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December, Monday 19, 2011

DOW – 100 = 11,766SPX –14 = 1205NAS – 32 = 252310 YR YLD -.04 = 1.81%OIL +.47 = 94.00GOLD – 5.30 = 1594.90SILV -.94 = 28.90PLAT –9.00 = 1413.00 The ratings agencies have been busy over the past few days – better late than never, I suppose. Fitch put Belgium, Spain, Slovenia, Italy, Ireland, and Cyprus on its negative watch list. Moody’s cut Belgium’s credit rating by two levels. Standard & Poors is expected to cut France’s credit rating this week. Fitch says a solution to the Eurozone crisis is “technically and politically beyond reach.” And credit downgrades make a solution fall even further out of reach. For any borrower – corporation or country – the worse the credit rating, the higher the interest on a loan is likely to be.For many Eurozone countries, they are having a hard time paying their debt right now; if interest rates move higher, it just increases the probability of default. It is a vicious cycle; deteriorating credit leads to higher interest rates and additional costs, which over time further damage the country’s credit rating. Another potential problem area is interbank lending might freeze up. Banks constantly have to borrow money from each other for a day or two because the balance between loans and money on hand is constantly shifting. But when banks begin to worry about possible losses on Eurozone bonds at other institutions, they may refuse to lend money overnight. Short-term money gets frozen in place. The European Central Bank …

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December, Friday 16, 2011

DOW – 2 =11,866SPX +3 = 1219NAS +14 = 255510 YR YLD -.06 = 1.85%OIL +.08 = 93.95GOLD +28.60 = 1600.20SILV +.46 = 29.84PLAT +14.00 = 1427.00 The Irish economy shrank 1.9% in the third quarter. The news on the declining Irish GDP comes as legal advisers are preparing a draft of a referendum on whether Ireland wishes to remain in the Eurozone.  Any deal to keep Ireland in the European Union would likely result in at least a decade of austerity. Countries with a debt-to-GDP ratio of over 60 per cent would agreed to reduce their debt by 5 per cent each year – a clause which would force Ireland, with a debt-to-GDP ratio of around 90 per cent, to take billions more out of each Budget for the medium-term future. Eurozone leaders have been talking up Ireland as a shining example of how you can combine austerity with membership of European Monetary Union and still get growth. So much for the Irish miracle. The National Institute for Statistics and Economics says France’s GDP will contract by 0.2% in the fourth quarter and shrink 0.1% in the first quarter of next year. A different report is forecasting Italy’s economy will shrink by 1.6% in 2012. Toss in Portugal, Greece, and Spain and it is pretty obvious that Europe is now in a recession. Three top US officials testified before Congress this morning on the Euro Crisis. New York Federal Reserve Bank President William Dudley, Treasury Deputy Assistant Secretary for …

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December, Thursday 15, 2011

DOW +45 = 11868SPX +3 = 1215NAS =1 = 254110 YR YLD +.01 = 1.91OIL –1.52 = 93.43GOLD – 5.90 = 1571.60SILV +.32 = 29.38PLAT-16.00 = 1409.00 The war is over. Everything that can be said about this tragedy has been said, many times over. Nevertheless, it seems appropriate to note the officially announced end of the war. After nearly nine years, 4,500 American dead and 32,000 wounded, and a price tag of approximately $3 trillion dollars, the war in Iraq is officially over. The death toll for Iraqi combatants and civilians is somewhere between 100,000 and one-million. Defense Secretary Leon Pannetta said today: “We spilled a lot of blood there, but all of that has not been in vain. It’s been to achieve a mission making that country sovereign and independent and able to govern and secure itself.” I never quite understood the mission in Iraq; the troops did their job; they did everything they were asked to do and more, but I’m not sure the mission was ever truly clear. But it’s over now. No pronouncement of victory, no cheers. There will still be about 150 American soldiers and there will be about 5,000 private security contractors and 16,000 State Department employees working around the US embassies. So, the war may be over but the work is unfinished. And what about the spoils of war? Exxon Mobil and Royal Dutch Shell were awarded early contracts to develop oilfields but there has been very little investment from other American …

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December, Wednesday 14, 2011

