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I am not an investment professional. I do not engage in stock or currency trading. I am a blogger and investor who believes the failure of credit has created an investment demand for gold, and that gold bullion is the sole means of wealth preservation.
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  • Gold Remains Stable As Bear Market Gets Underway Taking Stocks And Commodities Lower 0 comments
    Aug 22, 2010 11:11 AM | about stocks: GDX, GDXJ, GLD, EWV, SJH, EUO, EPV, FXE, FXY, SLW, JJT, PGF, FCZ, TMV, JNK, BAB, MUB, CMF, LQD, EMB, ZROZ, BND, PSCD, RZV, UUP, EWD, FEZ, EUFN, EWL, EWI, EWO, EWJ, JSC, AUSE, EWA, TAN, KBE, IWN, IBB, XHB, AMJ, USO, ACWI, AUNZ, FXC, FXF, FXB, FXA, FXS, FXRU, EMFN, BRAF, ECH, THD, PNQI, IYR

    The sell off in stocks and commodities confirms a double dip recession is underway

    Currency traders sold the euro yen carry trade, that is the EUR/JPY, and other currency trades causing stocks, ACWI, and oil, USO, leading commodities, DBC, to sell off globally today, August 20, 2010 on concern the economic recovery is in peril, as European Central Bank council member Axel Weber said the ECB shouldn’t withdraw stimulus before year-end, Rita Nazareth and Stephen Kirkland of Bloomberg report. Weber told Bloomberg Television that the ECB should discuss waiting until next year’s first quarter to stop providing stimulus to the economy, spurring concern the region’s economy may struggle for the rest of the year. 

    German 10-year and 30-year bond yields both fell to record lows after Weber, who heads Germany’s Bundesbank, said the ECB is likely to continue to support banks through end-of-year liquidity tensions before determining in the first quarter when to withdraw emergency lending measures. The 10-year German yield fell as low as 2.26 percent, while the 30-year yield dropped as much as 7 basis points to as low as 2.89 percent. The Shanghai Composite Index lost 1.7 percent, the most since August 10, 2010.

    This week’s chart of the Shanghai Composite Index, with the Russell 2000, IWM, Asia, DNH, Europe, FEZ, and Japan, EWJ … SSEC Composite, IWM, DNH, FEZ and EWJ … and given the August 11, 2010 and today’s August 20, 2010, sell of currency carry trades establishes that a bear global bear market has commenced.   

    The chart of the major world currencies, DBV, together with the emerging currencies, CEW, the Euro, FXE, and the Yen, FXY, from July 20, 2010 to August 20, 2010, shows that the Euro and major world currencies were sold off against the Yen, unwinding investment in stocks and commodities beginning August 11, 2010 …. DBV, CEW, FXE, FXY.  Today the Yen, fell from its recent high of over 116, having now succumbed to debt deflation. And today, the Euro, FXE, fell to its 50 day moving average at 126.85. 

    World currencies, DBV, sold off more heavily than emerging market currencies, CEW.

    The chart of the emerging currencies relative to the yen, CEW:FXY shows on going debt deflation. which finally took a toll August 11, 2010 as the stress test rally ended and then again August 19, and 20, 2010.

    Debt deflation has been operating through the major currencies as well, except more strikingly so as seen in the chart of DBV:FXY where currencies rose to an August 11, 2010 high hitting 50 day moving average and then sold off relative to the Yen; and then again on August 18, 19, and 20. Nine times out of ten it is the unseen hand and unreported activity of the currency traders who move the markets.

       

    The monthly chart of the Australian Dollar Japanese Yen carry trade, AUD/JPY, seen in FXA:FXY shows that this carry trade has now entered and Elliott Wave “3 of 3 down”. These are the most sweeping and active of economic and social waves, they create wealth on the way up and destroy wealth on the way down. A complete extinguishment of Australian and Asian wealth has no commenced.

      

    The chart of BHP Billiton, BHP, reflects the power of the Australian Dollar Japanese Yen carry trade. Significant deleveraging of investment value in this mining giant is coming now that the twin spigots of QE and carry trade liquidity have been turned off.

