G20 Currency Disputes

King World News Interviews

This week King World News interviews Jim Rickards (part 2), Michael Pento, Ben Davies & Art Cashin.  The interviews with Jim Rickards I would say are a must listen, very insightful and important information coming from Jim this week. 

Jim Rickards Part II - Discusses new events of the U.S. Military performing exercises to respond to riots based on the collapse of the dollar.  Jim also talks about Robert Zoelick's (president of the world bank) comments on gold somehow being tied to the dollars value, legitimizing gold as a currency.  Jim brings up that the U.S. Government is printing money to devalue it to get consumers scared into buying while things are cheap.  China and others doesn't believe us, and believes (based on Pres. Obama's comments) that we entered the currency war to create a trade war.  Jim notes that during Weimar the stock market went up even though the currency was diving, this is because the stocks value in dollars is worth more dollars as the dollar is devaluating.

Michael Pento -  Discusses the Fed's decision to blow up the economy through inflation and asset bubbles. Michael also talks about the changes in story between the Fed and Treasury Secretary in monetary policy position and the underlying action continues to be dollar destruction.  He also talks about runaway inflation and its impacts on the global market if things don't change.

Ben Davies - Discusses debt in the U.K. compared to their GDP.  Ben also discusses the moves in Gold/Silver and how it correlates to demand in the market.  Ben also talks about the increased margin requirements for Silver futures contracts and its downward pressure on Gold and Silver in the latter part of the 

Art Cashin - Discusses China's market plunge due to the concern of rising interest rates in China.  China trying to contain their economy with rising rates and a slowing economy, would impact the rest of the world markets.  Art also discusses the commodity inflation that is occurring due to the consequences of quantitative easing.

Friday's FED POMO Purchase

On Friday November 12th, 2010 the FED performed another POMO (Permanent Open Market Operation) purchase of $7.229 billion.  This brings the total since August 17th 2010 to $82.714 billion dollars.

OPERATION 1 - RESULTS

Operation Date:	11/12/2010
Operation Type:	Outright Coupon Purchase
Release Time:	10:42 AM
Close Time:	11:30 AM
Settlement Date:	11/15/2010
Maturity/Call Date Range:	11/15/2014 - 04/30/2016
Total Par Amt Accepted (mlns) :	$7,229
Total Par Amt Submitted (mlns) :	$29,039

Unofficial Problem Bank List

CalculatedRisk has updated the Unofficial Problem Bank List this week with an increase in the number of problem banks to 898.  Six additions to the list and 2 removals from the list occurred this week bringing the total asset value to $418.5 billion dollars from $416.5 billion.

Weekly Bank Failures

This week we lost 3 more banks bringing the 2010 record breaking number to a total of 147 banks.  The 3 failed banks are Copper Star Bank in Scottsdale AZ, Darby Bank & Trust Co in Vidalia GA and Tifton Banking Co in Tifton GA.

Jim Rickards on QE2

Jim Rickards discusses why QE2 is not required for economic growth and it is actually just being used to devalue the dollar.

Currency Wars Heating Up

With the G20 meeting this week and rumors of heated debate over the dollar, the U.S. dollar's perception of being a stable reserve currency is under attack.  The U.S. dollar is now starting to look like its Era as the reserve currency could be coming to an end.

Economic Points Supporting Gold

I post this somewhat humorous video as they make some really good points on the state of the economy that sums it up very well.  Obviously the video has a point it is trying to make as well, but I thought it was a good way to summarize our current economic state.

Jim Rogers on the Fed

Weekly Fund Flows

The weekly fund flows showed more money coming out of the stock market again.  This week -$1.134 billion was removed from domestic stocks and $1.863 billion into foreign stocks.  Bonds continued to see in-flows with $3.139 billion flowing into Taxable bonds and $405 million into Municipal bonds.

The total amount of money departing domestic stocks since July 28th 2010 is now $46 billion dollars.  

Import Prices Rise in October

It should come as no surprise that Import prices have risen 0.9% in October, most can attribute this to the devaluation of the dollar causing increases in imported goods/services.  The report has this to say about the overall change in import prices.

