Thursday, August 18, 2011
When the government announced in April that the economy had grown at a moderate annual pace of 1.8 percent in the first quarter, politicians and investors saw evidence that the nation was continuing its recovery from the depths of the financial crisis. The White House called the news “encouraging” and the stock market extended its bull run.
Three months later, the government announced a small change. The economy, it said, actually had expanded at a pace of only 0.4 percent in the first quarter.
Instead of chugging along in reasonable health, the United States had been hovering on the brink of a double-dip recession .
How can such an important number change so drastically? The answer in this case is surprisingly simple: the Bureau of Economic Analysis, charged with crunching the numbers, concluded that it had underestimated the value of vehicles sitting at dealerships and the nation’s spending on imported oil.
More broadly, politicians and investors are placing a great deal of weight on a crude and rough estimate that has never been particularly reliable.
“People want the best information that we have right now. But people need to understand that the best information that we have right now isn’t necessarily very informative,” said Tara M. Sinclair, an assistant professor of economics and international affairs at George Washington University. “It’s just the best information that we have.”
The growth rate that the government announces roughly one month after the end of each quarter—news much anticipated in Washington and on Wall Street—has been off the mark over the period from 1983 to 2009 by an average of 1.3 percentage points, compared with more fully analyzed figures released years later, according to federal data.
The second and third estimates, announced at subsequent one-month intervals, are no more reliable. The first quarter this year offers a typical example. The government estimated the annual growth rate at 1.8 percent in May and 1.9 percent in June before issuing its most recent estimate of 0.4 percent.
Perhaps more important, the government underestimated the depth of the recession by a wide margin, initially calculating that the economy contracted by an annual rate of 3.8 percent in the last quarter of 2008. It now estimates the contraction rate at 8.9 percent. Instead of an annual growth rate of 0.2 percent from the fourth quarter of 2007 through the first quarter of 2011, the government now estimates that the economy contracted at an annual rate of 0.2 percent during that period.
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A Russian company has unveiled a unique "Pandora's Box" cruise missile system which is deployed and can be fired from a standard 40-foot shipping container, from ships, rail cars or even off the back of a truck.
Morinformsystem-Agat JSC is marketing the system as a take-anywhere weapon able to destroy ships and attack land targets with the Novator Klub-K 3M-54TE missile, one of the deadliest cruise missiles in existence.
"We call it Pandora's box," said a company representative at MAKS air show, where the weapon made its first appearance.
The Club K missile system, containing four rounds, is self-contained in the sea container along with two crew members in a sealed cabin with their communications and targeting systems.
The weapon is fed information from satellites, then raised to a vertical position from the container by hydraulic rams, and fired. It is then guided inertially to the approximate target area, up to 270 kilometers away, where it finds the target using radar.
The missile then accelerates to around 700 meters per second to hit the target with its penetrator high-explosive warhead.The maker will not discuss potential customers but says the system has attracted "considerable interest" from abroad.
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U.S. core producer prices rose at their fastest pace in six months in July, pushed up by higher tobacco and light truck costs, according to a government report on Wednesday that could stoke inflation fears.
The Labor Department said its seasonally adjusted index for prices paid at the farm and factory gate, excluding food and energy, rose 0.4 percent—the largest increase since January—after rising 0.3 percent in June.
That compared with economists' expectations for a 0.2 percent rise.
Overall prices received by producers rose 0.2 percent after falling 0.4 percent in June, above economists' expectations for a 0.1 percent gain.
"Nobody is going to get too excited about inflation risks at this point,'' said Avery Shenfeld, chief economist at CIBC World Markets in Toronto.
U.S. financial markets were little moved by the data.
The Federal Reserve last week promised to keep interest rates near zero for the next two years to stimulate growth, saying the outlook for inflation over the medium-term was subdued.
A spike in food and energy prices pushed up inflation early this year, but weak economic growth and high unemployment kept underlying price pressures contained.
