency markets were fairly quiet ahead of the elections today. But as I pointed out yesterday, trading yesterday was nothing more than the quiet before the storm, as the currency markets were rocked overnight with surprise rate announcements by both Australia and India. I warned you that this week was going to get interesting.

The big news overnight was the Reserve Bank of Australia’s announcement that they would add another quarter point to their benchmark interest rate in order to steer their economy clear of inflationary pressures. The move pushed the Aussie dollar (AUD) to above parity for the first time in nearly 30 years. I pulled a chart of the Aussie dollar which shows that it moved through $1.00 on July 30, 1982 and hasn’t revisited this level since. 1982 was a great year for yours truly, as I was enjoying my last year in high school, listening to Billy Squier and watching MTV. For those of you who don’t believe the Aussie dollar can move above parity, it had traded all the way up to 1.49 back in 1973 (when Chuck was enjoying his senior year in high school!) But we will have to wait a while before we see those kind of levels again as the Aussie dollar couldn’t hold the $1.00 level last night and moved back just below parity as of this morning.

This was the first move by the RBA in 6 months, and caught most economists off guard. RBA Governor Glenn Stevens said the economy has “relatively modest amounts of spare capacity” and citing risk of inflation rising again over the medium term in his statement following the rate increase. Australia’s economy has been enjoying what looks like a very sustainable level of growth with unemployment at just 5.1% and inflation running at a modest 2.8%. But pressure on commodity prices has the RBA worried about inflation risks, and prompted RBA Governor Stevens to take action. This is one reason the Aussie dollar has been such a long-time favorite of the desk; the RBA has done a fantastic job of being proactive, and steering their economy through the global downturn.

The move by Australia also helped their sister currency, the New Zealand dollar (NZD), which moved solidly above 0.77 cents. The kiwi was also helped by a report which showed wages in New Zealand increased which could force a move on the part of New Zealand’s central bank. The kiwi may be a good alternative for those investors who feel they already have too much of their portfolio invested in the Aussie dollar. Both countries look to continue raising their rates, and commodity prices should stay strong with the growth in the Asian region.

Shortly after Australia announced their interest rate move, India joined in with a similar 0.25% move. India’s move was squarely aimed at reducing what is the fastest inflation rate among developed nations. Consumer prices rose just under 10% in India during the month of September. Reserve Bank of India Governor Duvvuri Subbarao said he expects inflation to slow to just 5.5% during the first quarter of 2011 and the economy to expand 8.5%. But he also sounded a word of caution to currency speculators, throwing cold water on any expectations of further rate tightening in the immediate future. The Indian rupee (INR) has gained just 4.8% versus the US dollar in 2010, versus an 11.52% jump by the Aussie dollar. Part of the reason for the lagging performance of the rupee is that interest rates in India remain well below those offered in Australia and Brazil. But growth rates in India, and the sheer size of their economy has many investors comparing it to China instead of Brazil or Australia. And when you make the comparison between China and India, interest rates in India do look attractive.

The moves by Australia and India highlight something that I touched on yesterday: the global economy is on two very distinct paths right now. Countries in Asia are back on a growth path (many never left it!!) and have clearly entered a tightening mode in order to prevent inflation from growing out of control. The economies of the US, Japan, and parts of Europe are still languishing in a no-growth mode with policymakers looking to start another round of stimulus efforts. So where would you rather put your money: in economies that are growing and where you can get higher interest rates; or in economies that are stagnant with interest rates near zero. It is a pretty easy question to answer, isn’t it? This obvious answer is what is propelling the higher yielding currencies of Australia, New Zealand, India, and Brazil up versus the US dollar and euro (EUR).

But the rush into these currencies is a bit worrisome, as “hot money” is never stable and is starting to inflate what could eventually turn into a bubble. Nouriel Roubini, the NY University professor who correctly predicted the housing crash, highlighted this growing bubble in a conference early today. Roubini said, “Prices may be running ahead of economic fundamentals” but also said the “party” can go on for a while. Interest rate differentials will continue to flood these markets with cash, and their central banks will need to try and keep their currencies from appreciating too quickly. One way these central banks can try to control the currency is by building up reserves, which can be used in currency interventions, and as I pointed out yesterday, India has done just that. But Chuck has always warned that currency intervention only works in the short-term, and even countries with some of the largest reserve pools (Japan) have trouble fighting the currency markets. While I appreciate where Roubini is coming from, I agree that the party can go on for a while, and we might as well participate (I’ve never been one to miss a good party!!)