    The industrial stalwart, Cummins, CMI, manifested bearish engulfing today, communicating that even this top stock market performer is headed off into a bear market.

       

    The US Dollar, $USD, rose 0.75% to strong resistance at $83.85, slightly below its 50 day moving average, on the falling currencies, continuing its rise since August 11, 2010.

    Of significant note, “competitive currency deflation” commenced today, August 20, 2010, with the fall of the Yen, FXY, from 116, given that on June 10, 2010, the Euro rose from 119 as the EFSF Monetary Authority was announced and the US Dollar Fell.  Now all currencies have succumbed to debt deflation and will be tumbling, albeit at different rates, lower. 

    Julianne Pepitone of CNN Money reports that oil prices’ historically bad week. Prices had briefly broken the $80 mark earlier this month, but they began falling last week and fell further this week. Prices settled at $73.46 a barrel Friday. Earlier in the week, the Energy Information Administration said supplies rose to 1.13 billion barrels last week. “There’s no other way to cut it: We have too much oil in this country,” Flynn said. “[The oversupply is] a terrible sign for prices, at a time when investors are already shaky.” In fact, the inventory report may have pushed prices even lower, “if the market weren’t already over-supplied across the globe,” Flynn said. Falling oil, $WTIC, prices sent energy service companies, OIH, 2% lower on the day.  Energy service started or rise in 2004 from 60 as the War On Terror picked up steam. It has been one of the most successful investment vehicles of all time. But now with exploding oil rigs and the likelihood of a military strike on Iran, even though it declares peaceful intentions as it starts its nuclear reactor, disinvestment has commenced.  

    The chart of gold, GLD, together with the defensive stocks, utilities, XLU, and telecom, IYZ, junior gold mining stocks, GDXJ, reflects that gold has been in breakout since August 11, 2010, when the currency traders sold the world’s currencies against the Yen, FXY, and that finally now the defensive shares are falling lower, and the junior gold mining shares are disconnecting from the price of gold … GLD, XLU, IYZ, GDXJ  

    Gold, GLD, fell only slightly, that is 0.35%, today while the junior gold mining shares, GDXJ, fell 0.47%.

    The junior gold mining shares should be sold short at this time, as they generally make market turns lower when US Government debt falls lower; and it appears, that debt is topping out. The chart of the junior shares relative to the 20 to 30 year US Treasuries, TLT, shows a fall to the edge of a head and shoulders pattern …. GDXJ:TLT  

    The chart of the junior gold mining shares relative to gold, GDXJ:GLD, shows their waning strength: this is an excellent time to sell them short.

    As the world goes into the double dip recession, carry trade investment will rapidly come out of high PE Canadian mining stocks causing the Horizon’s 100 inverse ETF,  HIG.TO. to rise …. Stockcharts.com chart of HIG.TO and in this YahooFinance chart of HIG.TO.

    The chart of the world shares, VT, compared to Europe, FEZ, the Russell 2000, IWM, Asia, DNH, and the emerging markets, EEM, shows that the greatest debt deflation today was experienced in the European stocks …. VT, FEZ, IWM, DNH, EEM

    Significant stock fallers today include Sweden, EWD, Europe, FEZ, European Financials, EUFN, Switzerland, EWL, Italy, EWI,  Austria, EWO, Japan, EWJ, Japan Small Caps, JSC Energy Services, OIH, Solar, TAN, Small Cap Consumer Discretionary, XLYS.

    The Small Cap Value Shares, RZV, entered a significant decline on August 11, 2010, as the currency traders sold the world currencies against the Yen as European Banks completed their stress tests and reported good earnings. With currency traders selling the EUR/JPY, the AUD/JPY and other carry trades throughout this week ending August  20, 2010, the only remaining spigot of investment liquidity is being turned off now that the Federal Reserve’s QE TARP facilities ended April 1, 2010: the result is signficant disinvestment from stocks and commodities is now underway.