In the 12 months to July, core producer prices increased 2.5 percent, the largest rise since June 2009.
Tobacco accounted for almost a quarter of the rise in the monthly core PPI rate, with light motor trucks and pharmaceuticals also making significant contributions.
Light truck prices increased 1 percent, while tobacco surged 2.8 percent, the largest increase since March 2009.
Overall producer prices were bumped up by food costs, which rose 0.6 percent as potatoes recorded their biggest increase in almost a year.
Gasoline prices, however, fell 2.8 percent.
In the 12 months to July, producer prices rose 7.2 percent after increasing 7.0 percent the prior month. The rise was above economists' expectations for a 7.0 percent advance.
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Tables published today show that the Bank believes there is at least a one-in-10 chance the UK will suffer a double dip over the next 18 months.
Its current forecast is more bleak than any projection since February last year, as Britain was coming out of the deepest slump since the 1930s, and even worse than its outlook in May 2008, when the recession had just started.
Details of the Bank's forecast came as it emerged that the two remaining members of the Bank's nine-strong rate-setting committee voting for a rise abandoned their position.
Spencer Dale, the Bank's chief economist, and Martin Weale, an external member of the Monetary Policy Committee (MPC), dropped their vote for a quarter-point rise this month and joined the majority view for rates to remain at 0.5pc, minutes of the MPC meeting showed.
It was the first time the committee had been unanimous since May 2010. Just three months ago, three members were voting for an increase, including a half-point hike from Andrew Sentance, who has now left the MPC.
The committee also discussed further stimulus to help the recovery. Adam Posen, another external member, again voted to add £50bn to the £200bn of quantitative easing (QE), but the minutes noted that other "members considered whether there was a case for increasing the degree of monetary stimulus".
For the time being, "those members concluded that the case was not yet strong enough".
"Further asset purchases might nonetheless become warranted were some of the downside risks to materialise," the minutes said.
The sharp shift in sentiment, reflected in the downgrade to the Bank's central forecast for growth this year from 1.8pc to 1.5pc, reinforced expectations that interest rates will remain at a record low for at least another year.
James Knightley, economist at ING Financial Markets, said: "Today's figures add weight to the view that a hike in rates remains a distant prospect – at least 12 months in our view – while an expansion of QE remains a clear possibility."
The markets are currently not expecting a rate rise until the middle of 2013.
According to the Bank's "numerical parameters", the chances of the economy contracting this quarter are one-in-eight and are at least one-in-10 for every quarter until March 2013, with the exception of the final three months of this year.
Comparing the latest forecast with that from May 2008, Simon Ward, chief economist at Henderson, said: "They are more worried about recession now than they were when we were actually starting one last time."
He added that the "probability of a double dip is greater than these forecasts as the Bank calculates growth on a year-on-year basis".
"It is quite difficult for that to turn negative," Mr Ward said. "The normal definition of a recession is two consecutive quarters of quarter-on-quarter contraction."
The minutes showed the Bank has now "judged it increasingly likely that the global slowdown would prove to be more prolonged than previously assumed". The biggest risks are international, and a eurozone crisis "could have a material adverse impact on the UK".
The Bank warned the slowdown had knocked both exports and business confidence, which "could dampen investment" and slow the recovery. It added credit conditions are not improving for small businesses. "Small companies, with weak cash flow or relatively little collateral, still found borrowing terms prohibitive," it said.
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Russian Foreign Minister Sergei Lavrov said on Wednesday he hoped that talks between global powers and Iran on Tehran's nuclear program would resume soon and use Moscow's proposal as their basis.
Lavrov said Iran had shown a "lively interest" in the proposal, details of which have not yet been made public.
"We hope this will help us move forward faster than has been the case until now and that we can resume negotiations soon," Lavrov told a joint press conference with Iranian Foreign Minister Ali Akbar Salehi.
Salehi praised Moscow's proposal for its "step-by-step" approach to the dispute, saying it contained "good elements" and that Tehran would study the details.
