Financial Sense Blog

In 2009 and 2010 we saw a 5-8% correction down to the key moving averages. I feel that we are in store for a similar pullback in 2011. After that we will most likely continue higher. The one issue I see going forward is that if the dollar breaks down it will most likely help boost oil prices which in turn puts downward pressure on stocks.

It's just a matter of time before the Fed finds itself unable to continue propping up the economy with QE pillars of paper-(dollar)-mache now replacing the crumbled columns of 15-year credit expansion.

The negative feedback loop goes like this: Debt monetization -> higher commodities -> reduced profit margins -> consumers spending flattens -> food riots erupt -> governments topple -> oil prices rise -> economy suffers more

Government statistics guru John Williams believes the most important economic indicators used by our political leaders in their decison-making - the Consumer Price Index, the unemployment rate, the Gross Domestic Product - are deeply flawed in how they're calculated.

The oil picture is always complex, but right now things are about as complicated as they can get.

The turmoil in the Middle East and North Africa has led to higher oil prices (see Chart 1, data plotted up to 3/1/2011). Brent crude oil was trading at $116.99 ($113.07 on 3/1/2011) as of this writing and West Texas Crude was quoted at $101.68 ($99.63 on 3/1/2011). The Libyan crisis has raised oil prices significantly in the last three trading days. The crisis in the region commenced the day after a Tunisian man set fire to himself on January 21, 2011.

The conclusions of our "2011 Thesis - Beggar-thy-Neighbor" was that the world is on a glide path towards a global Fiat Currency Failure and the emergence of a New World Order. We are unclear whether it is planned or happenstance, but what the regularly conducted abstraction mapping process clearly indicates is that it is presently a high probability outcome.

With the bull market in precious metals likely to accelerate in the coming years, folks should turn a great of their attention towards finding the growth stocks of the bull market. We are talking about your Ciscos and Microsofts. These are the stocks one can hold for at least several years.

Senator Shelby asked Bernanke to explain how he came to the $600b QE2 program. The answer came at minute 32 of this C-SPAN clip. Ben explained that he felt that a monetary ease equivalent to a 75 BP reduction in the Fed Funds rate was in order to avoid deflation.

It now appears that the United States has finally succeeded in its efforts to destroy confidence in the U.S. dollar. Given the currency's reserve status, its ubiquity in financial markets, and the economic power and political position of the United States, this was no easy task.