    The small cap consumer discretionary shares, XLYS, have fallen below support of 22.5; these are fast fallers as they are based upon discretionary spending and are thinly capitalized and highly dependent upon free-flowing bank loans and credit.  Value Expectations relates: “Consumer spending accounts for 70% of the US GDP, with business investments and government spending contributing approximately 15% and 20% (-5% from trade deficit). The expansion of government in the economy is rarely a good thing, as the interaction between government and consumer spending is generally either ineffective, or results in severe resource misallocations – hello can anyone say Fannie and Freddie?” As consumers and their debt spending contracts in the now confirmed double dip recession, then we can expect to see a very fast fall in XLYS.

    Significant currency fallers today are the Euro, FXE, the Canadian Dollar, FXC, the British Pound Sterling, FXB,  the Swedish Krona, FXS,  and the Russian Ruble, XRU.

    Prashant Gopal of Bloomberg  reports that U.S. mortgage rates set a record low for the ninth straight week. The average rate for a 30-year fixed mortgage dropped to 4.42%.

    This week is likely seeing a top made in bonds, as BND, traded lower today on a day when world stocks, ACWI, traded lower, and after yesterday Stockcharts.com reported that 1020 mutual funds made a new 52 week high; these were mostly long-term government bond funds. 

    Nathan Slaughter of StreetAuthority relates that according to the U.S. Treasury, our national debt is currently more than $13 trillion (that’s a 13 with twelve zeroes). And that’s not even counting unfunded Medicare and social security liabilities. That works out to roughly $118,477 for each and every taxpayer. 

    The federal government has now run a deficit for 21 consecutive months (the longest stretch of red ink on record). In April, tax receipts totaled $245 billion, but outlays hit $328 billion. That means for every $1 taken in, we spent $1.34. No household could survive long on that reckless budget — but then again, you and I can’t print money. For all of 2010, the deficit is projected to reach $1.5 trillion. That’s an insane +780% increase in just three years.

    I believe that very soon investors will become concerned and take flight from debt of all types, including US Federal, state and municipal debt.

    I recommend that a whole spectrum of bonds be sold at this time staring with Junk Bonds, JNK, Build America Bonds, BAB, Municipal bonds, MUB, California bonds, CMF, corporate bonds, LQD,  Emerging market bonds, EMB, the Zeroes, ZROZ.

    And I recommend that one stand ready to purchase of the 300% inverse of the 30 Year US Government Bond, TMV, as it is likely bottoming out at this time and currency carry trade funding is confirmed as falling lower for a second week now.       

    Of note, Fidelity Capital & Income, FAGIX, has fallen to the middle of a broadening top pattern at 8.79, that goes back to April 1, 2010 at 8.74, when distressed debt instruments led bonds, BND, higher. FAGIX is a bond fund that invests in the toxic kinds of debt that the  US Federal Reserve swapped out under the TARP Facility.

    The yield curve is flattening some, yes it flattened some as is seen in the chart of $TYX:$TNX, due to the rate of the 10 Year Note, $TNX, coming back up at a faster rate than the 20 to 30 Year US Government Bonds, $TYX. Yes both started to rise today; that is why I think a peak is being made in bonds. Not only that, think the Bond Bubble will burst, causing a liquidity evaporation and a liquidity crisis.

    EconomicPolicy Journal reports the details of just who has been buying US Treasuries

    A top has likely been made in Financial Preferred, PGF, Ford Motor Credit, FCZ; I recommend these for addition to a  short selling portfolio — they are at their peak and have excellent fall potential. 

    Tin, JJT, fell from support, making it a reasonable short seller.  

