Monday, December 7, 2009

Opportunity Knocks

European markets drop as dollar surge continues- AP

Dollar surge my ass! What financial media pundits refer to as a "surge" is nothing more than technical Dollar short covering. The nonsense we were force fed this past Friday afternoon about the "potential now" for the Fed to begin raising interest rates "sooner than later" because of the "sudden turn in unemployment" is pure bullshit. Bets that the Fed will raise interest rates "soon" are going to be bad bets.

On Friday the US Dollar Index broke a very long downtrend line. The catalyst was Friday's Jobs Report where the economy ONLY LOST 11,000 jobs in the month of November. [Never mind the fact that the economy has literally run out of jobs to lose.] The economy didn't gain any jobs in November, it ONLY LOST 11,000. [According to US Government statistics.] Short covering the Dollar was warranted on the breach of the downtrend. There is no fundamental reason on earth for a "surge to the Dollar" to occur. There is absolutlely ZERO reasons to outright be a buyer of the US Dollar here. There are uncountable reasons to to be a seller. And the sellers will return very soon, happy to get a better price thanks to the induced short covering Friday.

The unemployment rate after being "talked higher" since the October Jobs Report in early November miraculously drops from 10.2% to JUST 10% Friday. Euphoria spreads across the financial media like a warm blanket on Christmas Eve. Never mind the false euphoria late this summer when the unemployment rate fell from 9.5% to 9.4% and the financial media heralded "the bottom" in the jobs market...only to see the unemployment number continue to rise in the months that followed. With the way that the government rigs the measure of the unemployed, a 0.2% move in the unemployment number is statistically irrelevant.

Joel Bowman, reporting for the Daily Reckoning:
We've never met a statistic without split-personality disorder. Viewed in one light, for instance, losing 11,000 jobs in a month is relatively dandy for the US economy. It looks, prima facie, as though her job(less) market is bottoming out...that things could soon be on the mend. And lo, her unemployment figure even dipped, down from 10.2% to "just" 10%.

But wait just a minute, we hear those skeptics say. How could this be? How might an economy lose jobs and simultaneously witness a fall in the unemployment rate? Well, those figures don't allow for the people who are simply "defined" out of the workforce. For instance, the number of "discouraged" workers - literally people who have given up looking - increased by 53,000 to 861,000. In other words, more people "left" the official unemployed pool than joined it...even though they didn't actually find a job. Incidentally, that's the most "discouraged" workers since the recession began...which is pretty discouraging.

But why would people stop looking for a job when there's a recovery underway? Don't they watch the news? Good question. Maybe they went home for the holidays to sleep on Ma and Pa's couch...or maybe they're waiting until after Christmas to renew their efforts...maybe they're just fed up with getting knocked back...

Or maybe it's all of the above...

According to the Department of Labor report, the number of long-term unemployed (those jobless for 27 weeks and over) increased by 293,000 over the past month to 5.9 million. Two in five unemployed people now fit into the "long-term" category, up 2.7% from last month.

Statistics, you see, are rarely as straight-faced as they first appear...particularly when they end up on websites ending in "dot.gov."

http://dailyreckoning.com/

The 5-Minute Forecast's Ian Mathias also tosses us Dollar Bears a bone with this note:
We celebrate the jobs scene stepping back from the brink, but there must be some merit in noting that our current state of jobless claims "recovery" is at the same level of the worst - the absolute peak - of the last two recessions. We're also not even halfway back to the pre- crisis norm, nor are jobless claims below a level that would disqualify a double dip, as illustrated in the early '80s.

Clearly then, this "surge to the Dollar" is just another media induced hallucinogenic dose of CONfidence designed to further fool an already buffaloed public into believing everythink is OK.
Well, it's not...

Perhaps Friday's number was just a government lie, a Christmas gift to the "discouraged American":

The report doesn't match up with other jobs data: Today's report will no doubt be a head scratcher for economists as they try to understand how other labor market data could be so divergent. Earlier in the week, ADP reported private payroll losses of 169,000 for November. The Monster Employment Index, which measures online job demand, actually dipped slightly from October's number. "This was a shocking report because the reported payroll data bear little resemblance to any other evidence concerning the labor market, including the ADP survey, which is based on hard data from a much wider sample of payrolls than is the government's survey," says Joshua Shapiro, chief U.S. economist at research firm MFR.

