Peter Schiff: Creating Inflation Will Not Solve Unemployment Problem

Peter Schiff on Tech Ticker (10/15/2010). He talked about the implications of a lower Dollar, inflation, 0% Fed Funds, CPI ex-food and energy, commodity prices, rising costs, inflation/unemployment, lower Dollar/exports, the trade deficit and financing the Government debt. I embedded the video after the break.

Weekly Geopolitical Summary, 14 October 2010 - Guest Post

Submitted by the Global Intelligence Report

Weekly Geopolitical Summary, 14 October 2010

·Head of Turkmengaz Fired and Replaced with Deputy
·CYBERCOM to Go Operational This Month
·Govt Takes over Hungarian Plant after Deadly Toxic Spill
·French Transport and Oil Industry Strikes Risks Radicalization
·Bolivia to Start Lithium Production in October
·ISAF's Torkham AfPak Border Crossing Reopened
·Iran's President Visits Lebanon in Clear Attempt to Boost Hezbollah

Bernanke Speech at Boston Fed: Monetary Policy in a Low-Inflation Environment (10/15/2010)

Chairman Ben S. Bernanke
At the Revisiting Monetary Policy in a Low-Inflation Environment Conference, Federal Reserve Bank of Boston, Boston, Massachusetts

October 15, 2010

Monetary Policy Objectives and Tools in a Low-Inflation Environment

The topic of this conference--the formulation and conduct of monetary policy in a low-inflation environment--is timely indeed. From the late 1960s until a decade or so ago, bringing inflation under control was viewed as the greatest challenge facing central banks around the world. Through the application of improved policy frameworks, involving both greater transparency and increased independence from short-term political influences, as well as through continued focus and persistence, central banks have largely achieved that goal. In turn, the progress against inflation increased the stability and predictability of the economic environment and thus contributed significantly to improvements in economic performance, not least in many emerging market nations that in previous eras had suffered bouts of very high inflation. Moreover, success greatly enhanced the credibility of central banks' commitment to price stability, and that credibility further supported stability and confidence. Retaining that credibility is of utmost importance.

Gary Shilling: Home Prices to Fall 20%, Likes 30y Bond and Cash (Sees Decade of Slow Growth and Deflation)

Gary Shilling, who runs research firm A. Gary Shilling & Co., was featured on a Bloomberg Podcast on 10/14/2010. He's still in the deflation camp and believes home prices will fall by another 20% to revert back to the long term trend. 30 Year Treasuries are still his favorite investment and have been for 29 years. He has a new book coming out next month titled: "The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation". So you know where he stands. Shilling believes gold is rising on "the rejection of paper currencies" not because of inflation. It's interesting that he doesn't care about the recent price moves in agricultural commodities (corn, cotton). Maybe food spikes will be the next "$147 oil" catalyst that brings on the next crash in risk assets.

In his portfolio, Shilling said he's heavily weighted in cash and 30-year Treasury bonds (sees the 30y bond yield at 3% and 10y-note yield at 2%) and remains "suspicious" on stocks and commodities. $TLT (20+ Treasuries ETF) better hold $100 and the 50DMA btw. For more, listen to the whole 10 minute podcast here (via Bloomberg Radio).

Justin Bieber vs. Alan Greenspan on Housing Bust (Jimmy Fallon Video)

This is funny. Pop star Justin Bieber (impersonated by Jimmy Fallon) blamed former Fed Chairman, Alan Greenspan, for inflating the housing bubble and causing the "credit freeze" by keeping interest rates artificially low for too long.

Greenspan already testified before the Financial Crisis Inquiry Commission about this (link - Overseas Savings Glut Kept Long Term Rates Low, Fed Funds Rate Was Ineffective In Controlling Housing Inflation, Financial Crisis Inquiry Commission Testimony). Watch the video after the jump.

Bond ETF Technical Update: TLT, LQD, HYG, IEF (TLT Broke Ascending Channel, 100 is Critical)

TLT (20y+ Treasury ETF) broke through an ascending channel, a near term support level AND the 50 day moving average. $100 support from the mid-2009 high and, if that breaks, the 200DMA ($96.27 but rising) look like support. Will the two year lower high in TLT stick and confirm the 30 year bottom in yields? $100 and the 200DMA are very important levels to hold here.

