We Are Witnessing The Largest Financial Bubble In History

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/19_We_Are_Witnessing_The_Largest_Financial_Bubble_In_History.html

Don Coxe On Everything From The Markets Rolling Over, To Persistent Food Inflation, To The Coming US Sovereign Debt Crunch

http://www.zerohedge.com/article/don-coxe-everything-markets-rolling-over-persistent-food-inflation-coming-us-sovereign-debt-

Yale Ph.D., And Former Fed Member Tells Obama To Pull A "Gordon Brown" And Sell All Of America's Gold

http://www.zerohedge.com/article/yale-phd-and-former-fed-member-tells-obama-pull-gordon-brown-and-sell-all-americas-gold

Disclosure: long gold and silver. In other words, I am not listening to financial "experts" and economists like Edwin Truman.

Safest credit ratings

http://www.economicpolicyjournal.com/2010/09/us-about-to-drop-off-list-of-top-ten.html

According to CMA Datavision, the U.S. ranks below nine other countries in terms of the safety of its sovereign debt. Norway is #1 followed by Finland and Germany.

Sweden and Hong Kong are new members of top ten list, displacing France and Belgium.

Game of chicken between fiscal and monetary authorities

http://www.zerohedge.com/article/willem-buiters-game-theoretical-explanation-interaction-between-central-banks-and-treasuries

To sovereign debt holders, the game is more like "musical chairs."

Inflation vs. deflation

The battle between equities giant Warren Buffett of Berkshire Hathaway and PIMCO's Bill Gross, the biggest bond fund manager, will be decided on whether inflation or deflation win out going forward. Buffett has increased his position in short-duration Treasuries, betting that inflation will cause longer-dated Treasury bond yields to rise. Gross is betting that long-term T-bond yields will continue to decline, as global economic growth declines, causing deflation.

http://www.zerohedge.com/article/buffett-vs-gross-or-inflation-vs-deflation-who-right

My guess is that both will be right. Long-expiry T-bond yields will continue to decline short-term in a low-growth environment, and demand for credit will be muted. However, as economic conditions continue their descent, central banks worldwide will inject liquidity in an attempt to stimulate their economies. The opposite effect will occur, as paper currencies are further debased, diminishing the standard of living for billions. Monetary stimuli will inevitably increase the prospects of inflation, especially if the velocity of money accelerates. The bond vigilantes will sense weakness in various foreign currencies, pushing up sovereign debt yields.

With the global economy intractably connected, sovereign debt crises will leapfrog from country to country, eventually reaching the shores of US, while the reserve status of the US Dollar will come into question.

Europe's 30 trillion Euro headache

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7915246/Europes-30-trillion-headache.html

Niall Ferguson again

I've posted about Niall Ferguson, Harvard Professor and historian, several times and this is a good interview on US fiscal policies, sovereign debt crisis, financial, political, and tax reform.



http://www.youtube.com/watch?v=03CB8pVJkI8&feature=player_embedded




http://www.youtube.com/watch?v=JmOSaAYb4Qk&feature=player_embedded

“Fiscal tightening is baked in the cake. Tax increases are coming and coming soon… The US has a kind of stay of execution while the European crisis unfolds, but at some point the nasty fiscal arithmetic will get everyone, including the U.S… Treasuries are a safe haven the way Pearl Harbor was a safe haven in 1941. It’s safe until it’s not safe anymore.”

The point of no return

http://seekingalpha.com/article/204882-beyond-the-point-of-no-return-you-need-to-buy-gold-bud-conrad

Hold on to your gold

That's the advice the Guild Investment Management team gives.

http://www.guildinvestment.com/ARThome.aspx?ModuleId=0&Itemid=385&SType=F

German article on bubbles

This is one of the best articles I've seen on sovereign debt. It's longish, but I highly recommend reading it if you have been stuck in a cave the last two years.

http://www.spiegel.de/international/europe/0,1518,692666,00.html

Dr. Fat Finger

Rumors are being spread that some trader entered the wrong dollar amount, triggering an avalanche of computer-driven algorithm sell orders. Liquidity dried up, and high-frequency trading caused the market meltdown. Bids disappeared, providing no support for plummeting prices.

Personally, I don't buy the "fat finger" theory. Markets are skittish, and any exogenous event can trigger a sell-off, whether it's Greek sovereign debt, or the collapse of the Euro.

SkyNet Defense System now activated!



http://www.youtube.com/watch?v=35Io50Dw2tY

Europe to United Kingdom to United States

The contagion will spread according to the Global Europe Anticipation Bulletin.

http://www.business24-7.ae/banking-finance/banking/commercial-banks-buy-gold-to-meet-demands-2010-05-05-1.240551

The BIS on sovereign debt

http://www.fgmr.com/gold-needed-now-more-than-ever.html

“Since the start of the financial crisis, industrial country public debt levels have increased dramatically. And they are set to continue rising for the foreseeable future.”

