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A Very Mild Alert: The CCI Breaks Out to New Highs

Thursday, December 23, 2010, 3:45 PM

Well, I can rip down the post-it from my monitor:  The Continuous Commodity Index has broken out to a new daily high, having bested the previous 615.14 level. It’s currently at 617.35.

This means that the Commodity Index, consisting of energy (18%), grains (18%), livestock (12%), softs (29% - this is coffee, OJ, cotton, sugar and cocoa), and metals (23%) has never been at a higher level in history. Of course, this is in nominal terms, and I am not sure how much higher these may have been at earlier times expressed in dollars that were worth more.

But as far as current consumers are concerned, they are at all-time highs.

Unless the index reverses hard later today, the weekly index will close at a new all-time high. And unless it closes down hard next week, it will close at a new monthly high as well. Jim Rogers (et al.) wins this battle.

» Read more


Atrocious Reasoning: Media Whiffs on Gas

Wednesday, December 22, 2010, 12:37 PM

The mighty media blender is furiously trying to spin things every which way but right. Around here, what we care about is information and context, two essential elements to making correct decisions.

You might have recently read an article that put forth the idea that US gasoline consumption has peaked, never to recover its 2006 highs. That's a powerful assertion and deserves to be carefully examined, not blindly accepted.  » Read more


Fueling the Fire: Commodities Hit a New High

Monday, December 20, 2010, 7:01 PM

Is the stock market topping? Will deflation return soon? Is oil about to tank?

As we continue to wrestle with the various policy gyrations that are complicating the macro picture, we're going to continue to keep our eyes firmly on market activity for clues.

Our old friend, the Continuous Commodity Index (CCI) has made a new closing high today. If it does not soon turn down, it will give traders a powerful motivation to run it up even higher, as it will have broken out from a potential double-top formation.

"Things" are getting more expensive. That is a fact. Energy, metals, and the 'softs' (grains and cotton) are all headed higher, both in the US and elsewhere across the world.

True, the new daily closing high for the CCI is by a whisker, but it's a new high nonetheless:

» Read more


The Federal Budget Deficit and the Looming Crisis

Thursday, December 16, 2010, 5:02 PM

The US federal government is barreling towards a certain fiscal train wreck. While there is much being gleefully reported about the return of the, consumers...uh, patriotic citizens...spending more than they have, there is almost no hope of growth returning fast enough to offset the amount of budgetary deterioration that now seems to be baked into the cake.

As always, one component of the problem is that the US political leadership has absolutely zero experience with controlling spending, let alone cutting spending. Where austerity is being attempted in Europe (at great pain, too...if you have not seen this video of the recent Greek riots, it is both remarkable and disturbing) the current civil unrest shows that citizens don't necessarily dutifully accept their politicians' belt-tightening policies.

The plan, such as it is, for the US fiscal and monetary authorities seems to be to keep up the government spending (including the Fed's QE efforts) for as long as necessary until self-sustaining growth returns.

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Bond Market Rebels

Friday, December 10, 2010, 11:35 AM

The news is full of stories about how the bond market seems to be defying the Fed. While it is not yet clear what the drivers of the recent sell-off in bonds truly are, the action bears watching.

As I mentioned previously, there are both innocent and sinister explanations for why bonds might be selling off. The innocent explanation involves a return to economic health that is being discounted in the bond market. The idea here is that a return to economic health will include both the cessation of Fed bond buying activity (QE II) and higher interest rates. Under this scenario, which is supported by recent economic data, one does not want to be holding bonds, which will only lose value over time. Best to beat the rush and sell them now.

The sinister explanation involves the idea that the Fed is losing control of the market and is not as powerful as some might have thought. This is the angle that the WSJ is playing up today:

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Insider Alert: Food Storage Shortage Risk Emerging

Thursday, December 9, 2010, 9:15 PM

As an enrolled member, we're bringing this alert to you first, before we make it available to the general audience on Friday morning.

