Straight out of the New Deal playbook, public sector funds, better known as ‘free money’, will receive priority over private funds to provide liquidity and help stabilize troubled neighborhoods. Home Owners’ Loan Corporation (HOLC) of 1933 was also intended to provide liquidity and prevent foreclosures in troubled neighborhoods during the Great Depression. The HOLC ran out of money by 1935 and had little affect on the secular trends in place since 1929.

Major banks are agreeing to give local governments and nonprofit groups the ability to buy foreclosed homes before they are sold to private investors.

The Obama administration said Wednesday local officials could benefit from acquiring these properties and renovating them or using the land for redevelopment projects. Congress has provided $7 billion to buy the homes, but these groups are struggling to spend the federal money because they are often outbid by speculators who are snapping up foreclosures.

Source: finance.yahoo.com

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UN: Global food prices highest in 2 years
CIGA Eric

International food prices have risen to their highest level in two years, fueled in part by a drought in Russia that lifted the cost of wheat, a U.N. agency said Wednesday.

Rising global food prices are byproduct of currency devaluation across the globe. Yet, the headline discussion remains fixed on the message of deflation.

Spot Commodity Prices: CRB Spot Index (1947 – Present);
16-Raw Industrial Spot Price (1935-1947);
Great Britain Wholesale Price of All Commodities (1885-1935)

Foodstuffs, which have underperformed the spot index since 2009, has begun to outperform again. That last time this happened gold accelerated from 2007 to 2008.

Gold and CRBFood to CRBSpot Ratio:

The talk of deflation is nothing more than misdirection away from the message conveyed by the secular trends.

Source: hosted.ap.org

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Dear Eric,

China has a plan that goes out a century.

The West has no national economic plan even for tomorrow.

Regards,
Jim

China may probe BHP’s bid for Potash: report
CIGA Eric

The consequence of an economic battlefield, battle for resources and control, that not only knows no boundaries but also allegiances.

China may launch an antimonopoly probe into BHP Billiton’s $39 billion bid for Canada’s Potash Corp, the China Business News said on Wednesday, citing a source familiar with the matter.

China will also review the merger of two Russian potash firms — Uralkali and Silvinit — given the major impact the two deals would have on China, the paper cited the unnamed source as saying.

Source: finance.yahoo.com

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While the Canadian dollar will benefit, it will not be the ‘big’ winner. Gold has consistently outperformed all fiat, including the Loonie, since 2000. Expect this trend to continue as long as devaluation through perpetual stimulus remains the official solution.

If the Fed pursues another round of quantitative easing, the Canadian dollar may be the big winner. The loonie has tended to perform fairly well following previous QE episodes, according to Barclays strategist Paul Robinson.

Source: business.financialpost.com

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Analyst: Citigroup Is Cooking the Books
CIGA Eric

Headline should read who’s not cooking their books? Generous accounting flexibility allows financial firms to reports earnings that do not exist. This is hardly a news flash.

An all-out war has broken out between Citigroup CEO Vikram Pandit and a prominent securities analyst who is saying that the big bank may be cooking the books by inflating its earnings through an accounting gimmick, FOX Business Network has learned.

Source: foxbusiness.com

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Broke City Breaking Employee Contracts
CIGA Eric

Since local governments cannot devalue their currencies to pay for services they cannot afford, they must either receive "free" money from the federal government (which can print money) or drastically curtail their spending. The federal government’s most recent liquidity infusion to local and state coffers to fill budget holes suggests that they are fully aware of the economic consequences of public sector employment contraction. Unfortunately, the small cash infusions won’t provide much more than a temporary solution to a long-term secular problem.

The city of Miami is so broke it’s forcing employees to take pay cuts, even though they’re under contract.

Mayor Tomas Regalado said he’s never seen a financial mess like this before, and his options are grim.

“It’s either that or we layoff 1,000 employees or we raise taxes to the max, and we’re not raising taxes to the max,” the mayor said.

Source: nbcmiami.com

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In the early 1980s I wrote a book on the strategic metals and materials war. I owned a minor metals trading business in London at 116 Borough High Street.

I know this market better than most. This is HUGE. It can shut down the Western World high tech industry.

Jim

Backlash over China curb on metal exports
CIGA Eric

Draconian describes one perspective. Strategic position or reposition describes another. It’s difficult to establish leverage in trade negotiations when huge structural deficits places hat during the Treasury auctions to the same nations setting the ‘unfavorable’ rules.

