Dow, Gold, Copper and the Loonie

Dow

The first wave of selling has completed and the markets are racing upwards on very light volume; this is a very bearish development. Worse yet the Dow mounted one of the largest one day point gains in years this Monday and yet the volume was at best mediocre. A very clear signal that the smart money is selling into strength and not buying the crap that the economy has entered into a new paradigm. The problems of Europe have not vanished and we have a bank and real estate bubble brewing in China. Thus the potential to get hit from all sides is rather strong.

Rising volume, lower prices and rising prices and lower volume are both very negative developments. At this point of the game it appears that we are still not out of the woods.

Gold

Has also moved up strongly but it’s extended its gains when it is already trading in the very overextended ranges. The current pattern could produce more price gains but it is also a very dangerous pattern for when it reverses it could lead to very strong pull back. Caution is warranted in the short term.

Copper

Is still trading below 330; the longer it takes to trade to this level, the more likely the market is to mount a stronger correction. A failure to trade hold above the 330 ranges if they are tested again will lead to a drop to the 280-290 ranges.

Canadian dollar

It mounted a Relief rally; there is a daily sell signal in effect and more downside is expected before it trades to new highs.

 

Related Articles

More Euro woes; Wage cuts May 13, 2010

World's 1st gold ATM; a sign of a top? May 13, 2010

Euro; the Worst is yet to come,  May 12, 2010

Euro shock and awe bailout, more like shock and shake May 10, 2010

Ulterior motive behind Greek Bailout, May 3, 2010

Roast the PIIGs; End the Euro crisis April 30, 2010 

Strategist states that southern Europe Countries Need Wage Cuts; easier said than done

  If you lead the people with correctness, who will dare not be correct?
Confucius,BC 551-479, Chinese Ethical Teacher, Philosopher

 

Financial markets are showing they have their doubts, with markets in Europe and Asian drifting lower Wednesday after Monday's initial euphoria over the initial 750 billion euro package announced by European Union officials over the weekend."Is the package big enough?" asked Paul Lambert, the current director of currency and macro strategies at Polar Capital who's also held roles at Deutsche Asset Management, UBS, Citibank and the Bank of England. "That depends on the success of the debt consolidation in the periphery [and] whether they're ultimately able to have falling real wages so that they can come back in line with the core."

Much criticism has been lobbed at places such as Greece for high public sector wages, which will now be brought down sharply by the government as part of the agreement for its bailout package. That's also been one of the key reasons Greeks have taken to the streets over weeks that have turned violent at times. On Wednesday, Spain announced a plan to reduce public wages 5% this year and freeze them in 2011 while suspending a pension hike. The moves come as the government there fears being dragged into a situation similar to Greece's.

"I've observed that if any country in the emerging markets had been offered a loan package like the Greeks were offered before they got the eventual loan package they got, people wouldn't have been rioting on the streets, they would have been saying thank you," said Lambert at a Morningstar Investment Conference in London.

"The fact they're rioting on the streets means ultimately there may not be the ability of the Greeks to see a 20% fall in real wages," he said. Full Story=

Yeah we would like to see how long individuals are willing to keep quiet once the government starts to cut their salaries, increase taxes and cut benefits. People used to the good life do not take kindly to such measures, they are going to get rid of the existing government, (Greece is the lead candidate for such a move) and replace it with one that is more sympathetic to their cause. The only way to solve this is by the properly (instead of the miserably program called shock and awe, more like shock and shake) is for the Euro zone to set an example. They need to let one country default; this will send a strong message to the others that if they don’t wake up, a sledge hammer is going to fall right on their heads and snap them out of their coma.

In the short term this is a very painful strategy, but long term this would be very beneficial to the Euro, as it would give it credibility and make it a true front runner as a challenger to the US dollar. Investor will have more faith in a nation that is willing to take strong measures to protect its currency.