Iranian President Mahmoud Ahmadinejad on Tuesday welcomed Moscow's attempt to revive talks with six world powers that view its uranium enrichment program as a potential pathway to nuclear weapons, but was also vague about what the agenda should
Lavrov told U.S. President Barack Obama last month of a step-by-step approach under which Iran could address questions about its nuclear program and be rewarded with a gradual easing of sanctions.
Lavrov also said the Bushehr nuclear plant, that Russia had agreed to construct in the 1990s, would start operating very soon and that the date was being agreed with Iran.
A senior Russian diplomat said earlier this year the plant was likely to become fully operational by early August.
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Turkey's military confirmed on Thursday that its air force has pounded targets of the terrorist Kurdistan Workers' Party (PKK) in northern Iraq and vowed to continue the attacks until the terrorist group is "rendered ineffective."
Jets hit 60 PKK targets in the largely mountainous region near the border with Turkey late Wednesday as well as targets on the Kandil Mountains, along the Iraqi-Iranian border, where the leaders of the terrorist group are believed to be hiding, the military said in a statement.
The strikes were in retaliation for an ambush by the PKK on a Turkish military convoy earlier on Wednesday that killed eight soldiers and a village guard helping the troops. The military said 15 other soldiers were wounded.
Close to 40 troops have been killed in stepped-up PKK strikes since July. Earlier, Prime Minister Recep Tayyip Erdoğan had hinted at a major operation against the PKK, saying Turkey had reached the end of its tether.
Turkish and Kurdish media had reported that Turkey's air force sent jets into northern Iraq Wednesday. But officials did not confirm the raids until Thursday.
Many PKK terrorists shelter in the mountains of Iraq, crossing the border into Turkey for hit-and-run assaults. The group, which is fighting for autonomy in southeast Turkey, is considered a terrorist organization by both the European Union and United States.
Turkey has carried out several cross-border airstrikes and ground incursions to fight the PKK in Iraq over the last few years. But Wednesday's is the military's first offensive into northern Iraq since last summer, when Turkish planes carried out a series of similar retaliatory raids on PKK hideouts across the border.
"The Turkish armed forces will continue with similar actions inside and outside of Turkey with determination, until the north of Iraq becomes a secure, livable area and the separatist organization which uses it as a base for attacks on Turkey is rendered ineffective," the military said in a statement posted on its website.
The military said Turkish forces also fired 168 rounds of artillery on suspected PKK targets, targeting terrorist sites and avoiding civilian targets. All planes returned to base safely and the operation was a success, it said. There was no word on casualties.
A Kurdish news agency that is close to the PKK said the jets pounded "empty fields" and there were no PKK casualties.
The raid is expected to escalate tensions in the Kurdish-dominated southeast, where frequent clashes and violent protests have undercut reconciliation efforts.
Last year, Turkey declared it was taking steps toward granting more rights for Kurds in an effort to reduce support for the PKK and end the decades of fighting that has killed tens of thousands of people.
The PKK, however, accused Turkey of ignoring demands for autonomy, freedom for imprisoned PKK leader Abdullah Öcalan, an unconditional amnesty for PKK commanders and permission for Kurdish-language education in schools.
Last month an umbrella Kurdish group that includes a Kurdish party proclaimed Kurdish autonomy in Diyarbakır, the largest city in the southeast, in an act of defiance against the government, which views it as a threat to national unity.
In Iraq, Prime Minister Nouri al-Maliki's spokesman said the government "denounces any attack against Iraq's sovereignty," but, "at the same time it also denounces any terrorist attacks launched by such groups against the neighboring countries."
Iraqi officials have been loath to criticize Turkey too harshly on how it deals with the PKK. While they do not like the idea of any foreign government infringing on Iraqi airspace and territory, they have little ability to protect their own borders.