A deeper look behind the jobless numbers
Despite the upbeat report, long-term unemployment worsens
http://www.msnbc.msn.com/id/34280589/ns/business-stocks_and_economy/

This Is Progress? Jobs Data Optimism Obscures Harsh Reality
As of now, more than 15 million people around the country remain out of luck. Beyond the 10% headline number in joblessness, the situation is actually worse. Factoring in people who have stopped looking for work and those in part-time positions who want a full-time job, the "underemployment" rate is 17.2%. In fairness, that was down from 17.5% in October, but it remains a daunting swath of the U.S. workforce struggling to make ends meet.
http://finance.yahoo.com/tech-ticker/article/384684/This-Is-Progress-Jobs-Data-Optimism-Obscures-Harsh-Reality?tickers=dia,spy,qqqq,%5Egspc,%5Edji,gld&sec=topStories&pos=1&asset=&ccode=

Now, considering a "sooner rather than later" increase in interest rates by the Fed. Poppycock! Looking past the fact that the economy has yet to turn the corner higher, see lackluster jobs reality above, consider that the amount of debt the US Government is in the process of issuing, and the thought of higher interest rates must abhor them. Raising interest rates anytime soon will KILL any and all hopes for a recovery, let alone a recovery itself. But stop and consider the effect of raising interest rates on the "costs" of financing the governments NECESSARY and ongoing debt issuance. The Fed and Treasury must be freaking out...

Think about this little factoid gleaned from a recent interview with oft quoted and much respected John Williams of shadowstats.com: If you taxed EVERY worker in the country at 100% of their incomes, and if you taxed EVERY business at 100% of their profits, you still would NOT have enough money to meet the funding needs of the US Governemnt. This is an absolutlely shocking revelation. You can here John Williams interview with King World News here: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2009/12/4_John_Williams.html
I strongly suggest you find time to listen to the interview in it's entirety.

Taking this government funding shortfall as fact, why would the Fed raise interest rates, and increase the governments costs to finance their deficit spending? Deficit spending that is already pressured by annual service costs close to $300 BILLION Dollars? Are you kidding? The Fed will hold off on raising interest rates indefinetly for as long as they can. The Fed is no hurry to increase interest rates. The US Dollar will fall a LOT further before the Fed considers defending it with higher interest rates ala Paul Volker in 1980.

The Treasury Department will auction $74 billion in notes and bonds during this coming week. The government will sell $40 billion in 3-year notes on Tuesday, then $21 billion in 10-year securities on the following day. Another $13 billion in 30-year bonds will be auctioned on Thursday. I doubt traders will hang onto this idea that the Fed will raise interest rates "sooner than later" for very long.

U.S. Treasuries’ Biggest Overseas Buyer May Sell
Dec. 4 (Bloomberg) -- Speculation that the Japanese government plans to sell $100 billion of U.S. Treasury debt to pay for domestic spending may impede the Obama administration’s borrowing plans.

Japan has been this year’s biggest buyer of Treasuries, which means it has done more to help finance the widening U.S. budget deficit than any other country. Its holdings have risen by $125.5 billion, according to data compiled by the Treasury. The comparable figure for China, which surpassed Japan last year as the largest international investor in the securities, is $71.5 billion -- 43 percent lower.

Japan will inform the U.S. about the possible $100 billion sale, according to a Market News International report yesterday that cited “rumors” from unnamed sources.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aBKGmT4oRCOs&pos=15

Dubai World looks to sell assets in quest for cash
DUBAI, United Arab Emirates (AP) -- Dubai World may unload some assets to raise cash, a senior government official said, reflecting a potential about face for the heavily-indebted conglomerate behind much of Dubai's boom.

Dubai Finance Department Director-General Abdul Rahman al-Saleh did not say which pieces of the company are for sale. However, he emphasized that the assets in question would be Dubai World's alone -- underscoring the government's position that it is not responsible for debts racked up by a company it created and backed during the city-state's boom years.

"Like any company that has commitments, part of getting liquidity is selling some assets. Of course local or foreign assets," he said in an interview aired by al-Jazeera Monday.
http://finance.yahoo.com/news/Dubai-World-looks-to-sell-apf-3557768547.html?x=0&sec=topStories&pos=3&asset=&ccode=&sec=topStories&pos=3&asset=&ccode=

Might those foreign assets of Dubai World include some US Treasuries? [Perhaps even Gold?] Imagine the difficulty the Treasury may face in the not to distant future were foreign governments to begin selling their US Treasuries to raise cash to meet their own local government spending needs. This type of action alone would force an increase in interest rates. I highly doubt the Fed would seek to exacerbate the problem this will cause by raising short-term interest rates. The Fed has said repeatedly that they will NOT raise interest rates for an extended period...and they won't because they can't without destroying the country. What a wicked web they have weaved...

As I research and type this entry this morning, the US Dollar is once again in descent. Much like a stone tossed into the ocean. The Dollar is in big trouble. The US and Global financial systems are on the brink of catastrphic failure no matter what the government officials and financial tv talking heads would like you to believe.

