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Tag Archive: stock market

Jan 26

Gold Climbing Back to $2,000 on News that Federal Reserve Vows to Keep Rates Low & Home Sales Fall

Oil rose to near $100 a barrel Thursday in Asia after the U.S. Federal Reserve said it would keep interest rates at record lows at least until 2014 to help jump-start the world’s biggest economy.

As we suspected yesterday, crude oil prices edged higher after an overtly dovish FOMC announcement sank the US Dollar. The move higher was muted by a pickup in inventories however, where the weekly build more than doubled expectations. Looking ahead, a mixed set of US economic data is ahead, with expectations calling for a slowdown in Durable Goods Orders but improvements on the composite Leading Indicators index and New Home Sales. However, the earnings calendar may prove most market-moving as a hefty dollop of industrials report results, with traders particularly interested in guidance from the likes of Caterpillar Inc as a proxy gauge of the global business cycle (and thereby oil demand prospects).

The U.S. central bank, which has kept its benchmark interest rate near zero for three years, said Wednesday that it doesn’t plan to raise the rate before late 2014.

That caused the dollar to turn lower against major currencies, which makes dollar-priced oil less expensive for holders of other currencies.

“That would mean the U.S. dollar would continue to be cheap versus other currencies, and there is typically an inverse correlation between the value of the dollar and commodity pricing,” said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.

The median sales price for a new home fell 2.5 percent to $210,300 last month, the biggest drop in four months. Compared to December last year, the median price was down 12.8 percent.

There were a record low 157,000 new homes on the market last month and at December’s sales pace, it would take 6.1 months to clear them, up from 6.0 months in November.

Spot Gold (NY Close): $1710.57 // +44.90 // +2.70% 

Not surprisingly, gold soared after the Federal Reserve extended its pledge to keep interest rates at “exceptionally low” levels to the end of 2014 from the previously promised mid-2013. With the central bank determined to keep borrowing costs near-zero for the foreseeable future and recent US economic data pointing to a pickup in activity, inflation expectations are understandably climbing and boosting demand for the yellow metal as a store-of-value hedge. Indeed, the 2-year breakeven rate – a measure of inflation expectations derived from bond yields – soared to the highest in nearly 7 months after the FOMC outcome crossed the wires.

Spot Silver (NY Close): $33.16 // +1.12 // +3.49%

As with gold, silver prices soared higher after the dovish FOMC outcome stoked future inflation bets, with more of the same seemingly likely ahead. Likewise in line with its more expensive counterpart, the spotlight now turns to US economic data to see if positive momentum resumes or falters, with the latter scenario likely to defuse what will otherwise almost certainly amount to another major advance for precious metals. Prices are testing resistance in the 38.78-33.30 region, with break higher exposing 35.30. Near-term support lines up at 31.04.

Sep 29

Shocking Interview “Goldman Sachs Rules the World”…..I Dream of Depression

The main Stream media is hit by a shocker! A so-called independent trade comes out and does the culturally taboo thing to stock market traders to do, he tells the truth.  Saying”Goldman Sachs Rules the World”, not the people in governmental power.  He was shunned by all of the main stream T.V. & print media, which may put a damper on him getting into that Boy’s Club of high frequency traders.

Aug 19

Gold Price Vaults to Record High Investors Seek Safety, China Needs Caution in Drive Up Gold Reserves, Silver Surging Twice as Fast as Gold

Gold vaulted 1.4 percent in the first two hours of trading Friday amid mounting concerns the U.S. economy is heading into another recession and as some European lenders faced a short-term funding crunch, highlighting the risk of a banking crisis.  Nervous investors fled to the safety of core government bonds, Swiss francs  and gold, which hit a record high, with many seeking to unwind holdings of riskier assets such as stocks, commodities and higher-yielding currencies before the weekend.

European shares extended steep losses from Thursday, when they suffered their biggest daily slide in 2-1/2 years, with key indexes in Britain, France and Germany all deep in the red.

The sharp decline in stock markets is expected to have an adverse impact on household wealth, further undermining consumer confidence and demand in coming months. Heightened uncertainty over growth could also see producers delaying decision-making, hitting global output.