Back here in the US we have finally arrived at Election Day. Hopefully everyone will take the time to get out and vote. I know I am planning to stop by the polling place on my way home. I may have led many to believe I wouldn’t be voting with my statement yesterday when I said that it really doesn’t matter who has the helm of a rudderless ship; but I feel it is my civic duty to vote, and hope that everyone else gets out to vote also. While I do believe the debt that has accumulated over the past several years is pushing the US economy in a scary direction, which will not be avoidable, I still want folks in congress who will at least recognize that we have accumulated this debt and need to do something about it!! You have to start attacking this debt much like you eat an elephant, one bite at a time. And I would like to see members of our congress push up to the table.

But the elections are still not taking center stage in the markets here in the US. That ground is being held by the FOMC, which is set to announce the size of its new stimulus effort tomorrow afternoon. There is not really any question over whether or not they are going to announce the stimulus measures, but the questions are now just how large the stimulus will be. Most believe they will announce $500 billion of new bond purchases spread out over the next few months, but many (including Chuck) believe the actual amount will be much larger. The currency markets have “baked in” a 500B figure, so if the stimulus is anything less, we could see a rally in the US dollar. If they come clean and announce a number that is closer to what I think it will eventually turn out to be, the dollar will be sent to the woodshed. After all, if the FOMC is flooding the markets with US dollars, the value of every dollar has got to go down (according to the laws of supply/demand).

I would expect the Fed to take a cautious approach with QE2 and just announce a $500 billion package, knowing that they will likely have to come back and announce a further package sometime later. And who knows, if the dollar continues to drop (as I believe it will) our exports may actually turn the economy back around and start to pull us out of this malaise. But that theory would stand a much better chance if we still made things in the US! I think the process will be longer, as we will need innovation and the creation of new products and new markets overseas to really increase our exports enough to make a difference.

Hong Kong’s Monetary Authority was recently granted authority to invest in bonds and stocks on the Chinese mainland, giving them the ability to further diversify their currency holdings. The Hong Kong dollar (HKD) has been pegged to the US dollar for a number of years, and recent moves indicate that this peg may be scrapped in favor of a link to China’s currency. Chuck mentioned this possibility earlier this year, and many investors have been purchasing Hong Kong dollars as a surrogate to investing in the renminbi (CNY). Hong Kong’s financial markets are more advanced than those on the mainland, and there is definitely a possibility that China will decide to let the Hong Kong dollar float prior to releasing the peg on the renminbi. With a peg to the US dollar, Hong Kong’s monetary policies are tied to the US, but their economy is more closely aligned with China. We have seen a tremendous jump in the cost of forward contracts in the Chinese currency, indicating the markets believe the Chinese will take further steps to loosen their grip on the renminbi. A first step could be to let the Hong Kong float.

The metals are largely unchanged from yesterday, but they could be impacted by the election returns here in the US. The metals are seen as “safe haven” buys, and the questions surrounding the elections and the size of the FOMC stimulus efforts could definitely produce some volatility in the metals markets.

To recap, both India and Australia raised rates, starting off what will be several rate announcements in the coming days. US elections will take place today, with a change in the ownership of the house predicted. FOMC will be announcing their rate decision (most likely no move) and the size of the QEII. And finally, China may be looking to let the Hong Kong dollar float prior to releasing their tight grip on the value of the Chinese renminbi.

Chris Gaffney
for The Daily Reckoning

Australia and India Raise Rates originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Australia and India Raise Rates




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

New buys this week! Your deadline: THIS TUESDAY!

October 24th, 2010

Martin D. Weiss, Ph.D.

If you haven’t seen our most recent online presentation, I think you’d better do so before this weekend is over.

The reason for the urgency is quite straightforward: The presentation is about the strategy and investments I’m planning to jump into THIS week — to get my $1,000,000 portfolio positioned IN ADVANCE of the elections.

Moreover, I want to give you the opportunity to buy BEFORE I do. So your deadline is Tuesday — the day after tomorrow!

Explosive market forces are bursting onto
the scene with great speed and power …

And this week will give us one of the
opportunities to take advantage of them!

The cornerstone of the U.S. economy — the U.S. dollar — is losing value right before our eyes.

Real estate is reeling again under the crushing weight of mortgage foreclosures and legal disputes.

The 11 million unemployed plus hundreds of millions of consumers are snapping shut their pocket books.

But there are three MAJOR asset classes — gold, other commodities and foreign currencies — which are enjoying long-term BULL markets, with only temporary corrections. And now, these explosive forces are all coming to a head.

So here’s the timeline …

Tuesday (2 days from today): We take our new presentation offline.

Wednesday (3 days from today): We send out an advance alert to investors providing specific instruction on what I’m going to buy, when and how — with 24 hours advance notice.