Turkey is also one of Iraq's major trading partners and holds great influence in the Kurdish region as well as the rest of Iraq. Kurdish officials, who are also eager to strengthen bonds with Turkey, have in the past called on the PKK to lay down their arms but they're also hesitant to actively go after their fellow Kurds.
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US stock index futures pointed to a sharply lower open on Wall Street on Thursday, with futures for the S&P 500 down 2 percent, Dow Jones futures down 1.5 percent and Nasdaq 100 futures down 2.2 percent at 0917 GMT.
Japan's Nikkei stock average dropped 1.3 percent, falling below the closely watched 9,000 line, hurt by the yen's persistent strength and fears the United States might be heading for another recession, with many investors on the sidelines ahead of US economic data.
European stocks were down 2.3 percent, with heavyweight miners among the heaviest losers as nagging fears about the outlook for the global economy prompted investors to sell recent gains from the market's tentative recovery rally started last week.
Investors were bracing for a raft of US macro data, including weekly jobless claims, existing home sales and the Philadelphia Federal Reserve Bank's business activity index, seen ticking up to 3.7 from 3.2 last month, suggesting only modest activity growth.
The global economy is "dangerously close to a recession", Morgan Stanley said, as it slashed its growth forecast for 2011 and 2012, citing recent policy errors in the US and Europe and the prospect of further fiscal tightening in 2012.
Morgan Stanley cuts its global gross domestic product growth forecast to 3.9 percent from 4.2 percent for 2011, and to 3.8 percent from 4.5 percent in 2012.
On the earnings front, companies including Hewlett-Packard, Gap and Sears Holdings are due to report results.
Limited Brands Inc reported a higher-than-expected profit as it sold more lingerie at full price and the company raised its August same-store sales and full-year profit forecasts, sending its shares up more than 3 percent.
Data storage equipment maker NetApp Inc posted quarterly revenue below Wall Street projections, saying business fell dramatically in July, the latest sign that global technology spending is slowing.
JDS Uniphase Corp forecast weak first-quarter revenue on macro-economic challenges and inventory corrections, but said booking trends were encouraging.
Insurance broker Marsh & McLennan Cos Inc said it will buy back an additional $500 million of shares, doubling its share repurchase programme to $1 billion.
China Mobile logged its fastest half-yearly profit growth in nearly three years as the world's largest mobile phone operator by subscribers attracts more high-end 3G users upgrading to smartphones.
Tech shares fell on Wednesday after Dell's disappointing sales outlook fanned worries that weak economic growth will hurt earnings in the third quarter.
The Dow Jones industrial average was up 4.28 points, or 0.04 percent, at 11,410.21. The Standard & Poor's 500 Index was up 1.12 points, or 0.09 percent, at 1,193.88. The Nasdaq Composite Index was down 11.97 points, or 0.47 percent, at 2,511.48.
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London's FTSE 100 index was down 4.2% and Germany's Dax had lost 5.6%, while Wall Street's Dow Jones lost more than 4% in early trading.
Shares in some leading banks plummeted, with Barclays and Royal Bank of Scotland down more than 10%.
Analysts again cited reasons including worries about global growth, and the eurozone debt crisis.
As well as some worse-than-expected US economic data, markets were concerned about the exposure of European banks to the eurozone debt crisis.
The European Central Bank lent dollars to an unnamed eurozone bank on Wednesday, the first of its kind since February, and a further sign of worries within the eurozone economy.
In addition, a report in the Wall Street Journal said that the Federal Reserve Bank of New York had asked for more information about whether the US bank units of big European lenders have reliable access to funds needed to operate.
The Federal Reserve Bank of New York has yet to comment.
Meanwhile the spot price of gold hit yet another record high, up 1.6% on the day to $1,816.09 an ounce, as more investors moved their money into the haven currency.'Negative tone'
One analyst described the mood in the markets as "fairly bleak".
"There is a general negative tone in the markets right now," said Kathleen Brooks from Forex.com.