These concerns are likely to see investors cut exposure to stocks, commodities like metals and oil and growth-linked currencies such as the Australian dollar in the coming days.

Gold for December delivery on the CME Comex jumped $33.60 to $1,855.60, up from Thursday’s closing price of $1,822. At one point in Friday trading it reached $1,881.40, a nominal record. The inflation-adjusted record occurred in 1980 when it hit the equivalent of about $2,400.

China Adding to it’s Gold Reserves

According to data on every country’s gold reserves recently issued by World Gold Council (WGC), the United States’ gold reserves are 8,133.5 tons, accounting for 26.49 percent of the world’s total, and the Untied States is still the largest gold reserve country. China’s gold reserves are a little more than 1,054 tons, ranking sixth in the world. Although China’s gold reserve is not less in quantity, it accounts for only 1.6 percent of China’s total foreign reserves. In comparison, the Untied States’ gold reserves account for 74 percent of its foreign reserve, and even emerging countries including Russia and India have gold reserves accounting for more than 5 percent of their foreign reserves. Insiders said that it is good for emerging economies to hold more gold reserves. It is the trend that the Central Bank of China will hold greater gold reserves.

The gold purchased by every country in 2011 is three times as much as the gold they purchased in 2010.  In fact, before Standard and Poor’s downgraded the U.S. credit rating, the central bank of every country already started to gradually increase their gold reserves because of the European and U.S. debt crises and the declining confidence in the U.S. dollar and Euro. People have noticed that the countries that dumped gold in the past 20 years actually turned into net gold purchaser in 2010 because they want to realize foreign reserve diversification and reduce dependence on the U.S. dollar.

According to data issued by the WGC, governments of all the countries have purchased a little more than 203 tons of gold in 2011, three times as much as the gold they purchased in 2010. It indicates that every country is more and more regarding the gold as a tool for resisting the depreciation of paper money and global economic turbulence. Currently, China’s foreign reserves are definitely the largest in the world, but China’s gold reserves are still far less than the global average level.

Therefore, gold is of great significance to preserve a country’s financial security. The United States holds about 8,100 tons of gold reserves; Germany, 3,400 tons, and France and Italy each, 2,500 tons. These countries have paid high costs for their gold reserves, showing that they have drawn particular attention to the strategic importance of gold reserves.

Silver Surge

For all the well-deserved attention being paid to the rocketing price of gold, the price of silver was rising early Friday at more than twice the rate of gold as Indian investors piled into the white metal. Although silver has not been setting record highs in recent weeks, as has gold, it was surging at 8:35 a.m. EDT in electronic trading on the CME Comex division of the New York Mercantile Exchange.

Silver for September delivery, the most actively traded contract, jumped to $41.79 from Thursday’s closing price of $40.68, a 2.79 percent gain.  Gold, meanwhile, rose to $1,844.80
from Thursday’s closing price of $1,822, a 1.25 percent gain.

Meanwhile, iShares Silver Trust, an exchange-traded fund that is backed by physical silver jumped in premarket trading 3.38 percent.

 

Mar 28

Chinese inflation goes global; New China price, as we all pay for wage hikes

By Craig Stephen

HONG KONG (MarketWatch) — Inflation has become a growing concern for mainland Chinese authorities and is now set to become everyone’s, as higher-priced made-in-China goods are exported around the globe.

Last week, Hong-Kong-based logistics and consumer-good sourcing company Li & Fung /quotes/comstock/22h!e:494 (HK:494 37.55, -1.50, -3.84%)   /quotes/comstock/11i!lfugf (LFUGF 4.90, -0.10, -2.00%)   warned that we are now entering a new age, where sourcing in China will come with higher prices. The company, which is one of the largest suppliers of Chinese goods for Western retailers, described in a release that due to China, “the world has basically been in a low-supply-cost era for the last 30 years. The change in wage policy in China in 2009 — and the subsequent significant higher export prices — brings this status quo to an end.”

