Financial Sense Blog

The Fed announced plans to purchase government-sponsored enterprise (GSE) debt [$100 billion] and mortgage backed securities [$500 billion] on November 25, 2008 and increased the size of these purchases on March 18, 2009 to $200 billion and $1.25 trillion, respectively. Purchase of $300 billion of longer-term Treasury securities was also announced on the same day in March 2009.

LME Week is an important tradition in the global metals industry calendar that takes place each year in London during the fall. This year’s event kicked off on Monday and the spotlight on industrial metals couldn’t be brighter, especially for copper. With prices up around 13 percent so far this year, copper’s notched a spectacular rebound off its lows and currently sits about 10 percent below its all-time high set in 2008...

For those living outside of the U.S., on 2 November the most important U.S. election since 1932 will take place. On that day, U.S. voters may repudiate the Keynesian liberal model of government. For nearly 80 years Keynesian liberals have been on a path of wealth confiscation and destruction not seen since the Mongol hordes unleashed their terror across Asia and Europe. On 2 November we may, hopefully, witness the beginning of the death of Keynesianism. If not, we still have Gold.

As I review the landscape at this time, the key feature I am seeing is that a number of key markets are playing in the vicinity of significant support and resistance. Some of these are areas of technical significance on a very short term or long term basis. Among the markets in question are: US Dollar Index, Gold, EuroDollar, DollarYen, EuroYen, Australian Dollar, SPX, NDX, World Leaders Index, and the SPX:30 Year Treasury Bond ratio.

Every three months a new earnings season shows up bring with it new set of worries for investors. What are the current expectations? What might happen my stock beats expectations? What if they do not?

The markets in mainland Europe are going through something of a revolution particularly since the MiFID directive in 2007 from the European Commission. The purpose of this initiative was to promote competition in the financial markets throughout the Euro zone.

When George Soros stated that gold was the “Ultimate Gold Bubble,” we believe that he was not saying that it is now in a price bubble, but that it would one day get there. This is backed up by his accumulation of gold and gold shares since then. So we are not looking at a ‘gold bubble’ even with gold at this price.

Named in honor of Charles Darwin, the Darwin Awards commemorate those who improve our gene pool by accidentally removing themselves from it. I therefore propose the ‘Nobel Award in Darwin Economics’. The recipient of the award would graciously be asked to remove (just) their ‘economic genes’ from our economic gene pool. If they teach economics, they’d be asked to cease and desist, if they were the Secretary of the Treasury, the Chairman of the Federal Reserve, or the President of the United States they’d be asked to resign.

The Fed is most likely to announce the second phase of quantitative easing (QE) in the policy statement after the conclusion of the November 2-3 FOMC meeting. The minutes of the September 21 meeting indicate an extensive discussion about the unsatisfactory pace of economic recovery. The utmost importance of taking action to promote economic growth was visible in the repetitive mention of the need for additional monetary accommodation. The following excerpts from the minutes support expectations of further Fed action at the close of the November 2-3 meeting.

We are on a bull party, but there are risks involved. No matter how much fun it is hanging around the punch bowl, we must be aware of these risks. No, I do not view the static emanating from Ms. Yellen as a risk. But at some point, building pressures may abruptly cause a power outage when enough party goers have arrived and partaken.