After hearing reports of depleting inventories of pre-packaged, ready-to-purchase stored food, did a little investigating. It turns out there's truth behind the rumor.

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Don't Be Fooled: Inflation Has The Upper Hand

Wednesday, December 8, 2010, 6:23 PM

Don't Be Fooled: Inflation Has The Upper Hand

Wednesday, December 8, 2010

Executive Summary

  • Money supply (M2) has been steadily growing for a decade, and banks hold an unprecedented amount of excess reserves that could enter the market at any time.
  • Credit growth is flatlining.
  • Debt in the household & financial sectors (the big enchilada) exhibits the deflationary trends that are pre-occupying the Fed.
  • Federal government credit is exploding upwards as a result.
  • Corporate and state debt are increasing, but at more moderate rates.
  • Energy costs are high and getting higher = inflationary.
  • Confidence in paper currencies is plummeting = potentially hyperinflationary.
  • Forecast for the future...

Part I

If you have not yet read Part I of this report, please click here to read it first.

Part II 

In Part I, we stepped through prices as useful indicators of whether we are in a period of inflation or deflation.  Because there’s no more important determination to make than to get an early read on whether we are facing a future of inflation or deflation, we are going to dive a bit more deeply into the evidence here to round out the story.

Let’s begin with….


The classic definition of inflation or deflation is a “relative change in the amount of money compared to goods and services.”  Too much money and you have inflation; too little and you have deflation.


Budget Wars

Tuesday, December 7, 2010, 6:50 PM

All the world was waiting to see what form of budgetary punishment would be visited upon the Irish people as a consequence of banking mistakes and the perceived “need” by the European political class to assure that no bank investors shouldered any of the losses.

While the proposed budget may not be capital punishment, it is not far off.

» Read more


It's Coming...From The Outside In

Tuesday, November 30, 2010, 10:41 AM

What Europe fears, and the reason that the EU members on the Ireland negotiating team "went berserk" when Ireland raised the prospect of a haircut (losses) for the failed bank's bondholders, is that the contagion will spread from the periphery to the core.

That is, that the disease will progress from the outside in.

The strange market counter currents that we began tracking a couple of weeks ago are still with us and getting stranger by the day.

At this point I am quite concerned about another major banking crisis, quite similar to the one that nearly took down the system in October of 2008.  The evidence is mounting.

Here are the similarities:

» Read more


It's Official: The Economy Is Set To Starve

Tuesday, November 23, 2010, 1:18 PM

It's Official: The Economy Is Set To Starve

Tuesday, November 23, 2010

Executive Summary

  • The age of conventional oil is over, but energy demand will continue to climb.
  • Natural gas is the "silver" of energy plays.
  • The inexorable onset of Peak Oil will drive natural gas much, much higher.
  • A tipping point of awareness approaches.
  • Prepare for extreme market volatility.

Part I

It's the End of the Oil As We Know It...

Please click here to read Part I of this report.

Part II

Scouring the Globe for Fuel

Please click here to read Part II of this report.

Part III

Okay, so we've come to the conclusion that by the time the IEA, which has every incentive to underplay the timing and impact of Peak Oil, has publicly done everything but hand the world an engraved invitation on a silver platter that reads You are cordially invited to accept the reality of Peak Oil, it's already past time to begin making whatever adjustments you are going to make.

Remember, it is my view that when the changes finally arrive in full force, their speed will overtake most people's, countries', and companies' ability to react gracefully. (Click here for a recent report on this subject). Which means that the time to begin these efforts, if you have not already started, is now.

But we've gone over this in quite a bit of detail recently, and so I will not rehash those thoughts here and now. This report begins with the assumption that you have taken care of the basics: food, water, energy, and shelter. Further, you have gold and silver. You've got enough spare goods, parts, and necessities to take care of yourself, your family, and a few others besides. You've safely removed a comfortable portion of your wealth from the paper-based banking and financial systems. You are diligently working on building your local community.

Okay, so you've done all of that.  Now what?