    A top has likely been made in silver mining stock Silver Wheaton, SLW, as it has made a triple top and has turned down and has a PE of 39. Based upon recent trading, this mining stock could remain both highly priced and volatile for a long period of time

    Top performing Proshares 200% inverse ETFs since August 11, 2010 include: Ultrashort Russell 2000 Value, SJH,  Ultrashort Europe, EPV,  Ultrashort Euro, EUO, and Ultrashort Japan, EWV,  This as Bloomberg reports: ”Banks led an increase in the cost of insuring against default on corporate bonds as investors bet slowing U.S. growth will hurt Europe’s recovery. The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 25 European banks and insurers rose 5.5 basis points to 136.5, heading for a third weekly increase, according to JPMorgan Chase & Co. at 11 a.m. in London. “All the data point to a slowdown in the U.S., and the Philly Fed points to a much stronger slowdown, even in negative territory,” said Philip Gisdakis, a Munich-based strategist at UniCredit SpA. “We are concerned that neither the European economy, nor European credit markets can decouple from these developments.” The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 12 basis points to 511 and the investment-grade Markit iTraxx Europe Index of 125 companies climbed 3.75 basis points to 114.75, JPMorgan prices show.”

    The MSN Finance Chart of SJH, EPV, EUO and EWV, from August 9 to August 20, shows that the 200% inverse of the Russell 2000 Value and the 200% inverse of Europe have returned 15%, and the 200% inverse of the Euro and the 200% inverse of Japan have returned 7%. The US small companies and Europe companies and banks will be the first to experience the fierceness of the coming economic deflation.   

    The MSN Finance Chart of JJT, AMJ, XLYS, XHB, EUFN, RZV, and EWP for the period of August 9 to August 20, 2010, shows losses of 2% for Tin and the Energy partnerships, 7% percent for the Small cap consumer discretionary and Home building, and 10% for the European Financials, Small cap value and 12% for Spain.  Tin and the energy partnerships are the most highly capitalized commodity and energy investment and may fall the hardest and fastest once investors become aware of the severity of the downturn that is coming. The small cap consumer discretionary and the home builders are at the fore front of the double dip. The European Financials, the small cap discretionary and Spain demonstrate that they are fast risers and fast fallers.

    Some call for austerity …. others call for stimulus

    CNN Money reports Closed signs went up at California government agencies Friday as a second slew of mandatory furloughs went into effect for government employees in an effort to resolve California’s $19 billion budget deficit. Gov. Arnold Schwarzenegger, according to the governor’s office, ordered state workers to take three unpaid days off per month until a new budget is in place and the Department of Finance certifies that California has enough cash to meet its financial obligations through the end of the fiscal year. The furloughs were to have started Aug. 1 but were temporarily blocked by a lower court decision. On Wednesday, the state supreme court allowed the furloughs to resume.

    Tomoko A. Hosaka of the Assoicated Press reports Japan is considering new stimulus as strong yen and plummeting growth prompt Japan’s government to mull new stimulus. But it will be a tricky task for Prime Minister Naoto Kan, who is also juggling a promise to reduce the country’s massive debt and a possible challenge for leadership of the Democratic Party next month. Kan has asked his Cabinet for ideas that limit new spending, suggesting tax and regulatory reforms as potential alternatives. “Of course we have to consider fresh fiscal spending,” Kan told reporters, according to Kyodo news agency. But “it seems possible to boost demand or stimulate the economy without depending on fiscal spending.” Separately, the country’s finance minister indicated a cautious stance on taking on more debt, which is almost double the size of GDP. “It is our mission to both stimulate the economy and restore public finances,” Finance Minister Yoshihiko Noda said. “As for whether we need to issue new government bonds (to finance the stimulus), this is something we should determine while closely monitoring economic movements.” Kan is aiming to compile and approve new measures by the end of September, according to the Nikkei financial daily. The government could tap into a reserve fund in this year’s budget as well as a surplus from last year, which total 1.7 trillion yen ($20 billion), said Masaaki Kanno, chief economist at JPMorgan Securities Japan, in a report. Japan had posted solid growth numbers since emerging from recession last year. Robust demand in China and elsewhere in Asia have fueled exports, production and corporate profits. The sudden deceleration in the second quarter, which stemmed from weak domestic demand, came as an unnerving surprise to economists and government officials ….. Adding to woes is the yen, which hit a 15-year-high against the dollar last week. While a strong Japanese currency boosts consumers’ purchasing power, it poses a major risk to the country’s exporters such as Toyota Motor Corp. and Sony Corp. When the yen climbs, the value of repatriated earnings fall. The Nikkei reported Friday the government’s new stimulus package is likely to include measures aimed at helping job hunters find work and supporting small and midsize businesses. It may also incorporate subsidies for green technology companies.

