The contrarian market and liquidity glut

http://www.zerohedge.com/article/contrarian-market-and-liquidity-glut-dissected

“I can’t think of a reason to be bullish...so I guess that is the reason to be bullish.” That quote from a client at our June 30th credit roundtable dinner in our view best summarized investor sentiment at the beginning of July. It also highlighted a key technical reason to have been bullish in July as negative investor sentiment reached a peak at the beginning of the month."

“I want to say one word to you. Just one word.” Not “plastics” but “liquidity”. Our longer term positive outlook on credit relies significantly on the technical condition of excess liquidity in financial markets. While eventually economic and credit fundamentals will need to catch up to those technicals to justify a continuation of spread compression (and credit market overweights), for now our year end outlook maintains that positive liquidity trends will lead to compression in spreads recouping much if not all of the European sovereign crisis induced spread widening.

In other words ignore fundamentals, ignore technicals, ignore everything you know about asset allocation and selection, and put your financial well being in the hands of the same people (the Fed) who have time after time proven the be the biggest wealth destructors of the US middle class year after year (unless of course one is a member of the privileged kleptocracy, in which case there is nothing to worry about).

Initial claims for unemployment insurance rises

http://www.dol.gov/opa/media/press/eta/ui/eta20101073.htm

I'm sure our government leaders will come up with another positive spin on the numbers.

Severe drought in Russia

http://earthobservatory.nasa.gov/NaturalHazards/view.php?id=44743

Higher food prices coming to a supermarket near you.

How to brainwash a nation

http://www.youtube.com/watch?v=zeMZGGQ0ERk

..the 4 steps used to transform the thinking and behavior of an entire population, over generations.

1) Demoralization
2) Destabilization
3) Crisis
4) Normalization

Senate approves aid to Medicaid and public employees

http://money.cnn.com/2010/08/04/news/economy/Senate_state_aid_medicaid_teachers/index.htm?hpt=T2

Secret banking cabal

To conspiracy theorists, the existence of a secret banking cabal is not news. What is shocking is the fact that a mainstream financial media outlet like Bloomberg would write about it. What is this world coming to? Will CNBC next expose the price suppression of precious metals in London and at the COMEX?

http://www.bloomberg.com/news/2010-01-28/secret-banking-cabal-emerges-from-aig-shadows-david-reilly.html

The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.

Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG’s bailout -- deserves further congressional scrutiny.

Cup and handle

Click on chart to enlarge.

Gold is forming a potentially bullish cup and handle continuation pattern. It theoretically marks a consolidation period before a breakout to the upside. It is just one of many indicators chartists utilize in technical analysis.

See disclaimers in the side bar.

Disclosure: long physical gold and silver.

Gold takeovers

Mergers and acquisitions activity is perking up among gold mining companies, as gold prices remain at elevated levels.

http://www.bloomberg.com/news/2010-08-03/gold-takeovers-reach-record-as-bullion-climbs-boosting-bmo-hsbc-merrill.html

SP downgrades Moody's

http://blogs.telegraph.co.uk/finance/tracycorrigan/100006756/why-sp-is-worried-about-moodys-and-vice-versa/

In an ironic twist, S & P is downgrading Moody's, which signals the beginning of a mutual cannibalization frenzy among the 3 credit ratings agencies (Fitch being the other). They all enabled and perpetuated the financial Ponzi schemes by assigning AAA credit ratings on worthless, toxic mortgage-backed securities, but the government did nothing to disembowel them. They also missed on the financial collapse and insolvency of major banks. It's ironic because while the government didn't kill them off, they will do it to each other.

Total market cap of gold equities

http://goldstocksdaily.com/2010/07/19/total-market-cap-of-all-gold-companies-262-1-billion/

It only takes a few big funds and central bankers from emerging countries (Russia, China, India, Brazil) to move the gold needle quickly and violently. Why? Because all the gold mining companies in the world are worth less than ExxonMobil.

The market capitalization for all gold mining companies globally is $262 billion. Exxon alone is worth $274 billion. The aggregate S & P 500 market cap is $10 trillion. When pension funds, mutual funds, banks, hedge funds, and investors rush into gold and gold equities, there will be trillions of dollars chasing companies worth $262 billion. It doesn't take a wild imagination to expect the prices of gold and gold equities to soar as a result.

University of Texas Investment fund buys gold

http://www.chron.com/disp/story.mpl/business/7108909.html

Fearing unstable international financial markets and the possibility of high inflation, Texas' higher education investment managers have bought more than $500 million in gold.

The gold purchases represent only 3 percent of the University of Texas Investment Management Co.'s $22.3 billion in investment funds, but it indicates how deeply the fund managers are concerned about the global financial future.

Wheat prices soaring

Yes, but our government tells us deflation is our biggest fear, in order to rationalize printing trillions of more dollars.

http://www.ft.com/cms/s/0/51913ed6-9e60-11df-a5a4-00144feab49a.html

Treasuries lack safety, liquidity for China

When your largest creditor wants to turn off the spigot, and your citizens back home are losing their jobs, their homes, and net worth, it's "uh-oh" time.

http://www.businessweek.com/news/2010-08-03/treasuries-lack-safety-liquidity-for-china-yu-says.html

The Chinese are diversifying away from USDollar-denominated assets, and looking at Special Drawing Rights as an alternative reserve currency. They're also accumulating gold.

Gold dinar, silver dirham

http://www.youtube.com/watch?v=nNtIsSWVJBI

ARNA Q2 earnings report

http://finance.yahoo.com/news/Arena-Pharmaceuticals-prnews-3737388002.html?x=0&.v=1

Arena Pharmaceuticals, Inc. (Nasdaq:ARNA - News) today reported financial results for the second quarter ended June 30, 2010, and recent developments, including the successful Pre-Approval Inspection, or PAI, of the company's Swiss drug product manufacturing facility by the US Food and Drug Administration, or FDA.

