Gold Gaps to New High Above $1063

and yes, the Dollar tanks again! Surprise!

This combination is the most reliable trend in the world right now!

Does Weaker Data Point Toward Recovery... or Disappointment?

from Mish's blog:
After spending $trillions one would have hoped to see something more than an expected GDP revision of 2.8%. Looking ahead MarketWatch is asking Do weaker data show recovery is stalling?

Last week, a "reality check" rippled through the markets following weak data on housing starts and industrial production, said Nigel Gault and Brian Bethune, U.S. economists for IHS Global Insight. They expect further "mixed and somewhat ambiguous" reports in the coming week, but, on whole, they say "the evidence is still positive and continues to point to a nascent recovery" that will need "strong policy support" for some time.

Housing

Even four years after the peak, the state of the housing market remains central to the medium-term outlook.

Construction, sales and prices picked up over recent months after hitting generational lows, boosted in part by federal policies and in part by improvement in some of the fundamentals. But the weakening in the October data ahead of the anticipated expiration of the federal home-buying subsidy has put the strength of those fundamentals to the test.

The home-buyer tax credit, of course, has now been extended and even expanded. But buyers and builders didn't know that in October.

Last week, we found out that builders cut back on permits and starts on single-family homes in October, in anticipation that the tax credit would expire on Nov. 30.

GDP revisions

The other big story for the week could be the revision to third-quarter growth figures. Last month, the Commerce Department said real gross domestic product grew at a 3.5% annualized rate, the first gain in a year. On Tuesday, that figure is likely to be revised to about 2.8%.

The largest source of revisions will come from nonresidential construction spending and net exports. Spending on nonresidential structures was weaker than first thought, while imports were stronger than believed, suggesting that more of the gains from increased sales in the third quarter accrued to foreign producers, rather than domestic companies. Inventories will be revised lower.

"Despite the likely downward revision, we still believe that the third quarter will prove to be the first quarter of recovery and that it demonstrates a decisive turn in the economy," wrote economists for Barclays Capital.

Economists see the economy growing at a pace just above its long-term trend. They expect GDP to grow 2.5% in the fourth quarter, 3% in the first quarter of 2010 and 3.5% in the second quarter. That's a far cry from the 6% growth seen in typical V-shaped recoveries, but it's better than a poke in the eye with a sharp stick.

Of course, those are just forecasts. No one really knows for sure how the economy will do over the next 12 to 18 months.

MarketWatch asked the right question but the economists quoted came to the wrong conclusion.

100% of this so-called "Nascent Recovery" is due to government stimulus, housing credits, cash for-clunkers, and other wasteful spending.

Extending the home tax credit was exactly the wrong thing to do. It adds to the deficit and does little but push demand forward and/or give money to people who were going to buy a home anyway.

When it comes to 3.5% GDP in the second quarter of 2010, I will take the under. Of course I can easily be wrong depending on how much deeper in the hole Congress is willing to go.

One thing I am sure of is this: A recovery so fragile that it is 100% dependent on "strong policy support" that adds to the national debt, does little more than push demand forward, and does next to nothing for new job creation or family formation is not a "recovery" of any kind, it's a mirage.

Hunger Rises to Historic High

from Feedstuffs.com:
- Hunger in America at highest level in history of USDA report.

- Sources note that the report covered 2008, suggesting that situation is even worse this year.

- Adults tend to sacrifice nutritional needs to make sure their children have access to food.

IT'S not a holiday story one wants to report, but more people in the U.S., including children, are going hungry than ever before in history, according to the U.S. Department of Agriculture's "Household Food Security" report issued last week. 
The annual report revealed that 17 million American households -- 14.6% of households -- were "food insecure" in 2008, the highest level observed since the report was first undertaken in 1995, USDA's Economic Research Service (ERS) said.

The numbers represent 49 million Americans, including nearly 17 million children. 
Furthermore, fully one-third of the affected households -- 6.7 million, or 5.7%, of American households -- were in the highest-possible state of food insecurity -- meaning that at least some household members experienced decreased food intake and disrupted eating patterns during the year -- also the highest level in the history of the report, ERS said.

Children are normally shielded from food insecurity, ERS noted, but nevertheless, children in 506,000 households, or 1.3%, experienced the highest-possible state of food insecurity in 2008, ERS said. 
The fundamental reason for food insecurity in the U.S. is poverty, which is marked by a lack of resources to address basic needs such as food, shelter and health care, said Agriculture Secretary Tom Vilsack.

He noted that the Obama Administration has taken aggressive steps to address poverty through the American Recovery & Reinvestment Act of 2009, focusing on job creation and training, income support and unemployment insurance and affordable housing.

A Copper-Colored Disconnect

from WSJ:

Copper's continuous rally in the face of swelling inventories -- a sign of weak consumption -- has perplexed many in the market.
Copper stockpiles at London Metal Exchange warehouses are at their highest level since April. In China, the world's biggest consumer of the metal, copper stocks have risen sixfold at the Shanghai Futures Exchange this year. And at Comex, the metals division of CME Group, stocks are their highest level since August 2004.
Yet, copper soared 5% last week...

I wonder if this disconnect is occurring in sympathy with gold, or if it is a flee to hard assets because of worries about the debt bubble.It appears to be an "anything but fiat" money trade!

Positive Proof Global Warming Is a Scam

from Mish's Global Economic Trend Analysis blog;

It's now official. Much of the hype about global warming is nothing but a complete scam.

Thanks to hackers (or an insider) who broke into The University of East Anglia's Climatic Research Unit (CRU) and downloaded 156 megaybytes of data including extremely damaging emails, we now know that data supporting the global warming thesis was completely fabricated.

Inquiring minds are reading Hacked: Hadley CRU FOI2009 Files on The Reference Frame by Luboš Motl, a physicist from the Czech Republic.

The University of East Anglia's Climatic Research Unit (CRU), usually working together with the Hadley center (recall HadCRUT3 global temperatures), has been hacked.

So far, the most interesting file I found in the "documents" directory is pdj_grant_since1990.xls (Google preview, click) which shows that since 1990, Phil Jones has collected staggering 13.7 million British pounds ($22.6 million) in grants.

Phil Jones, the main criminal according to this correspondence, has personally confirmed that the website was hacked and that the documents are authentic. See Briefing Room.

He says that he "can't remember" what he meant by "hiding the decline." Well, let me teach him some English. First, dictionaries say that hide means

1. to conceal from sight; prevent from being seen or discovered: Where did she hide her jewels?
2. to obstruct the view of; cover up: The sun was hidden by the clouds.
3. to conceal from knowledge or exposure; keep secret: to hide one's feelings.
4. to conceal oneself; lie concealed: He hid in the closet.
5. British. a place of concealment for hunting or observing wildlife; hunting blind.
6. hide out, to go into or remain in hiding: After breaking out of jail, he hid out in a deserted farmhouse.

