Downgrade in Japan? Weak US data sends USDJPY back down instead

Earlier today, Moody’s warned that Japan might be downgraded. This led to a sharp rise in the USDJPY.

Now the weak US data has led to a reversal in the pair as focus comes right back on the weakening US economy. 

The pair fell back down to the 100 hour MA at the 81.28 level. The  50% of the move up from the low today comes in at the 81.23 level. The low has reache 81.24.  A move below these levels will open the door for further downside potential now.   Watch the 81.36 level for close upside resistance now.  Above that a move above the 81.46 level would be a signal that the trading waters are muddy.

Weekly Trading Outlook - Be Careful What You Wish For

Gold Breakout - What to Watch

The gold price has staged a strong rebound off its May 5th low print of $1,462 and is now trading within 2.5% of its all-time high of $1,578 per ounce. Gold futures and options positions on the COMEX rose for the first time in five weeks with net long futures positions rising 7%. It is worth considering what might signal that a sustainable breakout in gold is forthcoming. The following should be closely monitored in coming weeks:

• Are the gold mining stocks confirming a breakout in gold? Is the Market Vectors Gold Miners ETF (GDX) making a lower high, thereby creating a bearish divergence?
• Is the silver price making a lower high? If gold's sister precious metal is unable to climb to a new high, the intermediate-term outlook for both gold and silver would deteriorate markedly.
• Is the silver/gold ratio able to move to fresh lows? A move below 30 in the silver-gold ratio could usher in fresh speculative money flows into both precious metals.

All of the above, if achieved, would usher in a more bullish backdrop for gold prices and would likely lead to a significant breakout. However, if the preceding does not materialize, then the resulting bearish divergences would point to a deeper correction. The current rebound in gold could then be considered a countertrend move and new correction lows would be likely.

Impact of Greek Crisis on Gold

With credit default swaps on Greek debt blowing out to fresh record highs last week, it is worth pondering the implications of a Greek default. Last week, the International Monetary Fund (IMF) warned that it may not continue funding Greece if the Hellenic Republic cannot guarantee financing for the next 12 months. Of greater importance than a default, or partial default (re-structuring), by Greece is the broader impact on the European Central Bank (ECB). The ECB has billions of dollars of low-quality securities, including Greek debt, on its balance sheet.

While the ECB and leaders across Europe have thus far been able to kick the can down the road, a Greek default would call into question the integrity of the ECB. Given that the same structural issues facing Greece exist in Portugal, Ireland, and Italy, confidence in the euro could vanish rather quickly.

Given that gold is a monetary asset, the long-term implications on the yellow metal are decidedly bullish. Both individuals and central banks would likely increase their allocations to gold due to the fact that it is the one currency with no political liabilities behind it. The central banks of emerging nations have already displayed a penchant to hold a greater percentage of their foreign exchange reserves in gold. Falling confidence in the euro would likely exacerbate this trend and provide a strong tailwind for gold prices.

Be Careful What You Wish for

Despite the positive long-term implications, over the shorter-term a sinking euro could be bearish for gold - as well as nearly every asset class. A currency crisis would likely lead to deleveraging in financial markets. As was clearly evident from the 2008 experience, selling begets selling and quality assets are liquidated alongside junk. Investors in gold exchange-traded funds, such as GLD, as well as gold stocks would likely sell in a rush to cash. The U.S. dollar would rally and, in the midst of a wave of deleveraging, gold could move lower.

Gold bulls calling for a steep drop in financial assets as a currency crisis unfolds should be careful what they wish for.

KEY UPCOMING CATALYSTS FOR GOLD The most anticipated economic report of the month comes Friday when the May unemployment report is announced. A Bloomberg survey of economists shows expectations are for a gain of 185,000 nonfarm payrolls. The unemployment rate is forecast to drop 0.1% to 8.9%.

A weak employment report, combined with last week's downward revision to first quarter GDP, will keep Chairman Bernanke and the Fed firmly in the dovish camp. Monetary policy remains a tailwind for the gold price and as long as the labor and housing markets continue to show very little improvement, surprises in the gold market should be to the upside.

Risk back in favour?

After an incredibly dull day yesterday with the major markets closed, it was Asia again that led the charge, risk seemingly back in favour this morning as I walk in, on the back of what seems a relatively innocuous Wall Street Journal article citing the fact that Germany is prepared drop its push for restructuring of the Greek debt in an effort to facilitate a new aid package for the beleaguered southern nation. Coupled with the fact that the EURUSD was trading above that 1.4250 pivot level at the time that the market took notice of this article was enough to push the cross through stops in a hunting frenzy and allow it to trade at a  high of 1.4405 or thereabouts overnight. In other news we see the NZDUSD trading at all time highs as consumer and business confidence registered its biggest print in over a year, all the while the rather confused finance minister was off jawboning and contradicting himself yet again.

Adding to the excitement was Moody’s out saying that it would place Japan on review for a possible downgrade.

Turning to the day ahead, we all know it’s month end and some of the flows we’ll see today are clearly going to be related to this, meaning more USD sales if anything. Beyond this we have the Bank of China interest rate announcement as well as the Eurozone flash CPI estimate printed this morning.

With regard to the market, looking at the EURUSD first, given the current price action, equities and commodities all higher it’s hard to imagine that the pair won’t test (and in all likelihood take out) resistance sitting at the 1.4430 area. After a brief stop run above there I would expect the cross to settle into a 1.4300/1.4400 day.

The Cable is benefiting once again from broad USD sales and looks for 1.6580 as the next natural cap. If this sentiment persists for the bulk of the day it’s not unlikely to see the cross trading into serious offers sitting around the 1.6650 area.