Bank Repos Hit Record of 102,134 in September (RealtyTrac, Sharga Interview)

According to RealtyTrac, banks repossessed a record number of 102,134 homes in September. During the third quarter, bank repossessions (bank-owned foreclosures or Real Estate Owned/REOs) hit a record of 288,345 (+7% from Q2 2010, +22% from Q3 2009), foreclosure auctions scheduled hit a record of 372,445 (+5% from Q2 2010, +4% from Q3 2009) and default notices declined to 269,647 (-1% from Q2 2010, -21% from Q3 2009). Read the press release for data on total foreclosure filings (defaults, scheduled auctions and bank repossessions), foreclosure sales and foreclosure rates by state. Below is a quote from RealtyTrac's CEO, James Saccacio, and an interview with Senior VP Rick Sharga on Tech Ticker.
“Lenders foreclosed on a record number of properties in September and in the third quarter, taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months,” said James J. Saccacio, chief executive officer of RealtyTrac. “We expect to see a dip in those bank repossessions — and possibly earlier stages of the foreclosure process — in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks.”

Cotton ETN $BAL Up 63% in 3 Mos, Cotton Price Inflation Hits China

Cotton inflation is hitting China. Watch the video below: Video: High cotton prices strike textile industry - CNTV. By the way, did you know the iPath Cotton ETN is up 63% in the last 3 months? Also take a look at the actual futures contract from 2005. There must be a put play in there somewhere.

$BAL (iPath DJ-AIG Cotton Total Return Sub-Index) - (courtesy of StockCharts.com)


Cotton Continuous Future (CT) - 2005-10/2010 (courtesy of FutureSource.com)


Related stories:

Industry seeks check on ‘speculative' cotton export registrations - Hindu Business Line

Cotton Futures Advance to Record on Speculation China May Boost Imports - Bloomberg

Cotton prices rule at record levels - Business Recorder

NY cotton ends at 15-yr high on dlr, Chinese rally - Reuters

Windmill Country: Gins fire up on high cotton yield, prices - GoSanAngelo.com

Cotton cloth producers fall on hard times - CNTV [China]

Zuckerberg on the Facebook/Microsoft Bing Social Search Partnership (Video, 10/13/2010)

Mark Zuckerberg spoke on the Facebook/Microsoft Bing social search partnership at Microsoft HQ. He said he wants to partner with the "underdog".

"The thing that makes Microsoft a great partner for us is that they really are the underdog here right and because of that they're in a structural position where they're incentivized to just go all out and innovate..."
Watch the video after the jump.

NY Fed Buying $32 Billion of Treasuries/TIPS From 10/15 to 11/8 (Schedule and TLT Chart)

I found this info first at Reuters today. The New York Fed is re-investing $32 billion of principal from agency debt and agency MBS into Treasuries with various maturities and TIPS (Treasury Inflation Protected Securities). Below is a snapshot of the actual schedule from Newyorkfed.org. I'm watching the Treasury ETFs for any confirmed reversals here, specifically IEF (7-10yr Treasuries) and TLT (20+). TLT pierced the ascending channel, pierced floor support at the 7/1 high and is under the 50 day moving average. TIP is making new highs. Are the bond vigilantes testing market missiles? After the jump is the Treasury Operation Schedule and 2 year TLT chart. There are two potential scenarios for Treasuries: 1) they follow JGB yields lower on continued stimulus/deflation; 2) yields breakout on recovery/inflation (see the Faber and Soros links below).

Animated Gold Market Update! Mr. T on Bloomberg and GLD Chart from 2005

Everything you need to know about the gold mania and more (video courtesy of NMA.tv). Also, look at the GLD chart from 2005 and Mr. T on Bloomberg TV (h/t Deal Breaker).



Swiss Finish Sets New Standard for Global Bank Regulation - Guest Post (Credit Suisse/UBS)

Submitted by globalintelligencereport.com

Swiss Finish Sets New Standard for Global Bank Regulation

INCIDENT: The traditional Swiss finishing school taught young women etiquette and social graces, but international bank regulators are talking about something much tougher when they refer to a "Swiss finish" for global banks.
Just how tough became clear last week, 4 October, when a Swiss commission proposed that its two giant banks, UBS and Credit Suisse, be subjected to capital requirements of up to 19%, nearly three times as tough as the 7% capital-to-assets ratio recently suggested by the Basel Banking Committee as a minimum global standard.