It added that increased product cost “seems inevitable.” What is more uncertain is whether consumers around the world will be willing to pay higher prices for goods, and how this will impact corporate margins and the global manufacturing landscape. It always seemed inevitable there would come a time when mainland workers would tire of working for pocket change to keep the West flush with an endless supply of cheap consumer products.

Rising mainland wages has been in focus since Foxconn /quotes/comstock/22h!e:2038 (HK:2038 4.84, -0.06, -1.22%)   /quotes/comstock/11i!fxcnf (FXCNF 0.66, +0.05, +7.32%)   hiked wages in response to worker suicides last year. A new survey last week from Standard Chartered Bank of its clients in China said they expect wages to increase between 9% and 15% this year, which is less than some reports, although it said labor shortages are also widespread.

It added that this is policy-driven, as the central government wants to raise minimum wages despite broader worries over inflation. But it also reflects the market dynamics as firms struggle to find workers. Standard Chartered’s survey found that 45% of firms were finding it harder to recruit workers this year, despite generally paying more than the minimum wage. The firms surveyed pay 1,800 to 2,000 yuan ($270-$300) a month, which is already 30%-40% above the minimum wage.

The response of firms surveyed has been to move production inland, rather than leave China itself, and increase the use of capital equipment to boost productivity.

This comes at a time when there is a widening appreciation that, this time, inflation in China is not transitory, caused by bad harvests or the like. There is a new China price.

Economists at Bank of America Merrill Lynch describe it as “the new normal for a new decade.” Put simply, they say consumer-price-index inflation will be elevated at around 4% in the coming years on the steadily rising cost of labor in China as it passes the Lewis Turning Point — that is, the point at which a developing country sees wages begin to rise quickly as surplus of labor from the countryside tapers off.

As this is digested, it will have various implications for investors. For many years, buying what China is buying, and selling any company that is making the same product as China, has been an investment theme. Whole industries have been outsourced, as China effectively hollowed out the industrial base from the U.S., Europe and the rest of Asia, with its gigantic manufacturing machine primed on cheap labor. Meanwhile, demand from China’s army of factories sent the price of everything from steel to coal to copper soaring.

While China’s labor is still relatively cheap, it is no longer the global cost leader. Given China’s size, it is going to be difficult to find anyone else to take its place. This means the era of China being a source of deflation in global markets and easy productivity gains for many companies looks to be over.

One investment theme getting more attention to play this transition is manufacturers of machinery and robotics, as China seeks to move up the value chain. Another area worth taking a closer look at will be industries that no longer face the same level of price competition from China. This could give a few more countries the chance to compete with China.

Li & Fung are in the fortunate position that they take a commission on all their trading business, so higher prices tend to be good for them. But many others margins will be squeezed unless companies can pass these rising prices on to the consumer.

On a wider perspective, China will now move from being a source of deflation to a global exporter of inflation. That is unlikely to be accepted by China’s leadership, who have recently complained the U.S. has been stoking inflation with the Fed’s quantitative easing. The end game may well come when these higher prices arrive in the U.S. and will force the Fed’s hand to begin tightening. Then everyone will end up paying for higher wages for China’s factory workers.

beprepared 600x1501 Chinese inflation goes global; New China price, as we all pay for wage hikes

Mar 23

Trading Dollars for Gold & Silver: Implications for U.S. Currency, Markets Yet To Price In Armageddon

What do I have in common with Iran?

Not much I suppose. But we’ve both been trading dollars for gold.

And Iran isn’t the only Middle Eastern nation trading dollars for gold. According to a recent Wikileaks cable, Jordan and Qatar have been loading up as well.

This story has also been verified by Bank of England officials, according to an article in the Financial Times:

“Andrew Bailey, head of banking at the Bank of England, told an American official that the central bank had observed ‘significant moves by Iran to purchase gold,’ according to a U.S. diplomatic cable obtained by WikiLeaks and seen by the Financial Times.”

You might be wondering why Iran has so many dollars, and how it got them.

After all, Iran is a sworn enemy of the United States, and vice-versa. So where did they get these dollars?

The answer is simple. Iran is one of the 12 member states of OPEC. And while the United States actually buys most of its oil from Canada, all oil contracts are settled in dollars.

