Day: December 19, 2011

We’ve reached the end game for Central Bank intervention.

When confronted with excessive debt, you can either “take the hit” or you can try to inflate the debt away.

In 2008, the Central Banks, lead by the US Federal Reserve, decided not to “take the hit.” They’ve since spent trillions of Dollars propping up the financial system. By doing this, they’ve essentially attempted to fight a debt problem by issuing more debt.

The end result is similar to what happens when you try to cure a heroine addict by giving him more heroine: each new “hit” has less and less effect.

Case in point, consider the Central Banks’ coordinated intervention to lower the cost of borrowing Dollars three weeks ago. Remember, this was a coordinated effort, not the Federal Reserve or European Central Bank acting alone.

And yet, here we are, less than one month later, and European banks have wiped out MOST if not ALL of the gains the intervention produced.

Here’s the Irish Bank Allied Irish Banks:

This is actually the best of the bunch I’m going to show you (by the way, this was a $4 stock at the beginning of the year).

Here’s the Spanish Bank Santander:

And lest you think it’s only the PIIGS banks that are in trouble, here’s French bank Credit Agricole:

And here’s Germany’s Commerzbank:

On that note, if you’re looking for investment ideas and risk strategies on how to profit from this, I strongly urge you to check out my Private Wealth Advisory newsletter.

Private Wealth Advisory is my bi-weekly investment advisory aimed at helping investors beat the market by anticipating major trends and avoiding the REAL risks to their portfolios.

Case in point, Private Wealth Advisory subscribers profited from the collapse in late July/ early August, having been warned weeks in advance that it was coming.

They’ve since locked in some 33 winning trades (and no losers)… at a time when 99% of investors (professional and otherwise) are getting whipsawed this way and that by the market’s volatility.

As a result of this, we’re crushing the market this year, which is why my clients (which include executives at Fortune 500 companies and some of the largest financial institutions in the world including UBS, Wells Fargo, Merrill Lynch, and others) are very, very happy.

But we’re not done by any stretch.

Indeed, we just opened seven new trades last week to profit from the next round of Deflation. All of these trades are positioned to explode higher in the coming weeks as the market comes unhinged.

To find out what they are… that the worry and uncertainty out of investing in today’s market… and start making serious returns from your investments (again, we’ve seen 33 STRAIGHT WINNERS in the second half of 2011)…

Click Here Now!!!

Graham Summers

 

 

 

 

 

 

… Unless we get a major bank going under or a 2008-type event.

I’ve been reading that several pundits believe QE 3 is just around the corner. I’m sorry to say that this view is both misguided and has proven to be extremely dangerous to investors’ portfolios over the six months.

Indeed, we’ve heard this argument virtually non-stop since last June. Every time the Fed had another FOMC coming up, the argument was made that QE 3 would be announced. Every single time the Fed disappointed and the markets cratered (only to then be ramped higher by the PPT).

The madness would then start all over again a few weeks later. Whether it was some Dovish Fed President hinting the Fed was ready to act… or some economic data point missing expectations… EVERY TIME the pundits spun this to argue that QE 3 was just around the corner.

However, for those who actually read what Bernanke was saying, it was clear as day that QE 3 was NOT coming… at least not without some kind of Crisis hitting first: such as a major bank collapsing or another 2008 episode.

Take a look at the following:

Q. Since both housing and unemployment have not recovered sufficiently, why are you not instantly embarking on QE3? — Michael A. Kamperman, Waco, Tex.

Mr. Bernanke: “Going forward, we’ll have to continue to make judgments about whether additional steps are warranted, but as we do so, we have to keep in mind that we do have a dual mandate, that we do have to worry about both the rate of growth but also the inflation rate…

“The trade-offs are getting — are getting less attractive at this point. Inflation has gotten higher. Inflation expectations are a bit higher. It’s not clear that we can get substantial improvements in payrolls without some additional inflation risk. And in my view, if we’re going to have success in creating a long-run, sustainable recovery with lots of job growth, we’ve got to keep inflation under control. So we’ve got to look at both of those — both parts of the mandate as we — as we choose policy”

http://economix.blogs.nytimes.com/2011/04/28/how-bernanke-answered-your-questions/