The AUDUSD traded higher on the back of all of the above taking out stops above 1.0730 and trading to 1.0750 on the exhaustion that followed. Fading rallies intraday might be the way forward with sales and stops needing to go in closer to that overnight high area.

The JPY and its crosses are understandably a little battered on the back of this briefly renewed risk sentiment and Moody’s news, however they remain confined for the most part. EURJPY is the current standout for being overdone on this spike and selling at market is the call amongst a few of my contacts with their stops going in above 118.30, looking for a return to around the mid 115 area.

CHF data this morning proved to be worse on both the headline and the devilish detail but the only cross getting anything out of this was the EURCHF which has spiked but still trades heavy nonetheless.

Market Preview - 31 May 2011

Forex Overnight: EUR is trading higher

The EUR is trading higher this morning against the major currencies, after the head of the euro-area finance ministers’ group, Jean-Claude Juncker, yesterday, signaled that the European Union leaders would decide on additional aid for Greece by the end of June 2011.

The JPY is trading 0.4% lower against the USD, after the Moody’s Investors Service placed Japan’s Aa2 local and foreign currency bond ratings on review for a possible downgrade.

At 6am, the EUR is trading 0.7% higher against the USD at $1.4382, while GBP is trading 0.4% higher against the USD at $1.6544. The EUR is trading 0.3% higher against the GBP at £0.8694.

The AUD is trading 0.2% higher against the USD.

UK Stocks: Likely to open higher

UK markets are likely to open higher, with the FTSE 100 expected to open 37 to 42 points higher.

Renold, Majedie Investments, GCP Infrastructure Investments, Artemis and Hargreave Hale are scheduled to report their results later today.

Royal Bank of Scotland and its local Chinese partner, Guolian Securities, have launched a joint venture in China. The bank would hold a one-third stake in the venture.

The Daily Telegraph has reported that Debenhams is in talks with Sears about opening concession or franchise areas in Sears outlets across the US.

The Telegraph has reported that Wolseley has hired Bank of America Merrill Lynch to run an auction of Build Center, the building trade supplier, Electric Center, the electrical products wholesaler, and Encon, the insulation specialist.

Novae Group and Omega Insurance are in preliminary talks over a £500.0 million merger, as a move towards consolidation in the industry.

The Chief Executive Officer of Tesco, has indicated that the company is to planning to launch new Tesco-owned brands, in both the food and non-food businesses.

Asia: Trading higher

Asian markets are trading higher this morning, amid optimism that the European officials would offer additional aid for Greece.

In Japan, export sector stocks, Sony Corporation, Elpida Memory and Sharp Corporation are trading higher, as the Yen weakened against the Euro. Sojitz Corporation has gained, after news indicated that it plans to boost production of rare metals in Portugal and Canada by about 60.0%, between 2012 and 2013. Tabuchi Electric Company has risen, after it announced plans to raise ¥824 million by selling shares to TDK Corporation, and to four other companies. Tokyo Electric Power Company is trading lower, after Standard & Poor’s lowered its credit rating to Junk. At 6 am, the Nikkei is trading 1.4% higher at 9,640.5.

In South Korea, Samsung Electronics has gained, after it announced its decision to commence mass production at its liquid crystal display plant in Suzhou, China, in H1 FY2013. In Hong Kong, Cosco Pacific is trading higher. In China, Huaneng Power International and China Yangtze Power have gained, after reports indicated that the government would increase retail electricity prices beginning next month.

US Stocks: Futures trading higher

US stock index futures are trading higher at 6am, with the S&P 500 Index futures up 8.1 points.

Key economic releases today include Consumer Confidence, Chicago Purchasing Manager Index, Dallas Fed Manufacturing Activity and S&P/Case-Shiller Home Price Index.

In corporate releases, Phillips Van Heusen Corporation, Lions Gate Entertainment Corporation and Eltek would announce their results today.

US markets were closed yesterday, on account of Memorial Day.

European Stocks: Expected to open higher

European markets are expected to open higher. The DAX is likely to open 51 to 57 points higher, while the CAC is expected to open 21 to 27 points higher.

Investors await German Retail Sales and Unemployment Rate, Euro-zone Consumer Price Index and Swiss Gross Domestic Product.

Strabag, Voestalpine, Neopost, Petrolia, Bavarian Nordic, Laurent Perrier and Sevan Marine are scheduled to report their results later today.

Renault has appointed Carlos Tavares as its new Chief Operating Officer, effective immediately.

In overnight news, the Financial Times Deutschland has reported that Bayer would outsource the production of its blockbuster drug, Betaferon, to Boehringer Ingelheim.

The Financial Times Deutschland, citing Munich Re’s board member, Torsten Jeworrek, has reported that the company seeks expansion in the US through more acquisitions.

LVMH Moet Hennessy Louis Vuitton has stated that it wishes to remain a long-term shareholder of Hermes, and denied allegations it was trying to destabilise the latter.

According to the Times of Oman, Alstom has signed a preliminary agreement for constructing an aerial urban metro line in Baghdad, called the Baghdad Elevated Train (BET). The metro plan would cost about $1.5 billion, and would be funded by the French government and banks.

Macro Update

Japanese industrial production rises in April

On a monthly basis, industrial production in Japan climbed 1.0% in April, compared to a 15.5% decline posted in the previous month.

Moody's reviews Japan rating for downgrade

Moody's Investors Service has put Japan's Aa2 local and foreign currency bond ratings on review for a possible downgrade, due to long-term fiscal concerns.

Unemployment rate in Japan climbs in April

On a seasonally adjusted basis, the unemployment rate in Japan rose to 4.7% in April, compared to a 4.6% rate posted in the prior month.

South Korea’s industrial production drops in April

On a month-on-month basis, the industrial production in South Korea fell 1.5% in April, following a 1.4% increase recorded in March.