That’s gotta be a thorn in the side of countries like Iran, and Venezuela. These folks make no bones about hating America.

But I don’t think that trading in dollars for gold is done so purely out of spite.

Look at what happened the preceding five years before Iran allegedly began dumping dollars for gold:

saupload rp 203.22.11 Trading Dollars for Gold & Silver: Implications for U.S. Currency, Markets Yet To Price In Armageddon

I’d say that more of Iran’s hatred for America probably only comes second to its hatred of watching its currency holdings fall by 25% in a five year span. Who can blame them, or any of the OPEC nations for ditching cash as fast as they can?  The dollar is losing its dominance. You can pull up a chart of the dollar index, like the one above, which compares the dollar to a basket of other currencies. Or you can pull up a chart of gold priced in dollars, or wheat, corn, coal, coffee, oil – almost anything. And the tape tells the tale. The dollar is losing value, and quickly.

The danger isn’t that Iran will keep buying gold. They can do that with Iranian Rials. The danger is that some of the most significant OPEC nations would love nothing more than to stop settling their oil contracts in dollars. They have the motive. All they need is the opportunity.  What’s a better opportunity than civil war throughout the Middle East? What better time to switch OPEC contract settlement to a currency that’s slated to increase in value, like the Chinese Yuan or the Brazilian Real?

Those countries are growing. That’s where real oil consumption growth is going to be in the coming decades.  And with the dollar in free fall, I say it’s only a matter of time before something similar to an OPEC contract shakeup will happen. And then the dollar’s slide will only get worse.

Silver, gold gain on fast-changing global events

Silver and gold prices are climbing as developing crises from Portugal’s financial problems to uprisings in the Middle East are prompting investors to buy more stable assets.

Silver for May delivery rose 2.6 percent Wednesday to settle at $37.198 an ounce. Gold settled up $10.40 at $1,438 an ounce.

Investors are nervous as they monitor fast-changing global events.

In Portugal, lawmakers are poised to vote against more austerity measures for the debt-stressed country. Meanwhile violence in the Middle East and North Africa is raising concern about oil supplies.  The uncertainty of how those events will play out is supporting both precious metals, which have the reputation of being safer assets to hold during turbulent economic times.

Energy prices were mainly higher. Bean and grain prices fell.

Gold Struggles to Build Momentum

Spot Gold (NY Close): $1431.57 // +$3.90 // +0.27%

Commentary: Opposing forces are battling for control over gold price action as sentiment looks for direction. One hand, the US Dollar’s role as a safe haven puts gold on a path parallel stock markets, with bouts of risk aversion sending the greenback higher to produce de-facto downward pressure on the yellow metal. On the other, lingering uncertainty about a host of issues – from the impact of Japan’s Tohoku earthquake on global growth to the crisis in Libya – makes gold attractive for safety-seeking investors looking for a tangible store of value amid the turmoil. On balance, a steady recovery in ETF holdings suggests the path of least resistance leads higher, although a short-term pullback is not out of the question while as the current tug-of-war is resolved.

Technical Outlook: Prices are stalling below falling trend line resistance that has capped the upside throughout March. A bearish Shooting Star candlestick formation hints the path of least resistance leads lower, with initial support lining up at $1412.54. Alternatively, a break above the aforementioned trend line exposes $1444.85.

Crude Oil Hits 2-Week High on Libya

WTI Crude Oil (NY Close): $104.00 // +$1.67 // +1.63%

Commentary: The escalating conflict in Libya continues to pressure crude oil prices higher, with US Admiral Samuel Locklear promising further airstrikes against the forces of embattled leader Muammar Qaddafi in the “coming hours and days”. As we have noted previously, the UN intervention sets an important precedent for future Western involvement in similar scenarios, particularly as protesters face a harsh response in Bahrain. In turn, that uprising is seen by many as a trial run before something similar is attempted in Saudi Arabia – the world’s top oil exporter – and the path for the WTI contractappears to lead higher as long as the possibility that the Kingdom could end up looking like Libya remains alive. The forthcoming reconstruction effort in Japan promises to compound upward pressure from the demand side of the equation as the island nation substitutes traditional energy sources to pick up the slack from its earthquake-damaged nuclear sector. Expectations of a second consecutive drop in weekly DOE inventory figures bolster the case for an upside scenario.