Here Are A Few Choice Emails

From: Phil Jones
To: ray bradley ,mann@virginia.edu, mhughes@ltrr.arizona.edu
Subject: Diagram for WMO Statement
Date: Tue, 16 Nov 1999 13:31:15 +0000
Cc: k.briffa@uea.ac.uk,t.osborn@uea.ac.uk

Dear Ray, Mike and Malcolm,
Once Tim's got a diagram here we'll send that either later today or first thing tomorrow. I've just completed Mike's Nature trick of adding in the real temps to each series for the last 20 years (ie from 1981 onwards) amd from 1961 for Keith's to hide the decline. Mike's series got the annual land and marine values while the other two got April-Sept for NH land N of 20N. The latter two are real for 1999, while the estimate for 1999 for NH combined is +0.44C wrt 61-90. The Global estimate for 1999 with data through Oct is +0.35C cf. 0.57 for 1998. Thanks for the comments, Ray.

Cheers
Phil

Prof. Phil Jones
Climatic Research Unit Telephone +44 (0) 1603 592090
School of Environmental Sciences Fax +44 (0) 1603 507784
University of East Anglia
Norwich Email p.jones@uea.ac.uk
NR4 7TJ
UK

===================================

From: Gary Funkhouser
To: k.briffa@uea.ac.uk
Subject: kyrgyzstan and siberian data
Date: Thu, 19 Sep 1996 15:37:09 -0700

Keith,

Thanks for your consideration. Once I get a draft of the central and southern siberian data and talk to Stepan and Eugene I'll send it to you.

I really wish I could be more positive about the Kyrgyzstan material, but I swear I pulled every trick out of my sleeve trying to milk something out of that. It was pretty funny though - I told Malcolm what you said about my possibly being too Graybill-like in evaluating the response functions - he laughed and said that's what he thought at first also. The data's tempting but there's too much variation even within stands. I don't think it'd be productive to try and juggle the chronology statistics any more than I already have - they just are what they are (that does sound Graybillian). I think I'll have to look for an option where I can let this little story go as it is.

Not having seen the sites I can only speculate, but I'd be optimistic if someone could get back there and spend more time collecting samples, particularly at the upper elevations.

Yeah, I doubt I'll be over your way anytime soon. Too bad, I'd like to get together with you and Ed for a beer or two. Probably someday though.

Cheers, Gary
Gary Funkhouser
Lab. of Tree-Ring Research
The University of Arizona
Tucson, Arizona 85721 USA
phone: (520) 621-2946
fax: (520) 621-8229
e-mail: gary@ltrr.arizona.edu
================================================

There is much more in that first link on The Reference Frame, including ways to download all the data yourself. Thanks Luboš!

Hadley CRU says leaked data is real

When this story broke, many assumed it was a fake. Nope.
Hadley CRU says leaked data is real

The director of Britain's leading Climate Research Unit, Phil Jones, has told Investigate magazine's TGIF Edition tonight that his organization has been hacked, and the data flying all over the internet appears to be genuine.

In an exclusive interview, Jones told TGIF, "It was a hacker. We were aware of this about three or four days ago that someone had hacked into our system and taken and copied loads of data files and emails."

"Have you alerted police?"

"Not yet. We were not aware of what had been taken."

Jones says he was first tipped off to the security breach by colleagues at the website RealClimate.

Alert The Police?

Yes, someone ought to alert the police and have Phil Jones and everyone else involved in this fraud arrested.

Market Ticker On The Scam

Carl Denninger was also commenting on the scam on Friday in "Global Warming" SCAM - Hack/Leak FLASH.

.....
Yes, I have the file. So do a few million other people.

There's enough evidence in there, in my opinion, of outrageously fraudulent conduct to make this the scandal of the 20th and 21st century.

Sorry folks, there's no science here - this is, from what I see, a massive and outrageous fraud, and now that the documents have been confirmed as authentic, it is time to pull the curtain down on this crap and start locking up all of the proponents - starting with AL GORE.

Here are some interesting "meta statistics" on the documents, and the number of times the words referenced appear:

• Fraud: 79
• Falsify: 6
• Inflate: 14
• Conceal: 5
• Hide: 19

Just for starters.

If you think that's bad, you might like this - from the file "ipcc-tar-master.rtf":

47 out of 91 models listed in Chapter 9 assume that carbon dioxide in the atmosphere is increasing at the rate of 1% a year when the measured rate of increase, for the past 33 years, has been 0.4% a year. The assumption of false figures in models in order to boost future projections is fraudulent. What other figures are falsely exaggerated in the same way?

And then there's this...

From: Phil Jones p.jones@uea.ac.uk
To: "Michael E. Mann" mann@meteo.psu.edu
Subject: IPCC & FOI
Date: Thu May 29 11:04:11 2008

Mike,

Can you delete any emails you may have had with Keith re AR4? Keith will do likewise. He's not in at the moment - minor family crisis.

Can you also email Gene and get him to do the same? I don't have his new email address.

We will be getting Caspar to do likewise.

I see that CA claim they discovered the 1945 problem in the Nature paper!!
Cheers
Phil

Rules Of The Game

Here is an interesting snip on Rules of the Game posted in What's Up With That?

I downloaded the zip file, unpacked it, browsed a bit. I opened a .pdf file entitled “RulesOfTheGame.pdf”. Very interesting document. Most compelling is that I broke open the metadata for this file. The file date stamp is Oct. 3, 2006, the metadata says it was created Oct 14, 2005 using QuarkExpress v.6.1 (released in 2004). All properties and metadata for this file definitely appear genuine to me.

Interesting that this document describes methods of convincing the public of the “crisis”.

Excerpt:

a new way of thinking

Once we’ve eliminated the myths, there is room for some new ideas. These principles relate to some of the key ideas emerging from behaviour change modeling for sustainable development:

5. Climate change must be ‘front of mind’ before persuasion works
Currently, telling the public to take notice of climate change is as successful as selling tampons to men. People don’t realise (or remember) that climate change relates to them.

6. Use both peripheral and central processing Attracting direct attention to an issue can change attitudes, but peripheral messages can be just as effective: a tabloid snapshot of Gwyneth Paltrow at a bus stop can help change attitudes to public transport.

7. Link climate change mitigation to positive desires/aspirations Traditional marketing associates products with the aspirations of their target audience. Linking climate change mitigation to home improvement, self-improvement, green spaces or national pride are all worth investigating.

8. Use transmitters and social learning People learn through social interaction, and some people are better teachers and trendsetters than others. Targeting these people will ensure that messages seem more trustworthy and are transmitted more effectively.

9. Beware the impacts of cognitive dissonance Confronting someone with the difference between their attitude and their actions on climate change will make them more likely to change their attitude than their actions.