Australia's current-account deficit widens in 1Q FY2011

On a seasonally adjusted basis, the current account deficit in Australia widened to A$ 10.45 billion for the first quarter of 2011, following an A$ 8.09 billion deficit recorded in the previous quarter.

Australian building approvals drop in April

On a monthly basis, building approvals in Australia fell 1.3% in April, following a revised gain of 8.6% posted in the previous month.

Can the Oil Market Be Manipulated?

On Tuesday, May 24, the U.S. Commodity Futures Trading Commission (CFTC) sued two companies on charges they manipulated prices for crude oil and oil futures at the height of the recession.

The case – filed in Manhattan's U.S. District Court – is called U.S. Commodity Futures Trading Commission v. Parnon Energy Inc.

It actually charges two related companies with manipulating the pricing in West Texas Intermediate (WTI) crude between the fourth quarter of 2007 and early in 2008. They are California-based oil logistics company Parnon Energy and London oil trader Arcadia Petroleum – both affiliates of the closely held Cypriot company Farahead Holdings Ltd.

(Remember, WTI is the benchmark crude traded on NYMEX in New York.)

The suit alleges that the companies acquired stockpiles of crude, issued call and put options on the long and short positions developed to mimic a market shortage, and profited enormously from what the CFTC says amounts to a fictitious, "artificial," price increase.

And it is reviving the question of whether the price of crude oil can be manipulated.

The companies lost on the sale of the crude oil itself (the "wet" barrels of actual commodity) they had stockpiled. But, according to the filing, they gained more than $50 million in profits from the derivatives (the related "paper" barrels).

The alleged activity occurred during the early part of a run up to historically high oil prices of $147.27 a barrel (by the second week of July in 2008). The companies charged, however, were trading, and making profits, when the price for crude was well under $100.

The civil lawsuit further contends that the companies stopped the practice when they were apprised of a CFTC investigation.

Now, the Commission regards this alleged conduct as an unwarranted manipulation of pricing -for both a physical commodity and the derivatives based upon it.

The companies, of course, will claim that their actions amount to normal operations of supply and demand.

However, given a number of precedents, the respondents will have some difficulty in sustaining that position…

After all, several years ago, BP plc (NYSE:BP) tried to claim the same thing, when a couple of affiliated traders cornered the propane market and then began increasing prices. And although the oil major never admitted to any wrongdoing, it still paid a fine of almost $400 million.

The same result probably awaits Parnon/Arcadia/Farahead, along with two company officers also named in the civil suit.

The Real Question Is Whether Such Manipulation
Can Actually Determine Direction and Price

Taking a $50 million profit from paper transactions is one thing… but when compared to the daily trading in oil futures and options the amount is insignificant – it's positively minute.

Certainly no one can suggest that amassing an oil stockpile like the one documented in this case could actually control the crude oil market. Even creating a bottleneck through artificial means (controlling access to transit volume at a strategically located port, for example) could not result in more than a temporary impact on market pricing.

Conspiracy theory buffs aside, this may be the way players manipulate for a short-term, localized profit.

Yet the sheer size of the suppressed inventory (on the one hand) and the avalanche of derivative paper (on the other) that it would take to control the market in this way renders such a strategy impossible. Even if a series of traders could pull it off, it makes for an unwieldy tool and a very obvious group of culprits.

Traders, speculators, shippers, and logistics providers cannot artificially manipulate the broader market this way. However, producers might…

A More Troubling Development

I have had an interest in tracking oil companies (for crude) and refineries (for oil products) trading in their own volume over the past 11 years.

As I noted last week, anecdotal evidence is already emerging that vertically integrated oil companies (VIOCs) – those controlling the upstream/downstream process from field to refinery through retail outlet – were unusually active recently in trading in near-month futures contracts in their own product.

This occurred both when crude oil and gasoline prices were rising (through close on April 29) and thereafter, as crude plummeted almost 15% and gasoline over 13% as of the end of trading on May 6.

Hedging is certainly required in such volatile periods. And the VIOCs will insist that is what they were doing.

Yet an even more troubling development may be brewing with the activities of the huge state-controlled producers in OPEC and Russia. These two sources alone account for almost 58% of all crude oil available in daily trading. That certainly accounts for the "wet barrel" side of the equation.

And for the "paper barrel" side?

Take a look at where more of the investments are directed these days… from these countries' sovereign wealth funds.

That combination dwarfs anything that might come out of a courtroom in Manhattan.

Sincerely,

Kent Moors Ph.D.

 

Weekly Commodity Update: Commodities regaining support

Commodity markets saw the first broad based bounce in weeks after the early May correction now seems to have run its course.

Weak U.S. data helped remove some of the recent support for the dollar, with the Euro bouncing despite heightened tension over what will happen to Greece in the months ahead. European stock markets have fallen victim to this uncertainty with the benchmark Euro Stoxx 50 Index dropping 7.5% from recent highs during the week, before recovering. For now though, the market believes the political will to find solutions is strong enough to help avoid any further escalation.

With the dollar having stopped strengthening commodities began to recover. This was helped by some investment banks raising their end of year price forecast for Brent crude but also because weather continues to play havoc with prospect for this autumns harvest from China to Europe and the U.S.

The CRB at the time of writing this, headed for its second weekly gain with investors slowly dipping their toes back into the market. Silver, the main casualty of the recent sell off, has been the star performer this week.

Raised crude oil price forecast
After testing the lows once again, the energy market got a boost from a rebound in the Euro and escalating violence in Libya and Yemen. Two major investment banks added to the positive sentiment by raising their price forecast for Brent crude, expecting it to return to the $120 to $130 range with the risk of overshooting to the upside. With all of the four major commodity banks now all looking for higher prices, one analyst said that being negative on oil was “as difficult as managing Chelsea football club”.