Technical Outlook: Prices have taken out resistance at $104.24 to meet trend line resistance just below the $106.00 figure. A break higher above this juncture exposes the March swing top at $106.95. Alternatively, a drop back below $104.24 exposes trend line support at $102.50.

Feb 21

Gold reaches $1,400, silver price exploding to Record Highs, as Mid East violence spreads

Gold prices rose above $1,400 an ounce on Monday for the first time in nearly seven weeks as violence flared in north Africa and the Middle East, boosting interest in the precious metal as a haven from risk.

Tensions have spread across the regions from Egypt and Tunisia, where protests unseated leaders earlier this month, threatening the grip of long-entrenched autocratic leaders.

Spot gold rose as high as $1,403.38 an ounce and was bid at $1,401.30 an ounce at 1240 GMT, against $1,388.58 late in New York on Friday. U.S. gold futures for April delivery rose $13.60 an ounce to $1,402.10, having peaked at $1,404.30.

Gold priced in euros hit its highest since January 18 at 1,025.85 euros an ounce, and sterling-priced gold its highest since January 14 at 865.33 pounds an ounce.

“There is no doubt that the recent move higher across the precious metals reflects a degree of safe-haven buying as a result of the unrest in the Middle East,” said Daniel Major, an analyst at RBS Global Banking & Markets.

“If (buying) is not through the exchange-traded funds or a clear change in the net long on Comex, it is most likely to be through the physical market — coin and small bar buying, and I potentially wouldn’t rule out larger purchases by high net worth individuals on the back of the unrest we’re seeing,” he added.

“That has clearly been a game-changer in the last couple of weeks for gold and silver after what was quite a lethargic start to the year in terms of identifiable investment demand in the exchange-traded funds.”

Holdings of the world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, fell to a nine-month low on Friday at 1,223.098 tones, data from the fund showed, even as prices rallied.

Turkish Foreign Minister Ahmet Davutoglu said on Monday that Tunisia’s revolution could provide a model for other countries seeking reform if it can avoid pitfalls on the path to elections.

Dozens of people were reported killed in Tripoli overnight as anti-government protests reached the Libyan capital for the first time and the building where the country’s parliament meets was ablaze.

SAFE-HAVENS RISE

The resulting risk aversion sparked buying of assets seen as a haven from risk. Bund futures rose as tension in Libya sparked safe-haven flows into German debt, while the Swiss franc rose against the dollar and euro.

Brent oil prices meanwhile surged nearly $3 a barrel to 2-1/2 year highs as traders eyed unrest in major producer Libya. European shares slipped in response to the tensions, as investors cut exposure to risk.

Other precious metals also rallied, with silver touching its highest in 31 years and palladium a 10-year peak. Silver outperformed gold, with the number of silver ounces needed to buy an ounce of gold dropping to around 42, a near 13-year low.

“Precious metals continued to recover as civil unrest intensified in the MENA region, with silver touching levels not seen since the peak of the Hunt Brothers squeeze in 1979/80,” said Morgan Stanley in a note.

“We expect the combination of continued strength in investment demand and a sustained industrial demand recovery will support silver… this year before easing amid improved economic conditions in 2012.”

Silver hit a high of $33.50 and was later at $33.44 an ounce against $32.46. Platinum was at $1,842.35 an ounce against $1,833.50, while palladium peaked at $859 and was later at $855.22 against $848.25.

Feb 17

Silver rises to New All Time high as mints start to ration coins

The price of the precious metal hit $31.37 a troy ounce on Thursday, up 16 per cent since mid-January and the highest since March 1980. The world’s leading mints have reported record sales of silver coins in January and some, including the Royal Canadian Mint and Austrian Mint, have had to ration sales

 “We have sold everything we can produce in silver and have demand for at least twice that volume,” said David Madge, head of bullion sales at the Royal Canadian Mint, which produces the silver Maple Leaf coin. Silver coin sales at the US Mint and the Austrian Mint also hit record levels in January.