 

Things turn out best for those who make the best of the way things turn out.
Jack Buck

 

VIP Futures 1 year win ratio 84.6%

Tactical Investor

VIP futures 5 year win ratio 75%

http://www.thehiddenorder.com/commodity

Strategist states that southern Europe Countries Need Wage Cuts; easier said than done

  If you lead the people with correctness, who will dare not be correct?
Confucius,BC 551-479, Chinese Ethical Teacher, Philosopher

 

Financial markets are showing they have their doubts, with markets in Europe and Asian drifting lower Wednesday after Monday's initial euphoria over the initial 750 billion euro package announced by European Union officials over the weekend."Is the package big enough?" asked Paul Lambert, the current director of currency and macro strategies at Polar Capital who's also held roles at Deutsche Asset Management, UBS, Citibank and the Bank of England. "That depends on the success of the debt consolidation in the periphery [and] whether they're ultimately able to have falling real wages so that they can come back in line with the core."

Much criticism has been lobbed at places such as Greece for high public sector wages, which will now be brought down sharply by the government as part of the agreement for its bailout package. That's also been one of the key reasons Greeks have taken to the streets over weeks that have turned violent at times. On Wednesday, Spain announced a plan to reduce public wages 5% this year and freeze them in 2011 while suspending a pension hike. The moves come as the government there fears being dragged into a situation similar to Greece's.

"I've observed that if any country in the emerging markets had been offered a loan package like the Greeks were offered before they got the eventual loan package they got, people wouldn't have been rioting on the streets, they would have been saying thank you," said Lambert at a Morningstar Investment Conference in London.

"The fact they're rioting on the streets means ultimately there may not be the ability of the Greeks to see a 20% fall in real wages," he said. Full Story=

Yeah we would like to see how long individuals are willing to keep quiet once the government starts to cut their salaries, increase taxes and cut benefits. People used to the good life do not take kindly to such measures, they are going to get rid of the existing government, (Greece is the lead candidate for such a move) and replace it with one that is more sympathetic to their cause. The only way to solve this is by the properly (instead of the miserably program called shock and awe, more like shock and shake) is for the Euro zone to set an example. They need to let one country default; this will send a strong message to the others that if they don’t wake up, a sledge hammer is going to fall right on their heads and snap them out of their coma.

In the short term this is a very painful strategy, but long term this would be very beneficial to the Euro, as it would give it credibility and make it a true front runner as a challenger to the US dollar. Investor will have more faith in a nation that is willing to take strong measures to protect its currency.

 

Things turn out best for those who make the best of the way things turn out.
Jack Buck

 

VIP Futures 1 year win ratio 84.6%

Tactical Investor

VIP futures 5 year win ratio 75%

Worlds 1st Gold ATM; is this a sign of a top?

Do not be desirous of having things done quickly. Do not look at small advantages. Desire to have things done quickly prevents their being done thoroughly. Looking at small advantages prevents great affairs from being accomplished.
Confucius,BC 551-479, Chinese Ethical Teacher, Philosopher

 

Amid fears over the strength of nearly every major currency, Abu Dhabi's top hotel has come up with a new type of ATM for their most risk-averse guests. The Emirates Palace is giving those staying there the chance to withdraw gold from the world first ever gold dispenser. With gold prices at record highs amid fears that the EU's rescue package will drive inflation higher, the ATM monitors the daily price of gold and offers small gold bars that weigh up to 10 grams with customized designs.

Giessler's timing is very good given gold is currently at a record high. Given the price action at the moment your 10 grams could be worth considerably more by the time you check out and could help you pick up the tab at the luxury resort. One night in a three-bedroom suite that could set you back more than $10,000 a night. Full story=

This is a clear sign that Euphoria levels are reaching an extreme level in the Gold camp. The next move for gold could therefore be down instead of up. History has shown that whenever something spectacular is done in a market that is extremely overbought, a top is usually close at hand. The Burj tower is a prime example.