Despite seeing activity in OECD nations slowing somewhat the banks continue to see strong demand from EM countries more than making up for this slack. With Saudi Arabian oil being of a heavier quality than the lost output from Libya, there is a risk of spare capacity being run down to critical levels. Only a rise in the price of oil to levels where demand begins to be impacted can halt this slide and prevent demand outstripping supply into 2012.

After the initial rally off the lows traders might be reluctant to take Brent and WTI crude much higher from current levels. The Eurozone issue is bound to continue to yield market unfriendly headlines and until we see where the dollar is going, playing the range seems to be the most favoured trade.

Euro-gold reaching a new record
Gold and silver have benefitted from the heightened tension in the Eurozone with the price of gold in Euros reaching a new record during the week. At one stage it rallied together with the dollar, which is a sign that Euro woes were the main driver. Some producer selling in both silver and gold was seen which halted the rally, at least for now. Strong Chinese demand over the coming years, as forecast by the World Gold Council, also continues to add support.

Silver put in a strong performance and has now managed to retrace 38.2% of the selloff from the highs set back in April. Daily swings are still quite dramatic and that is one of the reasons why silver may struggle to reconnect with investors who got burned during the violent selloff.

The above chart shows the daily ranges as a percent of the price and it is clear to see why silver has become very difficult to trade with daily average swings more than double of what we see in gold. An investor in silver therefore needs to be prepared to suffer some pain before eventually getting it right. This is also one of the reasons why ETFs have become very popular as an investor will be in on a one for one basis compared to the leveraged nature of futures.

Russia might resume wheat exports
The Russian government has indicated that it might allow exports of wheat to resume as early as July, in order to free up storage space ahead of the upcoming harvest. A bumper crop due to increased acreage, weather permitting, is expected to yield between 85 and 90 million metric tonne, some 40% more than last year. The reaction has so far been muted as traders still have a vivid memory of the drought that hit Russia and Ukraine last year and substantially reduced production.

Milling wheat hits a new record as drought continues
This news comes as a relief to consumers in Europe as the worst drought to hit France, Germany and the U.K. for decades has seen the price of new crop milling wheat rally strongly during May to a new record of 254.50 Euros per metric tonne.

Meanwhile delays due to wet weather continue in the northern U.S. and Canada with farmers struggling to get especially wheat into the ground. As of last Sunday only 54% of spring wheat had been planted, well behind the average of 85% for this time of year. Corn farmers are contemplating switching to soybeans unless a window of opportunity arises within the next couple of weeks. Some 20% of the corn crop has yet to be sown and farmers may either cash in on their insurance or move to soybeans which can be planted until the end of June.

Livestock prices under pressure ahead of barbecue season
At the bottom of the performance scale we have live stock such as hogs and cattle. Prices has tumbled recently due to weak beef demand, fund selling and higher slaughter rate as dry weather has left cattle with little grass to graze. The weak demand has come from a slow start to the barbecue season as wet weather elsewhere has left men without a good excuse to hang around the barbecue.

Sell-off in solar stocks creates opportunities

Solar stocks have plunged 20.6 percent in May alone sending the year-to-date performance into negative territory, driven by worse than expected first quarter earnings releases in the industry. We believe the sell-off provides an opportunity to pick up solar stocks.

In our Yearly Outlook we put forth the idea that solar stocks would be a great play in 2011 and with at least 30 percent potential. While that target was almost reached in February the latest development in the Guggenheim Solar ETF (see chart below) has erased this year's gain. The main driver is concerns over demand as the Eurozone struggles (the largest Photo Voltaic market), overcapacity leading to price wars and a weak euro.

 Source: Bloomberg

All the arguments against solar are fair and reasonable. However, we believe the upside potential still outweighs the risks and investors will eventually realise that during 2011.

Many investors have talked about solar energy being non competitive and only booming because of government subsidies. While the latter is correct the idea that solar energy is not able to compete in the marketplace is wrong. Mark Little, GE's global research director, was out saying yesterday that GE believes that solar energy could be cheaper than fossil power in five years as technological advancements keep pushing down the unit cost for a kilowatt-hour; the cost of solar cells has fallen 21 percent in 2011. According to research, the cost of solar power is now about the same as the rate utilities charge for conventional power in the sunniest parts of California, Italy and Turkey. It is this underlying trend in unit costs that eventually will support the investment case in solar stocks.

We think fierce competition and continuing declines in production costs remind us of the old days in the computer industry. The constant push for lower prices will ultimately grow the market into a global mass market, but on that path many companies will fail due to inefficiency etc. Overall, we are optimistic on solar energy and believe it will be the largest disruption to utility markets in the coming decades.

Silver May Nearly Double by Labor Day

My Favorite Silver Trading

Silver May Nearly Double by Labor Day
By Greg McCoach

As we expected, the price of silver is rapidly recovering after the brutal correction we experienced earlier this month.

And now, the next phase of the silver bull market looks like it will open with a healthy bang, taking prices much higher.

I'll detail for you one of my favorite silver trades — one that I've personally made money with at least a dozen times in the past year.

After shedding some 31% of its value, the price of silver has bounced off its monthly low of about $33.50 an ounce.

This morning, silver prices opened around $37.50 an ounce.

 

This month's silver sell-off puzzled many investors, especially those who truly understand the intrinsic value of the white metal and have a clear perception of its supply/demand fundamentals.

But the fact is silver was ripe for profit taking after swiftly moving from $30 to $50 an ounce in a matter of weeks.

No market goes up in a straight line, and we were due for consolidation at some point...

Nevertheless, I believe we'll see the price of silver steadily rise throughout the rest of the year, with moderate corrections along the way.