SIGNIFICANCE: The ambitious Swiss plan, designed to solve the "too big to fail" problem, will set the standard for megabank regulation as Group of 20 heads prepare for their summit in November. It almost certainly means that other big global banks such as JP Morgan Chase and Deutsche Bank will face capital surcharges from their national regulators.

Marc Faber on Bonds, Stocks, US Dollar, Interest Rates and Commodities (10/12/2010)

Marc Faber, who writes the Gloom Boom & Doom report, made some big calls yesterday in this Bloomberg article yesterday. In summary he said: The US Dollar Gains on higher interest rates (which "begin to rise within about three months"), buy stocks and sell bonds. His reasoning? The Fed printing money. Read the article. Also, Faber said in this SFGate/Bloomberg article that the turning point would also "mark declines in commodity prices".

However, according to this Business-Intelligence Middle East article on 10/11/2010, Faber said in his October report that there could be a stock market correction in October/November.
"Writing in the October edition of The Gloom Boom & Doom report, Faber says the Fed will start printing money again and that would create a negative sentiment driving markets down. He doesn’t however see a threat to the March 2009 lows."
So does the Bloomberg article trump this article? Maybe the fun begins in December after a correction. Tech Ticker interview?

Federal Reserve Minutes From 9/21/2010

"A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors in Washington, D.C., on Tuesday, September 21, 2010, at 8:00 a.m."

Developments in Financial Markets and the Federal Reserve's Balance Sheet
Staff Review of the Economic Situation
Staff Review of the Financial Situation
Staff Economic Outlook
Participants' Views on Current Conditions and the Economic Outlook
Committee Policy Action


View it here (Federalreserve.gov - Minutes of the Federal Open Market Committee 9/21/2010). After reading it check out this blog post: A Bombshell in the FOMC Minutes at Macro and Other Market Musings.

More: Sovereign Default Swaps, French Strikes, Housing, Buffett, Google Car, Gold, LionsGate/MGM, MS/GS Profit Estimates

powerLINKS archive

Buffett Says `Pain Will Be Felt for a Long Time' Amid Recovery - Bloomberg

CMA Global Sovereign Credit Risk Report for Q3 2010 - Stocktwits Blog

Lions Gate Offers to Acquire MGM - MarketNewsVideo

Goldman, Morgan Stanley Profits Seen Falling - WSJ (h/t @hamzeianalytics)

Google Tests Self-Driving Cars - MSNBC

Goldman Raises 12 Month Gold Forecast From $1,365 To $1,650, Silver To $27.60 - Zero Hedge

S&P Expects 6-8% Home Price Decline Through November 2011 - Zero Hedge

French strikes: 3.5 million take to streets to protest pension reform - Telegraph.co.uk

Reads: China Hikes Bank Reserve Ratio, Rail Traffic, Ireland Debt, VIX/VXV, Kathy Lien on USD, Office/Industrial Vacancy Rates (CBRE)

powerLINKS archive

China Banks Hit Again with Required Reserve Ratio Hike - Reuters

China Hikes RRR (Nicholas Consonery, China analyst at Eurasia Group) - CNBC Video

China Trade Surplus Poised to Cap Biggest Quarter Since Crisis - Bloomberg

Kathy Lien's outlook on the Dollar, USD/JPY, yields and quantitative easing etc. - CNBC Video

1165 Fut Key to Flash Crash & Gold & Silver (Top Step) - Hedge->Accordlingly

Is Ireland About To Impair Bank Senior Debtholders? - Zero Hedge

Rice May Surge 30% as U.S. Crop Misses Forecast, Group Says - BusinessWeek (h/t @Soybeanwatch)

1M-3M Volatility Term Structure Plunges To Steepest In Years (VIX/VXV) - Zero Hedge

Rail Traffic Continues To Be Strong, And It's Actually Accelerating - Business Insider (h/t @pdenlinger)

California accepts $2.33-billion bid for 24 state office buildings (State will lease back for 20 years) - LA Times (h/t @bankrchick)

U.S. Office And Industrial Vacancy Rates Decline For First Time In Three Years - CBRE Press Release (h/t @bankrchick)

Obama seeks bipartisan support for infrastructure upgrade ($50 Billion) - CNN Video

David Tice Likes Silver, Gold and Miners But Not Stocks (CNBC Video 10/11/2010)

David Tice, bear market strategist at Federated Investors (Prudent Bear Fund), was bullish on gold, silver and precious metals mining companies but bearish on stocks on CNBC (10/11/2010).

