Stocks jump on better-than-expected GDP, jobs data
NEW YORK (AP) -- Wall Street barreled higher Thursday after a better-than-expected reading on the gross domestic product and a drop in jobless claims gave investors some reassurance that the economy is holding up. The Dow Jones industrial average jumped more than 200 points.
Investors are watching GDP, considered the best barometer of the economy's well-being, to look for signs that growth is picking up after being pounded by housing woes and a debilitating credit crisis. The economy grew at a weak rate of 0.9 percent in the first quarter after shrinking in the last three months of 2007.
"Better than expected." Yada, Yada, yada. This GDP number is pure fantasy. To begin with 25% of GDP is government spending. Then let's tack on a $168 BILLION government handout to taxpayers. And let's not forget that this number does NOT account for inflation. Adjusted for inflation, using ANY measure of inflation, GDP is NEGATIVE.
If "investors" are watching GDP for "signs that growth is picking up", they're watching in their rear view mirror. GDP is a backwards looking number. Everything it measures is in the past. It offers no "predictive" value whatsoever. Besides, 2nd qtr GDP is negative, as in no growth people. Just the fantasy of it.
Spring's economic rebound unlikely to last
WASHINGTON (AP) -- The economy pulled out of a dangerous rough patch in the spring, thanks largely to strong exports, but the rebound isn't expected to last. Economic slowdowns overseas could make exports tail off just as Americans are hunkering down after the bracing impact of rebate checks wanes, plunging the country into another rut later this year.
White House press secretary Dana Perino said the numbers demonstrated the economy's resilience in the face of many challenges. But she added: "No one is doing a victory dance."
Others agreed that the growth pickup wasn't a sign of better days ahead. Analysts predict the second quarter will represent the high point for economic activity this year.
It's "the last hurrah for this economic cycle," said Martin Regalia, chief economist for the U.S. Chamber of Commerce.
Federal Reserve Chairman Ben Bernanke has warned the economy will be weak through the rest of 2008. Economists believe growth will slow in the July-September quarter to a pace of around 1.5 percent, and will turn even weaker in the fourth quarter. Some, including Regalia, think the economy might jolt into reverse yet again.
Let's note here that most of the "strength" in GDP has been attributed to a weak Dollar and strong exports. With Dollar off it's lows and the rest of the World's economies "slowing", I would suspect that this waning "rebound in growth" [read: fantasy of growth] will not last. As a matter of fact, it has already ended. But those in denial refuse to recognize that truth.
Exports are the crux of the World Economy. Each economy must keep it's currency devalued to keep their exports competitive. Look at the Euro. There is now a "recognized slowing" of growth in the Eurozone. The ECB flatly refuses to cut interest rates there. So what do they do? They sell the Euro and buy the Dollar in an effort to boost their exports. The Chinese are doing the same thing. They are covertly suppressing the Yuan in an effort to keep their export prices competitive. This action has to have Hanky Panky Paulson fuming. Japan has sold the Yen and bought Dollars for years in an effort to keep their exports competitive. The Dollar won't keep rising, because in doing so it makes American exports too expensive, and exports are the last crutch holding the US Economy above water. Clearly it is a race to the bottom for global currencies. Who can get to the bottom first and give their exports away the fastest. What a dismal outlook for the Global Economy. But what a bright future for the Precious Metals.
Independence Day: Decoupling Gold and Silver from the Dollar
by James Conrad
Yesterday, something interesting happened. Precious metals went up, while the dollar went up. Everyone is amazed. But, the news shouldn't really be surprising, because it is nothing new. Gold and silver have never been tethered to the dollar, or anything other than the principles of supply and demand. When looked at in the long term, they have been rising against a falling dollar, but, also, against a rising euro and pound, for over 8 years now.
All the world’s Central Banks - most notably the Federal Reserve (the Fed), but, also, the European Central Bank [ECB], the Bank of England [BOE], the Bank of China [BOC] and the Bank of Japan [BOJ] - have been heavily printing paper money in the last few years. All have increased their M3 money supplies by staggering percentages (see shadowstats.com). Making matters worse, the central bankers are now accepting mortgage backed paper from their friends at major politically connected banks, as collateral for cash and/or government securities. Problem is, the mortgage backed bonds are suffering high default rates.
There’s no way to avoid the inevitable. No amount of lying will avoid basic truth. Our money is losing its value. Yes, the dollar has been temporarily up against other paper currencies, in the past few weeks, but that gives little solace. The rise does not reflect the positive factors operating inside the American market, but rather the fact that things are worse in Europe now. Both the dollar and all other major paper currency, is down against itself. American consumer prices have leaped up to double-digit levels, and the government is lying about it. You can read an in-depth discussion of the Bureau of Labor Statistics use of so-called “geometric” weighting here.
Simply put, regardless of what Ben Bernanke says, high levels of inflation can no longer be avoided. Even if forthright intelligent men suddenly took control of the Fed, the Treasury, and the private banking world, too much damage has already been done. We will endure higher inflation and lower growth levels as a result. The situation, now, will be much worse than back in the so-called stagflation era of the 1970s. To make matters worse, many years of bipartisan economic mismanagement will provide either a recession or an outright depression, at the very same time as inflation is rising. It is a terrible combination, but one that can no longer be avoided, at the societal level, no matter what we do.