"In the absence of any new information investors are more comfortable selling. This could weigh on markets for some time as there appears to be no immediate solution to the eurozone debt crisis and there are growing signs that the UK, US and Europe are on the cusp of recession," she said.
Continue reading the main story
Jack de GanAnalyst, Harbor AdvisoryIf there's stress in major European banks, it will affect US banks too”
In the UK, Lloyds Banking Group also suffered sharp falls, down 9.5%, while HSBC Holdings lost 6.6%.
Barclays' shares have now fallen 51% over the past six months, with RBS down 53%, Lloyds 56%, and HSBC 29%.
In Germany, Commerzbank was down 5.3% and Deutsche Bank fell 4.3%.
France is one of a number of European countries where there is a ban on short-selling of shares in financial firms, where traders bet that their value will fall.
Despite this, some of France's biggest banks were down heavily, with Societe Generale down 7.3% and Credit Agricole dropped 4.2%.US concerns
On Wall Street, Bank of America was the biggest faller, losing 7.2%.
US investment analyst Jack de Gan, chief investment officer at Harbor Advisory, said all eyes were on the European banking system.Continue reading the main story
He added: "If there's stress in major European banks, it will affect US banks too."
US investor sentiment was also hit by a big drop in a closely watched guide to manufacturing activity in the mid-Atlantic states.
The Federal Reserve Bank of Philadelphia's business activity index slumped to -30.7 points in August from +8.2 points in July.
It is now at its lowest level since March 2009.
Grant Lewis, head of economic research, Daiwa Capital Markets, London, told the BBC that the Philadelphia index was now "at levels that point towards recession territory".
Official US figures also showed that the number of people claiming unemployment benefit rose by 9,000 last month to a seasonally adjusted 408,000.
Mr Lewis added that markets were now looking to Federal Reserve chairman Ben Bernanke's speech next week at the US central bank's annual meeting in Jackson Hole, Wyoming, for signs of the bank agreeing to additional quantitative easing (QE).
Under QE, central banks pump new money into the financial system to try to boost the economy.Slow growth
This was the second day of big falls for some bank shares. Wednesday's sell-off had come after comments in support of a financial transaction tax from German Chancellor Angela Merkel and French President Nicolas Sarkozy.
The proposed Merkel-Sarkozy tax would be used to raise money to help bolster any future bailout funds.Continue reading the main story
The two leaders also called on Tuesday for "true economic governance" for the eurozone in response to the debt crisis.
There are concerns that the debt situation in the eurozone, which has already led to bailouts for Greece, the Irish Republic and Portugal, will also engulf Italy, Spain and even France.
Traders saw Tuesday's meeting as another missed opportunity to tackle the crisis and calm the uncertainty gripping the markets.
"What we need is the likes of Angela Merkel and Nicolas Sarkozy to come up with some ways to fight these problems but they met again this week and all we got was talk again. What we need is action," market analyst James Hughes from Alpari UK told BBC News.
"We are still in that same situation that it doesn't take a lot of news to get the markets going," Mr Hughes added.
"The problem that we have in the moment is that fears are generating... big swings one way or another. Today it is a big swing lower and there is nothing to say we don't get another big swing higher in the next few days."
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The U.S. House of Representatives just passed a debt ceiling bill on Aug. 1. On thenext day, a total of 181 members of the House of Representatives signed a letter sentto U.S. President Barack Obama stating that the federal government should approvethe sale of F-16 C/D fighter jets to Taiwan as soon as possible to help ensure peaceand stability across the Taiwan Strait.
The U.S. Senate passed the debt ceiling bill on Aug. 2, and Obama signed it into law.Shortly thereafter, the U.S. Treasury obtained the authorization to issue 400 billion U.S.dollars in new debt. Will China become the largest buyer of U.S. debt again?
Despite knowing that major creditor countries, especially China, would be the mainbuyers of its new debt, certain arrogant and disrespectful U.S. Congress membershave totally ignored China’s core interests by pressuring the president to sell advancedjets and even an arms upgrade package to Taiwan.