China’s draconian export curbs on rare earth minerals needed by the rest of the world for frontier technologies is escalating into a serious diplomatic and trade clash with the United States and other leading powers.

Source: telegraph.co.uk

Thanks Bob

More…

Americans spend a bit more as economy limps along
CIGA Eric

As I suggested in my commentary, If you don’t like the message conveyed by economic time series, revise it! , personal spending and consumption data, as well as many more economic series, are hardly worthy following due to constant revision and massaging techniques. Capital flows could care less about utopia theories based on biased and historically uncomparable economic times series.

Americans are spending a little more this summer, but hardly enough to rejuvenate the weakening economy.

What is needed is a bigger boost in salaries and more jobs. Economists don’t see either coming this year, which is why the economy is likely to limp along.

Source: news.yahoo.com

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It’s easy to see why pension funds are in so much trouble. What an ingenious way to cull the gene pool.

Best regards,
CIGA Black Swan

Behind Fraud Charges, New Jersey’s Deep Crisis
By RICHARD PÉREZ-PEÑA

New Jersey got in trouble with federal regulators this week for misrepresenting the health of its pension funds. But the bigger problem may be what the state was trying to hide: a long-brewing crisis in its ability to pay retirees.

Experts say that governors and legislators, Republicans and Democrats, have all contributed to the problem by refusing to put state money into the funds as they should have. And even if benefits are cut and taxes raised, they said, there is no obvious fix in sight.

“The whole political culture evolved where the purpose in Trenton was to spend and defer the problems until later,” said James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.

The state’s most recent report said that as of June 2009, the pension funds should have had assets of $112 billion to meet their future obligations, but had only $66 billion — one of the largest shortfalls, known as unfunded liability, in the country. The situation is probably worse today: The state is supposed to contribute about $3 billion a year to the funds, but amid huge budget deficits and spending cuts, it is in the second consecutive year of contributing nothing.

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Your formula looks spot on as always. I am of the opinion that the "recovery talk" was all hot air!

Best,
CIGA BT

Dear BT,

QE to Infinity is certain. Gold at and above $1650 is certain.

Management of Perspective Economic (MOPE) is running out of steam.

Regards,
Jim

“Throughout the summer, data signals have become more alarming,” wrote El-Erian, who is based in Newport Beach, California. “Current policy approaches here and abroad are unlikely to deliver a durable and robust U.S. recovery.”

El-Erian Says `Alarming’ Data Show U.S. Economy Slowing
By Wes Goodman – Aug 27, 2010 3:03 AM MT

PIMCO CEO Mohamed A. El-Erian, seen here, wrote, “Current policy approaches here and abroad are unlikely to deliver a durable and robust U.S. recovery.” U.S. economic data are “alarming,” signaling the recovery is losing momentum, Mohamed A. El-Erian, Pacific Investment Management Co.’s chief executive officer, wrote in an opinion piece in the Washington Post.

Unemployment is high, consumer credit is shrinking and small companies are having trouble obtaining bank lines of credit, wrote El-Erian, who is also co-chief investment officer at Pimco, which runs the world’s largest bond fund. Increased government spending and additional debt purchases from the Federal Reserve are unlikely to spur a rebound, he wrote.

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Dear Eric,

I am most interested in Shadow Stat’s take on the real number.

Regards,
Jim

GDP seen revised down on imports and inventories
CIGA Eric

U.S. economic growth likely was much weaker than initially thought between April and June, hurt by surging imports and as rebuilding of business inventories softened, a government report is expected to show on Friday.

Gross domestic product now is estimated to have grown at a 1.4 percent annual rate during the second quarter, rather than the 2.4 percent estimated in the government’s first reading last month, according to a Reuters survey.

While cracks in the façade of big consumption and government are beginning to show, the economic and financial structures that maintain it are still in place. As long as Americans consume more than they produce, they must issue debt (paper claims against future production) to balance the shortfall.

BIG CONSUMPTION -

Personal Consumption Expenditures (PCE) As A %GDP and Personal Consumption Expenditures As A %GDP Average from 1947:

BIG (GROWING) PUBLIC SECTOR -

Government Consumption Expenditures and Gross Investment (GCEI) As A %GDP Average from 1947:

The more debt America issues, the more devaluation of the U.S. dollar will be consequence of most, if not all, policy responses.