How To Avoid Taxes On Grants

Mike Abbott (17:06:59):

Here’s a quote from one of the emails:

“Also, it is important for us if you can transfer the ADVANCE money on the personal accounts which we gave you earlier and the sum for one occasion transfer (for example, during one day) will not be more than 10,000 USD. Only in this case we can avoid big taxes and use money for our work as much as possible.”

Reducing "Blips"

Ric Werme (19:43:43):

This sounds like a “get rid of the MWP,” I hope it’s just a what if
speculation/exploration that might lead to research directions.

tux:mail> cat 1254108338.txt
From: Tom Wigley
To: Phil Jones
Subject: 1940s
Date: Sun, 27 Sep 2009 23:25:38 -0600
Cc: Ben Santer

Phil,

Here are some speculations on correcting SSTs to partly explain the 1940s warming blip.

If you look at the attached plot you will see that the land also shows the 1940s blip (as I’m sure you know).

So, if we could reduce the ocean blip by, say, 0.15 degC, then this would be significant for the global mean — but we’d still have to explain the land blip.

I’ve chosen 0.15 here deliberately. This still leaves an ocean blip, and i think one needs to have some form of ocean blip to explain the land blip (via either some common forcing, or ocean forcing land, or vice versa, or all of these). When you look at other blips, the land blips are 1.5 to 2 times (roughly) the ocean blips — higher sensitivity plus thermal inertia effects. My 0.15 adjustment leaves things
consistent with this, so you can see where I am coming from.

I downloaded the document and found some interesting stuff

Wang Fabrications

From: "D.J. Keenan"
To: "Steve McIntyre"
Cc: "Phil Jones" Subject: Wang fabrications
Date: Tue, 19 Jun 2007 20:45:15 +0100
X-Mailer: Microsoft Outlook Express 6.00.2900.3138
X-UEA-Spam-Score: 0.0
X-UEA-Spam-Level: /
X-UEA-Spam-Flag: NO

Steve,

I thought that I should summarize what has happened with the Wang case.

First, I concluded that the claims made about Chinese stations by Jones et al. [Nature, 1990] and Wang et al. [GRL, 1990] were very probably fabricated. (You very likely came to the same conclusion.)

Second, some investigation showed that Phil Jones was wholly blameless and that responsibility almost certainly lay with Wang.

Third, I contacted Wang, told him that I had caught him, and asked him to retract his fabricated claims. My e-mails were addressed to him only, and I told no one about them. In Wang's reply, though, Jones, Karl, Zeng, etc. were Cc'd.

Fourth, I explained to Wang that I would publicly accuse him of fraud if he did not retract. Wang seemed to not take me seriously. So I drafted what would be the text of a formal accusation and sent it to him. Wang replied that if I wanted to make the accusation, that was up to me.

Fifth, I put a draft on my web site--
http://www.informath.org/apprise/a5620.htm
--and e-mailed a few people, asking if they had any recommendations for improvement.

I intend to send the final version to Wang's university, and to demand a formal investigation into fraud. I will also notify the media. Separately, I have had a preliminary discussion with the FBI--because Wang likely used government funds to commit his fraud; it seems that it might be possible to prosecute Wang under the same statute as was used in the Eric Poehlman case. The simplicity of the case makes this easier--no scientific knowledge is required to understand things.

I saw that you have now e-mailed Phil (Cc'd above), asking Phil to publish a retraction of Wang's claims: http://www.climateaudit.org/?p=1741#comment-115879
There could be a couple problems with that. One problem is that it would be difficult for Phil to publish anything without the agreement of Wang and the other co-authors (Nature would simply say "no").

Another problem is that your e-mail says that you presume Phil was "unaware of the incorrectness" of Wang's work. I do not see how that could be true. Although the evidence that Phil was innocent in 1990 seems entirely conclusive, there is also the paper of Yan et al. [Advances in Atmospheric Sciences, 18: 309 (2001)], which is cited on my web page. Phil is a co-author of that paper.

Phil, this proves that you knew there were serious problems with Wang's claims back in 2001; yet some of your work since then has continued to rely on those claims, most notably in the latest report from the IPCC. It would be nice to hear the explanation for this. Phil?

Kind wishes, Doug

That is just an accusation but it looks pretty damning.

This whole thing with tree rings is pretty fascinating. There was a reference in the emails to this site: Ross McKitrick: Defects in key climate data are uncovered

Only by playing with data can scientists come up with the infamous ‘hockey stick’ graph of global warming

Beginning in 2003, I worked with Stephen McIntyre to replicate a famous result in paleoclimatology known as the Hockey Stick graph. Developed by a U.S. climatologist named Michael Mann, it was a statistical compilation of tree ring data supposedly proving that air temperatures had been stable for 900 years, then soared off the charts in the 20th century. Prior to the publication of the Hockey Stick, scientists had held that the medieval-era was warmer than the present, making the scale of 20th century global warming seem relatively unimportant. The dramatic revision to this view occasioned by the Hockey Stick’s publication made it the poster child of the global warming movement. It was featured prominently in a 2001 report of the U.N. Intergovernmental Panel on Climate Change (IPCC), as well as government websites and countless review reports.

Steve and I showed that the mathematics behind the Mann Hockey Stick were badly flawed, such that its shape was determined by suspect bristlecone tree ring data. Controversies quickly piled up: Two expert panels involving the U.S. National Academy of Sciences were asked to investigate, the U.S. Congress held a hearing, and the media followed the story around the world.

The expert reports upheld all of our criticisms of the Mann Hockey Stick, both of the mathematics and of its reliance on flawed bristlecone pine data. ...

Thus the key ingredient in most of the studies that have been invoked to support the Hockey Stick, namely the Briffa Yamal series, depends on the influence of a woefully thin subsample of trees and the exclusion of readily-available data for the same area. Whatever is going on here, it is not science.

I have been probing the arguments for global warming for well over a decade. In collaboration with a lot of excellent coauthors I have consistently found that when the layers get peeled back, what lies at the core is either flawed, misleading or simply non-existent.

Ross McKitrick is a professor of environmental economics at the University of Guelph, and coauthor of Taken By Storm: The Troubled Science, Policy and Politics of Global Warming.

That article is a fascinating read in and of itself, implicating U.S. climatologist Michael Mann.

By the way, I am questioning if this was really the work of hackers. It could just as easily be an inside job of some disgruntled worker deciding to expose the CRU.

It's a good thing Cap-And-Trade "Three-Card Monte" Dead For 2009.

Now let's kill it permanently. Global warming is a hoax. At least the data presented is a hoax. If there is a problem then the free market will find a solution. The idea that a bunch of politicians with an agenda can do anything about it is ludicrous.

