Stocks Tread Water as Debt Crisis Lingers- AP
U.S. and European stocks mostly moved sideways Monday as Europe's debt crisis loomed over markets, offsetting any optimism generated by Federal Reserve chairman Ben Bernanke's suggestion that stimulus measures could be boosted.
If it were not for the financial news headlines, I do not know where I would get my amusement. Can the financial media be any more ignorant? THE debt crisis that "looms" is right here in our own backyard, and Americans seem completely blind to it...convinced the government will "fix it".
Bernanke pointedly remarks that the US economy is currently "non-sustaining" yet the focus of the media is on further stimulus to keep our economic engine from stalling at 30,000 feet. PEOPLE! The economy is non-sustaining BECAUSE of a debt crisis right here at home. Europe should be the least of our worries, yet the US financial media continues to shine a light on Europes debt woes in an effort to keep the focus of the bigger problem here in America. It's shameful!
Muni-bond bust could do big damage
Bernard Condon The Associated Press Arizona Daily Star
It's the other U.S. debt problem.
States are scrambling to close $114 billion in budget shortfalls over the next year and a half. For now, they can borrow at curiously low rates in the bond market - but they better hurry.
Lenders are still throwing money at the federal government despite its trillions of dollars of debt. But when it comes to states, cities and local governments deep in the red, their generosity appears to be running out.
Prices of municipal bonds, which are issued to build schools, lay water pipes and pave roads, dropped last month at one of the fastest clips since the credit crisis two years ago. Shares of mutual funds that hold the bonds fell, too.
Some experts worry that problems in the municipal-bond market could spread to other markets. Their worst case: A plunge in muni prices triggers panic among investors and widespread selling of other financial assets. That happened during the 2008 credit crisis, when the market for mortgage-backed bonds collapsed. Credit markets froze, and stock prices plunged worldwide. A recession that had begun nearly a year earlier became the worst downturn since the Depression.
"It's a Molotov cocktail," Envision Capital founder Marilyn Cohen says of the muni market. "It could explode."
The causes of turmoil in the $2.8 trillion muni market are myriad, but critics say one was misplaced investor enthusiasm.
State and local governments have rarely been in worse shape, but the average investor was convinced they would always pay back what they owed anyway. So bonds were scooped up, prices rose, and yields, or the interest paid each quarter as a percentage of those prices, fell to the lowest in decades. New buyers of muni bonds earned less in interest even as the risk grew that a state or city or town couldn't pay it.
After a recession, the economy typically would grow strongly, raising the tax revenue needed to close budget gaps. And if the economy snaps back, city and state tax revenues will grow quickly, making the crisis a memory.
But so far, that isn't happening. As a result, local governments are turning to states for emergency funds to pay for services and salaries. Others are looking at plans to sell or lease public property to raise money fast. And some have taken the unusual step of using proceeds from muni bonds to meet payroll or other immediate expenses instead of funding big projects.
"It's like using your credit card to cover living expenses," says Richard Lehmann, an investment adviser and author of the Distressed Debt Securities Newsletter. "It's a quick path to ruin."
Another looming problem: woefully underfunded pensions. To make good on promises to current workers, state and local governments need to inject $3.6 trillion into the funds, a study shows.
Ignoring this imminent crisis will not make it go away, or lessen the blow of it. A muni-bond implosion will make the European debt story sound like a fairy tale. This is America's nightmare scenario. Toss in the never ending mortgage debt crisis, and the American bank failure crisis and America sits before an overwhelming bowl of debt crisis all it's own. And all the financial news media is focused upon is more stimulus from the Fed to keep the stock markets creeping up...ignoring the inflationary implications of this misguided worship of government stimulus.
Stocks: ‘Muted’ reaction to grim jobs report
NEW YORK (CNNMoney.com) — Stocks retreated Friday, after a government report showed that U.S. job growth in November was much slower than expected.
Declines were fairly modest, as investors moved beyond the numbers to focus on what favorable policy decisions might be triggered by the disappointing data.
“It was a surprisingly lousy jobs report, but the market’s reaction is muted,” said Timothy Ghriskey, chief investment officer at Solaris Asset Management.
