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- Talk of a Greek Exit Gets Louder
- Doug Casey on Taxes and Freedom, Part II
- Is Facebook the Rusty Hinge of the Stock Market?
- Fitch Downgrades Japan
- Doug Casey on Taxes and Freedom
- Greeks Run on Banks as Euro-Confidence Wanes
- To the Class of 2012
- Hedge Funds Bail On Euro Now
- Expatriation in the Wake of the Facebook IPO
The Fed Resumes Printing
The Fed Resumes Printing
The Federal Reserve recently announced important policy changes after its Federal Open Market Committee (FOMC) meeting. Here are the three most important takeaways, in its own words:
- The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
- The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate. In the most recent projections, FOMC participants’ estimates of the longer-run normal rate of unemployment had a central tendency of 5.2 percent to 6.0 percent.
- The Fed released FOMC participants’ target federal funds rate for the next few years.
Immediate Reactions
The first item is the most important as it was not expected – and it had an immediate effect on markets. As seen in the chart below, gold spiked higher on the surprise news of extending the zero-rate policy through 2014.
ART CASHIN: Beware The Ides Of March—Or Maybe A Few Days Later
People are giving up on the Greek/Debtor deal and starting to whisper about structured default, according to UBS floor trader Art Cashin. Those whispers could get much louder ahead of Greece’s March 20 deadline to repay 14.5 billion euros in debt.
Here’s Cashin:
Beware The Ides Of March – Or Maybe A Few Days Later -
As a Greek/Debtor deal has been dangled before markets day after day for over three weeks, rumors of a different deal have begun to circulate. That rumor is of the EU finding a way to engineer a structured default of Greek debt, keep them in the Euro-zone and restructure Greek debt and finances in the post-default environment.
On March 20th, Greece is obliged to redeem 14.5 billon Euros in debt. Even after pulling all the coins out from under the sofa cushions, Greece is a bit short of this amount. How short? About 14.5 billion Euros short.
So, right now with an empty piggy bank and a calendar due date coming up fast, the Greeks are stuck pacing up and down in front of the EU offices with a bag reading “Friends help friends”.
But the giving friends, particularly the Germans, are reluctant to… Continue reading
George Soros on the Coming U.S. Class War
You know George Soros. He’s the investor’s investor—the man who still holds the record for making more money in a single day’s trading than anyone. He pocketed $1 billion betting against the British pound on “Black Wednesday” in 1992, when sterling lost 20 percent of its value in less than 24 hours and crashed out of the European exchange-rate mechanism. No wonder Brits call him, with a mix of awe and annoyance, “the man who broke the Bank of England.”
Soros doesn’t make small bets on anything. Beyond the markets, he has plowed billions of dollars of his own money into promoting political freedom in Eastern Europe and other causes. He bet against the Bush White House, becoming a hate magnet for the right that persists to this day. So, as Soros and the world’s movers once again converge on Davos, Switzerland, for the World Economic Forum this week, what is one of the world’s highest-stakes economic gamblers betting on now?
He’s not. For the first time in his 60-year career, Soros, now 81, admits he is not sure what to do. “It’s very hard to know how you can be right, given the damage that was done during the boom years,” Soros says. He won’t discuss his portfolio, lest anyone think he’s talking things down to make a buck. But people who know him well say he advocates making long-term stock picks with solid companies, avoiding gold—“the ultimate bubble”—and, mainly, holding cash.
He’s not even doing the one thing that you would expect from a man who knows a crippled currency when he sees one: shorting the euro, and perhaps even the U.S. dollar, to hell. Quite the reverse. He backs the beleaguered euro, publicly urging European leaders to do whatever it takes to ensure its survival. “The euro must survive because the alternative—a breakup—would cause a meltdown that Europe, the world, can’t afford.” He has bought about $2 billion in European bonds, mainly Italian, from MF Global Holdings Ltd., the securities firm run by former Goldman Sachs head Jon Corzine that filed for bankruptcy protection last October.
Has the great short seller gone soft? Well, yes. Sitting in his 33rd-floor corner office high above Seventh Avenue in New York, preparing for his trip to Davos, he is more concerned with surviving than staying rich. “At times like these, survival is the most important thing,” he says, peering through his owlish glasses and brushing wisps of gray hair off his forehead. He doesn’t just mean it’s time to protect your assets. He means it’s time to stave off disaster. As he sees it, the world faces one of the most dangerous periods of modern history—a period of “evil.” Europe is confronting a descent into chaos and conflict. In America he predicts riots on the streets that will lead to a brutal clampdown that will dramatically curtail civil liberties. The global economic system could even collapse altogether.