“First, fiscal problems confronting industrial economies are bigger than suggested by official debt figures…As frightening as it is to consider public debt increasing to more than 100% of GDP, an even greater danger arises from a rapidly ageing population. The related unfunded liabilities are large and growing...In the aftermath of the financial crisis, the path of future output is likely to be permanently below where we thought it would be just several years ago. As a result, government revenues will be lower and expenditures higher, making consolidation even more difficult…

Second, large public debts have significant financial and real consequences. The recent sharp rise in risk premia on long-term bonds issued by several industrial countries suggests that markets no longer consider sovereign debt low-risk…

Third, we note the risk that persistently high levels of public debt will drive down capital accumulation, productivity growth and long-term potential growth…

Finally, looming long-term fiscal imbalances pose significant risk to the prospects for future monetary stability...unstable debt dynamics could lead to higher inflation: direct debt monetisation, and the temptation to reduce the real value of government debt through higher inflation.”

The Bank for International Settlements (BIS) is the highest authority on international finance. Which is why as a contrarian, I was shocked they are firing the same warning shots on sovereign debt that I've been ranting on for years. Perhaps the debt problems have become so severe and apparent that even the blind can see what faces us.

Greece, currencies, gold

I've been warning of sovereign debt problems for 2 years, advocating gold and silver for years, and sounding the alarm bells of Dubai, Greece, and the Club Med Euro countries for months. Don't follow the puck--anticipate where it's headed. See the objects in the waters ahead in the UK, Japan, and the US for what they are: icebergs, not lifeboats.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/4/29_Out_Of_Currencies_And_Into_Gold.html

Eric King: This statement from Alex Barrett says it all, “Gold in Euros is at record highs and I think that people not just in Europe but across the world are losing faith in a lot of the fiat currencies and are actually heading towards real assets.” This is exactly the kind of thing you would expect to see in phase II of this secular bull market in gold. Big money flows into hard assets including gold and silver and also more institutional involvement. Contrarians may worry that gold is getting on more investors radar screens but this is simply the nature of bull markets.

Phase II of secular bull markets are longer than phase I so it will most likely go on for years before the manic phase III begins. Alex Barrett also remarked about the flow of funds, “...and that’s going to continue until we see this loose monetary policy start to get tightened up, so until then just keep investing.” Well there you are, we do not expect tight monetary policy just jawboning so the flow of money into both gold and silver should continue and accelerate for years which is supportive of a long phase II leading into the final crescendo of phase III.

If you understand the 3 stages of a secular bull market it makes it much easier to hold on during the reactions or shakeouts. Seasoned investors always look to accumulate during major corrections inside of secular bull markets because the wind is at their backs longer-term. For those who have a hard time buying during the major drawdowns they can simply use James Turks advice which is to dollar cost average by making purchases each month. This is sound advice from James and it helps remove emotion for some investors. The most effective way to make money in bull markets is simply to buy and hold, this is a fact but it requires tremendous patience.

See disclaimers in the side bar.

Disclosure: long gold and silver, long mining shares.

S & P downgrades Greece, Portugal, and Spain

The contagion spreads. Folks, as I have posited many times, this is only the beginning.

http://online.wsj.com/article/SB10001424052748704423504575212104219854716.html?mod=WSJ_hpp_MIDDLETopStories

Sprott on sovereign debt

http://www.sprott.com/Docs/MarketsataGlance/04_10%20Weakness%20Begets%20Weakness.pdf

Niall Ferguson on sovereign debt (repeat)

This is a repeat blog from last month, but I'd like to highlight one paragraph.

http://www.ft.com/cms/s/0/f90bca10-1679-11df-bf44-00144feab49a.html?nclick_check=1

Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase “safe haven”. US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.

Portugal next

Like clockwork, the "P" in the "PIIG" European countries--Portugal, is about to roll over due to sovereign debt problems. This is like watching a developing train wreck in slow motion.

http://www.businessweek.com/news/2010-03-24/asian-stocks-rise-on-strengthening-global-economy-euro-falls.html

Bud Conrad on sovereign debt

His notes:

We have gone through 3 of 4 predictable ordered phases:

1) Credit Bubble (everywhere, even subprime);

2) Credit Crisis from the bubble burst;

3) Massive Bailout, with the government absorbing the bad credit going into debt to lift the collapsing private sector, keep politicians in power, and support industries slopping at the government trough;

Leaving us with one more logical extension:

4) Currency Crisis. The massive government debt can't be paid off, confidence in the dollar will weaken more, and the eventual result will be repudiation of the debts that can't be paid. That is the step that comes after the Banking/Financial/Credit Crisis.

In our case, it is assured by the accumulated trade deficit on top of the government deficit. I was trying to give some parameters about that toward the end when Brian was asking for a time frame. The fact is that I don't know when, but I'm confident it will happen; in part because no one is worried about it.