The upward volatility will become greater as more and more investors and institutional funds wake up to the fact that they need to diversify away from the depreciating dollar.

Overall, I expect the silver prices to be closing back in the $50 level over the next few weeks as the dollar continues to wane in value. After that, I believe silver could even hit $70 an ounce by Labor Day.

World Silver Demand Facts

Investment demand for silver has skyrocketed 522% since 2007. World governments are hoarding silver; official sales have plummeted 83% in the past three years. Above-ground silver supplies dropped 86% last year. Industrial demand for silver has increased over the past decade, despite a 236% increase in prices.

Investment demand will remain key to silver's price. Higher demand will be required from investors because silver's supply/demand fundamentals are expected to deteriorate, with an expected surge in mine production and lower fabrication demand.

And as gold prices approach $2,000 an ounce, I believe silver will be preferred by many — if not most — retail customers as a cheaper alternative that provides the level of wealth protection investors might be looking for.

Gold is moving up against all currencies worldwide. And while some may flee the dollar to go into the euro or some other fiat currency for a time, most will eventually come to both gold and silver as the only true safe haven for their savings.

Add on top of all these events the next wave of derivative problems that are soon to hit the market, and we have the making of the perfect financial storm worldwide.

Owning the physical precious metals and quality junior mining stocks is the only insurance one can have against the financial insanity that's about to be unleashed on a worldwide basis.

Get your house in order and prepare while you still can.

Here's one great way to do exactly that...

The ProShares Ultra Silver ETF (NYSE: AGQ) 

is designed to track double the daily market performance of silver.

The ETF seeks daily investment results that correspond to twice (or 200%) the daily performance of silver bullion, as measured by the U.S. dollar fixing price for delivery in London.

In other words, AQG is designed to increase 2% when the daily London fixed price of silver increases 1%. And of course, this works both ways: When silver prices decrease 1%, AQG is designed to lose 2%.

But this is very important...

The ProShares Ultra Silver ETF does not directly or physically hold the underlying silver bullion. Instead, the ETF seeks exposure to silver through derivatives.

Typically, I avoid investing in any kind of derivative like the plague. But the ProShares Ultra Silver ETF isn't really an investment instrument; it's really best used for trading.

As the price of silver retraced its steps earlier this month, I wrote to my subscribers urgently telling them these are the dip moments I have been talking about where you want to be a heavy silver buyer.

And the ProShares Ultra Silver ETF was the perfect trade.

It has already been a wild ride, but one that has brought great satisfaction to me in helping others to make money. What's even better is that the best is yet to come for the precious metals and the mining shares.

Stay tuned, stay focused, and don't let this bull toss you off its back. It's kicking and bucking to knock as many of you off as possible...

Hang tight. It will be worth the ride in the end.

Good Investing,

Greg McCoach

Daily Report: Dollar Broadly Lower, Swiss Makes Record Highs

The economic data triggered selloff in dollar extends further today, sending the greenback broadly lower. Overnight comments from EU Juncker triggered brief pull back in EUR/USD but that was quickly overshadowed by weakness in the greenback. Drop in treasury yield is also seen as another factor weighing on the dollar as 10 year yield drops to a six-month low over night. Swiss franc jumped to new record high against dollar and euro as IMF urged SNB to raise rates. Meanwhile, Kiwi extends recent rally to a three year high, taking the Aussie higher too.

The rally is Swiss franc is particularly impressive. Safe haven flow from Euro is once factor which IMF's comments added more fuel. The IMF noted that Switzerland's exception fiscal position of nearly balanced budget and said "with the output gap closing and a below neutral policy interest rate, monetary accommodation should be withdrawn in the near-term under the baseline scenario."

There was temporary setback in EUR/USD's rebound over night after President of Eurogroup of finance ministers Juncker said Greece won't reach its 2011 budget deficit goal, and that the IMF may withhold the next tranche of Greece's bailout funds. Also, former ECB economist Issing accused that Greece "cheated" to get in Eurozone. The comments kept Euro under pressure in crosses.

On the data front, Japan core CPI rose 0.6% yoy in April, first rise in two years on a spike in energy and tobacco prices, retail sales dropped -4.8% yoy in April. UK Gfk consumer sentiment improved to -21 in May. Eurozone M3 and confidence indicators will be released. Swiss KOF leading indicator will be a focus as Swiss bulls would draw every excuse to send the currency higher. From US, personal income and spending will be released and dollar selloff might extend further in case of data disappointment.

New Zealand dollar has been exceptionally strong this week. NZD/USD's break of 0.8118 resistance yesterday confirms up trend resumption. And that's supported by rising upside momentum too. 0.8213 record high set in 2008 should be taken out in near term with ease and we're expecting the uptrend to extend further to 100% projection of 0.6559 to 0.7973 from 0.7115 at 0.8529 in medium term. 

Meanwhile Swiss Franc also rose to new record high against sterling overnight. GBP/CHF dropped to as low as 1.4028 so far. Current down trend should now extend through 1.4 psychological level to 100% projection of 1.5689 to 1.4295 from 1.5169 at 1.3775 next. 

Will the U.S. default? Is it really possible?

What happens on the day Uncle Sam runs out of money?

Or equally drastic: What happens when he’s no longer able to borrow from Peter to pay Paul and misses payments to countless creditors around the world?

Treasury Secretary Geithner sent a letter to Congress earlier this month with some of the answers. In it, Geithner describes a scenario in which …

A broad range of government payments are stopped, limited, or delayed, including military salaries, Social Security, and Medicare payments, interest on debt, unemployment benefits, and tax refunds.
Interest rates and borrowing costs move sharply higher, home values decline, and retirement savings for Americans are reduced.

Geithner even warns of “a financial crisis more severe than the crisis from which we are only now starting to recover.”