"We have recently achieved a number of important milestones, including the establishment of an agreement with Eisai for the commercialization of lorcaserin in the US, the successful completion of the FDA's pre-approval inspection of our Swiss manufacturing facility and the publication of our BLOOM trial results in the New England Journal of Medicine," stated Jack Lief, Arena's President and Chief Executive Officer. "We are continuing to execute on our plans for lorcaserin as we prepare for the September FDA advisory committee meeting and potential regulatory approval."

See disclaimers in the side bar.

Disclosure: long ARNA sharews.

China opens up domestic gold market

http://www.thedailycrux.com/content/5410/China/eml

China will let more banks import and export gold and open trading further to foreign companies as near-record prices and falling stock markets spur demand in the world's second-largest buyer of the metal. Gold prices gained.

Gold demand in China, the world's largest producer, gained in the first half as government measures to cool the property market and falling equities spurred investment, the Shanghai Gold Exchange said July 7. Spot gold gained to a record in June as investors sought to protect their wealth amid concerns about the global economic recovery.

Ben Davies on gold

One of the best interviews on gold on CNBC, of all networks. Bravo.

http://www.cnbc.com/id/15840232?play=1&video=1552984313

The Year America Dissolved

http://onlinejournal.com/artman/publish/article_6153.shtml

Paul Craig Roberts wrote this futuristic fictional vision of how he sees America in a few years due to a currency collapse. It sounds like a few scenes out of a post-apocalyptic Mad Max movie, so it's easy to assume he's just a right-wing, gun-slinging, anti-government nutjob...until you read his resume.

Dr. Roberts was Assistant Secretary U.S. Treasury, Associate Editor Wall Street Journal, Columnist for Business Week, Senior Research Fellow Hoover Institution Stanford University, and William E. Simon Chair of Political Economy in the Center for Strategic and International Studies, Washington, D.C.

Lorcaserin article in the Formulary Journal

Along with a peer-reviewed report and editorial in the well-respected New England Journal of Medicine, another positive article about Lorcaserin has been published in the Formulary Journal, a peer-reviewed drug management journal for managed-care and hospital decision-makers.

http://formularyjournal.modernmedicine.com/formulary/Modern+Medicine+Now/Lorcaserin-A-novel-selective-5-HT2C-receptor-agoni/ArticleStandard/Article/detail/673923

Morgan Stanley: inflation is biggest risk

http://www.moneynews.com/StreetTalk/Morgan-Stanley-Inflation-Risk--Double-Dip/2010/07/30/id/366105

Inflation is the biggest risk to emerging economies, but it helps reduce the debt burdens of developed countries, including the US.

My investment thesis is that US government monetary officials will declare war on deflation in an attempt to ward off another (deeper) recession and curb high unemployment. This will justify the Fed deploying another round of fiscal and monetary stimulus, Quantitative Easing 2.0. This will stoke inflation globally, even if it could appear dormant in the US for a while longer.

Treasury bond trust

http://dollarcollapse.com/uncategorized/sebastian-mallaby-nobody-would-know-whom-or-what-to-trust/

JPMorgan downgrades ARNA

Two weeks ago, JPMorgan upgraded shares of ARNA to Overweight. This morning, JPMorgan downgrades ARNA to Neutral, with a price target of $6. Sure, shares have appreciated 80% since the upgrade, but this appears suspicious. Could it be they have clients that need to cover their shorts--or longs that missed the run up and would like to enter at a lower price? Not that I am suggesting there is manipulation at work--since it's illegal, but the timing suggests opportunism.

http://www.businessweek.com/news/2010-08-02/boyd-charles-river-humana-mosaic-penske-u-s-equity-movers.html

http://www.canadianbusiness.com/markets/market_news/article.jsp?content=D9HBFN6O0

See disclaimers in the side bar.

Disclosure: long ARNA shares, added to my position this morning.

Thanks for the gift, JPMorgan and shorts.

Barbell--not dumbbell investing

http://www.marketwatch.com/story/barbell-investing-is-the-new-normal-2010-08-02

Pirating is a dangerous business these days

At least if you're a Somalian pirate operating in waters patrolled by Russians.



http://www.youtube.com/watch?v=TruV3sxS9Zw&feature=player_embedded

Alan Greenspan: The Financial System Is Broke

Visit msnbc.com for breaking news, world news, and news about the economy

http://www.msnbc.msn.com/id/21134540/vp/38510073#38510073

MR. GREENSPAN: Yeah, yeah. I, I would say that there's nothing out there that I can see which will alter the, the, the trend or the level of unemployment in this context.

MR. GREENSPAN: Well, the problem there implies that the government has control over those rates, meaning the Federal Reserve and the Treasury Department, in a sense. There is no doubt that the federal funds rate, that is the rate produced by the Federal Reserve, can be fixed at whatever the Fed wants it to be, but which the government has no control over is long-term interest rates, and long-term interest rates are what make the economy move. And if this budget problem eventually merges to the point where it begins to become very toxic, it will be reflected in rising long-term interest rates, rising mortgage rates, lower housing. At the moment, there is no sign of that, basically because the financial system is broke and you cannot have inflation if financial system is not working.

There's nothing like the truth coming from a former Fed Chairman. Greenspan is correct in this case: bond vigilantes will punish the US Treasury bond markets in demanding higher yields on long-dated Treasury bonds, forcing up long-term interest rates. They will also drive down the value of the USDollar, as the US government's ability to pay its obligations will come under question. It's not a matter of if, but when the steepening of the yield curve will occur.

Here is an article addressing the steepening of the yield curve from 2009.

http://www.reuters.com/article/idUSTRE54U1NZ20090531