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Currency

Merkel Bends on Spain - What’s next for the U.S. Dollar? QE3?

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Posted by Axel Merk - Reuters

on Thursday, 07 June 2012 07:33

Germany finalizing face-saving aid deal for Spain

The dismal U.S. jobs report for May, released last Friday, caused the price of gold to soar as the market appears to be pricing in an ever-greater chance of “QE3” – another round of quantitative easing by the Federal Reserve (Fed). But given that 10-year government debt is already down at 1.5%, the Fed may dive deeper into its toolbox in an effort to jumpstart the economy. Investors may want to consider taking advantage of the recent U.S. dollar rally to diversify out of the greenback ahead of QE3.

2012-06-05-bernanke-cartoon-qe3

 

o a modern central banker, it may be very simple: if the economy does not steam ahead, sprinkle some money on the problem. The Fed has done its sprinkling; indeed, the Fed has employed what one may consider a fire hose. But after QE1 and QE2, we continue to have lackluster economic growth, unable to substantially boost employment. Never mind that the real problem the global monetary system is facing is that the free market has been taken out of the pricing of risk:

.....read more HERE



Currency

HYPERINFLATION Calls are so Wrong - Its DEFLATION in Your Future

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Posted by Mike Shedlock Mish's Global Economic Trend Analysis

on Friday, 01 June 2012 00:00

All of the hyperinflation calls have been missed by a mile. The dollar is strengthening, consumer credit is once again sinking, and treasury yields just made 60-year lows.

  • This is what happens when you fail to take into consideration:
  • Credit conditions Global economic conditions
  • Printing by other central banks especially China
  • Currency instability in Europe
  • Untenable situation in Japan

Every time the US dollar ticks lower, commodity prices tick higher, or the CPI rises two tenths of a percent, hyperinflationists come out of the woodwork with nonsensical predictions and silly comparisons to Zimbabwe or Weimar Germany.

220px-GermanyHyperChart
 
Given that the US dollar recently fell to the lower end of its trading range, hyperinflationists once again came forth with their message of impending doom.
 
....read why calls for Hyperinflation are so far off HERE and

(Ed Note: You can scroll down to the Headline "Alternate Nonsense" to get right to the Hyperinflation/Deflation argument). Mish's Global Economic Analysis has an even deeper study HERE



Currency

U.S. Dollar and Euro - Exciting Opportunities

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Posted by Axel Merk of Merk Investments

on Thursday, 31 May 2012 08:27

Merk Sees Easing Around the World, to Benefit of Currencies and Commodities:

We continue to believe the currency asset class may provide investors with the opportunity to access enhanced risk-adjusted returns and valuable diversification benefits. We are excited about the outlook for the asset class and believe many investment opportunities continue to exist in the space.

....read more  about the oppportunities HERE

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Currency

Commodities Down, Dollar Up … and Why That Could Change Soon

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Posted by Larry Edelson - Uncommon Wisdom

on Tuesday, 22 May 2012 07:15

It didn’t take long for Europe’s sovereign-debt crisis to reassert itself. Here we are in May, a short three months after the last bailout of Greece, and Europe is crumbling again.

Greece is on the ropes, and will most assuredly have to splinter away from the euro and take back its currency, the drachma. It’s the only way Greece can get out of its depression. Dump the euro, take back the drachma, devalue it, and inflate its way out of the mess and out of debt.

Portugal is reeling again, too. Spain is also going down the tubes. Depositors are making runs on the banks. Moody’s has downgraded virtually the entire Spanish banking system. Spain’s stock market is at 20-year lows.

It’s not much better in Italy, the most-indebted country in Europe. And France isn’t far behind. Now that the Socialists lead the country, you can expect France’s fiscal situation to worsen.

Meanwhile, the only economy holding Europe upright is also starting to slow. Germany’s giant export machine is wobbling, and so is its economy.

So it should be no surprise to you that stock markets are falling now. In order of weakness: Europe is the most-vulnerable, U.S. stocks are the second-weakest, and Asia’s equity markets are the least-weak of the three corners of the globe. Latin American markets will generally follow the U.S. markets.

But what about commodities? It’s certainly understandable that economic weakness would also take its toll on demand-sensitive commodities such as copper, foods, other base metals, and the like. After all, if economies are sinking anew, demand for these commodities is sure to fall.

And that’s precisely what I’ve predicted for the commodity sector. I was perhaps one of the only commodity bears out there for the past several months, but now my warnings are coming true. We’re seeing a sharp decline in most commodity prices.

The big question on most investors’ minds is why gold and silver are also falling. After all, when governments are on the verge of collapsing, shouldn’t that be bullish for gold and silver?

Under certain circumstances, yes. But not always. If the peripheral economies are collapsing, and their governments are under social attack, like what’s happening in Europe, then it’s not all that bullish for gold and silver. The core of the global economy, the U.S. and the U.S. dollar, can still suck up much of the frightened capital.

Again, that’s precisely what I warned, and precisely what’s happening. As scared capital flees Europe — it’s going primarily into cash, and into the U.S. dollar.

That’s pushing the U.S. dollar up, and taking the shine off of precious metals. Plus, always keep in mind that at the beginning of a crisis like we have now in Europe, investors want cash above all else. So gold is not the king right now. Cash is king.

That’s all going to change soon, because the world’s central banks despise runs to cash … they despise falling asset prices … and they absolutely abhor disinflation or, even worse, outright deflation.

So that means that central banks are soon going to start printing massive amounts of money again, flooding the global economy with trillions of additional dollars.