All Imports: The price index for overall imports increased 0.9 percent in October, the largest monthly advance for the index since a 1.1 percent advance in April. The October rise was also only the second onemonth upturn since the April increase. Despite the downward trend between May and September, import prices rose 3.6 percent over the past 12 months.

Fuel imports grew 3 percent in the month of October, which is a large change in costs to the U.S. Consumer and the businesses that rely on Fuel for their businesses (i.e. transportation).  If this continues, this will have to trickle down into food prices (really all goods made and transported), which will impact the U.S. Consumer.  Not exactly hyperinflation, but high inflation non-the-less.

Fuel Imports: A 3.0 percent advance in fuel prices in October accounted for approximately two thirds of the increase in overall import prices. The October rise in fuel prices was the largest monthly advance since a 4.4 percent increase in January, and was driven by a 3.3 percent advance in petroleum prices, which more than offset a 2.3 percent drop in the price index for natural gas. Fuel prices increased 7.9 percent for the year ended in October, while petroleum and natural gas prices rose 7.6 percent and 9.5 percent, respectively, over the same period.

General impact of non-fuel imports, like food and goods increased as well, so this will have a snowball effect in the states when you start to figure in the increased fuel prices on transportation.

All Imports Excluding Fuel: Nonfuel prices rose 0.3 percent for the third consecutive month in October. Rising prices for nonfuel industrial supplies and materials and foods, feeds, and beverages led the advance, while prices for finished goods were mixed. The price index for nonfuel imports increased 2.5 percent over the past 12 months, driven by an 11.8 percent jump in the nonfuel industrial supplies and materials prices. 

It will be very interesting to follow this as the downward trend of the dollar continues.

Weekly Initial Unemployment Claims

The weekly Initial Unemployment Claims were released a day early this week.  Initial Claims is a measure of the number of person whom filed for unemployment for the first time in the previous week.  The forecasted number was for 451k and the actual headline number came in at 435k.  This is good news for now.

The week to week initial claims is trending down, this could be a seasonal effect as retailers and the like ramp up for the christmas season adding noise to the unemployment figures.  I think we may have to wait until after the Christmas spending season to get a true picture of unemployment.  

The delta in revisions have seem to be pulled in a bit as we enter the Christmas spending season.  Again, may have to wait until after the holidays to see spikes in revisions.  

Monthly Trade Balance

The Trade Balance number is the difference in value between imported and exported goods and services during the reported month. For the month of September, the trade balanced improved slightly over the previous months -46.4 billion.   The forecast called for a number of -45 billion, but the actual headline number came in at -44 billion.

With the dollar continuing to devalue, we very well could see a further narrowing of the gap between imports/exports (as it becomes cheaper to consume American goods/services).  Export of Goods improved, while the exports of Services declined.  

Expansion of Government Spending

USA today had an article today entitled "More Fed Workers pay tops $150K" where Dennis Cauchon points out that Government worker pay has increased 10 fold (doing the math it is more) in the past 5 years, with a majority occurring under the current administration.  Table 1 shows a breakdown of the increase in the number of persons receiving a particular pay category.

Salary	Growth
$150,000	90%
$160,000	93%
$170,000	95%
$180,000	95%

Table 1

President Obama plans on giving government workers a pay 1.4% pay raise across the board, which is up for debate in the lame duck session. This type of inflation in pay is another reason for continuing growth in our federal budget deficit each year, which will inherently cause rising taxes (we may avert them next year, but the bill will come due one way or another some day).  Not to say government workers do not deserve a pay raise (moderate, not 90+%), but not of this magnitude and during a recession.   I would certainly understand a portion of this going to our military who protect and serve, but that does not seem be where this money went to.   We are going to have to get our government spending under control, as expansion in federal spending will inherently mean more printing (devaluation) of dollars and/or increased taxes (and nobody wants that) to cover the check.  This is just a small example where spending has moved into an unrealistic figures.

The Comedic Summing up of Europes Woes

POMO Picks Up

With the Fed announcing a $900 Billion dollar purchase of securities through POMO (Permanent Open Market Operations) they certainly started out with a bang.  Today the Fed Purchased $6.26 billion in treasuries.  This brings the total to $75.485 billion since August 17th and I think the aggregate curve is going to turn up sharply.