Again, another must read essay by James Conrad. His discussion about the effect of supply and demand and "investor demand" for Gold should be an eye opener far anybody giving up hope on the Gold Bull. It is the Gold "investor" that is going to push the metal to "infinity and beyond". And judging by the recently reported GLOBAL shortages of physical Gold bullion it is clear that the "investor" has arrived at the buy window. Fundamentally Gold could not be more set up for a launch to the heavens than at present. In spite of the games and criminal activity on the CRIMEX in New York, Gold demand is soaring Globally. It will only take a run of delivery requests in the futures market to send the price of Gold on a rocket ride.
Frank Barbera: Precious Metals Heading to All-Time Highs
Frank Barbera, CMT, is a veteran money manager and currently the editor of The Gold Stock Technician [GST] Newsletter, published since 1993. Barbera uses technical indicators to analyze precious metals and mining stocks, as well as oil and the overall market. Barbera has also managed private equity capital for a number of years, most notably for the Los Angeles-based Caruso Fund, which earned returns in excess of 25% to 30% during the last bear market.
TGR: So do you think a core position today might be some bullion, or an exchange fund?
FB: I think right now the safe bet is to load up on bullion. In my opinion, it’s almost inconceivable how bullion will not do well.
I tend to think that as less foreign capital flows back into the U.S., there’s a very good chance that a housing problem, which has led to a banking problem, is going to lead to a currency and a current account problem. And I think that that’s phase three in a currency crisis. The dollar is going to devalue against commodities because commodities are acting and have been acting as a de facto currency, a currency where you can’t artificially increase supply. You have to go out and actually find more. So there’s a limit on money supply and quantity, if you will, looking at commodities as a currency, especially gold and silver. And I think that’s where the precious metals are really coming into their own.
I’m a dollar bear — I think the dollar’s probably peaking. I think it will make new lows in the next six months vs. the Euro. You want to be as much out of the dollar as you can be and you definitely want to have the physical. Let’s say, for example, that we have a crash, a big crash, and then let’s say that that crash is attended by some kind of a systemic banking problem, where maybe more than one bank fails at one time. Our system was really designed to handle your periodic, every now and then, type of banking failure.
Say something happens that really impairs the basic functioning of the U.S. financial system to the point where the president has to declare a "bank holiday," closing banks for two weeks. When the banks reopen, you may get access to your money, but you may have only a limited ability to withdraw your money. That happened in Argentina a few years ago. You could have domestic hyperinflation that would run wild for a year, maybe longer, and money would be trapped in the banking system and losing purchasing power every day.
So for investors who don’t have any exposure to precious metals, 5% or 10% can protect the greater pot of capital that you own. In my opinion, this is no time to be without that kind of protection, whether you have it in the form of an ETF or physical or some other form.
Great interview. Bumbling Ben and Hanky Panky are dancing on the head of a pin trying to stave off a systemic financial collapse. There are only a couple more tunes left on the CD before the music stops and they both fall off and take the financial system down with them. They are both praying they can keep the music going through the election. Because when the Music's Over...well, just ask Jim Morrison.
Oil prices fall as Gustav impact discounted
NEW YORK (AFP) — Oil prices reversed course and fell sharply Thursday as traders discounted the impact of Tropical Storm Gustav as it churned toward the Gulf of Mexico's energy installations.
Oil prices opened sharply higher as Gustav threatened to build into a hurricane as it headed toward the Gulf of Mexico.
"Gustav could become a hurricane before moving over Jamaica," the US-based National Hurricane Center said.
But prices eased back later in the session amid speculation about Gustav's eventual impact.
"The latest forecasts for Tropical Storm Gustav suggest a slightly lower chance of major disruptions in oil production," said Al Goldman, analyst at Wachovia Securities.
Mike Fitzpatrick at MF Global said that "even if the damage from the approaching storm is fractional it could still be significant" because of limited capacity.
"The environment of sparse capacity means that every barrel of oil lost to the marketplace will be felt, particularly as the northern hemisphere's winter is just around the corner," he said.
"Even if the storm veers to the west and south away from productive infrastructure in the Gulf, the outer bands which produce extraordinary rainfall amounts will put important refineries along the Texas coast in jeopardy of flooding."
Gustav was expected to enter the Gulf of Mexico over the weekend, then make landfall in Louisiana and Texas on Monday, according to the National Hurricane Center.
Isn't Wachovia on the list of banks soon to be in default? This is STUPIDY talking. NEVER, NEVER fool with Mother Nature. Gustav is forecast to be at minimum a CAT 3 hurricane. Katrina was CAT 3 when it hit New Orleans in 2005. US Oil infrastructure is clearly at risk. These clowns will have changed their tune by Friday afternoon, and will be tripping all over each other to buy Oil ahead of the three day weekend. Don't be fooled by projections that may have Gustav coming ashore West of New Orleans. The NE corner of a hurricane is the most destructive. I know, I've survived five of them here on the Carolina Coast. Isn't it ironic that a hurricane with a Russian name could bring the US Economy to it's knees given all the US/Russian tension the past couple weeks?
"Stupidity is an elemental force for which no earthquake is a match."