The earth has gone through cooling and warming cycles for millions of years. Attempting to measure one small period and then thinking one can find the true cause of that change (assuming it even exists), goes beyond hubris.

It would just be just as correct to say ...

Beware The Ice Age Cometh

Because given enough time I am sure it will.

The Deflation Black Hole

Black Hole Madness

The black hole is not deflation. The black hole is fighting it like Japan did, or as the US is doing now. For the $trillions spent fighting this mess, all we have to show for it is a lousy bump in GDP at an annualized rate of 2.5%. Now, Fisher suggests (and rightfully so), that's all there is.

Meanwhile all the consumer debt and housing debt is still intact. Moreover, another turn down in commercial real estate and residential real estate is coming. To top it off unemployment is 10.2% and rising, likely headed far North of 11%.

Given that the US is essentially following the same idiotic path as Japan, there is every reason to believe the problem manifests itself in a similar fashion.

Here is the full article.

Economic Iceberg Coming in Deficits

By DOUGLAS HOLTZ-EAKIN

President Barack Obama took office promising to lead from the center and solve big problems. He has exerted enormous political energy attempting to reform the nation's health-care system. But the biggest economic problem facing the nation is not health care. It's the deficit. Recently, the White House signaled that it will get serious about reducing the deficit next year—after it locks into place massive new health-care entitlements. This is a recipe for disaster, as it will create a new appetite for increased spending and yet another powerful interest group to oppose deficit-reduction measures.
Our fiscal situation has deteriorated rapidly in just the past few years. The federal government ran a 2009 deficit of $1.4 trillion—the highest since World War II—as spending reached nearly 25% of GDP and total revenues fell below 15% of GDP. Shortfalls like these have not been seen in more than 50 years.
Going forward, there is no relief in sight, as spending far outpaces revenues and the federal budget is projected to be in enormous deficit every year. Our national debt is projected to stand at $17.1 trillion 10 years from now, or over $50,000 per American. By 2019, according to the Congressional Budget Office's (CBO) analysis of the president's budget, the budget deficit will still be roughly $1 trillion, even though the economic situation will have improved and revenues will be above historical norms.
The planned deficits will have destructive consequences for both fairness and economic growth. They will force upon our children and grandchildren the bill for our overconsumption. Federal deficits will crowd out domestic investment in physical capital, human capital, and technologies that increase potential GDP and the standard of living. Financing deficits could crowd out exports and harm our international competitiveness, as we can already see happening with the large borrowing we are doing from competitors like China.
At what point, some financial analysts ask, do rating agencies downgrade the United States? When do lenders price additional risk to federal borrowing, leading to a damaging spike in interest rates? How quickly will international investors flee the dollar for a new reserve currency? And how will the resulting higher interest rates, diminished dollar, higher inflation, and economic distress manifest itself? Given the president's recent reception in China—friendly but fruitless—these answers may come sooner than any of us would like.
Mr. Obama and his advisers say they understand these concerns, but the administration's policy choices are the equivalent of steering the economy toward an iceberg. Perhaps the most vivid example of sending the wrong message to international capital markets are the health-care reform bills—one that passed the House earlier this month and another under consideration in the Senate. Whatever their good intentions, they have too many flaws to be defensible.
First and foremost, neither bends the health-cost curve downward. The CBO found that the House bill fails to reduce the pace of health-care spending growth. An audit of the bill by Richard Foster, chief actuary for the Centers for Medicare and Medicaid Services, found that the pace of national health-care spending will increase by 2.1% over 10 years, or by about $750 billion. Senate Majority Leader Harry Reid's bill grows just as fast as the House version. In this way, the bills betray the basic promise of health-care reform: providing quality care at lower cost.
Second, each bill sets up a new entitlement program that grows at 8% annually as far as the eye can see—faster than the economy will grow, faster than tax revenues will grow, and just as fast as the already-broken Medicare and Medicaid programs. They also create a second new entitlement program, a federally run, long-term-care insurance plan.
Finally, the bills are fiscally dishonest, using every budget gimmick and trick in the book: Leave out inconvenient spending, back-load spending to disguise the true scale, front-load tax revenues, let inflation push up tax revenues, promise spending cuts to doctors and hospitals that have no record of materializing, and so on.
If there really are savings to be found in Medicare, those savings should be directed toward deficit reduction and preserving Medicare, not to financing huge new entitlement programs. Getting long-term budgets under control is hard enough today. The job will be nearly impossible with a slew of new entitlements in place.
In short, any combination of what is moving through Congress is economically dangerous and invites the rapid acceleration of a debt crisis. It is a dramatic statement to financial markets that the federal government does not understand that it must get its fiscal house in order.
What to do? The best option would be for the president to halt Congress's rush to fiscal suicide, and refocus on slowing the dangerous growth in Social Security, Medicare and Medicaid. He should call on Congress to pass a comprehensive reform of our income and payroll tax systems that would generate revenue sufficient to fund its spending desires in a pro-growth and fair fashion.
Reducing entitlement spending and closing tax loopholes to create a fairer tax system with more balanced revenues is politically difficult and requires sacrifice. But we will avert a potentially devastating credit crisis, increase national savings, drive productivity and wage growth, and enhance our international competitiveness.
The time to worry about the deficit is not next year, but now. There is no time to waste.
Mr. Holtz-Eakin is former director of the Congressional Budget Office and a fellow at the Manhattan Institute. This is adapted from testimony he gave before the Senate Committee on the Budget on Nov. 10.