But if the United States truly missed interest and principal payments on its debts, the actual scenario would likely be far worse:

Instead of acting as ultimate protector and benefactor, the government is increasingly perceived as the ultimate deadbeat and even public enemy. Government agents and agencies fail to respond when desperately needed or, worse, overreact to perceived threats to their power, harming innocents financially and even physically.
Local governments shut down libraries, county jails, even courts. Garbage piles up on the streets. Crime rates soar. But police enforcement is so scarce that the wealthy must pay bribes for adequate protection, while middle-class communities are left largely defenseless.
State governments gut budgets, lay off teachers, and close schools. Classrooms are so crowded, children are allowed on campus strictly on a first-come, first-served basis. Truancy is rampant but ignored.
The federal government cuts current Social Security and Medicare payments across the board or, worse, sends recipients greatly devalued checks. Veterans hospitals shut down. Unemployment benefits are slashed.
Fannie Mae’s and Freddie Mac’s lending operations are phased out. Affordable FHA mortgages are scarcer than hen’s teeth. Washington’s many foreclosure prevention programs are themselves closed. Millions of homes are repossessed and dumped on the market.

What Will Actually Happen?

Let’s consider all the facts — coldly, objectively, and without political bias.

Fact #1. Everyone — including Mr. Geithner and the Republican leadership in Congress — knows that the debt ceiling debate is mostly political posturing. Everyone also knows that to overcome this hurdle, all Congress has to do is pass a simple piece of legislation. Therefore, we do not expect the U.S. government to default directly on its debts.

But the U.S. is already defaulting indirectly by devaluing the U.S. dollar … and it will continue to do so!

Fact #2. No government can repeal the law of supply and demand. No army or police can enforce laws that might seek to control global financial markets.

They cannot stop investors all over the world from selling U.S. dollars.

They cannot stop those same investors from dumping U.S. Treasury notes or bonds.

And ultimately, they cannot force foreign creditors to continue lending money to the United States.

Fact #3. The U.S. has already reached its debt limit, and a fundamental shift in global attitudes toward Washington is already under way.

Meanwhile, Mr. Geithner is postponing the ultimate judgment day with a series of money-shifting shell games at the Treasury Department.

The true, drop-dead deadline, he says, is August 2. If Congress doesn’t raise the nation’s legal debt limit by then, that’s when the shift will truly hit the fan.

This gives Congress some more time. But no one knows how much time America’s foreign creditors will give us …

Fact #4. Even as early as the year 2000, the U.S. began to depend massively on borrowing from overseas — a total of $1 trillion.

China, the UK, Germany, and OPEC countries loaned America large sums, with the single largest loans coming from Japan. In fact, at that time, the U.S. borrowed more from Japan than the sum total of the other four.

But it wasn’t enough to sustain the debt-hungry, bubble economy in the United States.

Giant Internet and technology companies crashed. The Nasdaq lost three-quarters of its value. The American economy sank into recession. Unemployment soared.

Fact #5. To save the economy from collapse, then-Fed Chairman Alan Greenspan artificially shoved interest rates down to the lowest levels in a half century … and kept them there for nearly two years.

In addition, the U.S. was forced to borrow massively from overseas AGAIN — this time mostly from China.

But it STILL wasn’t enough!

The housing bubble burst. The economy collapsed. America’s largest banks went broke or needed giant bailouts. All of Wall Street nearly melted down.

Total debts to foreigners as of the latest reckoning: $4.47 trillion, or more than QUADRUPLE the level of 2000 — by far the largest of all time.

Fact #6. If you think borrowing trillions from overseas is a warning sign of big trouble, wait till you see what happened next.

When the lowest interest rates in a half century and the biggest-ever borrowing from overseas were STILL not enough to rescue failing banks and finance ballooning federal deficits, Fed Chairman Ben Bernanke resorted to the greatest money printing in U.S. history (as measured by aggregate reserves of banks and the monetary base).

Heck, even in the most extreme circumstances of recent history, the Federal Reserve had never pumped in anything close to the amounts Bernanke created.

For example, before the turn of the millennium, the Fed scrambled to provide liquidity to U.S. banks to ward off a feared Y2K catastrophe, bumping up the monetary base from $557 billion on October 6, 1999 to $630 billion by January 12, 2000. At the time, that sudden increase was considered extreme — $73 billion in just three months.

Similarly, in the days following the 9/11 terrorist attacks, the Fed rushed to flood the banks with liquid funds, adding $40 billion through 9/19/01.

But Mr. Bernanke’s money printing since September 2008 has been a whopping 22 times larger than during in the Y2K episode and 41 times larger than 9/11!

Moreover, in the Y2K and 9/11 episodes, soon after the immediate crises had passed, the Federal Reserve promptly reversed its money infusions and took the excess amounts back OUT of the economy, restoring a semblance of normalcy.

But now, Mr. Bernanke has done precisely the opposite! He has continued his money-printing binge virtually nonstop — first under the rubric of “quantitative easing round one” (QE1) and now under “quantitative easing round two” (QE2).

Total amount printed by Bernanke so far? $1.634 trillion! (From 9/10/2008 through 5/4/2011.)

And that’s on top of Bush and Obama economic stimulus packages — not to mention countless government bailouts and guarantees!

But It’s STILL Not Enough!

As Mike Larson explains in “The Forgotten Crisis,”

“The massive economic stimulus package from a few quarters back, plus the Federal Reserve’s unprecedented wave of money printing, didn’t buy us much. We printed, borrowed, and spent more than $2 trillion. And all it bought us was a few quarters of tepid GDP growth.
“Now the end of QE2 is looming in just six weeks. The federal government is tapped out, what with the debt ceiling pressure. So we’re left with an economy that has to stand on its own two feet … and it appears it just can’t!
“GDP growth already slowed from 3.1 percent in the fourth quarter of 2010 to 1.8 percent in the first quarter of this year. Now it looks like things could be even worse in the current quarter.”