 

VIP Futures 1 year win ratio 84.6%

VIP Futures Win ratio for 2010, 100%

VIP futures 5 year win ratio 75%

Euro; the worst is yet to come

 

  If the thunder is not loud, the peasant forgets to cross himself.
Russian proverb

 

I think it is a given that Greece will have to default, everyone knows this, but they are just playing cat and mouse for now. Most Greeks are dead set against the new Austerity measures and they will likely throw this government out of power for the new changes they have instilled. The next government will cater to the people’s needs for fear of receiving the same treatment. Change is not wanted in Greece. The only way to fix this problem is if the nation as a whole understands that they have to go through a painful period of cuts, but as evidenced from the past riots this is not the case. The story below further substantiates our claims.

Greek unions announced on Wednesday that they would stage a 24-hour nationwide strike on May 20, the second major protest against tough austerity measures pledged in exchange for billions of euros in aid. The main public and private sector led a 50,000-strong march a week ago in which hundreds of angry Greeks fought pitched battles with police in the streets of central Athens and three people were killed in a petrol bomb attack on a local bank.

They are due to march in the capital on Wednesday from 6 p.m. (1500 GMT), in a rally which will give indications about the public mood before the big walkout next week. Investors are closely watching public reaction to government wage and pension cuts amid concerns broader unrest could hit Prime Minister George Papandreou's resolve in pushing them through. New figures published on Wednesday showed Greece's economy contracted 0.8 percent in the first quarter compared to the last three months of 2009.

The austerity measures, pledged in return for 110 billion euros ($139.7 billion) in emergency aid from the European Union and International Monetary Fund, are expected to keep the economy in recession through 2011."The IMF will not stop thirsting for workers' blood," said Yannis Panagopoulos, chairman of Greece's main private sector labor union GSEE. "Its recipes are a disaster and the government must turn them down."

The country's socialist government on Monday unveiled a draft law to raise the average retirement age and cuts benefits, which further angered unions already opposed to previous steps including public wage cuts and tax hikes. Full story

Adding to the host of problems is the fact that Greece is now officially in a recession. Painful cuts have to be implemented and maintained or Greece will default. Sometimes markets should be allowed to settle matters, intervention only delays the inevitable. Our stance has been that the Euro is going to trade down to the 115 ranges and could possibly trade down to the 110 ranges. The massive 1 trillion Package had no lasting impact on the Euro, after mounting a brief rally, the Euro crumbled and is now on its way to putting in another series of new lows.

 

Spain’s new austerity measures, too little too late

Prime Minister Jose Luis Rodriguez Zapatero said Madrid would slash civil service pay by 5 percent this year, freeze it in 2011, cut investment spending and pensions and axe 13,000 public sector jobs in a drive to meet EU deficit targets. "We have to make a singular, exceptional and extraordinary effort to reduce our public deficit and we have to do it when the economy is starting to recover," he told parliament. The announcement came two days after euro zone governments, the European Central Bank and the IMF agreed on a $1 trillion (674 billion pound) rescue package to stabilise the euro in exchange for pledges by highly indebted countries to pare down their deficits. Full story

We think this is action is a little late as Spain had ample time to address these difficult changes, but instead decided to sit on its fat rear and do nothing. The current recommendations are just too little to produce any meaningful change. Unofficially the employment rate is well past 20%, the housing sector has crashed, fiscal debt is roughly 112% of GDP and Rising and estimates put private debt between 160-180% of GDP. Thus unless they put forth some bone crushing changes, the odds are that Spain will be joining the Greeks sooner than later. Furthermore, this 1 trillion euro aid package is more of a band aid than a fix because the nations that are spending beyond their means are still doing so. Nothing has changed other than the day of reckoning.

The enemy of my enemy is my friend.
Arabian Proverb

 

VIP Futures 1 year win ratio 84.6%

VIP Futures Win ratio for 2010, 100%

VIP futures 5 year win ratio 75%

Strategic mortgage defaults the next time bomb

The first group of defaulters was individuals who were conned into buying houses at teaser rates and had a very hard time making payments when rates reset to market rates. The next group of individuals was individuals with decent to good credit; this group started to default because one or both members of the family lost their jobs and therefore, could no longer make payments on the mortgage. Now we have the next wave; the strategic defaulters. This group’s decision to default is based on cold logic. The value of the home of their homes has dropped so much that it no longer makes sense to make payments on a house that is trading well below market value. 