OPERATION 1 - RESULTS

Operation Date:	11/08/2010
Operation Type:	Outright Coupon Purchase
Release Time:	10:15 AM
Close Time:	11:00 AM
Settlement Date:	11/09/2010
Maturity/Call Date Range:	10/31/2016 - 08/15/2020
Total Par Amt Accepted (mlns) :	$6,260
Total Par Amt Submitted (mlns) :	$27,433

Comedy with Some Good Points

Weekly Fund Flows

I am a little late on fund flows this week, but better late than never.   This week we saw an uptick in outflows from domestic stocks again after 2 weeks of smaller outflows.  Domestic stocks saw $2.911 Billion leaving the stock market and $569 million going to Foreign stocks.

Continued interest in the bond markets with $4.762 billion flowing into taxable bonds and $545 million flowing into Municipal bonds.

The next chart puts things into perspective as far as Bonds vs stocks.  As you can see money continues to flow out of stocks and into bonds, a trend that has been with us most of 2010.

KWN Weekly Update

King World News interviews this week included Jim Rickards, Robin Griffiths, Jeffrey Saut & Bill Fleckenstein.  Discussions this week include the dollar decline, Gold/Silver, possible short squeeze in metals,

Jim Rickards - Discusses how the futures exchange works for Gold and Silver and how if the exchange get massive calls to take delivery to obtain gold or silver, the exchange will declare a timeout and when it is settled, they will cut you a check on the difference (not really gonna get your gold).  Jim also says that QE2 isn't really $600 billion it will really be more like $1.2 trillion (mainly cause their is no real end date assigned to it) and that it will not really impact the economy.
Robin Griffiths - Discusses the uptrend in Gold due to the downtrend of the Dollar (based on monetary policy).  Robin brings out the strategy of the Fed to prevent Shock and Awe by announcing a low number of monthly purchasing and giving an amount short term ($600 billion), but there is no stop announced, so it will most likely be $1.2 Trillion.  Robin also discusses that if the dollar index goes below 74, then China will want to dump dollars and we could see a 20% drop in dollar value.
Jeffrey Saut - Discusses Stocks, investment and chasing stocks.  Jeffrey also talks about areas he sees worth investing in currently.
Bill Fleckenstein - Discusses inflation and how prices for companies have been going up and will effect their bottom line.  Bill continues with the Feds actions and how it is creating distortions in the market to make reasonable decisions on what to do.

Chris Whalen on The Banks

Weekly Unofficial Problem Bank List

CalculatedRisk updated its Unofficial Problem Bank List remaining unchanged this week at 894 with 4 removals and 4 additions, but total assets at risk increased to $416.5 billion from $410.7 billion.

Removals:
K Bank    Randallstown, MD
Pierce Commercial Bank     Tacoma, WA
Western Commercial Bank    Woodland, CA
First Vietnamese American Bank    Westminster, CA

Additions:
Superior Bank    Tampa, FL
Suffolk County National Bank of Riverhead     Riverhead, NY
Essex Bank     Tappahanock, VA
Community Central Bank    Mount Clemens, MI

Weekly Bank Failures

Sorry that this is late, but the data the FDIC posts was altered a bit which created havoc with my parser (fixed now).  Four more banks failed brining the number of total banks failed to 144 surpassing last years record of 140.  This week 2 were lost from California (Western Commercial Bank & First Vietnamese American Bank) , 1 in Maryland (K Bank) and 1 in Washington State (Pierce Commercial Bank).

Monthly Pending Home Sales

The Pending Home Sales report was published Friday and revealed the index lost 1.8%.  The index moved from 82.4 in the previously reported month to 80.9.   Pending home sales measures the change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction and is considered a leading indicator of economic health.  

Monthly Non-Farm Payrolls

October's Monthly Non-Farm Payroll showed that 151k jobs and 159k total private jobs were added.  Non-Farm Payrolls measures the change in the number of employed people during the previous month, excluding the farming industry and is considered a leading indicator of consumer spending (which we all know our economy is based on consumer spending).