    Edward Harrison relates Bloomberg’s David Tweed has made a run through Europe highlighting the economy in each country as he reports this August. He has just gone to the Baltic countries of Estonia, Latvia and Lithuania, the videos of which I feature …  While Estonia is luring investors because of its EU entry, Latvia is still concentrating on austerity while Lithuania too is trying to fix its budget with asset sales.

    MSN Finance Chart reveals that three ETFs that have retained their value as the double dip recession have been Chile, ECH, Thailand, THD, and Nasdaq Internet, PNQI …. ECH, THD, and PNQI   

    Doug Noland of Prudent Bear writes on the Mother Of All Bubbles in his Prudent Bear August 20, 2010 article entitled Let’s Change The Debate stating “I have posited that the 2008 bursting of the mortgage/Wall Street finance Bubble unleashed an even bigger “mother of all” bubble throughout global fixed-income marketplaces.  I trace today’s Bubble back at least to the Greenspan Fed’s 1987 post-crash systemic reliquefication.  Resulting late-eighties’ excess led to severe early-90’s banking system impairment; followed by an another aggressive monetary policy response; the 1992/93 bond market Bubble; the 1994 bond bust and Mexican crisis; expanded monetary largess; the South East Asian Bubbles and collapses; additional policy accommodation; the Russian and LTCM fiascos; more extreme monetary stimulus; the resulting technology Bubble; and historic monetary stimulus and reliquefication leading to the mortgage/Wall Street Bubble.  Recent history of monetary disorder fueling serial boom and bust cycles is unequivocal …. From my analytical perspective, we’re in the midst of history’s greatest and most perilous financial Bubble.  And I am beside myself that nobody in a position of influence seems to care.  We’ve witnessed momentous analytical and policy errors over the years – and these blunders are allowed to repeat themselves without thorough analysis and review.  All this talk about fighting deflation and helping Main Street misses the point – and only feeds the Bubble.  I’m fed up with ideology trumping sound analysis … Why is there no consensus recognizing that the number one priority must be to protect the soundness of our government debt market – the heart of contemporary “money.”  For me, talk emanating from bond fund managers about how to help the average guy rings hollow.  It is fundamental to our nation’s future that we stabilize the government debt Bubble and secure the integrity of our monetary system.  The chorus of calls for larger deficits and greater Fed monetization is fueling distortions that risk financial calamity” …. Provided below is the chart of the 20 to 30 year US Treasury ETF, TLT and the chart of its 300% inverse TMV. Of the two which would you prefer to be invested in at the current time?

    TLT

    TMV


    Banks and holders of real estate continue to enjoy the FASB 157 entitlement.

    SoldAtTheTop relates that the latest release of the Moody’s/REAL Commercial Property Index showed a notable monthly decline of 4% since May suggesting that the nation’s commercial property markets are continuing to slump through a tremendous downturn that has seen prices down some 41% since the peak set in October 2007.

    The AICPA established FASB 157 and the SEC approved it; thus real estate held by banks, insurance companies and others is valued at mark to managers best estimate rather than at mark to market. CRE has not been marked down by the reported 41%, as is seen in the chart of Real Estate, IYR.

    Value Expectations relates: “Consumer spending accounts for 70% of the US GDP, with business investments and government spending contributing approximately 15% and 20% (-5% from trade deficit). The expansion of government in the economy is rarely a good thing, as the interaction between government and consumer spending is generally either ineffective, or results in severe resource misallocations – hello can anyone say Fannie and Freddie?” I relate that as consumers and their debt spending contracts in the now confirmed double dip recession, then we can expect to see a very fast fall in the small capitalized consumer discretionary stocks XLYS … ValueExpectations continues: “It is only the US consumers that will be engaged in a balance sheet recession for a long time, and it is crucial that government policies incentivize corporate America to maximize growth potential, and create jobs, so consumers can continue to deleverage without seeing their consumption seriously impaired” … and quotes Gary Becker as saying: “ I continue to believe that the biggest factor in the sluggish employment recovery of the US is that many of the actual new and proposed anti-business legislation, as well as the large fiscal deficits, made businessmen and investors cautious about taking on new workers. These proposals and laws include the health care bill, the pro-union bias and anti-business rhetoric of Congress and the president, suggested increased taxes on higher earners, changes in anti-trust laws to be less pro-consumer, and the endlessly complicated and largely misplaced financial “reform” law.”