Pessimistic Bernanke Fed Admits QE Has Failed In FOMC Statement

In its latest FOMC statement, the Bernanke Fed has admitted the economy continues to remain depressed, essentially admitting that both programs of long-term asset purchases, or quantitative easing, have failed to prop up output after what has been the worst recession since the Great Depression.

http://www.forbes.com/sites/afontevecchia/2011/08/09/pessimistic-bernanke-and-fomc-practically-admit-qe-has-failed/

“Monetary policy can do a lot, but monetary policy is not a panacea.” — Ben Bernanke 9/29/11

U.S. “close to faltering,” Fed ready to act: Bernanke

Asked whether another round of bond purchases, known as quantitative easing, was in store, Bernanke was noncommittal.

“We never take anything off the table because we don’t know where the economy is going to go. We have no immediate plans to do anything like that,” he said.

http://www.reuters.com/article/2011/10/04/us-usa-fed-bernanke-idUSTRE79337C20111004

Central banks may need to burst bubbles: Bernanke

Federal Reserve Chairman Ben Bernanke said on Tuesday that central banks may need to resort to monetary policy to combat asset bubbles, although regulation should be a first line of defense.

http://www.reuters.com/article/2011/10/18/us-usa-fed-bernanke-idUSTRE79H5IR20111018

 

Look at the progression there. As far back as May 2011, Bernanke admitted the benefits of QE were less attractive. He’s since not only admitted that asset bubbles exist (something Greenspan never admitted) but that Central Banks may even need to “burst” them!?!?

In what way do ANY of these indicate QE 3 is coming any time soon… if at all.

Which brings us to today. Once again the economy is weakening and once again the markets are under duress. And the pundits are out in full force saying QE 3 is coming in early 2012.

My question is: How exactly is the Fed going to sell that one?

The Fed can’t possibly claim it’s trying to lower interest rates with the short end of the curve essentially offering 0% and Operation Twist 2 focusing on getting the long-end even lower (at a time when the 30-year is already under 3% and the 10-year under 2%)?

Also how is Bernanke, who is now so politically toxic that he’s complaining to Congress that the media is treating him unfairly (and having his leaks at the Wall Street Journal write “Bernanke’s just like the rest of us… with a kindle and everything” articles) going to be able to unveil QE 3 without major consequences to his career?

Folks, this is the same man who used to lie openly to Congress about his intentions… who acted however he saw fit and was beholden to no one… NOW WRITING TO CONGRESS DEFENDING HIS ACTIONS AND COMPLAINING THAT HE’S BEING UNFAIRLY TREATED.

Do you really think Bernanke can launch another MAJOR monetary policy in this environment? Heck, EVERY GOP candidate is talking about firing him or calls his actions borderline treasonous. And with Obama’s rating at new lows… do you really think he’s going to be defending Bernanke when it’s already obvious that both the GOP and the general populace are outraged at the Fed?

Not. A. Chance.

The simple fact is that QE 3 is not coming… at least not without a 2008-type event or one of the TBTFs going under first. And even then, Bernanke may find that the political environment won’t tolerate it (after all, the simple argument to counter the need for QE 3 would be: “We’re in a Crisis again… so QE 1, QE Lite, QE 2, and Operation Twist 2 failed to solve the problem… so why should you launch QE 3?”).

On that note, if you’re looking for investment ideas and risk strategies on how to profit from this, I strongly urge you to check out my Private Wealth Advisory newsletter.

Private Wealth Advisory is my bi-weekly investment advisory aimed at helping investors beat the market by anticipating major trends and avoiding the REAL risks to their portfolios.

Case in point, Private Wealth Advisory subscribers profited from the collapse in late July/ early August, having been warned weeks in advance that it was coming.

They’ve since locked in some 33 winning trades (and no losers)… at a time when 99% of investors (professional and otherwise) are getting whipsawed this way and that by the market’s volatility.

As a result of this, we’re crushing the market this year, which is why my clients (which include executives at Fortune 500 companies and some of the largest financial institutions in the world including UBS, Wells Fargo, Merrill Lynch, and others) are very, very happy.

But we’re not done by any stretch.

