Financial Sense Blog

Many people understand that you cannot solve a debt problem by issuing more debt. They understand that politicians have overpromised Social Security and Medicare benefits to the tune of $100 trillion. They understand that if you cover 30 million more people in your healthcare system, it will cost hundreds of billions more. They understand that mega-corporations have shipped their manufacturing jobs overseas, and they aren't coming back. They understand spending $800 billion per year, policing the world, fighting two wars of choice, with hundreds of military bases across the globe is unsustainable. They understand that running $1.5 trillion deficits will eventually result in a collapse of the U.S. dollar. They understand that an individual or a country cannot borrow their way to prosperity. The U.S. government is essentially bankrupt and dependent upon Ben Bernanke's printing press to keep up the appearance of solvency.

The indirect bids at today's 13 week and 26 week bill auctions were down sharply from both last week and from the auctions of the expiring paper. That's a sign that Japan and other central banks did not show up at today’s auctions.

Last week I pointed to the 1302 level for the S&P. That was the prior week’s low. The market tap danced around that number at the end of the week. Levels of interest this week are 1292 for the S&P 500 and 11,936 for the Dow. If those levels give way this week on increasing volume a key level of support for the S&P is 1275 and 11,800 for the Dow.

As global oil prices surge above $100, consumers are once again reminded of the fact that oil prices are subject to the whims of geopolitics, weather, and growing demand. And unfortunately little is still being done to eliminate dependence on fossil fuels.

We have unwittingly become trapped in the snarled net of years of bad Public Policy. Like corporations that look no further than this quarter's results, our politicos never stop campaigning to start the tough task of ruling responsibly. A winning election simply represents 'rewards' and 'spoils' to all before quickly resuming the next campaign.

The RMB is unlikely to become a serious reserve currency in the foreseeable future. There are a number of reasons for this. First and most obviously, there are few realistic mechanisms by which the world can acquire RMB. Either China needs to run a large current account deficits, or it needs totally open domestic financial markets in which foreigners can easily acquire domestic RMB-denominated bonds to the tune of several percentage points of China’s GDP annually. I discussed why in a blog entry five months ago.

It's happening. The world is getting smaller. No, the physical world is not shrinking. And the number of people populating the planet is not going down, at least not yet. Instead, what we are referring to here is the human condition on mother earth.

The past couple weeks have been choppy in the equities market. While the strong intraday moves are great for day traders, it is extremely difficult for swing/position traders who normally hold positions for 3-60 days in length, which is my focus with this writing.

It is too soon to develop good estimates of the likely economic and financial effects of last Friday's massive earthquake and subsequent devastating tsunami, particularly with the situation in the damaged nuclear plants still unresolved.

I am at a loss for words (something that rarely happens to me) as to why so many in the Precious Metals Sector have become so negative at this juncture in this Historic Precious Metals Bull Market. No doubt, many have “2008-itis”, thinking that the Dow is going to crash. Of course, that has been the daily mantra since the top in 2000, hasn’t it?