    US Fed to issue paper to money market account providers

    I envision that a continuing falling EUR/JPY will result in further stock deflation, and then a liquidity crisis will emerge, where there will not be enough buyers for sellers of stocks as well as bonds; and that lending will grind to a halt, causing small business failures, banks to become sorely decapitalized, resulting in the president of the ECB arising to be an “Eurozone credit seignior” and provider of liquidity to Europe. I also believe that framework agreements will be announced in Europe providing for fiscal federalism giving a whole new meaning to the term European Economic Governance. Yes, I foresee a greater fiscal union. Fiscal federalism will result in the Eurozone evolving into a region of global governance where national sovereignty is a concept of a bygone era.

    MarketWatch reports Irish, Peripheral Euro-Zone CDS Spreads Widen. The spread on five-year Irish CDS widened to 295 basis points from 275 on Thursday, according to data provider Markit. Markit said the Irish spread has never seen 300 basis points. The Greek CDS spread widened 30 basis points to 835, while Spain widened 10 basis points to 223, Portugal widened 10 basis points to 275 and Italy widened 13 basis points to 201.

    The chart of the Brazilian Financial, BRAF, the Emerging market Financials, EMFN, US Banks KBE, and European Financials EUFN …  BRAF, EMFN, KBE and  EUFN for the period of August 9, 2010 to August 20, 2010, that is the beginning of the double dip recession, illustrates that investors are taking flight from US Banks and European Financial Institutions as the latter two have lost 6% in just 10 days.  Helder Marinho and Telma Marotto of Bloomberg report that Banco do Brasil SA, Latin America´s largest lender by assets, said second-quarter profit rose 35% as economic growth encouraged consumers and companies to take out more loans. Outstanding loans in the country expanded almost 20% in June from a year earlier, to a record 1.53 trillion reais. It was the 16th consecutive month of credit expansion.

    EconomicPolicy Journal reports in Bernanke Sets Up A … Clog The Leak Play that the New York Federal Reserve Bank just named 26 MMMFs that will be part of its emergency plan. The combined assets of these funds were approximately $900 billion at the end of July, according to Crane Data LLC ….. The funds aren’t keeping $900 billion on the sidelines. They have it in commercial paper and other short term assets. If the Fed calls on the money markets for anything over chump change of 5% of assets, i.e., anything over $45 billion, the money markets will have to start liquidating their paper to buy the Fed supplied Treasury paper. The planet hasn’t seen such a separation and shift in assets since North America separated from South America. Liquidation of anything over $45 billion by MMMFs means huge disruptions in the financial markets, especially the commercial paper market ….. The Fed can use the MMMFs for small operations, but I’m thinking anything significant is beyond the capability of the MMMFs, without it resulting in major instability in the financial system. In short, as far as I can determine, the Fed has no plan that will drain reserves fast enough with size, if banks began to rapidly deploy their excess reserves into the system.