Meanwhile, Mike points out that …

1. Housing starts have just plunged 10.6 percent, leaving the market stuck at a dismal level of about 500,000 to 600,000 starts for two-and-a-half years — DESPITE hundreds of billions of dollars in aid being thrown at the market by Washington.
2. Home prices are down again. They fell apart in the housing bust. Then they recovered a bit. Now, they’ve fallen back down and are dangerously near their lowest levels reached during the depth of the housing bust in early 2009!
3. Industrial production flatlined in April, confounding economists who were looking for a gain of 0.4 percent.
4. The Empire Manufacturing Index, which measures activity in the greater New York area, plunged to 11.9 in May from 21.7 a month earlier.

“Bottom line,” concludes Mike, “the American economic engine is starting to sputter again!”

Time Is Running Out!

The U.S. dollar has already been plunging against nearly all major currencies of the world.

The cost of food, energy, and imports are already going through the roof.

Mr. Bernanke’s second big round of money printing is already about to end. Even if he embarks on a third round, he will have to step up the pace dramatically, risking even bigger price surges … or cut back the pace, risking an economic tailspin.

Which will it be? Right now, Bernanke’s on track to ramp up the printing presses even further.

Our advice:

• Stay away from medium-term notes or long-term bonds of any kind, whether issued by local governments, the U.S. Treasury, or corporations. Remember: Even a moderate acceleration of inflation can significantly erode their value.
• To protect yourself against inflation, buy, hold, and accumulate gold and other hedges.
• The best defense is to go on the offense. And the best way to go for substantial profits is with ETFs that are most likely to rise as the dollar falls.

Prime example: ETFs tied to the most in-demand tangible assets, the strongest foreign currencies, and the most stable, fastest-growing economies.

Good luck and God bless!

 Martin.

http://www.moneyandmarkets.com/

The End of the World!

The End of the World!

(for Harold Camping's Credibility!)

Silver Stock Report

by Jason Hommel, May 23rd, 2011

Harold Camping's ministry and followers reportedly spent up to $100 million to warn the world that the rapture would come on the 21st. Today, it's the 23rd, and Camping and his followers are still here. I feel bad for them, as I also once tried to predict the rapture, way back in September 11th, 1999, and I spammed usenet to preach it! So, I know a bit of their disappointment. I still believe that the rapture will happen at the end of the world, at the beginning of the day of the Lord, before the 7 year tribulaion. Here's what the Bible says about false prophets:

Deut 18:22 When a prophet speaketh in the name of the LORD, if the thing follow not, nor come to pass, that is the thing which the LORD hath not spoken, but the prophet hath spoken it presumptuously: thou shalt not be afraid of him.

Ezek. 14:9 And if the prophet be deceived when he hath spoken a thing, I the LORD have deceived that prophet, and I will stretch out my hand upon him, and will destroy him from the midst of my people Israel.

It's a good thing that we false prophets can have forgiveness through Jesus!

Some Christians fear that the recent false prophecy of the rapture ruins the Bible's and God's credibility. No, it helps it! How? Because false prophets are a actually sign of the end times, and they will probably increase just like earthquakes, wars, and famines!

Mark 13:21 And then if any man shall say to you, Lo, here is Christ; or, lo, he is there; believe him not:

Mark 13:22 For false Christs and false prophets shall rise, and shall shew signs and wonders, to seduce, if it were possible, even the elect.

Also, I do believe that someday, prophets will accurately predict the Lord's return.

Amos 3:7 Surely the Lord GOD will do nothing, but he revealeth his secret unto his servants the prophets.

Mark 13:23 But take ye heed: behold, I have foretold you all things.

Mark 4:22 For there is nothing hid, which shall not be manifested; neither was any thing kept secret, but that it should come abroad.

Dan 12:9 And he said, Go thy way, Daniel: for the words are closed up and sealed till the time of the end.

Dan 12:10 Many shall be purified, and made white, and tried; but the wicked shall do wickedly: and none of the wicked shall understand; but the wise shall understand.

But it won't be by gematria. But rather, truth is established by 2-3 witnesses.

Deuteronomy 19:15 One witness shall not rise up against a man for any iniquity, or for any sin, in any sin that he sinneth: at the mouth of two witnesses, or at the mouth of three witnesses, shall the matter be established.

Matthew 18:16 But if he will not hear thee, then take with thee one or two more, that in the mouth of two or three witnesses every word may be established.

Thus, no prophecy will hang on a vague interpretation of one verse somewhere, but truth will be established by 2-3 scriptures, and many Christian denominations all embracing the truth that will be revealed.

We should never say, "we will never know when the Lord will return", because not knowing is a punishment for not watching and a punishment for being an evil servant of the Lord.

Revelation 3:3 "Remember therefore how thou hast received and heard, and hold fast, and repent. If therefore thou shalt not watch, I will come on thee as a thief, and thou shalt not know what hour I will come upon thee."

Luke 12:39 "And this know, that if the goodman of the house had known what hour the thief would come, he would have watched, and not have suffered his house to be broken through."

Mat 24:48 But and if that evil servant shall say in his heart, My lord delayeth his coming;

Mat 24:49 And shall begin to smite his fellowservants, and to eat and drink with the drunken;

Mat 24:50 The lord of that servant shall come in a day when he looketh not for him, and in an hour that he is not aware of,

Mat 24:51 And shall cut him asunder, and appoint him his portion with the hypocrites: there shall be weeping and gnashing of teeth.

