Tuesday, 15 February 2011

Danger Signals.

Baltic Dry Index. 1206 +28

LIR Gold Target by 2019: $30,000. Revised due to QE.

"In the long run, the gold price has to go up in relation to paper money. There is no other way. To what price, that depends on the scale of the inflation - and we know that inflation will continue."

Nicholas L. Deak

Commodity and fuel inflation now seems to be rapidly entering the US economy. Below, two very different sources suggest that stagflation has arrived. Stay long precious metals.

Companies Raise Prices as Commodity Costs Jump


A package of Oscar Mayer cold cuts. A pair of Nine West boots. A Whirlpool washing machine.

By the fall, people will most likely be paying more for each of them, as rising prices hit most consumer goods, say retailers, food companies and manufacturers of consumer products.

Cotton prices are near their highest level in more than a decade, after adjusting for inflation, and leather and polyester costs are jumping as well. Copper recently hit its highest level in about 40 years, and iron ore, used for steel, is fetching extremely high prices. Prices for corn, sugar, wheat, beef, pork and coffee are soaring. Labor overseas is becoming more expensive, meanwhile, and so are the utility bills to keep a factory running.

“There are cost pressures from virtually everywhere,” said Wesley R. Card, the chief executive of the Jones Group, whose brands include Nine West and Anne Klein. After trying to keep retail prices flat or even lower during the recession, Jones says prices for its brands will climb 15 to 20 percent by autumn.



Grand Theft USA – Prices Go Parabolic

By Phil of Phil's Stock World

Two percent!

That’s how much the price of EVERYTHING has gone up IN AMERICA since Christmas Day, just 6 weeks ago.  This is according to the very reliable Billion Prices Project at MIT, which collects pricing data every day from online retailers using a software that scans the underlying code in public webpages and stores the relevant price information in the database.  The daily online index is an average of individual price changes across multiple categories and retailers that provides real-time information on major inflation trends.   

In other words, this is not Bernanke’s BS – THIS IS REALITY FOLKS – and reality is NOT GOOD!  We’re talking parabolic short-term moves that you know and I know and the data shows is absolutely happening. Yet the Chairman of the Federal Reserve Bank of the United States of America tells us over and over and over again that it is not happening. 

He tells us that inflation was down in 2010 from 2.4% in 2009 to 1.2% last year and that he sees no inflation. In fact, he is basing his mathematical models on it and directing our nation’s policies on this basis and he is conducting the most dangerous monetary experiment in the history of the Universe – ALL BASED ON HIS PREMISE THAT INFLATION DOES NOT EXIST!



While it’s hard to think of America going the way of Egypt, for one thing it’s not a repressive dictatorship, for another the FBI is not the Egyptian Mukhabarat, food and fuel inflation at a time of stagnant or falling wages plus high unemployment, is a powder keg awaiting a spark. Retirees are among the most impacted by rising food and fuel costs, especially so at a time of almost zero interest rates. Thankfully for America and the rest of the world, historically retirees have never lead revolutions, and aren’t likely too this time either, but they are very likely to vote in disproportionate numbers in coming elections.

Inflation isn’t just a problem in the USA. Below, bad news from China, although it wasn’t unexpected given a 48% increase in money supply in just two years.

China's Inflation Exceeds Target, Adding Rates Pressure

By Bloomberg News - Feb 15, 2011 8:25 AM GMT

China’s inflation accelerated in January as prices excluding food rose the most in at least six years, bolstering the case for more interest-rate increases to tame overheating risks in the fastest-growing major economy.

Consumer prices rose 4.9 percent from a year earlier after a 4.6 percent December gain, the statistics bureau said on its website today. A separate central bank report showed banks signed 1.04 trillion yuan ($158 billion) in new loans, less than forecast while still the third-highest January total.

“Inflationary pressures haven’t abated and China has already entered into an era of structural inflation,” said Liu Li-gang, an Australia & New Zealand Banking Group economist in Hong Kong. He sees “more monetary policy tightening ahead.”