Source: finance.yahoo.com

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Jim Sinclair’s Commentary

Here is a report from a real business man, CIGA Marc, not some dumbass Wall Street cheerleader.

Dear Jim,

Traditionally, summer is a slow time of the year at the hardware store with August being the slowest of the summer months. Preliminary numbers thru yesterday show sales off slightly less than 8% year over year. Were it not for the paint category which we have aggressively marketed this year I feel sales would be off nearly double the 8%. Generally lumber, building materials and mason supplies see some movement during the summer months and this year those sales are off upwards of 30% as large renovation projects and new construction stagnate.

A recent hardware show in Chicago for a large independent wholesaler of hardware experienced good sales but very light attendance. There are those in the industry who have the capability to take advantage of the deals and those who don’t. Similar to other trends within our nation the "middle class" is harder and harder to find.

Recently I was alerted to the fact that drywall products (compounds, sheet rock) will again experience a price increase next month. I can assure you this is not demand related!

Paint manufacturers have increased prices over the summer months and we have also noticed increased prices of paint accessories such as roller handles, roller covers, drop cloths and related items. Many of these items are imported and have in some cases jumped dramatically in price over the past few months.

In general prices are definitely rising at the wholesale level. However the manufacturers and vendors are willing to offer deals to undercut each other which is allowing some flexibility at the retail level. With limited sales nobody wants to lose the sale. How long this can last before they are forced to charge the increased prices remains to be seen but with lackluster business it’s certainly not a sustainable strategy.

One of my favorite salesmen has a good answer when I ask him how business is. His response for nearly 2 years has been "spotty". I can’t argue with his assessment one bit.

Best Regards,
CIGA Marc

Dear Eric,

Double dip, like hell! The bottom is going to fall out.

The smoke and mirrors modest upturn in economic statistics primarily due to the FASB capitulation in April of 2009 comes to an end as the Ski Jumper gets airtime.

Regards,
Jim

Housing is Dragging the Economy to Hell
CIGA Eric

A little more than two months ago, banking analyst Meredith Whitney said on CNBC, “Unequivocally, I see a double-dip in housing. There’s no doubt about it . . . prices are going down again.”

Housing, an asset that depreciates over time, is a function of demographics, leverage, and access to credit (emphasis on access to credit in recent years). Once the credit machine shutdown in late 2008, housing began to revert to its unleveraged, supply and demand driven mean price. The virtuous cycle, positive reinforcing credit on the upside, had turned vicious by negatively reinforcing credit and home prices on the downside. I suggest that once currency devaluation is removed, no discernable “bounce” can be recognized from which a dip could materialize. The steep and largely uninterrupted down trend in the U.S. median home price (MHP) to gold since 2005 illustrates this point.
Source: usawatchdog.com

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Jim Sinclair’s Commentary

Non-recourse loans? So without ethics, why not screw the lender?

Commercial Property Owners Choose to Default
CIGA Eric

The banking system pressed hard for the new bankruptcy laws in 2005. Now those laws are biting them in the arse as more investors default and walk away. The commercial property investors are more professional, so they won’t waste time in doing so. For them it’s a good business decision. Rather than throw good money at a bad situation, they simply choose to walk away.

Like homeowners walking away from mortgaged houses that plummeted in value, some of the largest commercial-property owners are defaulting on debts and surrendering buildings worth less than their loans.

Source: online.wsj.com

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Dear Eric,

This thing is going to unwind so fast that other than us here at JSMineset, no one will believe it.

Jim

Bullish Sentiment Plummets to Credit Crisis Low
CIGA Eric

Following the herd is rarely profitable. The herd is bearish. Such readings tend to be associated with capitulation rather than an initiation of a trend.

The number of individual investors who have a bullish outlook on the stock market for the next six months plunged to 21 percent, from 30 percent last week, according to a widely followed sentiment survey.

What’s more, this is the lowest weekly reading from the American Association of Individual Investors since a March 2009 level of 19 percent, which occurred just before the S&P 500 collapsed to a 12-year low of 676.

American Association of Individual Investors Sentiment Survey:

More…

I still think the vast majority are in denial. There really does appear to be an engrained mindset that “it can’t happen here.” That no matter what, “the people in power are really smart and know these things so much better than I do so I am not worried about any sort of crisis developing.” “They can fix it.”