Panic in the Gold market Friday and again this morning should be dismissed out of hand. The price of Gold did not even fall 4% Friday. Gold DOWN $60 certainly looks frightening, but in reality it is a drop in the bucket at these current prices. Go back to Gold at $970. A 4% haircut at that price was $39 Dollars. As price rises, the volatility in Gold in terms of "Dollars" will appear to be very extreme. Focus on the moves in terms of percent to calm any irrational fears about the market you may have. No market goes straight up. The Gold market was quite due for a reaction and consolidation. I alerted you to this possibility in my post on Wednesday, December 2, Like A Hot Knife Thru Butta .

So we have gotten a reaction in Gold. The catalyst was a somewhat suspect November Jobs Report and the currency traders reaction to it. The Dollar broke higher, and Gold got punished. So where do we go from here? Using history as a guide, similar moves up in Gold in 2005 and 2007 suggest a 38% Finonicci retracement is due before Gold adds another 50% to it's price tag. That scenario suggests a swift move to 1104 in Gold. A consolidative move here suggests Gold bounces around in a range between 1200 and 1100 until the realization that the Dollar has no where to go but down reasserts itself. This could last through to the end of the year. A lot will depend on these Treasury auctions this week. Also bear in mind that their is a severe physical delivery issue manifesting itself in the Gold Futures Markets globally. This bears close watching as the bullion banks are staring at $12-15 BILLION losses on their huge short bets against Gold. The CRIMEX goons want/need that real Gold as much as you, I, and the Chinese do. This should help keep a floor under Gold for quite some time.

Jim Willie has an excellent expose of the growing physical Gold Crisis in his latest essay. I encourage all of you to read it in it's entirety.

Gold Nexus for Powerful Struggle Underway for New Global Financial World Order
By: Jim_Willie_CB
The corrupted COMEX and London Bullion Market Assn are the clear battlegrounds for the gold battle. In an open manner, no longer hidden from view, the COMEX is settling gold long futures contracts with Street Tracks GLD shares. Investors in GLD shares should be horrified at shareholder contamination. Clearly, the COMEX does not have much of any gold bullion, yet it operates formally as an exchange to sell gold, and to create a market for gold price discovery. Some call this new redemption developed appropriately a silent COMEX default, and correctly so. It is the early chapter of a COMEX default, presaged last May.

The two-sided fraud deserves mention once more. In time, the Street Tracks GLD (run by State Street, with JPMorgan as custodian) will be exposed as totally corrupt. They are using GLD shares openly now to cover COMEX short futures contracts. They are likely providing GLD bullion to London to satisfy futures contract delivery demands. Evidence painted a picture after London gold delivery stresses occurred at the same time as vast deletions from the GLD bar list, which suddenly reappeared days later. That is burning the candle at both ends of the GLD itself. Eventually my expectation is for GLD shares to sell at a 40% discount to gold price as the lack of gold inventory is revealed. Then later, after lawsuits, the GLD might easily sell at 80% discount. Finally the climax could be prosecution for fraud and all investors will be given 20 cents per dollar versus gold. Who knows? Maybe it will be 30% and 60% and 40 cents per dollar. The trouble for hapless unsuspecting investors is they did not read the prospectus, which permits such misuse of GLD shares. They just might be lazy and qualified sheeple. The Wall Street crowd did effective planning. One must give a tip of the hat to their brain trust. The GLD is a tool to drain gold demand from the public and to supply it to the syndicate. It is one of the most brilliant open ploys in financial history.

This is just the beginning. We are still in the proverbial second inning of this gold explosion. Gold continues to rise because the system is breaking, because almost zero remedy has been completed, because pressures are brought to bear using the same broken tools to fix the problems, because mountains of new money are wasted and paid to failed bankers, because the crisis is ongoing, because the economies are not responding to stimulus, because home foreclosures and job losses continue unabated. Much more government rescue and stimulus comes, MUCH MORE. The Chinese are firmly in control of the gold price. They inch up the gold price systematically in order to release more supply from both the cash desperate and the investment knuckleheads. A big story has hit the press, that HSBC is backing out of the gold storage business. My gut tells me that HSBC might be clearing major bank vault space to hold Chinese deliveries from metals exchanges. The gold price does not merely rise from a weakening USDollar and major currencies. Nations intentionally try to undercut themselves in order to preserve their export economies. The gold price also rises from the gradual removal of shackles that have falsely suppressed the price, as supply has dwindled, replaced by paper gold, and probably tungsten gold too. In the last couple weeks, extraordinary scrutiny has come to the gold delivery system. The process reveals an unspeakable global shortage of gold bullion.

The gold price is attempting to adjust to a proper higher price free from interference, based upon supply matching demand. The gold price will rise further from continued debasement of the major currencies. Even now, with the COMEX and LBMA in London, the gold market cannot clear at the current price. There is an extreme shortage of gold bullion in physical supply, due to years of price intervention and replacement by paper gold. Apart from weak or destroyed currencies, the gold price must be higher from basic intervention relief.
http://www.marketoracle.co.uk/Article15513.html

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