Guest Post: American Eulogy
by Zero Hedge - January 31st, 2011 9:19 am
Courtesy of Tyler Durden
Submitted by Jim Quinn of The Burning Platform
American Eulogy
The Founding Fathers described the kind of country they were shaping on July 4, 1776 with the most well known sentence in the English language:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. - Declaration of Independence
In 1776, America was an idea born of noble intentions. An idea that every citizen had the opportunity to succeed, prosper and achieve based upon their hard work and abilities. The government did not provide advantages or a safety net for its citizens. People were free to succeed or fail based upon their own merits. America had a frontier spirit because it was still a frontier. Individual effort, intellect and willingness to sweat allowed you to move up the socio-economic ladder. The government provided a National Defense, and very little else. In 1794, the country had a population of 4.4 million and a GDP of $310 million. Government spending totaled $7.1 million, or 2.3% of GDP, and was split between Defense and interest on the Revolutionary War debt. Today, Federal Government spending totals $3.7 trillion, or 25% of GDP.
James Truslow Adams in his 1931 Epic of America described the America that once existed in reality, but only exists as a phantom today:
“The American Dream is that dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, also too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”
“The American Dream that has lured tens of millions of all nations to our shores in the past century has not been a dream of material plenty, though that has doubtlessly counted heavily. It has been a dream of being able to grow to fullest…
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DiggGold Bar Premiums At 17-Year High In Hong Kong
by Zero Hedge - January 31st, 2011 9:09 am
Courtesy of Tyler Durden
Submitted by GoldCorp.
Gold Bar Premiums at 17-Year High in Hong Kong – Safe Haven Bid on Inflation and Egypt Concerns
The geopolitical ramifications of the revolution in Egypt and the likelihood that it will spread throughout the Middle East, North Africa and possibly further afield is leading to volatility in markets. Equity indices in the Middle East and Far East were mostly down (except for China) overnight. European bourses were under pressure this morning but have recovered somewhat.
Gold and silver are marginally lower after their strong showing Friday which resulted in silver closing the week 1.7% higher and gold being tentatively lower (-0.14%). Remarks by a People’s Bank of China advisor that the Chinese should diversify into gold and silver are very important (see below).
(Click to enlarge) Gold in USD and CFTC Gold Open Interest – 2 Years (Daily)
NYMEX crude is up some 0.4% to just over $90.00 (see long term chart below) and Brent crude remains close to $100 a barrel this morning. Oil’s nearly 5% surge on Friday to end the week higher was ominous and the possibility of unrest spreading to other oil rich dictatorships such as Saudi Arabia is making investors nervous. The Middle East and North Africa produce more than a third of the world’s oil and OPEC has warned of a possible oil “shortage”.
Oil in USD – 5 Years (Daily)
Any speculative froth seen when gold recently rose above $1,400/oz has been removed from the gold market as can be seen in the gold futures open interest numbers. Open interest has fallen by more than a third since early September. Those short the market have once again managed to flush out the weak paper longs who have been shaken out of positions.
Open interest levels are now well below those seen after the last period of correction and consolidation in the first quarter of 2010 (see first chart above) and we may now have seen capitulation.
Short positions remain high and concentrated with a few market players, especially JP Morgan, and they are vulnerable to a short squeeze, should prices begin to move up again. This seems likely given the tight physical demand situation in the market internationally.
Further evidence of this was seen in the fact that premiums for gold bars in Hong Kong are at…
Frontrunning: January 31
by Zero Hedge - January 31st, 2011 8:54 am
Courtesy of Tyler Durden
- Lonely Analyst Warns of 2015 Bank Crisis Amid `Upbeat’ Davos (Bloomberg)
- Wall Street’s Collapse to Be Mystery Forever (Bloomberg)
- Egypt and Tunisia usher in the new era of global food revolutions (Evans-Pritchard)
- Central Bank Raises Priority of Price Controls (Xinhua)
- Brazil and China Trade Tensions Set to Rise (FT)
- United, Delta Profit at Risk From `Silent Killer’ in Fuel Hedges (Bloomberg)
- Home Prices Sink Further (WSJ)
- Obama to Send Congress Multitrillion-Dollar Budget Likely to Show Cutbacks (Bloomberg)
- US Pushes for Calm Transition in Egypt (FT)
- Europe Summit to Focus on Funds (WSJ)
- RBA May Keep Rate Unchanged to Gauge Flooding Damage (Bloomberg)
- Traders Laying Groundwork For New Type Of Credit Derivative (WSJ)
- Canada Bears Tripling Bets as Carney Says Loonie Too Strong for Exporters (Bloomberg)
- Getting active: Icahn defends his role as an investor (Post)
- The Daily LOL: A Cross of Rubber (NYT)
European economic data:
- Germany Retail Sales -0.3% m/m -1.3% y/y – lower than expected.Consensus 2.0% m/m +1.1% y/y. Previous -2.4% m/m 2.0% y/y.
- Eurozone CPI Estimate 2.4% y/y– higher than expected.Consensus 2.3% y/y. Previous 2.2% y/y.
Walk away due to Egypt?
by Chart School - January 31st, 2011 8:52 am
Courtesy of Chris Kimble
The song “Walk like an Egyptian” became a number one hit back in 1986 (see video here) Should investors “walk away” from stocks due to the turmoil in Egypt?
CLICK ON CHART TO ENLARGE
These patterns create reasons to be concerned, yet at this time (Monday morning), key support in the Nasdaq 100 and the 500 remains in place. Does one day make a trend? NO! If long, tight stops right below support should be in place!!!