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And when they do, you could just as easily see gold and silver bottom out and begin the next legs up in their bull markets.

I believe that’s not too far away. But it’s likely we will see further declines first. My models tell me that we are not yet at asset price levels that would send central banks into panic mode, forcing them to put the pedal to the metal with their money printing.

Here’s what my models are telling me. Look for further declines ahead …

 

  • Down to below $1,440 in gold
  • Down to below $26 in silver, to as low as $21
  • Down to below $85 in oil
  • Down to below 12,000 in the Dow Industrials

 

And mark my words: When the commodity markets do bottom out and central banks start printing money again — it will represent the beginning of the biggest phase yet in the commodity bull markets.

So get ready, because it’s right around the corner.

Best wishes, as always …

Larry

 

Larry Edelson has nearly 33 years of investing experience with a focus in the precious metals and natural resources markets. His Real Wealth Report (a monthly publication) and Resource Windfall Trader (weekly) provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management.

For more information on Real Wealth Reportclick here.
For more information on Resource Windfall Traderclick here.



Currency

What Buffet's Buying + US Dollar & Gold Long Term

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Posted by Porter Stansberry

on Thursday, 17 May 2012 07:41

Crude oil is falling… copper is falling… stocks are falling. Because of the European debt crisis, people are fleeing assets that are sensitive to economic growth… and flocking to "safe havens" like bonds and the U.S. dollar (cash). As you can see in the chart, the dollar is currently winning the world's "least ugly" paper currency contest. It's gained around 9% from its August lows. This doesn't sound like much to most people, but it's actually a huge gain for a major currency.

20120516 DIG_USD

Of course, as the dollar rises, gold falls. The yellow metal traded for $1,750 an ounce in February. It's now trading for $1,530. That's a decline of 12.5% in three months.

On the surface, gold is falling because people are dumping assets to raise cash. Gold is a liquid asset, just like stocks and crude oil. So it gets thrown overboard when people are desperate for liquidity. But the "big picture" reason gold is experiencing a decline is that it's simply "due" for a substantial period of sideways (or lower) prices. Gold has risen in price every single year for the past 11 years. No other widely traded asset or index can match that record of consistent gains. Gold is up more than six-fold during this relentless, relatively calm bull market.

With this amazing, once-in-a-century bull market in mind, we remind you that markets are like runners. They can't run flat-out for miles without a break. The long-term picture for gold hasn't changed. Western governments still have massive, unfunded debts and obligations that cannot be paid with sound, honest money. The people of Asia (especially China and India) are getting a little richer every year. These people have a centuries-old affinity for precious metals, like gold and silver… and they are still buying. Again, gold is simply due for a break.

To put its recent decline into perspective, let's look at the "long view." Below is a 12-year chart of gold. As you can see, gold could fall all the way down to $1,300 an ounce and remain in a bull market. That's where it was in late 2010. In the context of gold's massive bull market, even the latest decline isn't severe…

20120516 DIG_GOLD

Another bit of perspective: Rich, sophisticated investors don't view gold as a conventional investment. It's not like owning an income-producing rental property. It's not like owning shares in a dividend-paying, blue-chip company like Coca-Cola. Gold is real money. It's a form of "crisis insurance." Rich people buy gold and hope they never have to use it. They don't buy it with the hope that they'll make hundreds of percent on their holdings. You can read more about the "rich guy" way to view gold in this short interview.

Speaking of rich people and what they buy…

This morning, the news services are reporting on the latest moves by billionaire investor Warren Buffett. His company, Berkshire Hathaway, has just filed reports with the Securities and Exchange Commission showing it has new stakes in automaker General Motors and media company Viacom. Buffett also increased his stake in global discount retailer Wal-Mart – one of Dan Ferris' favorite World Dominating Dividend Growers. Buffett recently said he doesn't think the Mexico bribery scandal will harm the company's long-term earnings power. Dan agrees. He sees the recent selloff as a good buying opportunity.

 Following the investments of legends like Buffett is a great way to find potential low-risk, high-reward ideas. The world's best investors and traders have massive research budgets. They have the best contacts. They have the best computers and the most extensive databases. They're able to achieve a tremendous "information edge" in the market. That's why looking over their shoulders makes sense.

Over the past few days, we've told you a few details about our newest service, DailyWealth Trader. We have several goals with DailyWealth Trader. The main goal is to educate readers on the best ways to make low-risk, high-reward trades. The service also acts as a "digest" of ideas from the world's best investors and traders.

For example, in the May 1 issue (which was made available only to Alliance memebers), we discussed one of the top ideas from legendary trader Jim Chanos. As one of the world's best short sellers, Chanos makes money by betting on a company's stock price falling. We highlighted his short position in Brazilian oil producer Petrobras. Chanos says the company is the picture of how government mismanagement wrecks companies. It's also spending hundreds of billions of dollars to develop high-cost offshore oilfields. Chanos is bearish…

As you can see from the chart below, shorting Petrobras was a heck of an idea. The stock has collapsed from $30 per share to less than $20 per share in just a few months. As of yesterday's close, that trade is up 17.5% in just two weeks.

20120516 DIG_PBR-1

Again, with a subscription to DailyWealth Trader, you'll receive ideas from the world's best investors and traders. You'll also receive a priceless education on how to act on those ideas. If you're new to trading… or interested in furthering your market education, you'll get tremendous insights from DailyWealth Trader… at a very low price. You can sign up for our upcoming educational video and receive information on a trading technique we normally charge at least $1,000 to teach here.



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