The Dow Jones industrial average (INDU) lost 8 points, or 0.1%, and the SP 500 (SPX) fell 2 points, or 0.1%. The tech-heavy Nasdaq (COMP) drifted into positive territory later in the morning rising 3 points, or 0.1%.
Investors have been buying up stocks and other risky assets this week, following a batch of mostly positive economic indicators.
“The market is looking beyond the current employment conditions and is looking forward to prospects of improvement,” Ghriskey said. “The weakness in the labor market does justify the Fed’s decision to keep buying more securities and keep interest rates low, and it gives Congress ammunitions to extend the Bush tax cuts.”
Ghriskey also noted that the market’s subdued reaction confirms underlying strength in the stock market.
“At today’s valuations, dividend yields and corporate cash levels — stocks are a bargain, and that continues to draw investors into the market,” he said.
This is patently absurd market commentary, not to mention absurdly inaccurate. Where is the mention that retail investors have pulled money OUT of the stock market for the past 30 months straight? If stocks are such a bargin, why are retail investors fleeing the equity markets as if facing the landfall of a category 5 hurricane? How can the markets be rising if investors are fleeing them?
In mid November, overall selling by S&P500 insiders was 8,279.5x times greater than buying (per Bloomberg). How can the markets be rising?
The Banks are buying stocks with money from the Fed. It is that simple, and it is no secret. Hey, the Fed is buying Treasuies to keep interest rates low, why wouldn't they buy stocks to keep the markets up, and consumers confidence along with them?
The stock markets should have crashed hard on Friday's jobs number, they flat lined instead. All of last weeks equity gains were a mirage conjured up by the Fed and their "primary dealers" as the Fed's Permanent Open Market Operations [POMO] worked their magic buying Tresuries from the banks, and the banks taking the money and buying stocks. Investors are not buying stocks. They have forsaken stocks to buy bonds. A decision they will one day rue with passion and hate. What a wicked web the masters of high finance weave.
The Pecious Metals markets smell the rats at work in high finance. They continued their march higher today in the face of a false rally in the Dollar, and the stupidity of Bumbling Ben Bernake's babbling on 60 minutes last night.
Bernanke Says Fed May Take More Action to Curb Joblessness
Federal Reserve Chairman Ben S. Bernanke said the economy is barely expanding at a sustainable pace and that it’s possible the Fed may expand bond purchases beyond the $600 billion announced last month to spur growth.
“We’re not very far from the level where the economy is not self-sustaining,” Bernanke said in an interview broadcast yesterday by CBS Corp.’s “60 Minutes” program. “It’s very close to the border. It takes about 2.5 percent growth just to keep unemployment stable and that’s about what we’re getting.”
Bernanke, in a rare appearance on a nationally broadcast news program, defended the Fed’s efforts to prop up a recovery so weak that only 39,000 jobs were created in November. The unemployment rate last month rose to 9.8 percent, the highest level since April, the Labor Department said on Dec. 3, three days after the Bernanke interview was taped. Republican lawmakers have said the Fed’s policy of “quantitative easing” may do little to help unemployment and may fuel inflation.
“At the rate we’re going, it could be four, five years before we are back to a more normal unemployment rate” of about 5 percent to 6 percent, Bernanke said. The purchase of more bonds than planned is “certainly possible,” said Bernanke, 56. “It depends on the efficacy of the program” and the outlook for inflation and the economy.
Bernanke said a return to a recession “doesn’t seem likely” because sectors of the economy such as housing can’t become much more depressed. Still, a long period of high unemployment could damage confidence and is “the primary source of risk that we might have another slowdown in the economy.”
Ben hardly makes the case for buying stocks in his "rare appearance" last night. If anything ben made the case for buying more Gold and Silver as fast as you can.
NIA Addresses Bernanke's '60 Minutes' Interview
Federal Reserve Chairman Ben Bernanke was a guest on '60 Minutes' this evening and the National Inflation Association felt it was important to address Bernanke's comments.
Bernanke claims to be concerned primarily about two things: unemployment and deflation. Bernanke says between the economic peak and the end of last year, 8.5 million jobs in America were lost with only 1 million jobs being regained since then. He says it could take 4 to 5 years for the U.S. to get back to a "more normal unemployment rate of 5% or 6%".