The problem is we have an entire generation that has no clue what “The Great Depression” was like, much less even know about it due to the pitiful amount and quality of the history classes taught today.

Most folks think that the Weimar Republic is a diner that serves hot dogs or weenies.

Heaven help us when they wake up and realize what is happening.

By the way, did you read about some of the small towns out that due to budget constraints told their citizens they will no longer be responding to burglary calls?

This is the sort of thing that concerns me where all this is headed.

Your pal,
Trader Dan

Cutbacks force police to curtail calls for some crimes
By Kevin Johnson, USA TODAY

Budget cuts are forcing police around the country to stop responding to fraud, burglary and theft calls as officers focus limited resources on violent crime.

Cutbacks in such places as Oakland, Tulsa and Norton, Mass. have forced police to tell residents to file their own reports — online or in writing — for break-ins and other lesser crimes.

"If you come home to find your house burglarized and you call, we’re not coming," said Oakland Police spokeswoman Holly Joshi. The city laid off 80 officers from its force of 687 last month and the department can’t respond to burglary, vandalism, and identity theft. "It’s amazing. It’s a big change for us."

More…

Gold Stocks Trend Energy Increasing
CIGA Eric

REV(E) has breached its June high despite a lower price. This suggests that trend energy is increasing and retest of the June price high.

Gold Miners Index ETF (GDX):

More…

Dear Eric,

Greenspan when Chairman confirmed MOPE (Management of Perspective Economic) as the present school of economic thought and application. Now Bernanke is making the same confirmation.

There comes a time when smoke and mirrors fall flat on their ass. This is the time as we are headed to a double dip with the double being the dip of a lifetime.

The result will without any doubt be "Currency Induced Cost Push Inflation." The problem is that so very few have a clue what that is, yet the fate of nations hangs on the correct understanding.

Regards,
Jim

Bernanke’s top tool now may be power of persuasion
CIGA Eric

The power of persuasion – spin, MOPE, propaganda, etc has been a critical tool since humans learned to talk within the context of centralized control. The fact that the media has chosen to recognize it at this point in the cycle reflects the growing fragility of the economic backdrop.

That’s the test facing Fed Chairman Ben Bernanke as he addresses a conference Friday in Jackson Hole, Wyo. Without any easy options left, Bernanke must try to prevent another recession by persuading people and businesses to feel confident enough about the future to spend more today.

Source: finance.yahoo.com

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Dear Eric,

Recession risk or the bottom will drop out? You are being too gentlemanly.

Regards,
Jim

U.S. Economy: Durables, Housing Signal Recession Risk
CIGA Eric

Both CPI and gold-adjusted business core spend (new orders of durable goods ex. defense and aircraft) time series are rolling over. Gold adjusted business core spending, a better reflection real of business activity, has not recorded positive year-over-year growth since 2007. This throws cold water on the heavily MOPE’d economic recovery of 2009-2010.

Real Business Core Capital Spending: Real or CPI-Adjusted New Orders of Durable Goods ex. defense and aircraft (RBCCS) and YOY Change:

Gold-Adjusted New Orders of Durable Goods ex. defense and aircraft (BCCSGLDR) and YOY Change:

Orders for durable goods in the U.S. increased less than forecast in July and sales of new homes unexpectedly dropped, increasing the risk of a renewed recession in the world’s largest economy.

Bookings for goods made to last at least three years rose 0.3 percent, figures from the Commerce Department showed today in Washington. Excluding transportation equipment, demand fell by the most in more than a year. Purchases of new dwellings fell 12 percent to an annual pace of 276,000, the weakest since data began in 1963, figures from the same agency showed.

Source: businessweek.com

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Dark Pool investing is spreading to Asia – allegedly because of client demand.

The chairman of the Hong Kong stock exchange is critical of the practice because of the lack of transparency. He warned that “Financial markets face a “systemic risk” from alternative trading platforms.”

No one is listening to him.

Best Regards,
CIGA Black Swan

Dear CIGA Black Swan,

If they are a danger to Asia where they are incipient what are they in the West where they are mature?

Regards,
Jim

Deutsche Bank Starts Hong Kong Dark Pool as Demand Increases 
By Jonathan Burgos – Aug 23, 2010 6:00 AM ET 

Deutsche Bank joins U.S. rival Citigroup Inc. in offering services in Asia for clients seeking trading venues that don’t display quotes publicly. 