Indeed, we just opened seven new trades last week to profit from the next round of Deflation. All of these trades are positioned to explode higher in the coming weeks as the market comes unhinged.

To find out what they are… that the worry and uncertainty out of investing in today’s market… and start making serious returns from your investments (again, we’ve seen 33 STRAIGHT WINNERS in the second half of 2011)…

Click Here Now!!!

Graham Summers

 

 

 

 

The markets have entered a new round of deflation. The only asset class that has yet to realize this is stocks.

Here’s the 30-Year Treasury Bond:

As you can see, we’ve already surpassed the former all-time established during the nadir of the 2008-2009 Crisis. To say this is deflationary would be an understatement. Indeed, on the shorter end of the bond curve Treasuries are yielding 0% (the 3-month), 0.02% (the six month) and 0.2% (the two year).

Put another way, investors are essentially willing to lend to the US for almost NOTHING in return for up to two years… based solely on the notion that by doing so they’re at least “guaranteed” a return OF capital.

DE-flation.

Here’s Gold:

Considering that Gold is a leading indicator for stocks… and that the precious metal only breaks below its long-term uptrend in times of systemic risk, the above breakdown is a MAJOR red flag that something BAD is brewing in the financial system. That something is another round of DE-flation.

How about Agricultural commodities… which anticipated QE Lite and QE 2 before every other asset class?

As you can see, we’ve wiped out ALL of the QE 2 gains and are now on the verge of breaking back into a trading range that goes back to 2009. Again, DE-flation.

 

And then there’s stocks… the most clueless of asset classes, which simply don’t “get it”… yet.

As you can see, while Europe’s banking system is imploding, Gold has broken its long-term uptrend, and US Treasuries are signaling a Crisis even worse than 2008, stocks are bouncing off of support as though there’s no real danger.

This can be attributed to three factors:

1)   Light volume (fewer and fewer folks are investing in stocks which allows Wall Street to move the market more easily).

2)   End of the year performance gaming by hedge funds and institutions (most of which have had horrible years)

3)   Misguided hope and delusions… just like the ones we had in 2008 when stocks didn’t “get it” until the whole system was ready to collapse

In simple terms, the best analysis of today’s markets is that we are getting MAJOR red flags across the board that another round of DE-flation is here.

Against this backdrop, stocks are as clueless as they were in 2008. And given that most traders will be taking off early this week, those remaining will be able to move the market any way they please as volume will be even lower than the abysmal levels we’ve seen for most of 2011.

So my advice is to avoid trading this week if you can help it. There is simply too much uncertainty in the market: stocks could rally based on end of the year shenanigans… or they could just as easily collapse due to Europe or any number of other issues in the system today.

However, the larger picture indicates that deflation is back and it’s back with a vengeance. It would be wise to prepare in advance for this as stocks are ALWAYS the last to “get it.” And by the looks of the recent action in Gold and Treasuries, “It” is going to be something VERY unpleasant.

On that note, if you’re looking for investment ideas and risk strategies on how to profit from this, I strongly urge you to check out my Private Wealth Advisory newsletter.

Private Wealth Advisory is my bi-weekly investment advisory aimed at helping investors beat the market by anticipating major trends and avoiding the REAL risks to their portfolios.

Case in point, Private Wealth Advisory subscribers profited from the collapse in late July/ early August, having been warned weeks in advance that it was coming.

They’ve since locked in some 33 winning trades (and no losers)… at a time when 99% of investors (professional and otherwise) are getting whipsawed this way and that by the market’s volatility.

As a result of this, we’re crushing the market this year, which is why my clients (which include executives at Fortune 500 companies and some of the largest financial institutions in the world including UBS, Wells Fargo, Merrill Lynch, and others) are very, very happy.

But we’re not done by any stretch.

Indeed, we just opened seven new trades last week to profit from the next round of Deflation. All of these trades are positioned to explode higher in the coming weeks as the market comes unhinged.

To find out what they are… that the worry and uncertainty out of investing in today’s market… and start making serious returns from your investments (again, we’ve seen 33 STRAIGHT WINNERS in the second half of 2011)…

Click Here Now!!!

Graham Summers