DOW –131 = 11823SPX –13 = 1211NAS –39 = 253910 YR YLD -.06 = 1.90%OIL –5.32 = 94.82GOLD –54.40 = 1577.50SILV –1.88 = 29.06PLAT – 53.00 = 1429.00 Last Friday the Europeans held a summit in Brussels and they announced a big plan to create a new Eurozone that would be a bit more fiscally responsible; they did not announce a massive bailout; there was no bond buying bazooka. Yesterday, the Federal Reserve held their final FOMC meeting for the year; they left interest rates at zero but they did not announce QE3; there was no plan for Ben Bernanke to fly his helicopter over Wall Street and toss out free cash for the holidays. Have the central bankers suddenly found fiscal discipline? Don’t hold your breath. The central bankers will do what the central bankers always do; they will print and spend staggering amounts of money that they don’t have; and they won’t tell you about it. Actually, they did tell us, very quietly and obscurely. Yesterday, I told you about a statement issued by the Bank of International Settlement, the central bank for central bankers. The BIS said it would “supply official liquidity in major currencies in an elastic manner.” The response to a deflationary depression is to inflate. And the big dog of bailouts is the Federal Reserve. So it should come as no great surprise that the dollar needed to get a little stronger. The only things going up in the past week – the dollar …

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December, Tuesday 13, 2011

DOW – 66 = 11954SPX –10 = 1225NAS –32 = 257910 YR YLD -.05 = 1.96%OIL +2.59 = 100.36GOLD –34.40 = 1631.90SILV -.45 = 30.94PLAT – 14.00 = 1477.00 A quiet day on the European front. I ran across an interesting statistic from the Bureau of Labor Statistics. You’ve probably heard that the Germans and the French are upset with the prospect of bailing out the Greeks and the Italians. Usually the narrative is that the industrious Germans don’t want to support the lazy lifestyle of the Italians. Turns out the Italians work approximately 25% more hours per year than the Germans and 24% more than the French. No word on the Greek work schedule. I’ve been saying the Euro Crisis will likely follow the Federal Reserve Playbook. There was confirmation of this on Sunday. A small, unobtrusive report issued by the Bank of International Settlements endorsing coordinated action by the world’s largest central banks to ease funding conditions for banks.  The BIS said: “A freezing of interbank markets in major funding currencies, as during the recent crisis, may require the ability to supply official liquidity in major currencies in an elastic manner.” Allow me to translate for you: The BIS is saying the plan is to print lots and lots of cash to prevent a modern day run on the banks. Now, the next logical question: who is the Bank of International Settlements? The BIS is a bank for the central banks, and it is not accountable to any …

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December, Monday 12, 2011

DOW –162=12,021SPX –18 = 1236NAS –34 = 261210 YR YLD -.04= 2.01%OIL –1.53 = 97.87GOLD –46.00 = 1666.30SILV -.94 = 31.39PLAT – 27.00 = 15.06.00 You remember on Friday, the big Euro Summit in Brussels resulted in a feel good day for the markets, although I’m still not sure why. Twenty-six of the 27 European Union leaders on Friday agreed to pursue stricter budget rules for the single currency area and also to have euro zone states pay up to $267 billion in loans to the International Monetary Fund (IMF) to help tackle the crisis. England backed out of the deal. Today, French President Nicolas Sarkozy said: “You have to understand this is the birth of a different Europe – the Europe of the euro zone, in which the watchwords will be the convergence of economies, budget rules and fiscal policy. A Europe where we are going to work together on reforms enabling all our countries to be more competitive without renouncing our social model.” Which is another way of saying they will try to make a Eurozone that is subject to sanctions by a board of economic technocrats who have the power to reject or accept national budgets even though they are not elected officials. And there is still the nagging little problem that this setup might not be legal. To which Sarkozy responded: “In the next fortnight, we will put together the legal content of our agreement. The aim is to have a treaty by March.” An EU diplomat …

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December, Friday 09, 2011

DOW +186 = 12,184SPX +20 = 1255NAS +50 = 264610 YR YLD +.08 = 2.05%OIL +1.47 = 99.80GOLD +5.50 = 1712.30SILV +.57 = 32.33PLAT + 20.00 = 1519.00 The European Union has come up with an economic treaty for 26 Euro nations. The UK did not sign on. The new treaty replaces the old treaty. The new treaty is supposed to require stricter fiscal and financial discipline in future budgets. The New Euro will pump hundreds of billions into the IMF and the Euro Stabilization Mechanism, and the ECB, and there will be more printing of money. And I am more convinced it is straight out of the Federal Reserve Playbook, with subtitles. So let’s review the playbook. I talked about this yesterday, but it deserves a little more attention today: the Government Accounting Office conducted an audit of the Federal Reserve, the first independent audit of the Fed in its 99-year history. The audit dealt with emergency measures conducted by the Fed and it was NOT a complete audit of all Fed functions, but the GAO produced a 251-page report. If you want a link to the report, then drop me an email and I’ll send you the link. http://www.gao.gov/new.items/d11696.pdf The report documents that Wall Street Bailouts by the Fed dwarf the $700 billion TARP, and everything else you’ve heard about. Page 131 – The total lending for the Fed’s “broad-based emergency programs” was $16,115,000,000,000. That’s right, more than $16 trillion. The four largest recipients, Citigroup, Morgan Stanley, Merrill …