"Essentially we have a very flammable condition and sparks could happen anywhere. I mean, just look at gold and look at the rest of the commodities. You can see silver and gold going up every day; gold at $1,350; we have this mortgage foreclosure issue that could be the next spark; there are earnings coming through strong but those are a lagging indicator; we still have European debt problems in the PIIGs, I do not think those have been solved...."

"Markets simply get tired and we've essentially retraced a Fibonacci level from the original decline. This market is acting a little bit tired; it took a long time to break through 11,000; maybe it goes a little more with some euphoria about Republicans winning back the house; however, this is short term."

"I still believe in precious metals mining companies....still like gold and silver even at these high levels.....and I sleep much better at night being generally short stocks rather than long stocks."

Soros Sees 2011 Global Slowdown; Optimistic on Greece (CNBC Video)

In a CNBC interview with Maria Bartiromo, George Soros (Soros Fund Management) warned about the risk of a second global economic slowdown in 2011. His view is that politics against further stimulus will exacerbate the problem. Soros was optimistic on Greece though. He believes corporations building liquidity from profit growth will just bid for other companies instead of hire employees. China and currency wars were also mentioned. A few days ago I posted his view on Treasuries. Video after the jump.

60 Minutes Looks at High Frequency Trading (Must See Videos)

Steve Kroft checks out the high frequency trading business in this 60 Minutes episode. He interviews Manoj Narang of high frequency trading firm TradWorx, Joe Saluzzi of Themis Trading LLC (who is against HFT), Larry Leibowitz of the NYSE, Senator Ted Kaufman and SEC Chairman Mary Schapiro. They also stroll through the NYSE data center in Mahwah, NJ.

SPY/SLV Double Dip is Here, SPY/GLD Next? ($SPX, $INDU Silver, Gold Ratios)

Check this out folks. SPY/SLV is testing the 2009 low RIGHT NOW! Will SPY/GLD follow suit? SPY/GLD is trading below the moving average death cross (50dma below 200dma) and appears to be in a descending triangle. Could we see a Prechter "Dow 2000" equivalent in the Dow:Gold ratio (1.486 from .182*8.17 using .182*11,000=2,000? Or will we actually see the ratio trade at 0.50 ($INDU 2,000/$GOLD 4,000). What do you think. Charts courtesy of StockCharts.com.

SPY/SLV (S&P 500 ETF/iShares Silver ETF)

SPY/GLD (S&P ETF/Gold ETF)

$INDU (Dow Jones Industrial Average/$GOLD (Continuous Future)

USDA World Crop Price Projections Rise, Corn at 2 Year High (USDA Price Table, USDX/CZ Chart)

The USDA released the October "World Agricultural Supply and Demand Estimates" report on 10/8 and a "Crop Production" update via NASS (National Agricultural Statistics Service). Commodities rallied on lower supply estimates and higher 2010/2011 price projections. Read the articles for more information.

Below is a table of 2010/11 price projections from the USDA report. If you chart out agricultural commodities, commodity indexes, base metals and precious metals, you can see that some prices pierced through overhead resistance on Friday. Right now the corn future is at a 2 year high (see chart). I'm also watching to see if the US Dollar Index catches support around here (see uptrend from 2008-2009 and 2009 floor on USDX/CZ10 chart). Eventually there will be a hard asset correction imo; however, the Ag trend, especially corn, looks strong. We'll see how 2010 ends. Hopefully input costs are hedged going forward if we see price spikes. Cocoa Puffs are already expensive as it is. Here we go: "Don Mulligan, chief executive at General Mills, told investors that the food company was “about 50 per cent hedged” for the 2011 fiscal year, which began in June." FT.com 8/2010.

NY Fed's Brian Sack on Asset Prices and Balance Sheet Policy 10/4

Brian Sack, Executive Vice President of the New York Federal Reserve, gave a speech at a CFA Institute Fixed Income Management Conference on 10/4. He made interesting remarks about asset prices and balance sheet policy. People should understand the forces at work here.