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Off The Cuff: Lots of Storm Clouds Brewing

Thursday, September 29, 2011, 3:12 PM

In this week's Off the Cuff with Mish & Chris podcast, Chris and Mish tackle:

  • The global commodity sell-off
    • What's driving the action here, and what impact would a slowdown in China and other key markets have on the US economy and the major asset classes?
  • The Fed
    • Should investors be expecting more stimulus to follow soon?
  • Europe
    • How close to the wire is the situation there at this point?
  • Gold
    • How should the metal fare up from here? Where should 'safe money' park?

» Read more

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Understanding What Happens Next

Wednesday, September 28, 2011, 10:15 AM

Understanding What Happens Next

Wednesday, September 28, 2011

Executive Summary

  • The sentiment on commodities is shifting in an important way.
  • What happens when a global credit bubble meets a secular rise in energy costs? (Answer: nothing good.)
  • The only chart you need to understand the future
  • Why the next steps of the Fed and other central banks is imminently predictable at this point
  • Given the high probabilities and their huge impact, you need to take steps now to position and protect yourself.
  • The three critical questions you need to be asking

Part I - What Just Happened

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II - Understanding What Happens Next

Global Carnage

During these turbulent periods, it's best to back up, widen the view, and ask where we are. Since the beginning of 2011, we observe that global equities have been hammered for losses, while global oil (Brent) and gold remain positive for the year.

Interestingly, we see that commodities in general (CRB) are down less YTD than even the best performing stock market (New York), which is not quite what I would have expected. Commodities typically lose first and most in a global downturn, or rout, and the fact that they haven't suggests that commodities are now being viewed as a safer place to be than equities. This is a stunning turn of events if it holds out going forward.

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Experts Weigh in on the Recent Action in Gold and Silver

Tuesday, September 27, 2011, 10:35 AM

Over the weekend, we reached out to several popular precious metals experts to get their quick take on the recent downdraft in gold and silver prices.

  • David Morgan
  • Ted Butler
  • Turd Ferguson

Here's what they had to say:

» Read more

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Twist and Rout: The Fed, Markets, and Precious Metals

Saturday, September 24, 2011, 8:59 PM

Bernanke, et al., stood pat, much to my great surprise given the macro data they had in hand, and the stock and commodity markets reacted badly. Very badly. The rout I had been expecting has finally arrived, albeit about a month later than I originally thought back in March.

What now?

First, let's revisit the views I laid out on May 12th in Positioning For The Coming Rout:

» Read more

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Off The Cuff: The Fed is Merely Treading Water at This Point

Thursday, September 22, 2011, 9:19 AM

In this week's Off the Cuff with Mish & Chris podcast, Chris and Mish cover:

  • Yesterday's 'Operation Twist' announcement by the Fed: 
    • What exactly was announced yesterday and what's the likely impact?

    • Who is likely to benefit (and who isn't)?
    • What's likely to be announced at the next Fed meeting in six weeks?
    • How much ability does the Fed really have to influence the outcome of our economic situation anymore?

» Read more

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Inflate or Die

Tuesday, September 20, 2011, 3:58 PM

Commodities are still poised to run from here, stoking inflation, although everything hinges on what the Fed and ECB do next.

The entire world awaits the Fed's pronouncements on Wednesday, September 21st. Will it announce just a little more thin-air money to be injected into the system, or a lot? Or maybe none at all?

To those of us watching all of this unfold, it's every bit as surreal as it appears. How can it be that we've gotten to the point that trillions upon trillions of global paper assets are poised to inflect upwards or downwards depending on whether seven people currently seated around a board room table decide to manufacture infinitely leverageable 'wealth' out of thin air now, or wait another six weeks before doing it?

That true wealth cannot be manufactured out of thin air seems lost on quite a few market participants, who are more than happy to continue trading stocks and bonds back and forth for as long as the music continues to play. What their exit strategy is for when the music stops is open to question, but in many cases it will be a forlorn hope such as, "I'll get (my clients) out in time!"