Deutsche Bank AG started dark pool trading in Hong Kong today, the German lender’s first such platform in Asia, to meet growing demand in the region. 

After Hong Kong, the bank plans to offer off-exchange trading in Australia, Japan and Singapore, said Mark Davis, head of equity and equity-linked execution for the Asia-Pacific region at Deutsche Bank. The timing of the introduction in those markets is still being confirmed, he said. 

Demand for dark pools, which don’t display quotes publicly, has grown more slowly in Asia than in the U.S. and Europe and Ronald Arculli, chairman of Hong Kong’s stock exchange, has criticized the platforms for lack of transparency. New York- based Citigroup Inc. said last week it plans to start dark pool services in Singapore next year after its off-exchange trading in Australia increased to a record in June. 

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Jim Sinclair’s Commentary

Intellectual giants and floor traders rarely go together. Floor traders and callused knuckles is a commonality.

There is one exception, maybe the only, and that is my dear friend and former partner Yra Harris.

Listen carefully, he knows what is coming.

Notes From Underground: CNBC-CME trader sounds off
August 25, 2010 at 9:19 am

Dear CIGAs,

When reading Yra’s article, remember that he is not in the Bubble Camp, he is a floor trader who has profited and survived by never standing in front of a locomotive.

The day a bubble is a bubble is the day after it gets pricked. True bubbles are always identified in hindsight.

Regards,
Jim

Treasuries – The New and Improved Toxic Asset?
CIGA Eric

Treasuries are now the New and Improved Toxic Asset. Everyone knows that they are overvalued, everyone knows their yields are absurd—yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is.

Bob

Bob,

The only opinion that matters is the market. The secular trends in the bond market suggest two things: (1) While the nominal (U.S. dollar)trend in bonds remains intact, it serves as a poor "canary in the coal" mine because of the devaluation bias (see chart below):

Long-Term U.S. Government Bonds Total Return Index (LTGBTRI):

(2) When the devaluation bias is removed, the secular trend in the bond market changes from up to down. Clearly, the canary in the coal mine died in 2001 – a long time ago.

Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) to Gold Ratio:

Do not let consensus opinion – "what should be" cloud your perception of reality. As I have said many times before, follow the money.

The flow of capital has already begun its transition from the public to private sector (see chart below). This transition will be manifested into market trends (capital flows) yet to be recognized by the collective vision of consensus opinion.

Long-Term U.S. Corporate Bonds Total Return Index (LTCBTRI) to Long-Term U.S. Government Bonds Total Return Index (LTGBTRI):

Regards,
Eric

More…

Silver Has Jumped The Creek
CIGA Eric

Silver will lead another liquidity blast. This is illustrated by the gold to silver ratio (GSR).

In early August I suggested that,

While the ratio remains above June 2009 swing low, today’s technical suggest that another wave of currency debasement lurks just around the corner.

Today’s price and volume action suggest that silver has "jumped the creek" above near-term resistance. This has increased the pull of the May-June highs.

Silver ETF (SLV):

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‘Quantitative Easing’: What Does It Really Mean for Investors?
CIGA Eric

Don’t make things more complex than they have to be. What does it mean?

Devaluation of paper money, particularly the senior currency in which the majority of debt was issued (U.S. dollar)

• Reduction in the general standard of living
• Ongoing default of debt through inflation
• Rising price of gold and silver relative to fiat.

Gold, London P.M. Fixed

Silver, London P.M. Fixed

Investors queasy over whether there’s anything that can be done to boost the flagging US economy could get a trillion-dollar answer this week from the Federal Reserve.

When officials from the central bank emerge from this week’s Jackson Hole, Wyo., retreat, they will likely disclose the latest in the arsenal of so-called "quantitative easing" measures.

Source: cnbc.com

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Yra is spot on. Please read this.

Notes From Underground: Amazing Grace has appeared and it’s in Jackson Hole
By Yra

Amazing Grace! How sweet the sound,
That saved a wretch like me.
I once was lost but now am found,
Was blind, but now I see.

The markets are reacting to a Wall Street Journal article by the new FED fair-haired minion, Jon Hilsenrath, and the great dissonance that took place at the last FOMC meeting. Our readers know that we have been very critical of the FED and its reliance on models that, on a good day, are so badly flawed. The pursuit of economic policies based on poor analysis has been a major problem and the markets are waking up to the fact that the FEDis neither omniscent nor omnipotent. Today, the markets are responding to the fear that the FED is” lost in the ozone ” so risk is being taken off and the algorithm’s of the risk-off trade are in full motion.