U.S. treasuries will lose value if China stops or reduces its purchases of them on alarge scale, which will also affect the value of China's U.S. treasury holdings. However,as the situation has gotten out of hand, allowing Washington politicians to continuetheir game might lead to more losses.
U.S. arms sales to Taiwan can only create more jobs for the United States but cannotimprove the ability of Taiwan's military force to compete with the Chinese mainland. Theessence of the problem is that some U.S. Congress members hold a contemptuousattitude toward the core interests of China, which shows that they will never respectChina. China-U.S. relations will always be constrained by these people and will continuealong a roller coaster pattern if China does not beat them until they feel the pain.
Stopping or massively reducing U.S. Treasury bond purchases will certainly bringlosses to China to a certain degree. China must try to reduce the loss and transfer thepassive situation to an active one. China should consider how to build a direct linkbetween the U.S. Treasury bond purchase and U.S. domestic politics while adoptingmeasures to gradually adjust the structure of China's foreign exchange reserves.
For example, China can directly link the amount of U.S. treasury holdings with U.S.arms sales to Taiwan and require international credit rating agencies to demote U.S.treasuries to force the United States to raise interest rates. China can also launchlimited trade sanctions to the states of those U.S. Congress members who vigorouslyadvocated arms sales to Taiwan to affect their employment.
Because it is the money of the people earned through hard work, China is not willing toarbitrarily use U.S. Treasury holdings as a weapon. However, China has no choice butto use it as a weapon to defend itself when facing threats to China's sovereignty.
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Chart of the week
The U.S. now has a breadline of 45.8 million people. Not only is this a new record, but the most recent month report added 1.1 million people, the largest single monthly jump since 2009.
Predictions Coming True
Last year FutureMoneyTrends.com predicted that currencies, like the Hong Kong Dollar, would eventually come under pressure to end their U.S. dollar peg. Though there has been no official word from Hong Kong, yesterday a story out of Sydney stated that there is mounting pressure from financial strategist who believe the current pairing is outdated and decoupling is only a matter of time. HSBC's Chief Executive Stuart Gulliver said that Hong Kong should consider moving the peg to a basket of currencies instead of the U.S. dollar. Right now Hong Kong is experiencing high price inflation due to their dollar peg, something that we believe will eventually force them to de-peg their currency.
FutureMoneyTrends.com is following these types of trends closely as they will help us assess how much longer the dollar will be the world's reserve currency. Already we are seeing nations get their ducks in line for a post dollar world, with many Asian nations shifting their foreign-reserve currencies out of the dollar and into physical gold. South Korea recently reported that they purchased gold for the first time in 13 years, joining other central banks in buying gold in 2011. China, India, Russia, Thailand, and Kazakhstan are among others who have been loading up on the yellow metal that the western media has been calling a bubble for the past 10 years.
China, the largest foreign creditor, criticized the U.S. for failing to ensure borrowing is reined in during the recent debt ceiling increase. China currently holds over 1 trillion in U.S. IOU's and is probably getting a little concerned about the U.S. borrowing over 40 cents for every dollar we spend. China's central bank said that they would be "closely observing" the implementation of the new deal. Well, considering that the D.C. gimmicked math is projecting 4% GDP growth in order to have the size of revenues and cuts they headlined, FutureMoneyTrends.com has ZERO expectations that 99% of the headline cuts will ever happen.
Harvard economist calls for more inflation to cure the economy
Ken Rogoff, another economist that didn't see the most obvious contraction since the last depression, is now calling for inflation to fix the economy. He thinks that inflation is an economic cure and that the reason previous stimulus hasn't worked so far is because it simply wasn't big enough. He is actually quoted saying, "inflation is an unfair and arbitrary transfer of income from savers to debtors. But, at the end of the day, such a transfer is the most direct approach to faster recovery." Rogoff clearly shows that he does understand how inflation hurts people, what he doesn't understand is that in order to have a real sustainable recovery, the U.S. and its citizens will have to stop borrowing from future generations in order to live rich today.