"Strategic" defaults accounted for at least 12 percent of all defaults in February, up from about 4 percent in mid-2007, according to a recent Morgan Stanley (NYSE:MS - News) report. Analysts led by Vishwanath Tirupattur classified a default as strategic when a homeowner who hadn't previously been delinquent made an on-time mortgage payment one month; skipped payments for the next three months; and stayed current on other consumer debt of $10,000 or more. Full Story

In a way this it’s payback time for the banks; the banks swindled millions of innocent homeowners when they turned a blind eye and even encouraged the sale of fraudulent mortgages via the liar loan application process. Then when the S**T hit the fan, they came running to Washington and like faithful concubines, Washington bailed them out with taxpayer dollars. Thus they were handsomely rewarded for their illegal activities. Now it appears that the individual home owner is deciding to stick it to them and if this new trend picks up steam, a massive wave of new defaults could hit the market, further souring an already weak real estate market.

Conclusion

Housing analysts say strategic defaults mainly occur when a home's value has dropped below the balance remaining on the mortgage. A homeowner in that position may decide that continuing to make payments is throwing money away, or may default to get the lender to modify the loan. All told, borrowers who aren't making mortgage payments are probably skipping roughly $100 billion annually, an amount equal to 1 percent of consumer spending, according to Mark Zandi, chief economist at Moody's Economy.com. Zandi likens the money to "a form of stimulus, a little tax cut."Full Story

Zillow.com states that one in five U.S. homes with a mortgage has “negative equity” so the number of potential strategic defaulters is rather huge; what we have on our hands is a ticking time bomb and purchasing real estate now is one of the dumbest moves an investor could make.

Long term the trend for housing is still down. Individual that are bearish can use strong rallies to short stocks in the housing sector such as LEN, BZH, etc. ETF players can open up positions in REK, SRS, and if you really want to take an aggressive position you can short via Direxion’s DRV. SKF is another option; it is an ETF that shorts the financial sector.

 

VIP Futures 1 year win ratio 84.6%

VIP Futures Win ratio for 2010, 100%

VIP futures 5 year win ratio 75%

Health overhaul could cost 115 billion more

The ink has just dried and the cost of the package is already 115 billion more. I wander how much more it will rise a year from now, 500 billion more. Already the potential savings are starting to look like a myth. Providing health insurance for everyone while most don’t have jobs is simply brilliant; well only a lobotomized individual would think so and congress seems to be full of such individuals.

The signs for hyperinflation are all over the place; the name of the game now is inflate baby inflate, for this is the only way we can pay for all this crap.

President Barack Obama's new health care law could potentially add at least $115 billion more to government health care spending over the next 10 years, congressional budget referees said Tuesday. If Congress approves all the additional spending called for in the legislation, it would push the ten-year cost of the overhaul above $1 trillion — an unofficial limit the Obama administration set early on.

The Congressional Budget Office said the added spending includes $10 billion to $20 billion in administrative costs to federal agencies carrying out the law, as well as $34 billion for community health centers and $39 billion for Indian health care. The costs were not reflected in earlier estimates by the budget office, although Republican lawmakers strenuously argued that they should have been. Part of the reason is technical: the additional spending is not mandatory, leaving Congress with discretion to provide the funds in follow-on legislation — or not.

"Congress does not always act on authorizations that are put into legislation by drafters," explained Kenneth Baer, a spokesman for the White House budget agency. "Authorizations for discretionary spending are not expenditures." Full Story

Let’s not forget that they are not giving anyone a choice. If you have no health insurance they are going to fine you. The land of the free has just changed; it should be called the land that was free. For now individuals have one foot out of the door, while the other is shackled to a prison cell.  Make sure you have a position in precious metals as this is the best way to hedge against the dangerous effect of inflation. If we move into a hyperinflationary cycle, precious metals could prove to a God sent.

 

VIP Futures 1 year win ratio 84.6%

VIP Futures Win ratio for 2010, 100%

VIP futures 5 year win ratio 75%