Futures Analysis for 11/20

Instrument	Contract	Hany	EMA	Klinger	DTA Anal	Candle
Corn	CH10	bearish	bearish	bearish	consolidation	na
Soybean Oil	BOF10	bearish	bullish	exhaustion	parallels	none
Soybeans	SF10	bullish	bullish	bullish	parallels	bull contin
Soybean Meal	SMF10	bullish	bullish	bullish	parallels	bull contin
Wheat	WH10	bearish	bullish	bearish	bubble ending	none
Oats	OH10	bearish	bearish	bearish	Bbands flat	none
Rough Rice	RRF10	bearish	none	bearish	Bbands flat	none
Sugar	SBH10	bearish	bearish	flat	Bbands flat	none
Cotton	CTH10	bullish	bullish	bullish	new parall	bull contin
Cocoa	CCH10	bullish	bullish	bullish	none	bull contin
Coffee	KCH10	bearish	bearish	bearish	none	bear contin
Orange Juice	OJF10	bullish	bearish	bearish	Bbands flat	none
Live Cattle	LCG10	bullish	bullish	bullish	bubble ending	none
Feeder Cattle	FCF10	bullish	bullish	exhaustion	bubble ending	none
Lean Hog	LHG10	bullish	bullish	bullish	Bbands flat	bull contin
Pork Bellies	PBG10	bearish	bullish	bullish	Bbands flat	consolidation
Lumber	LBF10	bearish	bearish	exhaustion	exit	reversal
Class III Milk	DAF10	bearish	bullish	none	Bbands flat	6-day engulf
Cash Butter	CBZ09	bearish	bullish	unknown	bubble ending	none
Dow	YMZ09	bearish	bearish	bearish	bubble ending	hanging man
S&P 500	ESZ09	bearish	bearish	bearish	unknown	none
US Dollar Index	DXZ09	bullish	bullish	bullish	Bbands flat	bull contin
Euro	ECZ09	bullish	bearish	bearish	Bands flat	none
Japanes Yen	JYZ09	bullish	bullish	bullish	parallels	bull contin
British Pound	BPZ09	bearish	bearish	bearish	Bands flat	bull contin
Australian $	ADZ09	bearish	bearish	bearish	Bands flat	bear contin
Canadian $	CDZ09	bearish	bearish	bearish	Bands flat	bear contin
Swiss Franc	SFZ09	bearish	bearish	bearish	Bands flat	none
New Zealand $	NE1Z09	bearish	bearish	bearish	Bands flat	none
EuroYen	RYZ09	bearish	bearish	bearish	none	bear contin
Remnimbi
Mexican Peso	MP1Z09	bearish	bearish	bearish	flat but wide	none
Russian Ruble	RUZ09	bearish	bearish	bullish	end parallels	bear contin
Crude Oil	CLF10	bearish	bearish	bearish	Bands flat	erratic
Natural Gas	NGF10	bearish	bullish	bullish	ending bubble	none
RBOB Gas
Heating Oil
Eurodollar	EDZ09	bullish	bullish	bullish	parallels	bull contin
LIBOR	EMZ09	bullish	bullish	bullish	parallels	bull contin
Fed Funds	FFZ09	bullish	bullish	bullish	parallels	bull contin
10 Yr. Treas	TYZ09	bearish	bullish	bullish	ending bubble	none
30 Yr Treas
Int Rate Swaps
Gold	YGZ09	bullish	bullish	bullish	parallels	bull contin
Silver	YIZ09	bearish	bullish	bullish	funnel stage	none
Palladium	PAH10	bearish	bearish	bearish	bubble ending	none
Platinum	PLF10	bearish	bullish	bullish	bubble ending	bull contin
Copper	OCH10	bearish	bullish	exhaustion	mixed	none

Gartman, Mauldin Warn of Potential for Nasty Dollar Correction

Where the Wild Things Are is a beloved children's book and now a beautiful movie. But in the investment world there are really scary wild things lurking about in the hidden recesses of the economic landscape. Today we look at one of the unintended consequences of the Federal Reserve's low interest rate policy.
For quite some time, I have been arguing that we are faced with no good choices, not just in the US but in the entire "developed" world. I see a low-growth, Muddle Through world over the next years (with a double-dip recession just to liven things up). However, that does not mean that we will lack for volatility. Things could get volatile rather quickly. Let's quickly set the background.

It Is Not Just Japan

Let's look at today's interest rate picture. Yesterday, we had the bizarre occurrence of banks actually paying the government to hold their cash. Three-month treasuries yield a miniscule 0.01% in interest. If you opt to buy a one-year bill you get all of 0.26%. You can see the entire spectrum below.

Look at the graph of the yield curve below. It is as steep as we have seen it in a long time. But that is almost the point. Banks are essentially getting free money. If you are a banker and can't make money in this environment, you need to quit and find meaningful employment.

And that is part of the rationale that the Fed espouses with its low interest rate regime. Not only does it allow banks to repair their balance sheets, it also encourages investors to put money into riskier assets in order to get some return on their investments. Over $260 billion has gone into bond funds this year, and just $2.6 billion into stock funds. However, you have to balance that with the fact that some $400 billion has left money market funds paying less than 0.2%. So there is some movement to capture yield.
But is it just banks that are getting cheap money? And is encouraging investors to find riskier assets a sound policy? Maybe not.

The Euro-Yen Cross and the Dollar Carry Trade

I wrote a great deal in the past few years about the strong correlation of the euro-yen cross to stock markets all over the world in general. (The euro-yen cross is the exchange rate of the euro and the Japanese yen.) This was a proxy for the Japanese carry trade. The stock markets of the world rose and fell in synchronization with the yen versus the euro.
A currency carry trade is a strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used.
The Japanese drove their rates down to essentially zero in the 1990s. By early 2007, it was estimated that the yen carry trade was over $1 trillion. But when the world credit crisis hit, the world wanted dollars. They paid back the yen and bought dollars, driving the yen higher and killing the yen carry trade. Who wants to borrow in a currency that continues to rise, even if the costs are low? And often, large leverage was used, so small movements in the currency could destroy outsized amounts of capital.
But now, there are some who are beginning to ask whether there is a dollar carry trade. In the last nine months, the correlation between the dollar and the stock market has gone to about 90%. If the dollar rises, the stock markets and other risk assets tend to fall, and vice-versa. It would appear that investors and funds are borrowing cheap dollars on a short-term basis and investing in all sorts of risk assets. Not only have stock markets risen, but so have high-yield bonds, commodities, and so on.
We have seen the steepest rise in US stock markets coming out of a recession since the end of the last world war. The market is "discounting" a 5% GDP next year and a profit rebound beyond anything in past experience. Depending on the quarter, operating earnings are expected to rise by anywhere from 30-40%. P/E ratios are back at 23, well above the 17 we saw in the summer of 2007 (I am using 4th quarter 2009 estimates so as to not have to take into account the disastrous 4th quarter of last year.)
Worrying about a dollar carry trade is not just a preoccupation of my friends Nouriel Roubini or David Rosenberg or Frank Veneroso. Look as this story from Bloomberg:
"China's Liu Says U.S. Rates Cause Dollar Speculation
"Nov. 15 (Bloomberg) -- The decline of the dollar and decisions in the U.S. not to raise interest rates have caused "huge" speculation in foreign exchange trading and seriously affected global asset prices, said Liu Mingkang, chairman of the China Banking Regulatory Commission."
"The continuous depreciation in the dollar, and the U.S. government's indication, that in order to resume growth and maintain public confidence, it basically won't raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation," he told reporters in Beijing today at the International Finance Forum.
"Liu said this has 'seriously affected global asset prices, fuelled speculation in stock and property markets, and created new, real and insurmountable risks to the recovery of the global economy, especially emerging-market economies.'
"His view echoes that of Donald Tsang, the chief executive of Hong Kong, who said the Federal Reserve's policy of keeping interest rates near zero is fueling a wave of speculative capital that may cause the next global crisis."
"'I'm scared and leaders should look out,' Tsang said in Singapore Nov. 13. 'America is doing exactly what Japan did last time,' he said, adding that Japan's zero interest rate policy contributed to the 1997 Asian financial crisis and U.S. mortgage meltdown."
It is not just China. Brazil has moved to impose a tax (or tariff) on investment money coming into the country on a shorter-term basis, as they are worried about both a bubble in their markets and in their currency. Russia is openly considering similar policies.
I have been doing a lot of speaking in the last month. In almost every speech, I warn of the significant imbalance in the dollar. I walk to the very end of the stage to help illustrate that the world now has on a massive ABD trade. By that I mean Anything But Dollars. Everyone is now on the same side of the boat. They have borrowed dollars to buy other risk assets, assuming that the dollar, like the yen in the glory days of the yen carry trade, will continue to fall. Dollar bears are everywhere.
Explanations abound for why the dollar is a trash currency. It is Fed policy, or the Obama administration's willingness to run massive deficits, or the trade deficit or our health-care policy or (pick any number of issues). But I wonder.
Global trade collapsed last year and well into this year. Global trade was essentially done in dollars. If global trade is down 20% or more, then there is less need for companies in various countries to hold dollars and more need for local currency because of the crisis. Thus, after a rush to safety in the credit crisis, there is a rational selling of dollars by business.