We at NOTES must ask: If the FED and its models are so badly broken why do investors want to run to DOLLARS for safety? If the major global policy force is in disarray, why do I wish to own its financial instruments? There is going to be a great deal of discussion among the premier academics in Jackson Hole this Thursday and Friday. But we stress that the FED is losing its credibility and there is concern about the way forward.

The FED will be looking to repair its fall from grace but it doesn’t know the way forward out of the policy maze in which it finds itself. The best thing is that the GREENSPAN PUT IS DEAD. But the FED is still lost and needs to be found. No wonder the Koreans and the Chinese are diversifying away from U.S. debt. U.S. residents are pouring into BONDS as the need for the return of their capital, just like the Japanese have done during the last 15 years. But on a global basis, the U.S. is far more important than Japan. Is this the discusiion that will break the back of the risk-off PARADIGM?

Notes From Underground: Amazing Grace has appeared and it’s in Jackson Hole
CIGA Eric

A note from Jim’s former partner Yra Harris shows how a Fed dependent on MOPE or spin to maintain the illusion of control and confidence is being trumped by the secular trends.

It’s not so much that the Greenspan or the Bernanke put is dead but rather growing disconnect between reality (secular trends) and "Fed speak" is becoming too obvious. Simply put, the Fed must the secular trends, or they, like all investors, run the risk of being steamrolled by their own illusion. As a follower of the market, the Fed should do as little talking against the trend as possible. The game of MOPE or spin by definition precludes silence. Silence will always be interpreted adversely by those seeking reinforcement of the illusion.

The markets are reacting to a Wall Street Journal article by the new FED fair-haired minion, Jon Hilsenrath, and the great dissonance that took place at the last FOMC meeting. Our readers know that we have been very critical of the FED and its reliance on models that, on a good day, are so badly flawed.

Source: yrah53.wordpress.com

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"Enron Accounting" Has Bankrupted America: U.S. Deficit Really $202 Trillion, Kotlikoff Says
CIGA Eric

Debt and fiscal management have bankrupted America. Enron-style accounting, supported by FASB and other regulator boards, hides the true extent of the debt burden that will never be repaid in anything close to constant dollar terms. The easy thing about denial is that it’s always the other guy’s problem.

The “real” deficit – including non-budgetary items like unfunded liabilities of Medicare, Medicaid, Social Security and the defense budget – is actually $202 trillion, the professor and author calculates; or 15 times the “official" numbers.

Source: finance.yahoo.com

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U.S. Existing Home Sales Plummet
CIGA Eric

The secular trends in housing relative to some headline interpretations, mostly MOPE, inescapably leads to the following quote from Dean Wormer from Animal House (1978),

0.2… Fat, drunk and stupid is no way to go through life, son.

Do not stick your head in the sand in regards to real estate. As I suggested in my commentary entitled 15 Signs The U.S. Housing Market Is Headed For Complete And Total Collapse,

Words like total collapse and dying tends to be associated with the "selling of fear". This label, in turn, can lead to instant discredit or laughable denial.

The cyclical low in housing is not due for years (decades). While the urge to stand with crowd is strong, it’s rarely profitable to do so. As the above headline suggests, home sales remains extremely weak. The months supply (turnover relative to supply), which excludes a large shadow inventory, confirms this trend and illustrates the work to be done before the cyclical low.

Months Supply And Change YOY

Expect more pain and corresponding "save me" stimulus in the years to come.

Sales of U.S. previously owned homes plunged 27 percent in July, twice as much as forecast, evidence foreclosures and limited job growth are depressing the market.

Purchases plummeted to a 3.83 million annual pace, the lowest in a decade of record keeping and worse than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. Demand for single-family houses dropped to a 15- year low and the number of homes on the market swelled.

Source: bloomberg.com

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Dollar Plunges As Everyone Now Figures Return Of Quantitative Easing Is A Done Deal
CIGA Eric

Please refer to the three Illustrations and the explanations posted today.

Any questions?

Jim

The dollar s the senior fiat currency in which most of the world’s debt has been issued. In other words, it is the poster child for the fiat currency system. Like all fiat, the dollar is depreciating against gold in a controlled, ebb and flow manner since 2000. The dollar’s recent strength against most major currencies from December 2009 to June 2010 suggested little as the price of gold also reached new highs. Relative weakness of the dollar against other fiat, designated as QE II or any other number, is nothing more than "it’s just the dollar’s turn in fiat’s race to the bottom.