The truth is, real unemployment in the U.S. today once you account for everybody who has given up looking for work as well as everybody who is underemployed, is already about 22%. NIA believes it is more likely that in 4 to 5 years from now, U.S. unemployment will rise to Great Depression levels. Bernanke's policy of printing money and creating inflation will not create jobs because the money the Fed creates is going to fund non-productive and wasteful U.S. government spending. The only jobs being created are artificial government jobs.
According to Bernanke, inflation is "very very low" and this is a major concern to him because we are very close to falling prices or deflation, which he says would lead to falling wages. Bernanke believes that with his $600 billion in "quantitative easing", the risk of deflation is now "pretty low" but if he didn't act, deflation would be a more serious concern.
The truth is, gold is the best gauge of inflation, not the government's phony CPI numbers. Gold is above $1,400 per ounce and near a new all time high. If deflation was as serious of a risk as Bernanke says, we would be seeing falling gold prices. Bernanke's quantitative easing has now made deflation absolutely impossible and Americans need to be concerned about the risk of massive inflation and perhaps hyperinflation. If we saw deflation, it would actually be a good thing because the savings and incomes of middle-class Americans would be worth more and prices for food and energy will become cheaper.
Bernanke says that those who look at the $600 billion in quantitative easing as being inflationary are "not looking at the risks of not acting". He says the Fed has "very carefully analyzed inflation every which way" and that fears of inflation are "way overstated". Bernanke claims it is a "myth" that the Fed is "printing money" because the "money in circulation is not changing in any significant way".
The truth is, the Fed's M2 money supply has risen by $44.9 billion to $8.8092 trillion over the past month. If you annualize this increase, we are talking about a 6.1% increase in the M2 money supply. All Americans who shop for food, gas, or clothes, realize that the U.S. currently has around 6% price inflation and the CPI's 1.17% rate way understates inflation. The U.S. Bureau of Labor Statistics uses geometric weighting and hedonics to understate inflation. The government's CPI simply cannot be relied upon.
Bernanke admitted in his 60 Minutes interview that he did not see the panic of 2008 coming. His excuse was that the Fed didn't have oversight of AIG or Lehman Brothers, and if the Fed had more powers they would have seen the crisis coming.
The truth is, there are many Austrian economists, including those who co-founded and are associated with NIA, who did see the panic of 2008 coming. Every Austrian economist who predicted the panic of 2008, now believes that massive inflation is in our future. It doesn't make sense for Americans to trust Bernanke about inflation when he was wrong about the housing bubble and just about everything else.
Bernanke says that all the Fed's quantitative easing is doing is, "lowering interest rates", but in fact, yields on the 10-year bond are now 2.97%, a new four-month high. NIA believes it is likely that bond yields will continue to rise dramatically in the months ahead, with 10-year bond yields likely to rise above 4% in the first half of 2011. The Fed's goal of keeping interest rates low is obviously failing. The bond bubble is getting ready to burst, which will collapse the U.S. government debt bubble with it.
Americans simply cannot trust Bernanke, who has continuously lied to the American public and been wrong about everything. All Americans need to realize that the real economic crisis is still ahead and it will come as a result of Bernanke's dangerous and destructive actions. Americans need to be preparing now for hyperinflation if they want to survive, because the U.S. government will soon no longer be able to provide for them.
“We are on the verge of seeing a potential massive squeeze in the gold market. We witnessed this last month, and it appears to be rehearsing for the same play this month. Physical demand out of Asia is overwhelming the egregious paper gold shorts. If we are thinking this for gold, it is cubed for silver.”
- Ben Davies
Silver smashed the $30 barrier today. Shortly after the equity markets closed in New York, Silver hit $30.24. Gold hit a new ALL-TIME high of $1426.99. The Precious Metals are the purveyors of TRUTH. And the truth is that the global fiat money system is on the cusp of evaporating before our very eyes. Couple that with the quickly evaporating above ground supplies of Gold and in particular Silver, and the sky just might be the limit to the upside in the Precious MEtals as we move into the year 2011.