The surge of buying has both boosted silver prices and helped push the market into “backwardation” – an unusual condition in which forward prices are lower than prices for immediate delivery. While investors are buying, miners have been selling their future silver production to lock in gains, which has depressed long-dated futures prices.

Dealers said smaller investors saw silver as a cheaper alternative to gold with greater potential for gains as they look to preserve their wealth against rising inflation and currency weakness.

The Austrian Mint sold 1.53m ounces of its silver Philharmonic coin in January, more than double the level a year earlier, according to Andrea Lang, marketing director.

“We could have sold more,” she said, adding that the mint would boost production to 2.2m ounces in February and March.

The US Mint sold 6.4m ounces of silver American Eagle coins in January, 50 per cent more than the previous record month, and have already sold 1.7m ounces so far in February.

Silver prices have outpaced gold in recent months as the improving economic picture has caused investment demand for gold to wane but has boosted silver’s industrial demand – which, in spite of rising investor flows, still accounts for 80 per cent of total silver consumption.

Both metals were buoyed on Thursday by renewed concerns over political stability in the Middle East. Gold gained 0.6 per cent to $1,382.90 a troy ounce, the highest in a month, but off the all-time peak of $1,430.95 touched in December

Feb 01

Obama Orders Military To Prepare For Spring Food Riots!

Millions Of Chinese Stunned After Government Makes Obama UFO Statment
A grim report prepared by France’s General Directorate for External Security (DGSE) obtained by Russia’s Foreign Intelligence Service (SVR) states that president’s Obama and Sarkozy have “agreed in principal” to create a joint US-European military force to deal exclusively with a Global uprising expected this spring as our World runs out of food.

According to this report, Sarkozy, as head of the G-20 group of developed Nations, called for and received an emergency meeting with Obama this past Monday at the White House wherein he warned his American counterpart that the shock rise in food prices occurring due to an unprecedented series of disasters was threatening the stability of the entire World and could lead to the outbreak of Total Global War.

Just last week French Prime Minister Francois Fillon underlined that one of France’s top G-20 priorities was to find a collective response to “excessive volatility” in food prices now occurring, a statement joined by Philippe Chalmin, a top economic adviser to the French government, who warned the World may face social unrest including food riots in April as grain prices increase to unprecedented highs.

The fears of the French government over growing Global instability was realized this past week after food riots erupted in Algeria and Tunisia and left over 50 dead. So dire has the situation become in Tunisia that their government this morning rushed in massive amounts of troops and tanks to their capital city Tunis and instituted a Nationwide curfew in an order to quell the growing violence.

The United Nations, also, warned this past Friday that millions of people are now at risk after food prices hit their highest level ever as Global wheat stocks fell to 175.2 million tons from 196.7 million tons a year ago; Global corn stocks are said may be 127.3 million tons at the end of this season, compared with last month’s USDA outlook for 130 million tons; and Global soybean inventories will drop to 58.78 million tons at the end of this season, from 60.4 million tons a year earlier.

Robert Zoellick, president of the World Bank, further warned this past week that rising food prices are “a threat to global growth and social stability” as our World, for the first time in living memory, has been warned is just “one poor harvest away from chaos”.

Important to note about how dire the Global food situation has become is to understand the disasters that have befallen our World’s top wheat growing Nations this past year, and who in descending order are: China, India, United States, Russia, France, Canada, Germany, Ukraine, Australia and Pakistan.

From China’s disaster: 2010 China drought and dust storms were a series of severe droughts during the spring of 2010 that affected Yunnan, Guizhou, Guangxi, Sichuan, Shanxi, Henan, Shaanxi, Chongqing, Hebei and Gansu in the People’s Republic of China as well as parts of Southeast Asia including Vietnam and Thailand, and dust storms in March and April that affected much of East Asia. The drought has been referred to as the worst in a century in southwestern China.

From India’s disaster: A record heat wave and growing water crisis in India are forcing politicians to consider implementing user fees and other measures to conserve water. Sri Lanka’s President Mahinda Rajapaksa yesterday instructed ministers and officials to prepare a strategic plan to face an impending food crisis as there were signs that the World is to confront a food shortage by next April.