Tuesday, November 2: Millions of American go to the polls, and as a result, fiscal conservatives sweep into power.

Wednesday, November 3: The Fed announces a whole new round of mass money printing.

And markets go haywire!

Click here for our presentation on what’s likely to happen next … and how you can convert these dramatic events into equally dramatic profits

Good luck and God bless!

Martin

Related posts:

  1. Weiss Buys Back Bank and Insurance Ratings from TheStreet.com
  2. Weiss Group buys back rating service
  3. The income investments Dad and I are going to talk about next week …

Read more here:
New buys this week! Your deadline: THIS TUESDAY!

Commodities, ETF, Mutual Fund, Real Estate, Uncategorized

G-20 HEADS UP: Losing battle to stem CURRENCY WARS!

October 21st, 2010

Martin D. Weiss, Ph.D.

I’m getting ready to put my $1,000,000 portfolio into a series of new investments, using an approach that could have generated a 2,478% total return in all types of market environments.

Just be aware that we’ve decided to make our move well ahead of the November 2nd elections, and we also want to give you a chance to act before we do. That doesn’t give you much time. So click here now for our newest presentation.

The reason timing is so critical is because of TWO game-changing events coming within the next two weeks — not only the elections but also a landmark Fed decision coming on the day after elections.

Plus, there’s a THIRD decision being debated right now in Gyeongju, South Korea: The G-20 countries are desperately trying to end the most frightening new phenomenon of our times — CURRENCY WARS!

According to Larry Edelson, one of the first to predict the currency wars …

No guns are fired, and no enemies are killed. Instead, each country tries to outdo the other with bigger and bigger money printing or devaluations.

But a failure of the peace talks in South Korea this weekend could be almost as impactful on the world economy as the peace talks that failed to stop two world wars in the last century.

What’s the biggest weapon of
mass destruction in this war?

The answer should be obvious: It’s the Fed’s high-powered money printing presses that can create hundreds of billions in new paper dollars with just a few clicks of a mouse. Moreover …

Bernanke & Company say they’re probably going to deploy this weapon in less than two weeks. And, at the same time, U.S. officials in South Korea are pushing hard for a truce!?

That blatant contradiction is not going to get much sympathy from the other G-20 countries.

Yes, you may see some rhetoric that hints at currency cooperation among the G-20 nations. And sure, Treasury Secretary Geithner may even claim that the U.S. has “no plans to devalue its currency.”

Don’t believe a word of it!

The officials at this weekend’s meeting will pose for group photos … head back home … and probably go back to doing what they’ve been doing all along — take major measures to DEVALUE or hold down their currencies!

Our view: The sweeping changes coming to Washington will be used as another major opportunity for the Federal Reserve and its Chairman to grab more power away from Congress and the President … and USE that power to ACCELERATE the devaluation of the U.S. dollar.

I categorically deplore that policy. It’s ultimately unfair to our children or grandchildren and IMMEDIATELY unfair to seniors right now.

But the dollar decline is also the engine that creates a whole series of unprecedented profit opportunity in a host of assets that soar when the dollar plunges.

Our newest presentation shows you how we do it and how you beat us to the punch.

Good luck and God bless!

Martin

Related posts:

  1. Homebuilders losing confidence in the recovery
  2. China’s Currency War: Enemy #1 for Global Economy
  3. Is China’s Currency Manipulation Coming to a Head?

Read more here:
G-20 HEADS UP: Losing battle to stem CURRENCY WARS!

Commodities, ETF, Mutual Fund, Uncategorized

Election’s impact on stocks, gold, oil, currencies and more!

October 11th, 2010

Martin D. Weiss, Ph.D.

If you think the winds of change in Washington — both on the political scene and at the Fed — can have a big impact on the financial markets, wait till you see what can happen in the coming political storm!

For a solid sneak preview, I invited world champion pollster John Zogby to an emergency briefing at our Florida office — along with strategists Richard Mogey and Monty Agarwal. Here’s the edited transcript …

Decision 2010: New Dangers,
New Profit Opportunities!

With Martin Weiss, John Zogby,
Monty Agarwal and Richard Mogey

Larry Edelson

Martin Weiss: On November 2, Americans will go to the polls to decide their destiny. They will vote for a continuation in the way our government has been fighting the financial crisis. Or they will vote for a revolution in the government’s role.

The entire world is watching, and make no mistake: Global investors are already voting with their money, already dumping the U.S. dollar, already rushing to nearly any asset that can go up when the dollar goes down.

Commodities, ETF, Mutual Fund, OPTIONS, Real Estate, Uncategorized

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