    ETFGuide in article Can The U.S. Government Prevent Another Meltdown? relates: Money market funds, such as Fidelity Cash Reserves, FDRXX,  currently providing 0.11% interest on a steady one dollar investment, have long been trumpeted as the one bastion of marketplace safety and liquidity. And for the most part, that’s been true. They generally invest in only the safest kinds of debt like government Treasuries. Prime money market funds attempt to get higher yields, but are still restricted to only investing in top quality short-term corporate bonds. Money market funds offer an alternative to bank savings accounts and certificates of deposits ….. But it wasn’t long ago that money market investments were crisis stricken. The failure of the $60 billion Primary Reserve Fund during the fall of 2008 nearly sank the entire $3.2 trillion money market funds marketplace. The Reserve Fund’s risky gamble on shaky debt caused it to break the buck, that is $1 net asset value (NYSE:NAV) standard, expected by investors. Before this, its managers led by Bruce R. Bent, were hailed as genius innovators. Even though the Treasury Department stepped in to offer temporary guarantees on money market funds, it didn’t prevent the Reserve Fund’s investors from going up in smoke ….. In its never-ending bid to protect investors, the Securities and Exchange Commission (SEC) sometimes punches them in the face. Whether these blows are completely intended or subtly inadvertent is the reader’s choice to decide. Look no further than the SEC’s latest 4-1 vote to restrict investors from redeeming their money inside money market funds. Feel free to re-read the previous sentence to make sure your eyes aren’t playing games with you. Under the rule, should your money market fund’s NAV fall below $1 or should the fund’s board decide to suddenly liquidate the fund, the fund company has the right to suspend redemptions. In other words, the liquidity you expect from your money market funds can go instantly go away. How about that for causing a run on money market funds! Should another financial crisis erupt, mayhem is likely to ensue in one of the quietest and most boring corners of the investment universe. This could make 2007-08′s financial crisis look like a cakewalk. What is the SEC’s response to all of this? They state, ‘We understand that suspending redemptions may impose hardships on investors who rely on their ability to redeem shares.’ No doubt, the SEC’s latest gaffe will re-invigorate our generation to become like previous ones; money mattress stuffers. Who can blame them?

    As I’ve stated above, I believe a liquidity crisis will emerge, where there will not be enough buyers for sellers of stocks as well as bonds. I believe that the Fed’s engagement of the top 26 MMMFs should be seen as a new Federal Reserve Facility that will have the same result of the Fed’s QE TARP Facility, that of being an integration of the financial institutions into Government. I believe that when liquidity evaporates, these MMMFs and other money market accounts will be used as a policy tool to seize and stabilize the financial system as a systemic risk event unfolds. I also believe that Financial Regulator will be announced who will oversee lending and credit, as well as money market and brokerage accounts. He will be what I call a credit boss or credit seignior who funds economic operations with an emphasis on seeing that the strategic needs of the country are met and that monies for food stamps keeps flowing. I believe the government will become the first, last and only provider of liquidity and money.


    Municipal debt news

    Nicole Gelinas of Bloomberg reports that the struggling city of Bell has ousted its overpriced executives. But its money troubles are far from over, thanks to a huge debt load.  By the end of the credit and real estate bubbles, Bell had amassed more than $77 million in direct debt. The city’s debt burden today clocks in at nearly three times its annual revenues. Debt in far wealthier New York City, by contrast, is less than 1.5 times its revenues.”


    Social news

    Associated Press reports that Swedish prosecutors have withdrawn an arrest warrant for WikiLeaks founder Julian Assange, saying the rape suspicions against him are unfounded.

    Erik Matuszewski of Bloomberg reports that New York Jets quarterback Mark Sanchez said he was anxious to see what the team’s new stadium looks like filled with fans.  He’ll get the chance tonight when the Jets host the rival New York Giants in the preseason opener for both clubs. It’s the first National Football League game at the $1.6 billion venue at the Meadowlands in East Rutherford, New Jersey.


    Rather than being active in short selling, I have chosen an investment in gold bullion.

    Jeff Nielsen writing in Seeking Alpha writes of the reasons for bullion as alternative to short selling: A cartoon character sees some gigantic boulder about to fall on top of him, and quickly pulls out an umbrella for “protection.” Quite obviously, US Treasuries are the “umbrella.” The “boulder” is the largest debts in history, the largest liabilities in history, the largest deficits in history – combined with massive, structural unemployment and falling, real wages (i.e. no revenues to make payments on all this debt). 

    I am invested in gold bullion as I am more concerned about return of my investment rather than return on my investment. Yes, I am concerned about having access to any financial resources held by others in the event of a liquidity crisis, so I purchased gold bullion some time ago, it was a buy and hold decision.



    Disclosure: I am invested in gold bullion
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