What's the end game? How do you ever stop constant inflation if you make the economy completely dependent on it like it is now? More inflation, theft, and fraud is not the answer to America's economy.
Is the new Super Congress Constitutional?
Watch Judge Napolitano explain just how outrageous this new super congress is that was included in the debt ceiling bill. Our way of government has literally been changed without a peep from the main stream media, absolutely disgraceful in our opinion.
FutureMoneyTrends.com believes that in the short term, over the next 1 to 12 months, a lot of wealth is going to be flooding into gold. Those that were looking to other fiat currencies for a safe haven have the potential to get burned as central banks around the world are coordinating a massive devaluation of all currencies.
Though we doubt it will go through, right now the Swiss National Bank is debating on whether or not to place a currency peg against the Euro. The Swiss National Bank has clearly injected this idea into the main stream as every Swiss news agency is covering it as their #1 story. In our opinion, this is currency suicide for the Swiss, yet this is now a real possibility. Just two weeks ago the Swiss cut interest rates in order to weaken their currency, so already investors have seen that running to the Swiss may not be the right answer.
FutureMoneyTrends.com believes that the rush to gold will soon start once gold breaks $2,000 per ounce. It is very possible that gold mania in Europe and Asia will breakout quickly pushing gold up another $500 in a very short time period. IF the Swiss were to peg themselves to the Euro, we believe this could be a major catalyst for a HUGE move up in gold. Imagine all of the investors who jumped the Euro ship looking for safety only to find themselves tied to the Euro again, these people will almost certainly go to gold. The fact that they are in the Swiss Franc already tells us what they think about the dollar, so it is highly likely that big money that was in the Swiss Franc for the long term will move into gold sending the price over $2,000 per ounce. You also have to consider what would happen if another major news event happened, safe haven fiat currencies would pretty much be nonexistent and investors would have no choice but to go into gold accelerating all bullish gold price predictions even by hard core gold bugs.
Other catalyst to push gold higher in 2011
- Super Congress Success in Cuts or Failure (we're betting on the latter)
- Quantitative Easing 3(QE3)
- Market Collapse Prior to QE3 Being Announced
- Bank of America (BAC) Filing Bankruptcy, Being Broken Up, or Bailed Out
- The Acceptance that the U.S. is Still in Recession and that Bernanke is out of Conventional Ammo
- Black Swan Event
What the Hell is going on with the Stock Market?
Look, pure and simple without quantitative easing, the stock market is screwed. We are literally one story away from a full blown meltdown. The fundamentals for the economy post quantitative easing are a disaster. Protecting yourself from a market downturn and keeping some opportunity cash to the side should be everyone's top priority.
Think about how a second wave could look if we have some type of Lehman Brothers moment. In 2008, we had 27 million people on food stamps, today we have 46 million. Unemployment is higher, the duration for the unemployed is at a record, and in order just to pretend we have a functioning recovery, the government is borrowing over 40 cents for every dollar we spend.
We are NOT investment advisers, but we do want to disclose that our chief strategist currently owns the following options, Citi Bank (C) Jan12 $30 Puts, Bank of America (BAC) Jan12 $6 Puts, S&P 500 (SPY) Jan12 $119 Puts, GLD Jan12 $170 Calls, and SLV Jan12 $39 Calls. Options are NOT for anyone who can't accept HIGH RISK, options are a BET that something could go up or down in a specific time period. Most options expire worthless and are for professionals only, please do NOT invest in options without educating yourself and speaking with a licensed professional. Our chief strategist has been in and out of these trades for the past 4 weeks and will continue to trade them as the market moves.
The reason we are disclosing these current positions is because we are very concerned about the risk of another market crash. We believe that to a certain extent the FED wants/needs a crash prior to unleashing another major dose of QE. Only this time, the fiat currency system itself will be on the line.
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