Financial Sense Blog

Germany has no option left but to exit the Eurozone. This fact is becoming increasingly clear, especially to the German people themselves, who now fear remaining in the Eurozone (and having their remaining national savings syphoned away by their profligate neighbors) more than than the pain of leaving it.

Proponents say a transaction tax would discourage short-term trading, with little effect on long-term investors. Opposition says the extra cost would undermine liquidity, adversely affect market quality and distort the value of a security.

Although noble, the Fed targeting the US employment level as a rationale for further money printing is a bit disingenuous given the structural issues facing the economy. What are these issues exactly and why will they be so hard to overcome?

The Dow Transports are not confirming the new highs for the Dow Industrials, and the internals look even worse.

The market declined for the 15th Monday out of the last 16. That is a pretty amazing trend. But, losses were minimal. The NASDAQ was off the most today. Apple declined by over one percent. Some were slightly disappointed that they only sold 5 million iPhone 5's over the weekend.

Our government literally injects trillions into the economy – Credit that inflates incomes and sustains consumption and elevates asset prices. The downside of this economic miracle is that, at the end of the day, there’s little left to show for the whole exercise except for an ever-expanding mountain of suspect financial claims.

Ray Dalio, founder and co-chief investment officer of Bridgewater Associates, L.P. and one of the most successful hedge fund managers of all time told Maria Bartiromo last week that he owns gold and that he sees no “sensible reason not to own gold”.

Just as more money is coming off the sidelines, stocks appear increasingly susceptible to a reversal. An intermediate-term peak in global markets could come sometime in the next two weeks. Positive developments in Spain could alleviate our concerns, but for now the current path of risk assets appears to be one of a topping process.

For the past thirteen years Venezuela has been moving away from a market economy towards a socialist economy under the leadership of Hugo Chavez. And now the future of Venezuelan socialism hangs in the balance.

This week saw the third central bank step on the gas in an attempt to reflate their economy. We had the ECB and the Fed which announced open-ended QE (quantitative easing) programs, followed this week by Japan which extended its current QE program into 2013. In effect, global QE has now begun, stoking a reflationary fire as stocks, commodities, and other asset markets react to the fire being kindled by central banks around the globe.