Thursday, March 10, 2011

Dodging Bullets

Well the feared carnage of this morning never quite materialized...yet.  Silver held it's uptrend line, but Gold broke it's, falling below $1423 and finding support at it's 20 day moving average at $1405.  Silver broke below it's 10 day moving average at $34.96, but was able to close just above it, closing at 35.27.

Technically both Silver and Gold look open to further decline as their daily MACDs are pointed lower with Gold's already having printed a bearish crossover.  Patietence and prudence may be warranted.

Oil was resilient in the face of the "global slowdown fears" that China's announced trade deficit sparked.  Reports of gunshots into crowds of Saudi protesters can be thanked for that.  The storage tanks in Cushing, Oklahoma might be full to the brim with oil, but the energy needs of the World no longer revolve solely around those of the USA.  But even Oil prices are a bit suspect here as they have been driven more by the unrest in the Middle-East and North Africa than actual demand/supply fundamentals.  The Oil market seems torn between a drop in demand because the [non-existant] global economic recovery may be faltering, and the potential for a major disruption in supply.  Oil is rising because the Dollar is teetering on the edge of destruction.

Lost in today's news vortex were the following pertinent negative economic stories that should have halted the Dollar's pithy rally in it's tracks:

Jobless Claims in the U.S. Rose 26,000 Last Week to 397,000

U.S. Posts a Record $222.5 Billion Monthly Budget Shortfall

Two Budget Bills Fail in Senate

U.S. trade deficit widens sharply

I'd like to focus briefly on the US trade deficit.  Global equities and the commodity sectory got hammered today because China reported an unexpected $7.3 billion trade deficit, the nation’s biggest in seven years.  The US trade deficit for January was $46 BILLION...a five month high.  And the World is worried about global economic growth because the Chinese posted a trade deficit that is $38.7 BILLION smaller than that of the USA?  China comes up short on trade because their country took a week off to celebrate the Chinese New Year, and global investors run for cover?  I'd hardly call this data a good reason to buy the Dollar.

The US posts a record monthly budget shortfall.  I hardly call this data good reason to buy the Dollar.

The US Congress can not come to agreement on how to fund the government and faces a march 18 government shutdown.  I'd hardly call this news a good reason to buy the Dollar.

Jobless claims rise unexpectedly.  Shocking!  Again, hardly a good reason to buy the Dollar.

And lest we forget, the US Congress must decide soon on how to deal with the nation's debt ceiling that is quickly coming into view...hardly Dollar positive.

The point is, far too much of today's fall in the Precious Metals and Commodities was blamed on a "strong" Dollar.  The Dollar is NOT "strong".  The US Dollar is the burden of debt suffocating America.  It is hardly a pillar of "strength".

The following story pretty much sums up the fallacy of an economic recovery taking root in America.  How can there even be talk of a recovery when fully one thrid of the nation's income is from the government fed bin?

Welfare State: Handouts Make Up One-Third of U.S. Wages
By: John Melloy

Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

“The U.S. economy has become alarmingly dependent on government stimulus,” said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, “either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion,” she said.

What a mess.

Prepare for continued volatility in the Precious Metals Friday...Oil prices remain the key driver.


1 comment:

  1. crazy stuff! You are spot on! In addition to oil prices, the devaluation of the dollar is a huge component as well!