12/6/11 Market Comment by JIm Kingsland
Certified Assests Management International
The Broad Outlook
This is looking like a softer to mixed, maybe higher, maybe lower (who knows) Tuesday for Wall Street. CNBC is headlining Treasury Secretary Geithner and his trip to Europe. Timmy who? I had wondered where this master of funny money ceremonies had disappeared to. Says CNBC, “U.S. Treasury Secretary Timothy Geithner arrived in Germany on Tuesday for a three-day blitz of euro zone officials to urge them to take decisive action to backstop their currency union and resolve a crushing debt crisis.”
Right, Tiny Tim will come to the rescue. Frankly, he will likely alienate the European participants with platitudes that the Europeans need to get things together (true, but easier said than done), while the US financial house of disorder is just a few steps behind Europe. However, he is likely to dangle some of sort cash, perhaps by way of a US injection into the International Monetary Fund. Perhaps that will bring 15 minutes of hope until next bolt flies out of the over pressurized steamer.
As expected, S&P has sharpened its pencils and is jabbing its “AAA” European economies. It's nice that S&P is trying to catch up to reality since it is way behind the curve and will remain behind the curve. I get my Sovereign debt rating information from an independent ratings firm that does not receive compensation from Wall Street. http://www.weissratings.com/. For the record, Weiss rates the major European countries in the C range. Some with high C's, some lower and this includes Germany. There are already NO triple A European countries unless you're S&P and like to play 'let's pretend.' LoL.
Here's another example. CNBC is getting its bonnet tied up in a knot by flashing news about the European Stability Fund, essentially useless unless gobs of funny money are added:
“Standard & Poor's placed the triple-A long-term credit rating on the European Union's rescue fund on credit watch, saying it could cut the long-term rating on the European Financial Stability Facility (EFSF)”
Standard and Poor's takes itself very seriously with this. The EFSF being AAA? I have come up with a new internet expression: PUKELOL. This kinda stuff is so bad you want to get sick, while at the same time you want to laugh because their paradigm is so ludicrous.
So hopes have faded and now everyone is afraid of the wrath of S&P. Lions and Tigers and Bears, oh my. But to be serious, even if S&P universe is flawed, this ratings saber rattling by one of the grand poobahs of the banking cartel does matter, as it does disturb stock market sentiment, for however long it last, before another round of false hope is injected into the market.
Gold remains in a holding pattern to lower as the European theatrics continue. A dip back below $1700 wouldn't surprise me ahead of the Friday EU hootenany. Does anyone expect any sort of realistic solution? The only idea that will conveniently float to the surface is the printing press once again, because the math does not permit any solution but default. otherwise. What else can they do? Jubilee? Ha Ha. With little turnover in Open Interest (OI) noted at the COMEX in recent days, gold is in a holding pattern to weaker ahead of the 12/9 meeting.
“But, Gee, Uncle Jim, why isn't gold going higher on the notion that future Central Bank printing is going to create ever faster inflation?” This is a question that I often get and I answer with a simple, “just wait.”
The idea that gold will eventually skyrocket due to future inflation does not sit well for me, but it will happen because of, one again, the bad math in all of this. I am not sitting here making pontifications based on my opinions, or what I feel are opinions that I agree with. This is simply an exercise in realizing the reality of basic compounding. This is not rocket science. They only make it seem complex with smokescreen statements and dishonesty through positive spin.
Life will become VERY difficult as the fiat ponzi gets to the point of generating big inflation (50%+ per year). I sure hope I will be wrong. There's no doubt that we are already in the 12% inflation range, as noted by independent economists like John Williams and market experts like Bob Chapman. Many feel we are in a deflationary era. That is partially true, especially for the savers who can only find yields of near 0%. These low rates also betray the fact that the system is broken. For borrowers, enjoy the low rates for the time being (that mislead many to believe that we are in a deflationary era). For everyone else who falls in between, already significant price increase have been noted across the board.
Here in my own little county close to NYC, the legislature has agreed to pass a 30% property tax increase due to high Medicaid and county personnel costs. The madness of exponentially higher costs (the math once again) for funding operations and paying debt is even apparent at a very local level. My property tax bill going up 30%!
Concerning bank bailouts
This is a fairly lengthy read. It goes into how the US taxpayers was really railroaded by the bailout of banks. If you feel that all is well, that TARP money was paid back with interest in and some cases giving Uncle Sam some juicy profits - think again. Sorry to burst some bubbles: Yes, Virginia, the banks really were bailed out. http://www.ritholtz.com/blog/2011/12/yes-virginia-the-banks-really-were-bailed-out/
Best as always to my readers,