» Read more

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Positioning Yourself for the Devolution of the Euro

Tuesday, September 20, 2011, 8:37 AM

Positioning Yourself for the Devolution of the Euro

Tuesday, September 20, 2011

Executive Summary

  • Expect dramatic downward volatility as the crisis worsens this year, forcing new and more dramatic 'fixes.'
  • What the best options are for capital when seeking to avoid a euro devaluation.
  • An interim period of stabilization is likely, as markets digest the impact of these 'fixes.'
  • Further downward movement is then anticipated if fundamental issues aren't addressed (which they likely won't be).
  • Why timing and vigilance are everything for the attentive investor.

Part I - The Fatal Flaws in the Eurozone and What They Mean for You

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II - Positioning Yourself for the Devolution of the Euro

One of the clichés of investing is, “There is no bad investment; there is only bad timing.” While we all know there are indeed bad investments, the point about timing is still valid: In certain situations, timing is the difference between a good and bad investment.

The European crisis may well be just such a situation. Until the structural imbalances are truly resolved and not simply papered over for purposes of perception management, then investments denominated in euros will remain at risk.

If the systemic flaws are not resolved, a risky investment (i.e., assets held in euros) could become a disastrous one. If the imbalances are eventually addressed on a structural level, assets denominated in euros or the follow-on currencies may become relatively attractive.

For investors, the key characteristic of the Eurozone crisis is its unpredictability. Anyone claiming there is “zero probability” of a Eurozone breakup is indulging in false precision. Nobody knows what will happen, as the E.U. and the euro are unique experiments without easy historical precedents. All that can be said with any certainty is that toothless reforms, empty compromises, and ballooning bailouts cannot fix structural flaws, and those are essentially all that’s been offered to date.

Despite the unpredictability of the Eurozone’s debt and currency crises, we can sketch out one potential timeline which would suggest an evolving, flexible investment strategy.

Insider

Off The Cuff: The Increasing Impotence of Central Planning

Thursday, September 15, 2011, 3:43 PM

In this week's Off the Cuff with Mish & Chris podcast, Chris and Mish focus on:

  • EuroBonds: All eyes continue to be on Europe. What are the odds of the proposal to issue Eruobonds passing? If passed, do these have a snowball's chance of helping the situation? 
  • Jobs: The situation looks uglier and uglier. Is the new deal proposed by the Admisinstration a step in the right direction?
  • QE3: For those who see Ben Bernanke announcing another round of quantitative easing on September 21 as a fait accompli, how should they position themselves beforehand?
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Off The Cuff: The Approaching Bonfire of the Incumbents

Thursday, September 8, 2011, 8:13 PM

In this week's Off the Cuff with Mish & Chris podcast, Chris and Mish get down to brass tacks on:

  • Europe: Where to from here? 
  • Gold: Is gold decoupling from its historic relationship with the dollar?
  • Fed intervention: Will QE3 be announced on September 21st? If it is, will it even make a difference? 
  • Popular discontent: The key question at this stage is who is going to pay for the clean-up of this mess? Voters around the world are becoming increasingly forceful, they are unwilling to fund more bailouts, and many incumbents look like their days left in office will be shorter than they'd like.
  • Leadership: Why are world leaders so intent on preserving an unsustainable status quo, especially at increasing risk to their political careers?

Insider

Why Commodities are the New Safe Haven

Wednesday, September 7, 2011, 11:39 AM

Why Commodities are the New Safe Haven

Wednesday, September 7, 2011

Executive Summary

  • Prices have already risen dramatically with the money supply.
  • An increase in money velocity will ratchet up the trajectory in prices dramatically.
  • Are we likely to see more or less moneyprinting from the Fed?
  • Why commodities, beyond the precious metals, are becoming the next safe haven.

Part I - Commodities Seem Set to Rocket Higher

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II - Why Commodities are the New Safe Haven

Condition #3: Preference To Hold Money Persists

What does one do with Money of Zero Maturity (MZM)? Well, you can save it in a money market fund, keep it at your bank, or you can spend it. The rate at which it is being spent, relative to the economy, is measured in terms of its velocity. 

The faster people are spending the same money chasing a relatively fixed amount of goods and services, the higher the rate of inflation goes. The mental image you should have here is someone in Germany in the 1920's being paid with a wheelbarrow full of cash that they push as quickly as they can to the nearest store (literal veloicty of money, as it were).

Right now, the velocity of MZM is near its historic lows (only recently set in 2009), keeping inflationary pressures relatively low -- for the time being.