Look at the above chart. Notice that the dollar is roughly where it was 20 years ago. And notice the recent jump during the credit crisis. We are not even back to where we were before the crisis.
What happens if world trade picks back up, as it appears to be doing? Admittedly, it is not a robust recovery as yet, but it is rising. That means more need for dollars. And dollars which are being borrowed (and probably leveraged!) on the assumption the dollar will continue to fall.
And I agree that, over time, the case for the dollar is not as good as I would like. But in the meantime, we could have one very vicious dollar rally, which would take equity markets down worldwide, along with other risk assets. Why? Because it would be a major short squeeze.
Barron's just did a survey. It revealed that the bullish sentiment on stocks is quite high and almost everyone hates US treasuries (graph courtesy of David Rosenberg of Gluskin, Sheff)

Whenever sentiment gets too strong in one way or the other, it is usually setting up the markets for a rally in the despised asset. Mr. Market like to do whatever he can to cause the most pain to the largest number of people.
I am not predicting a near-term crash or imminent precipitous bear, although in this environment anything can happen. I am merely noting that there is an imbalance in the system. The longer this imbalance goes on, the more likely it is that it will end in tears. And the irony is that a recovering world economy could be the catalyst.
The Wild Things? They may be hiding in a portfolio near you. Just food for thought. Stay nimble.

"I am trying to take away the feeling that there is no way to succeed in an unfavorable game." -- Phantom of the Pits

Societe Generale Warns Clients to Prepare for Worst Case Scenario

from the Daily Telegraph:

Explosion of debt: Japan's public debt could reach as much as 270pc of GDP in the next two years. A bullet train is pictured speeding past Mount Fuji in Fuji city, west of Tokyo Photo: Reuters

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.
Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.
Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.
Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.
(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).
The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.
Inflating debt away might be seen by some governments as a lesser of evils.
If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.
The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.
SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.
Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.
SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.
Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.

Bloomberg on Mortgage Defaults

from Bloomberg:
Nov. 19 (Bloomberg) -- Foreclosures on prime mortgages and home loans insured by the Federal Housing Administration rose to three-decade highs in the third quarter, driven by the biggest job losses since the Great Depression.
One out of every six FHA mortgages was late by at least one payment and 3.32 percent were in foreclosure, the highest for both since at least 1979, the Mortgage Bankers Association said today. The delinquency rate for prime fixed-rate mortgages, considered home loans with the least risk, rose to 5.8 percent and the foreclosure inventory rose to 1.95 percent, the highest since at least 1972.
Homeowners are falling behind on their mortgages as the U.S. has lost more than 7 million jobs since December 2007, driving the unemployment rate to 10.2 percent in October, the highest since 1983. Declining home prices in most markets also are preventing many owners from selling their properties, said Jay Brinkmann, the Washington-based trade group’s chief economist.
“If you don’t have a job, you can’t pay a mortgage,” Brinkmann said in an interview. “You don’t pay a mortgage with economic output, you pay a mortgage with a paycheck.”
The share of all types of mortgages with one or more payments overdue climbed to a record seasonally adjusted 9.64 percent in the third quarter. The foreclosure inventory increased to 4.47 percent from 4.3 percent. Both were the highest in 37 years of data.

Foreclosures Continue to Rise to New All-Time Record

from MW:

CHICAGO (MarketWatch) -- Job losses caused more Americans to fall behind on their mortgage payments in the third quarter, leading to a record 14.41% of loans either in foreclosure or with at least one payment past due, the Mortgage Bankers Association's chief economist said Thursday.

"Despite the recession ending in mid-summer, the decline in mortgage performance continues. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP," said Jay Brinkmann, chief economist of the MBA, in a news release. "Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07% to 1.42%."
Delinquency and foreclosure rates are expected to continue worsening before improving, he said. The employment picture is unlikely to improve until sometime next year, and even then jobs will grow at a slow pace.
"Perhaps more importantly, there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates," he said.
About 4 million mortgage loans are 90 days or more past due or in foreclosure, Brinkmann said. That compares with 3.9 million new and previously occupied homes now for sale, he said, adding that there is likely overlap between the numbers.
"The ultimate resolution of these seriously delinquent loans will put added pressure on the hardest-hit sections of the country," he said.
The delinquency rate for mortgage loans on one- to four-unit residential properties rose to a seasonally adjusted 9.64% of all loans outstanding at the end of the third quarter, up from 9.24% in the second quarter and 6.99% a year ago, according to the MBA's quarterly delinquency survey, released Thursday. That is the highest level of delinquencies on record, with data dating back to 1972.
Also breaking a record was the percentage of loans in the foreclosure process: At the end of the third quarter, that number was 4.47%, up from 4.3% in the second quarter and 2.97% a year ago.
Foreclosure actions were started on 1.42% of all mortgage loans outstanding at the end of the third quarter, up from 1.36% in the second quarter and 1.07% a year ago; the rate of foreclosure starts also set a new record.
The MBA survey covers about 44.5 million one- to four- unit residential properties, representing about 85% of all first-lien residential mortgages outstanding in the country.

Prime borrowers struggle

"Prime fixed-rate loans continue to represent the largest share of foreclosures started and the biggest driver of the increase in foreclosures," Brinkmann said. According to the survey results, 33% of foreclosures started in the third quarter were on prime fixed-rate loans.
The problems seen with this loan type are generally tied to the steady climb in unemployment -- even if there is a delayed reaction after a job is lost.
With prime fixed-rate mortgages, "when someone loses a job, chances are they don't go into default immediately" because these borrowers typically have reserves they can tap, he said. But reserves won't last forever, and the borrower's ability to keep that home depends on finding another job before his or her financial cushion runs out.
Also continuing to deteriorate is the performance of prime adjustable-rate mortgages, including pay-option ARMs, he said. Brinkmann noted, however, that pay-option ARMs have had some of the highest modification rates.
Meanwhile, foreclosures started on subprime fixed-rate and subprime adjustable-rate loans actually decreased, he said.
Four states continue to drive up the national foreclosure rate: Florida, California, Arizona and Nevada had 43% of all foreclosures started in the third quarter, down just slightly from 44% the previous quarter, according to the report.