Eric

Today the weak economic data is causing dollar selling, because it’s becoming crystal clear to folks, as ForexLive notes, that quantitative easing II is now a done deal. No more baby steps or holding the balance sheet steady. There’s no excuse for the Fed Board of Governors to be have an unclear picture of the economy’s direction anymore.

Source: businessinsider.com

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Words like total collapse and dying tends to be associated with the "selling of fear". This label, in turn, can lead to instant discredit or laughable denial.

Unfortunately, the cyclical low in housing is not due for years (decades). One-dimensional thinking, such as the price of my home is no longer falling in U.S. dollars so things are getting better, only ensures that most will be caught flat-footed by the complex nature of a multidimensional world. In constant currency terms, gold, the value of home prices in America continues to slide into the minor cyclical low.

As the article suggests the signs are there, but few are ready to acknowledge it until the majority of the damage has been done. Simply follow the money, listen to the markets, and ignore the rest.

U.S. Median Home Price (MHP) to Gold:

S&P Homebuilders (HB) to Gold Ratio:

The U.S. housing market is dying. You will only hear hints of this on the mainstream news and from the politicians in Washington D.C., but as statistic after statistic continues to roll in, the reality of what is happening is becoming very difficult to deny.

Up until the end of April, the giant tax credit that the U.S. government was bribing home buyers with helped stabilize the real estate market, but now that the tax credit has expired the decline of the U.S. housing market has resumed.

Source: businessinsider.com

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While massive net outflows in the Treasury bond market by connect players as open interest spikes doesn’t necessarily imply a immediate trend change, it does reflect an extremely unbalanced market. An extremely unbalanced with rising open interest (participation) tends to associated with hot markets. Hot markets are dangerous.

Those familiar with the probabilities of statistical Z scores from a normal distribution understand the rarity of +/- 3 Sigma reading. The enclosed link to Z-score applet with help those less familiar. The most recent COT data generated a -3.04 2-year trend Z-Score.

Lower Money Flow Table:

The following chart illustrates the spike in participation into hot market.

Long-Term U.S. Treasury Bond and the COT Futures and Options Open Interest Stochastic Weighted Average:

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Jim,

Weimar politicians thought it wise to hide their military debt as well as having various off-sheet unaccountable accounting measures as they prepared for the mass printing. We are better off cutting our own path thru the forests of finance

CIGA JB Slear

Figures on government spending and debt
On Friday August 20, 2010, 4:39 pm EDT

WASHINGTON (AP) — Figures on government spending and debt (last six digits are eliminated). The government’s fiscal year runs Oct. 1 through Sept. 30.

Total public debt subject to limit Aug. 19              13,310,379
Statutory debt limit                                         14,294,000
Total public debt outstanding Aug. 19                  13,363,228
Operating balance Aug. 19                               230,177
Net interest fiscal year 2010 thru July             185,248
Net interest same period 2009                                   167,706
Deficit fiscal year 2010 thru July                  1,169,071
Deficit same period 2009                              1,266,963
Receipts fiscal year 2010 thru July                        1,752,541
Receipts same period 2009                          1,739,949
Outlays fiscal year 2010 thru July                2,921,612
Outlays same period 2009                            3,006,912
Gold assets in August                                       11,041

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Dear Jim,

This is a milestone.

CIGA Ursel

Shrinking ‘Quant’ Funds Struggle to Revive Boom
August 19 – Financial Times (Julie Creswell):

"They were revered as the brightest minds in finance, the ‘quants’ who could outwit Wall Street with their Ph.D.’s and superfast computers.   But after blundering through the financial panic, losing big in 2008 and lagging badly in 2009, these so-called quantitative investment managers no longer look like geniuses… The combined assets of quantitative funds specializing in United States stocks have plunged to $467 billion, from $1.2 trillion in 2007, a 61% decline, according to eVestment Alliance… One in four quant hedge funds has closed since 2007, according to Lipper Tass. ‘If you go back to early 2008, when Bear Stearns blew up, that’s when a lot of quant managers got blown out of the water,’ said Neil Rue, a managing director with Pension Consulting Alliance… ‘For many, that was the beginning of the end,’ he added." 

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