If not knowing the time of the Lord's return is a specific punishment that applies to those who "shall not watch", or the "evil servants", then it seems this punishment could not apply to God's good servants who are watching.

Even the foolish virgins of Matthew 25:1-13 who will not be saved, will know the general time to prepare and get ready for the Lord's return.

Matthew 25

1 Then shall the kingdom of heaven be likened unto ten virgins, which took their lamps, and went forth to meet the bridegroom.

2 And five of them were wise, and five were foolish.

3 They that were foolish took their lamps, and took no oil with them:

4 But the wise took oil in their vessels with their lamps.

5 While the bridegroom tarried, they all slumbered and slept.

6 And at midnight there was a cry made, Behold, the bridegroom cometh; go ye out to meet him.

7 Then all those virgins arose, and trimmed their lamps.

8 And the foolish said unto the wise, Give us of your oil; for our lamps are gone out.

9 But the wise answered, saying, Not so; lest there be not enough for us and you: but go ye rather to them that sell, and buy for yourselves.

10 And while they went to buy, the bridegroom came; and they that were ready went in with him to the marriage: and the door was shut.

11 Afterward came also the other virgins, saying, Lord, Lord, open to us.

12 But he answered and said, Verily I say unto you, I know you not.

13 Watch therefore, for ye know neither the day nor the hour wherein the Son of man cometh.

If, therefore, the unsaved foolish virgins can know the time of the Lord's return, why wouldn't God's wise prophets know?

Thus, I believe one day, God's prophets will know the time of the Lord's return.

In fact, there are several things that have to happen first, in my opinion, before the pre-tribulation rapture.

Specifically, I believe the world will highly value silver and gold, and that the wealth of the world, in silver and gold, will be concentrated to Israel, as the Bible specifically says! How hard is it to believe something written with such specificity, plainness and redundancy?

Zechariah 14:14 Judah too will fight at Jerusalem. The wealth of all the surrounding nations will be collected — great quantities of gold and silver and clothing.

Ezekiel 38:13 Sheba and Dedan and the merchants of Tarshish and all her villages[e] will say to you, “Have you come to plunder? Have you gathered your hordes to loot, to carry off silver and gold, to take away livestock and goods and to seize much plunder?”’

If silver and gold are considered the wealth of the nations, then it appears to me that the world will highly value silver and gold, and be using them as money, at the time of the end.

It appears to me that the invasion of Israel from the north mentioned in Ezekiel 38 will be exactly the right pretext for the Antichrist to come on the scene and blame silver and gold for the world's problems, and usher in his anti-gold solution of the 666 mark of the beast for tracking all economic transactions.

The antichrist also is described as the "8th beast" in Revelation 17-18. His world government implies that there will be another world government that comes before it, the "7th beast". That, to me, implies a world government will exist prior to the rapture.

Both a world government, and the use of gold and silver as money, implies another important thing: World peace, which is also a feature of Ezekiel 38, specifically, that Israel is living at peace. Three times, Israel is mentioned as living in peace and safety.

Ezekiel 38:8 After many days you will be called to arms. In future years you will invade a land that has recovered from war, whose people were gathered from many nations to the mountains of Israel, which had long been desolate. They had been brought out from the nations, and now all of them live in safety.

Ezekiel 38:10 “‘This is what the Sovereign LORD says: On that day thoughts will come into your mind and you will devise an evil scheme. 11 You will say, “I will invade a land of unwalled villages; I will attack a peaceful and unsuspecting people—all of them living without walls and without gates and bars.

Ezekiel 38:14 “Therefore, son of man, prophesy and say to Gog: ‘This is what the Sovereign LORD says: In that day, when my people Israel are living in safety, will you not take notice of it?

Israel has never been at peace since the modern nation was founded. Military service is mandatory for all people of young age.

Paul, when writing about the rapture, in 1 Thessalonians chapters 4-5, mentions this peace and safety that is followed by the sudden destruction, and connects this with the rapture and the return of the Lord. There is only one time in the entire Hebrew Scriptures that describes a time when the people are experiencing and saying peace and safety, which is followed by sudden destruction, and it's Ezekiel 38. This passage also alludes to the fact that the timing of these events will be known to the followers of God.

1 Thessalonians 5

1 But of the times and the seasons, brethren, ye have no need that I write unto you.

2 For yourselves know perfectly that the day of the Lord so cometh as a thief in the night.

3 For when they shall say, Peace and safety; then sudden destruction cometh upon them, as travail upon a woman with child; and they shall not escape.

4 But ye, brethren, are not in darkness, that that day should overtake you as a thief.

5 Ye are all the children of light, and the children of the day: we are not of the night, nor of darkness.

6 Therefore let us not sleep, as do others; but let us watch and be sober.

7 For they that sleep sleep in the night; and they that be drunken are drunken in the night.

8 But let us, who are of the day, be sober, putting on the breastplate of faith and love; and for an helmet, the hope of salvation.

9 For God hath not appointed us to wrath, but to obtain salvation by our Lord Jesus Christ,

10 Who died for us, that, whether we wake or sleep, we should live together with him.

11 Wherefore comfort yourselves together, and edify one another, even as also ye do.

The time for the rapture was just not ready today.

Today, Israel is not living in peace and safety, as it will.

Today, the world does not highly value silver and gold. But it will.

Get ready. Buy silver and gold.

This will also help Christians to prepare for the Great Commission, to spend the money to take the gospel to the nations.

=====

I strongly advise you to buy and take possession ofreal gold and silver, at anywhere near today's prices, while you still can. The fundamentals indicate rising prices for decades to come, and a major price spike can happen at any time.

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http://www.facebook.com/jason.hommel

Sincerely,

Jason Hommel

www.silverstockreport.com

http://www.bibleprophesy.org/