The pre-market decline in the metals might reflect that the markets aren’t too concerned at this moment in time. I will keep posts coming due to the situation at hand.
Savings Rate Drop To 5.3%, Lowest In 10 Months
by Zero Hedge - January 31st, 2011 8:39 am
Courtesy of Tyler Durden
Of today’s Personal Income and spending numbers, the most relevant one was the savings rate. Income came unchanged at 0.4%, in line with expectations (previous revised to 0.4%), Spending was higher than expected, at 0.7% compared to 0.5% consensus (an increase of 0.3% from the revised 0.3% November point), meaning that the savings rate as a percentage of disposable income was 5.3%: the lowest since March 2010. The saving inflection point appears to have been 6.3% hit in June 2010. Is it all downhill from here?
Last but not least the PCE Core was just below expectations, at 0.0% compared to 0.1%. This was the clammest Year over Year core price gain on record. Once again: deflation is everywhere when one excludes everything.
Monday – Mubarak’s Mood May Move Morning Markets
by Phil - January 31st, 2011 8:21 am
Is it safe?
I asked that question at the end of November in "Timid Tuesday – Is It Safe" and here we are, 60 days later and up 7.5% and, on the whole, feeling less safe than we did back then, when the Market Oracle and I seemed to be the only people concerned global inflation and sovereign default risks rising rapidly. Although we were playing the market bullishly, with our aggressive $10,000 Virtual Portfolio (and make sure you check out our brand new $25,000 Virtual Portfolio that begins today with a $100,000 goal by December 31st) we decided to try to take from $26,000 to $50,000 by Jan 21st (we only made $35,000), our Breakout Defense Plays (5,000% in 5 Trades or Less) and our Secret Santa’s Inflation Hedges – it was with one hand on the exit door at all times. As I said at the close of Timid Tuesday’s article: "This house of cards is teetering folks – please be careful out there!"
That was 60 days ago. We’re a lot older now and have learned a lot about the World since then. We learned that China, Japan and the IMF are all ready, willing and able to buy the bonds of various EU nations. We learned that the Dollar can still fall 5% (was 81.44 on November 30th) further down despite Europe’s very obvious problems and Japan’s MASSIVE 200% Debt to GDP ratio. We learned that Uncle Ben will never stop printing money (until forced) and we learned that commodities can rise much faster than even our aggressive "Secret Santa" plays anticipated, with every one of our hedges (XHB, XLE, DBA and XLF) already over our year-end targets, all on track for gains well over 100%.
After watching our Alpha 2 pattern break (as I predicted it would on Monday morning) for the week, we went a lot more bearish on Thursday when I said in that morning post:
Keep in mind that gold and silver are our defensive plays. In Member Chat yesterday, Jromeha mentioned he’s 80% in cash and 85% short the market on the 20% in play and I said I thought that was an excellent way to play what I felt was a blow-off top after the Fed. We added 2 disaster hedges yesterday, a TZA spread that pays 500% if we get to $17 by
…
The Economist FTW – Part 2
by Zero Hedge - January 31st, 2011 8:21 am
Courtesy of Tyler Durden
Part 1 of the Economist FTW cover series came a week in advance of the first Greek bankruptcy (not to mention flash crash). Here comes Part 2…
Maersk Suspends Egypt Activities
by Zero Hedge - January 31st, 2011 8:06 am
Courtesy of Tyler Durden
And so it starts, as the first of the shipping giants decides evacuation is the better part of valor. Reuters reports that shipping conglomerate Maersk has suspended shipping activities in Egypt. But fear not. The Suez Canal is open. For now. From Reuters: “Danish shipping and oil group A.P. Moller-Maersk has suspended its Egyptian port terminal operations and closed its shipping offices in the country rocked by turmoil, the company said on Monday.” Surely this is bullish for stocks.
Per Reuters:
A.P. Moller-Maersk, whose Maersk Line is the world’s biggest container shipping company, said the unrest in Egypt had affected its commercial and operational activities but all its employees in the country are accounted for.
“Today, there are no terminal operations in Egypt and Maersk Line, Safmarine and Damco offices are closed,” A.P. Moller-Maersk said in a statement.
h/t Papaswamp
One Minute Macro Update
by Zero Hedge - January 31st, 2011 8:01 am
Courtesy of Tyler Durden
US: Geopolitical risk takes center stage following the weekend’s geopolitical headlines and Friday’s slight disappointment on GDP. The Fed does seem to be getting some consumer stimulus to go along with the commodity price inflation as the consumer contributed 3.04%age points of the 3.2% preliminary number on Friday. Today will see more critical consumer data points in PCE and consumer spending/income.
Europe: Fitch issues a warning on last week’s Spanish court ruling regarding mortgage foreclosure sale proceeds. Eurozone Jan CPI YoY 2.4% v 2.3%E (exceeds ECB target for 2nd straight month), providing more pressure on the ECB to move in a hawkish manner despite facing continued debt problems. BOE’s Weale joining Sentance in hawkish talk as well. To Vima (Greek newspaper) reporting today that ECB, EU, and IMF are working on a ‘re-profiling’ of Greek debt. Belgium, France, Austria, Portugal, and Spain all set to issue this week amidst the Egyptian geopolitical concerns.
Asia: PBOC Zhou warns on further RRR tightening (Nikkei News) and PBOC statement contains hawkish language. JPY manufacturing PMI and December industrial production both expansionary.
From Brian Yelvington of Knight Capital
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