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December, Thursday 08, 2011

DOW –198 = 11,997SPX – 26 = 1234NAS – 52 = 259610 YR YLD -.05 = 1.97%OIL –2.50 = 97.98GOLD –37.30 = 1706.80SILV .85 = 31.76PLAT –30.00 = 1498.00 We start with Europe. The European Central Bank, the ECB, cut interest rates by a quarter percentage point to 1 percent, matching a record low. They also loosened collateral rules so that banks can borrow more from the ECB and announced two unlimited three-year loans. ECB president Mario Draghi said the measures “should ensure enhanced access of the banking sector to liquidity.” Perhaps more important than what was said, was what was not said: The headline event today was that Draghi made it absolutely and explicitly clear that there would be no ECB bond buying bazooka. They’ll stay in the market but will only buy small amounts. It’s governments who’ll have to do the heavy lifting. In a separate speech, German Chancellor Angela Merkel confirmed the outlook by saying there will be no “big-bang” solution coming from the summit, which gets underway in Brussels tonight.  On the eve of this summit, the ECB started passing out, essentially, free money; making it easier for banks to borrow cash from the ECB. Credit claims such as bank loans will become eligible as collateral and the central bank reduced the rating threshold on asset-backed securities. This is the Euro version of cash for trash. The ECB also cut in half banks’ reserve ratio, which determines the amount of money they have to deposit with their …

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December, Wednesday 07, 2011

DOW +46 = 12,196SPX + 2 = 1261NAS –0.35 = 264910 YR. YLD. -.08 = 2.20% OIL -.73 = 100.55GOLD +13.70 = 1744.10SILV -.25 = 32.61PLAT +1.00 = 1533.00 (#1)(#2) A Day that will live in infamy. Under calm skies 70 years to the day of the attack on Pearl Harbor, about 120 survivors gathered this morning in Hawaii to mark the anniversary with ceremonies that began with a moment of silence for the 2,400 Americans who lost their lives. (#3)About half of the casualties were from the USS Arizona. For 24 of the survivors, it was their first time back to Pearl Harbor in the last 70 years. Today only 7 survivors of the Arizona attended the ceremony at Pearl Harbor. The ashes of Vernon Olsen, who was on the Arizona during the attack, were placed on his ship today. Today was the last day for such ceremonies; the Pearl Harbor Survivors Association announce that it would disband at the end of this month; the remaining members of the association are getting too old and are in poor health. (#4) Once again Europe is dominating the headlines and determining the direction of the markets. I had an email from a listener that gave a good summation: Sinclair, The EU leaders are now discussing a second bailout fund without even agreeing on how to fund the first one.  In either case, the amounts they are discussing are way too low.  They are going to need tens of trillions not billions. So far, the …

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December, Tuesday 06, 2011

DOW + 52 = 12150SPX + 1 = 1258NAS – 6 = 264910 YR YLD +.04 = 2.09%OIL +.21 = 101.20GOLD + 6.20 = 1729.40SILV +.68 = 32.86PLAT + 6.00 = 1532.00 The single most important thing you need to know today: The Green Bay Packers have offered 250,000 shares in the franchise for sale at $250 per share. They’ll use the money to make improvements to Lambeau Field. That brings the total number of shares outstanding to 5 million. The max you can buy is 200 shares. The shares are not traded on an open market. The shares don’t pay a dividend; the value doesn’t change; it is difficult to transfer shares, unless somebody dies or something – maybe it is a good investment. Our technical director, James Tidwell, a true cheesehead – tells me this is important. What else is going on in the world? Oh, Financial Armageddon, collapse, redemption, recovery, betrayal. Another quiet day. Let’s start with Financial Armageddon. It did not happen today. Despite the fact that Standard & Poor’s threatened to downgrade 15 European countries to negative outlook or actually cut their ratings or even call them bad dressers. The markets shrugged off the ratings agency threats like water off a ducks back. S&P pushed their point – they might downgrade the powerful countries of France and Germany. Yawn. Shrug. They might even downgrade the European Financial Stability Facility. Which was met with derision. Now, the markets seem to think credit downgrades are really nothing …

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