From Russia’s disaster: (10% of total World’s output, 20% for export) they were hit by the highest recorded temperatures Russia has seen in 130 years of recordkeeping; the most widespread drought in more than three decades; and massive wildfires that have stretched across seven regions, including Moscow.

From France’s disaster: The French government lowered their wheat crop forecast by 2.7% over last year due to drought and cold weather.

From Canada’s disaster: Record setting drought has affected their main grain producing provinces in the Western part of their Nation.

From Ukraine’s disaster: (the World’s top producer of barley and sixth biggest of wheat) hit as hard as Russia by fire and drought to the point they have halted all their exports of grains in 2011.

From Australia’s disaster: Fears of a Global wheat shortage have risen after the Queensland area of Australia was hit by calamitous flooding. Andrew Fraser, Queensland’s State Treasurer, described the floods as a “disaster of biblical proportions”. Water is covering land the size of France and Germany. It is expected to reach over 30 feet deep in some areas in coming days.

From Pakistan’s disaster: Floods have submerged 17 million acres of Pakistan’s most fertile crop land, have killed 200,000 herd of livestock and have washed away massive amounts of grain and left farmers unable to meet the fall deadline for planting new seeds, which implies a massive loss of food production in 2011, and potential long term food shortages.

Not only have the vast majority of our World’s top wheat producers been affected, but also one of the main grain producing regions on the Planet, South America, has been hit by disasters too where an historic drought has crippled Argentina and Bolivia, and Brazil, that regions largest Nation, has been hit with catastrophic floods that have killed nearly 400 people in the past few days alone.

Even the United States has been hit as a catastrophic winter has seen 49 of their 50 States covered by snow causing unprecedented damage to their crops in Florida due to freezing weather, and record setting rains destroying massive numbers of crops in their most important growing region of California.

And if you think that things couldn’t get any worse you couldn’t be more mistaken as South Korea (one of the most important meat exporters in Asia) has just this past week had to destroy millions of farm animals after an outbreak of the dreaded foot-and-mouth disease was discovered.

To how horrific the Global food situation will become this year was made even more grim this past month when the United States reported that nearly all of their honey bee and bumblebee populations have died out, and when coupled with the “mysterious” die-off of the entire bat population in America means that the two main pollinators of fruit and vegetable plants will no longer be able to do their jobs leading to crop losses this report warns will be “biblical and catastrophic”.
Chillingly to note is that after meeting with Sarkozy, Obama began implementing his Nation’s strategy for keeping the truth of this dire events from reaching the American people by ordering all US citizens to have an Internet ID so that they can be tracked and jailed should they begin telling the truth.

And so today, as agricultural traders and analysts warn that the latest revision to US and Global stocks means there is no further room for weather problems, a new cyclone is preparing to hit Australia, brutal winter weather in India has killed nearly 130, and more snow is warned to hit America, and we’re not even two full weeks into 2011… may God have mercy on us all.

It’s not too late, start preparing…

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Jan 13

When will the renminbi overtake the dollar?

January 6, 2011
Santiago, Chile

Without a doubt, the existing global financial system depends on the widespread use of fiat currencies issued by insolvent governments. The wealth of the world’s large financial institutions requires that there be currencies with sufficient size and circulation to absorb massive capital flows.

The current system is based primarily on the dollar; with a $14 trillion economy, the United States was for years the only country in the world with a sufficient money supply and financial infrastructure to take in the preponderance of the world’s wealth.

It is for this reason commercial loans, commodities contracts, international reserves, and cross border settlements have traditionally been denominated in US dollars.

Competing reserve currencies arose with the advent of the euro and Japan’s post-war rise; while the dollar has continued to remain dominant, these three are the only currencies which have the necessary supply and credit rating.

With trillions of dollars floating around the global financial system, managers are constantly making capital allocation decisions, moving funds in and out of various instruments. The reserve currencies play a big role in this because unallocated capital is frequently parked in their bond markets.