FHA loans falter

The foreclosure rate of loans insured by the Federal Housing Administration also increased in the third quarter, even though there also has been a large jump in the number of FHA loans outstanding, he said.
"The number of FHA loans outstanding has increased by about 1.1 million over the last year. This increase in the denominator depresses the delinquency and foreclosure percentages. If we assume these newly-originated loans are not the ones defaulting and remove the big denominator increase from the calculation results, the foreclosure rate would be 1.76% rather than 1.31% reported," he said in the release.
The FHA has been dealing with losses in its capital reserve fund, due to problems with mortgages that originated before this year. Read about changes the FHA is considering to manage risk.
But newly originated FHA loans are not likely to be at as much of risk as those made in previous years, Brinkmann said. The new loans are likely of better quality, partly because seller-paid down-payment assistance is no longer available for FHA-backed mortgages; the assistance has been blamed for contributing to some of the problems, he said.
Also, loans being originated today are being done at what is believed to be at or near the bottom of the home-price cycle, he added. While home-price drops may still be ahead, they're unlikely to be of the magnitude seen in the past, Brinkmann said.
And it's possible that if, in fact, unemployment is nearing its peak, new borrowers today are more likely to hang on to their jobs -- and make their mortgage payments.
"Those with jobs now may be the most likely to keep their jobs," he said in an interview.

Ride the Wave(s)!

My job as a trader is to harmonize myself with the market and ride the waves of order flows to profits, just as a surfer rides the waves of the ocean. It can be done safely!

"Correct behavior is a learned process and not one that is always obvious." - Phantom of the Pits

"It is possible to build a life-long trading career from a small monetary base." - Phantom of the Pits

"Some of the BEST traders started out broke! And then they got more broke. Until SUCCESS!" Phantom of the Pits

Seasonal Firming Typical for Dollar

Usually the dollar firms up during Nov. It's basically done that: Look at what Dec brings for the dollar.

Wow! December looks like it is typically a bloodbath for the Dollar.

Harvard Medical School Dean Says Healthcare Reform Will Accelerate Higher Spending

"I find near unanimity of opinion that, whatever its shape, the final legislation that will emerge from Congress will markedly accelerate national health-care spending rather than restrain it." - Jeffrey S. Filer, Dean of Harvard Medical School

also from the same editorial on WSJ:
"...while the legislation would enhance access to insurance, the trade-off would be an accelerated crisis of health-care costs and perpetuation of the current dysfunctional system—now with many more participants. This will make an eventual solution even more difficult."

Natural Gas Hits New 2009 Low

intraday:

daily:

Gold Reaches $1053 on Dollar Weakness

Doug Kass: "A Bubble in Quant Funds"

by Doug Kass:

"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing." -- Chuck Prince, former chairman and CEO of Citigroup (told to the Financial Times on July 10, 2007).

These words resonate to me in the current investment setting as many investors and traders are assuming the most benign of economic outcomes and have begun to dance and party like it's 1999. The media's talking heads are doing their best to fuel the celebration, just as they were at DJIA 14,000 before the market crashed last year. It is also the same group of cheerleaders that was mired in depression eight short months ago. Some, like myself, have been cautionary (and wrong) over the past few months, expressing concerns over emerging short- and intermediate-term headwinds that threaten a self-sustaining economic cycle, including the effect of the withdrawal of monetary and fiscal stimulus. Countering those concerns has been one overriding factor -- namely, the Fed's zero rate policy and curse on cash, which has already produced its desired effect of causing investors to "look over the valley" and to buy longer-dated assets (equities, bonds, commodities).
Here is the full article.

"market participants often rationalize the irrational" - Doug Kass

Mortgage Delinquencies Continue to Climb

For the three months ended Sept. 30, 6.25 percent of U.S. mortgage loans were 60 or more days past due, according to credit reporting agency TransUnion. That's up 58 percent from 3.96 percent a year ago.
Being two months behind is considered a first step toward foreclosure, because it's so hard to catch up with payments at that point.

Dollar Rebounds on Supportive Bernanke Comments

Question for Bernanke: HOW? It takes more than talk! It takes policy, too! Your cred is dead!

from FT.com:

In rare public comments on the dollar, Federal Reserve chairman Ben Bernanke said the US central bank was monitoring currency markets "closely" and will conduct policy in a way that will "help ensure that the dollar is strong".
But the dollar - after a brief spike - fell against other major currencies while commodities, stocks and bonds gained ground as investors focused on his comments on growth, prices and interest rates instead. Mr Bernanke said the recovery would gain traction in spite of "headwinds" from credit and unemployment, while inflation was likely to remain "subdued".
He said that the Fed still expected to keep rates near zero for an "extended period" - although he stressed that this was a conditional forecast, not a commitment.
The Fed chairman added that he did not think that new asset price bubbles were forming in the US in spite of the strong rebound in stocks and other risky assets.
In remarks apparently aimed at reassuring markets and governments that the central bank is not indifferent to the fate of the dollar, the Fed chairman said: "We are attentive to the implications of changes in the value of the dollar."
He added that the Fed "will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability" - and that doing so would support the value of the currency.
For the Fed chairman to comment on currencies is highly unusual. By convention, the US Treasury secretary is the sole US official who talks about the dollar.
The comments came amid growing international unease about the weakness in the dollar, which forms a backdrop to President Barack Obama's tour of Asia. Liu Mingkang, China's banking regulator, criticised the Fed at the weekend for fuelling the dollar carry-trade in which investors borrow dollars at ultra-low interest rates and invest in higher-yielding assets abroad.
Mr Bernanke cited the dollar as one of four factors affecting US inflation, and linked it to a second factor - "the prices of oil and other commodities". In doing so, he indicated that the central bank would not focus exclusively on measures of core inflation that exclude food and energy prices.
"Notwithstanding significant cross-currents, inflation seems likely to remain subdued for some time," he said.
His message on asset prices was amplified by vice-chairman Don Kohn, who said one of the reasons the Fed was keeping rates near zero was "to induce investors to shift into riskier and longer-term assets".