James Turk: The scramble for physical metal intensifies
Submitted by cpowell on Sun, 2010-12-05 03:43. Section: Daily Dispatches
10:35p ET Saturday, December 4, 2010
Dear Friend of GATA and Gold:
Gold and silver are in unprecedented backwardation, Free Gold Money Report editor and GATA consultant James Turk reports tonight. That is, prices for immediate delivery are higher than prices for future delivery, indicating strong physical demand and concern about counterparty risk. Turk's commentary is headlined "The Scramble for Physical Metal Intensifies" and you can find it at the FGMR Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
The Silver Shortage Pre-panic Line[INSIGHTFUL READING]
By: Bill Downey
For years we have heard of the coming silver shortage but somehow price was always contained and was a wild swinging commodity. But that changed last spring when allegations of silver manipulation made it to mainstream internet sites and became a focal point of testimony by Bill Murphy of GATA to the CFTC in early spring.
Since last August the silver market has been on a tear to the upside and the physical market is now again facing reported shortages. The demand for coin is at its highest levels in 25 years as reported by coin dealers.
Once silver broke above $20 dollars there was a triple demand factor that came into play.
The first is the industry that uses silver. It’s made a mad dash to the buy line to secure supplies. No user in his right mind is going to stick around and wait for the shortage to become acute and hold up production. That is a show stopper and industrial use is the largest demand factor in the fabrication of silver.
The second factor that is coming into play is the loss of confidence in paper money and the realization by many that silver is not only an industrial metal but was a monetary metal.
Silver has been around for just as long -- if not longer --- than gold. It was currency in the past --- and who is to say it will not be currency in the future? Indeed -- gold bugs who favor a return to the gold standard -- would stand a better chance if they were pushing a bimetallic system of both gold and silver. At least there would be more "currency" to go around. As nations that look to establish the former glory -- it might not be beyond the realm of China to go that route.
Finally the third factor that comes into play is the massive amount of short positions that have been sold forward by the manipulators of silver. According to the latest statistics there are 154 days of silver production that is currently sold short. As prices rise the shorts have only two choices. Sell more contracts short – or cover the positions. Each drop in silver since the summer has not been met with new short positions. It has been met with short covering. This triple whammy is turning the supply side equation and demand into a runaway freight train.
After a $4 dollar correction to $25, silver has rebounded once again to the $29 dollar area. This line is certainly important resistance on the price charts and from a technical perspective certainly should be respected. But the short positions remain very high and the demand is increasing. If investor demand for physical continues and price moves above the 30-31 dollar area it could produce another bout of panic buying. If that were to occur the next target for silver will be the pre shortage panic line in the $35 dollar range.
Statement on Position Limits, “Keeping Promises”
Commissioner Bart Chilton
December 2, 2010
Yesterday the Commission held the sixth in a series of open meetings to address rules implementing the Wall Street Reform and Consumer Protection Act of 2010. I commend the CFTC’s staff for working diligently on the myriad rules mandated by the Act, even now in the face of a pay freeze. The staff of the CFTC truly exemplifies the meaning of “service” in the performance of their roles as dedicated public servants.
I am concerned, however, with regard to the potential derailment of what I consider to be one of the most important rules required by the Reform Act: implementation of speculative position limits. Congress put special emphasis on this provision, to protect markets and consumers from excessive speculation in commodities markets. Indeed, we were given a specific implementation date for position limits on energy and metals contracts—January 17, 2011—well in advance of the majority of other Reform Act rules. We have a commitment to enact this rule on time, a “promise to keep,” with the American consumer who is affected daily by the prices discovered on commodities markets.
The Commission had originally intended to discuss position limits at yesterday’s meeting; unfortunately, that did not occur. Now, it appears that the Commission does not intend to address position limits at its next scheduled open meeting, on December 9, 2010. This makes meeting the mandatory statutory deadline difficult, but certainly not impossible.
The Reform Act was passed over four months ago—this provision isn’t a “surprise” to anyone. It didn’t fall out of the sky. Of course there are issues surrounding its implementation, but none of those excuse us from meeting the statutory requirements Congress has given us. This proposal should be discussed on December 9th at the Commission’s next meeting; a proposal should be put out for public comment as soon as possible; and we should commit to meeting the statutory deadline. We can always find excuses, justifications, or pretexts for inaction—this rule is too important to let any of those get in the way of fulfilling our statutory responsibilities, and keeping our promise.