For example, large corporations or banks that are sitting on billions of dollars in cash typically purchase short-term US or European government bonds because the low default risk.

The dollar, euro, and yen have bond markets of such size that getting liquid is never a problem, even for billions of dollars. There is always a market for treasury securities, hence they are considered ‘cash equivalents’.

You couldn’t do the same thing in the Kingdom of Bhutan with its tiny $3.5 billion economy. If you tried to move $100 million into Bhutan, its currency (the ngultrum) would spike. In the US, Europe, and Japan, $100 million barely registers a blip.

Over the last few years, though, the confidence has begun to fade quickly, and the reserve currency issuing governments are starting to be viewed with increasing skepticism.

The thing that’s missing right now is an acceptable alternative. There’s really nothing out there in large enough scale to withstand massive capital flows, and as I have written before, the game is now one of judging the ‘least worst’ of these three major currencies.

In what seems to be a 6-month cycle, the dollar and euro have been jockeying for the ‘worst of the worst’ title; markets focus on Greek woes for a few months, then turn their attention back to California and Obamanomics.

With Bernanke’s “100% certainty” and nonsensical economic numbers coming out of the America’s Ministry of Truth (Newspeak: USMiniTruth), we seem to be back in a period where the markets are more concerned with Europe. I think that Japan will be called to the carpet before too long as well.

As such, in an almost ritualistic cycle, financial markets are shifting funds around these currencies… the analogy I like to think of is like a series of buckets.

Imagine three buckets and an increasing volume of water. Capital allocators are essentially dumping the contents of one pail into another– from the dollar bucket into the euro and yen bucket, and from the euro bucket back into the dollar bucket.

Each time this happens, though, a little bit of water spills out into smaller buckets– gold, silver, Switzerland, Norway, Canada, Chile, Australia, etc.

All throughout, central bankers are standing there keeping the spigot at full blast, pumping more water into the system while bankers desperately try to find the least leaky balance.

What’s required is a new bucket that bankers view as strong, sturdy, and large enough to handle the volume. The most likely candidate is the Chinese renminbi… but not yet.

China’s economy is set to be the largest in the world in a matter of years, and it has the money supply to match. While its economic and monetary fundamentals are far, far from perfect, China is arguably in a much better financial position than the west.

It’s going to take several years for the renminbi to overtake the dollar, euro, and yen as a serious contender for the world’s main reserve currency… but it can happen. The major roadblock is that China’s renminbi is not free-floating– the government has imposed severe exchange controls.

I’ve written before that we are seeing the early signs of relaxing controls. China doesn’t do anything overnight, and I think there is a long-term plan in the works.

We have already seen China agree with other sovereign nations to introduce currency swap arrangements, so there are now several countries holding renminbi. Furthermore, the Hong Kong gold exchange recently announced its plans to launch a new gold contract denominated in renminbi.

To be clear, China already has its own gold exchange, but having one in Hong Kong opens up renminbi-denominated gold contracts to the entire world since Hong Kong has no exchange controls.

On that note, the mainland authorized Hong Kong’s banks to establish cross-border settlement accounts in renminbi last year, effectively providing a way for people to open a renminbi bank account. In fact, we have one.

Each of these measures to reduce exchange controls is one step closer to the renminbi being introduced as a global reserve currency.

Perhaps the most obvious step, though, came in just the last few days. Beijing has already allowed several multinational companies like McDonald’s and Caterpillar to issue renminbi denominated bonds. Now the World Bank, that unfortunate staple of the financial system, is issuing its own two-year renminbi bond.

This is a big deal… and I think that we’re going to continue to see bigger and bigger steps like this taken throughout 2011 and the coming years.

China’s government has been very clear that by 2020, it wants Shanghai to be a leading global financial center… and Chinese policymakers know that for Shanghai to be a financial center, the renminbi must be freely convertible.

Make no mistake, my friend, the deadline has been set… and if you haven’t started making decisions to preserve your capital, I strongly urge you to start now. More to follow.

Dec 16

You’re Foolish If You’re Not Invested Right Now !!

This is a must watch for current information on the ecomonic crisis the United States is in……..

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