Roubini: The Worst Job Losses Are Yet to Come

I like Roubini's frankness about job losses, but does he really believe that the answer is to do more of the same that brought us here? More spending, more bailouts, more debt, and more non-competitive union jobs?

from NY Daily News:
Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%.
While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession.
Also, remember: The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession.
So we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back.
There's really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation.
The long-term picture for workers and families is even worse than current job loss numbers alone would suggest. Now as a way of sharing the pain, many firms are telling their workers to cut hours, take furloughs and accept lower wages. Specifically, that fall in hours worked is equivalent to another 3 million full time jobs lost on top of the 7.5 million jobs formally lost.
This is very bad news but we must face facts. Many of the lost jobs are gone forever, including construction jobs, finance jobs and manufacturing jobs. Recent studies suggest that a quarter of U.S. jobs are fully out-sourceable over time to other countries.
Other measures tell the same ugly story: The average length of unemployment is at an all time high; the ratio of job applicants to vacancies is 6 to 1; initial claims are down but continued claims are very high and now millions of unemployed are resorting to the exceptional extended unemployment benefits programs and are staying in them longer.
Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more.
The weakness in labor markets and the sharp fall in labor income ensure a weak recovery of private consumption and an anemic recovery of the economy, and increases the risk of a double dip recession.
As a result of these terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures.
The damage will be extensive and severe unless bold policy action is undertaken now.
Roubini is professor of Economics at the Stern School of Business at New York University and Chairman of Roubini Global Economics.

Inflation Awakens

from Arlan:
Food & energy costs drove wholesale inflation up 0.3% last month, but corn inflation dropped 0.6%;

Another New Dollar Low

Just hit another new low for the Dollar in 2009!

Gold Rises $25/Ounce Today

"Every Trader Started Out As a Small Trader" - Phantom of the Pits

"I believe in the small trader! I know what the potential is because I know every trader started out as a small trader. Not one big trader started just big. You must start. There is no better place to start than the start line. Only then can you say you went the entire course."

-- Phantom of the Pits

Gold Buyers Enter 1st of Each Month

Another technical trader pointed out to me this morning that when money hits the market at the beginning of each  month, gold rises. Note that gold showed weakness toward the end of the month, but rose at the beginning of each month.

Fed Should Listen to China -- But They Won't!

 from 24/7:
The Federal Reserve and most economists believe that keeping US interest rates at near zero has been critical to the recovery of the American economy. Even with rates at historically low levels, banks and financial companies have been stingy in their lending practices because of the fear of risk from providing capital to people and businesses whose financial positions have been crippled by the recession.
Fed officials have hinted that the agency may not move rates up at all until 2011 because unemployment and tight credit will only allow a very fragile advance in GDP between now and then.
China would like the US to raise interest rates based on its theory that the low cost of capital is causing massive speculation in equity and commodities markets. China claims that Fed policy will cause bubbles that will burst and cause both another sharp downturn in the global economy and damage to the credit markets.
Liu Mingkang, chairman of the China Banking Regulatory Commission, said in comments reported by Bloomberg that “The continuous depreciation in the dollar, and the U.S. government’s indication, that in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation.”
It is a matter of debate whether asset inflation is a major problem. Last week, the CEO of Exxon Mobil (NYSE:XOM) said that the price of oil is $20 higher than it would be if the dollar was not especially weak. He said that global crude supply was more than ample to handle the current very modest increase in demand.
The price of crude is not the only fact supporting Liu Mingkang’s case. The price of gold was $874 an ounce a year ago. The metal traded at $1,117 last week, a rise of 32% over the period. The DJIA is up over 40% from its March lows and the Nasdaq is up over 50% during the same period. The only major asset is  thestill rapidly losing its value in the US is real estate. That ongoing drop could be tied largely to unemployment. The irony is that low interest rates are supposed to help businesses get cheap access to capital which should increase hiring.
Liu Mingkang’s case will fall on deaf ears, at least in the US. China has its own $585 billion stimulus package which has provided enough liquidity to the economy of the world’s most populous nations to create sharp increases in prices of equities and real estate. The value of stocks in China’s Nasdaq-style stock market, ChiNext, rose an average of 200% on the first day that the new exchange was open.
China’s banking authorities may be right. Low interest rates in American could cause inflation in some asset classes. The problem is that without rates near zero, the US economy could face another catastrophe.
Douglas A. McIntyre

from MW:

TOKYO (MarketWatch) -- The dollar slipped Monday, a day after China's chief banking regulator criticized loose U.S. monetary policy as leading to increased speculation.

"The continuous depreciation in the dollar, and the U.S. government's indication that, in order to resume growth and maintain public confidence, it basically won't raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation," Liu Mingkang, chairman of the China Banking Regulatory Commission, said Sunday in Beijing at the International Finance Forum, according to news reports.
Low U.S. interest rates and a weaker greenback have "seriously affected global asset prices, fuelled speculation in stock and property markets, and created new, real and insurmountable risks to the recovery of the global economy, especially emerging-market economies," Liu said.

Is China Ready to Be a Major Global Player?

WSJ's Jason Dean speaks to professor Huang Yasheng from the MIT Sloan School of Management about whether China is ready for a global leadership role.

The dollar bought 89.45 yen, down from 89.72 yen in late North American trading on Friday. The euro bought $1.4956, up from $1.4903 late Friday.
China has kept its tightly controlled currency, the yuan, almost unchanged against the U.S. dollar for more than a year, in a move that gives Chinese exports a competitive advantage in U.S. markets.
Last week, China's central bank made a rare change of wording on its exchange-rate policy that was seen as a hint Beijing may let the yuan appreciate.
The People's Bank of China said in its quarterly policy report released Wednesday that it will consider "changes in international capital flows and the trends of major currencies" in managing the exchange rate. Read more on People's Bank of China currency statement.
U.S. President Barack Obama is on his first official visit to China this week to discuss a range of contentious issues, but is unlikely to push China too hard on currencies or anything else.

Corn, Wheat Rise Near Upper End of Trading Range

Soybeans have trade flat overnight.

Risk Appettite Buoys Stocks

Gold Continues Its March Skyward

Gold has reached $1033.60/ounce.The Dollar continues downward, but hasn't breached it recent lows yet.

excerpt from Marketwatch:
"This is a different type of gold rally, with support coming from both sides of the market -- investment [and] fundamental," said Darin Newsom, a senior analyst at Telvent DTN.
"A certain portion of the buying interest has come from the continued weakness of the dollar, but there is more to it than that," said Newsom.
"There is some 'safe haven' buying as well, but with copper holding firm and the Baltic Dry Index rallying, the Chinese economy seems to be gaining strength," boosting investor confidence, he said.
Additional buying for gold "has been tied to foreign governments and mining companies, who may have been short futures" as well as to exchange-traded fund buying, he said.
"All in all, everyone is getting bullish in this market as it continues to post new highs," he said.

I had the flu during most of last week. Additionally, Wednesday was the Veterans Day holiday.