“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”
Soros’s warning is based as much on his own extraordinary personal history as on his gut instinct for market booms and busts. “I did survive a personally much more threatening situation, so it is emotional, as well as rational,” he acknowledges. Soros was just 13 when Nazi soldiers invaded and occupied his native Hungary in March 1944. In only eight weeks, almost half a million Hungarian Jews were deported, many to Auschwitz. He saw bodies of Jews, and the Christians who helped them, swinging from lampposts, their skulls crushed. He survived, thanks to his father, Tivadar, who managed to secure false identities for his family. Later, he watched as Russian forces ousted the Nazis and a new totalitarian ideology, communism, replaced fascism. As life got tougher during the postwar Soviet occupation, Soros managed to emigrate, first to London, then to New York.
Money insider foresees civil unrest in U.S. this year
Charles Ortel is a managing partner with Newport Value Partners, LLC in New York City. Newport, established in 2007, provides value-added research to executives and investment firms.
An analysis by highly regarded Wall Street financial analyst Charles K. Ortel predicts weak economic growth and disappointing private investment returns in the U.S. economy during 2012 and for the foreseeable future.
What is startling about Ortel’s economic analysis is the rapidity with which his dire economic and political forecasts are being realized on the front pages of newspapers worldwide.
On Jan. 13 the credit rating agency Standard & Poor’s downgraded nine eurozone countries, including France and Austria, with the Financial Times in London reporting in words Ortel himself could have crafted that the downgrade “reignited fears about the fiscal sustainability of the eurozone.”
Coming economic violence
“With no existing government or financial institution solvent enough, respected enough or feared enough to lead the required re-balancing in peace, we believe the world will experience a painful re-calibration of economic strength and geo-political standing during 2012 in the midst of widespread civil insurrection and cross-border war,” writes Ortel, a managing partner with Newport Value Partners, LLC in New York City
He further predicts… Continue reading
The American Debt Crisis
Gold for Protection and Profit
Ben Bernanke says, “Gold is not money.” Yet for thousands of years cultures across the globe have used gold as a means of exchange and store of wealth. Not one government-backed currency has endured like gold.
Doug Casey often refers back to Aristotle’s criteria for sound money as to why gold maintains this status. In Doug’s words:
- It should be durable (which is why, say, wheat isn’t a good money – it rots)
- It should be divisible (which is why artwork isn’t a good money – you can’t cut up the Mona Lisa for change)
- It should be convenient (which is why lead isn’t a good money – it just takes too much to be of value)
- It should be consistent (which is one reason why land can’t be money – each piece is different)
- And it should have value in itself (which is why paper money leads to trouble)
You don’t buy gold to get rich. You buy it because it purchases the same amount of stuff now as it did 100 years ago… while the purchasing power of the dollar has fallen by 98%.
You buy gold because Bernanke and friends have proven they’ll do anything to keep interest rates low and “fight off” the debt crisis – even if it means complete debasement of the dollar.
Biderman On 2012: Long Gold, Short EUR And Stop Praying For A Miracle
Wearing a shirt that only a mother could love, Charles Biderman of TrimTabs offers his insightful perspective on the year ahead. Against the backdrop of a fog-bound Sausalito, Biderman sees only one path over the medium-term for Gold (up) as developed market central bankers print their respective fiat currencies and emerging market central bankers horde the one true sound money alternative. Just as we have been pointing out, he notes that the ECB has been QE-ing in all but name and the region faces at best a recession and at worst a depressionary breakup. Cost averaging into a Long Gold, Short EUR position is among his favorite ideas for 2012. Furthermore, he likes non-USD commodity producers in local currencies – implicitly long commodities and short the USD but it is his epiphany that a ‘Miracle on Main Street’ is hoped for by any and every market observer and media hack that rings truest. The hoped-for miracle that explosive growth (just as has always been the case post WWII) is just around the corner and will rescue us from the doldrums-like state we are meandering through is simply our heuristic biases run wild (together with an entire industry of asset managers and strategists who always see 10-15% appreciation ahead in broad equity markets over the next year). Until there is a total restructuring of developed market economies to the point where entrepreneurs are encouraged to act and where government spending is ‘closer’ to government income and not to ‘wish fulfillment’, there can be no jump-start to growth. Political will remains bereft of desire to do anything but kick the can down the road – and unfortunately, that can is getting bigger and heavier by the minute.