The acceleration in inflation reflects rising rents, a 48 percent surge in money supply in two years and increasing domestic demand in the nation that’s replaced Japan as the world’s second-biggest economy. Policy makers may front-load monetary-policy tightening in the first half of the year as inflation remains elevated, according to JPMorgan Chase & Co. and Morgan Stanley



With inflation returning in that part of the world where people eat, drink, drive and heat themselves, it’s a bad time for the BOJ to have spotted the return of global growth. If the BOJ is right, a large period of downward mobility is in store for many in society, as a surge of price increases rolls around the world.

"The history of paper money is an account of abuse, mismanagement, and financial disaster."

Richard M. Ebeling

Bank of Japan Raises Economic Assessement on Global Growth

By Mayumi Otsuma - Feb 15, 2011 8:17 AM GMT

The Bank of Japan raised its economic assessment for the first time in nine months as faster overseas growth bolsters exports and production.

“Japan’s economy is gradually emerging from the current deceleration phase,” the central bank said in a statement today after keeping the key interest rate between zero and 0.1 percent and the size of an asset-buying program at 5 trillion yen ($60 billion) by a unanimous vote.

Japanese government bond yields are climbing on expectations global growth will accelerate this year and commodity inflation will increase worldwide, with the benchmark 10-year yields rising to a nine-month high last week. A brighter outlook combined with economists’ forecasts for the recovery to take hold this quarter may reduce the possibility of the central bank bolstering credit-easing measures.



"When paper money systems begin to crack at the seams, the run to gold could be explosive."

Harry Browne

At the Comex silver depositories Monday, final figures were: Registered 41.92 Moz, Eligible 60.84 Moz, Total 102.76 Moz.


Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today, China. Export at any price, comes at a high price for some. I suppose the message for tourists is, don’t eat the rice and in most cities, don’t breathe the air. Supposedly in the current 5 year plan adopted last November, tackling environmental pollution has been given a high priority. We shall see.

By staff reporter Gong Jing 02.13.2011 12:14

Heavy Metals Tainting China's Rice Bowls

Researchers say cadmium and other sewage toxins have poisoned large amounts of a Chinese staple

As much as 10 percent of China's rice may be tainted by poisonous cadmium, a heavy metal discharged in mine and industrial sewage that makes its way into rice paddies, according to agricultural researchers at a major university.

Much of this poisoned rice is consumed by farm families or sold in areas of the nation's food market beyond the reach of government safety regulators.

Following the lead of research conducted by scientists at Nanjing Agricultural University's agricultural resource and environment institute, a Caixin probe found several dozen farmers in the village of Sidi in southern China's Guangxi Autonomous Region have been troubled by a strange weakness of the legs for decades.

Health officials have declined to link the feeble leg condition to pollution, but similar conditions have been found among farmers in Zhejiang Province that the Nanjing scientists blamed on high levels of cadmium in the rice local families eat almost daily.

Rice is a staple food for 65 percent of the population in China, where annual rice farm output is about 200 million tons.

Sidi's rice paddies have been polluted by sewage from a nearby lead and zinc mine.

The Nanjing researchers, led by farm scientist Pan Genxing, took 91 samples from markets in six regions nationwide in 2007 and found elevated cadmium levels in 10 percent of the commercially sold rice.

The research attracted little attention after its publication three years ago. Pan's team followed up with another survey in 2008 focusing on several southern provinces.

They found 63 samples from markets in Jiangxi, Hunan and Guangdong provinces contained elevated cadmium levels in 60 percent of the rice, suggesting the problem is far more serious in the south than northern China.

Chen Tongbin, a research fellow at the China Academy of Sciences specializing in soil pollution and remediation, estimates heavy metals have polluted 10 percent of China's farmland. Leading the list of poisons are cadmium and arsenic.



"Increasingly, the wealth of the modern world has come to be represented by financial assets rather than real assets, and this to me is a very unhealthy situation, because financial assets are inherently unstable. Financial assets (currencies, bonds, mortgages, stocks, bank credit, etc.) can be quickly and violently reduced in value, or destroyed completely by either inflation or deflation."

Donald J. Hoppe

The monthly Coppock Indicators finished January:

DJIA: +161 Down 10. NASDAQ: +228 Down 10. SP500: +161 Down 4.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. December is the seventh down month, but the downward momentum has virtually stopped. I would put on (purchased) synthetic double options here for a breakout in either direction. Professional traders would adopt much more risky granted option strategies

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