Today’s Call: NO CALL, taking a break as we revert to the mean.
Rationale: As you can see, our calls are reverting to the mean. It has occurred to us that many of our bad calls end up panning out after the 72 hour time period. We are going to start a new service based on our findings during this experiment which will give position entry and exit recommendations. Thank you for watching this space and stay tuned!
Result of Call for June 27, 2011:Spain5yr Credit Default Swap to rise. Was 315.20, Currently 269.70. Bad Call.
Calls to Date: Good Calls: 32, Bad Calls: 29, Batting .525
*See the MINT Perceived target Rate Chart. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
Fjordbank Morsis a small lender in Denmark which went bankrupt as an indirect result of another Danish bank failure, Amagerbanken. Due to the incestuous nature of their collective balance sheets, banking systems are by nature (and sometimes by law) doomed to rise and fall together.
Much has happened in the financial markets in this past week, and much will happen in the coming weeks. But perhaps what is most notable is what has not happened.
Namely, the US Congress has not raised its self imposed credit card limit. For an entity that is already $14.3 Trillion in debt ($4 Trillion of which reportedly comes due in the next 12 months) with no realistic plan to pay for it, this is suicide. What are they thinking?
The two parties are in agreement one count, they need to save $2 Trillion dollars over 10 years. Why this sum has been identified as the cure for what ails the country’s finances is anybody’s guess. Unfortunately, but not surprisingly, there is no agreement as to how to get there.
Where will they find $2 Trillion? Tax the rich, screams Obama, repeating the eternal populist sentiment. Stop spending, say the Republicans, using the circumstances to make a push for “limited government.”
Editors Note: There is no hope for limited government with the current two party system in place, therefore the Republican’s stance is entirely a façade.
The President has taken the extraordinary step of asking Congress not to recess over the Fourth of July, as is their custom, calling their lack of agreement akin to his daughters not completing their homework. While the President makes a quaint metaphor, we believe that Obama’s daughter’s homework is probably more challenging than Congress’s task of balancing the budget.
Obama Admonishes the GOP to stay and do its "homework
Balancing a budget is simple. It just takes courage. It seems that courage is in short supply in Washington DC these days.
Without internal fortitude to press the Americans along, a little external pressure is beginning to be applied. First, the Treasury’s latest 7 year bond auction did not go as well as planned as investors demanded 2.43% to hold US paper for a sabbath cycle. Without the FED at the table, it is hard to imagine how it could have gone well. Bond Market participants are beginning to wring their hands.
Then comes word that the IMF is beginning to apply pressure, eloquently reminding the Americans of what they should do and why they should do it. It is worth noting that the IMF appears to be the last to know about such things so we will excuse their apparent surprise at the lack of inaction (they are most likely not informed MINT readers like yourself):
“…the federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets,”
Yeah, tell us something we don’t know. And then, true to their holier than thou, infallible status, they give the Americans advice on how to do it:
“We see early political agreement on a comprehensive medium-term consolidation plan based on realistic macroeconomic assumptions as a cornerstone of a credible and cyclically appropriate fiscal adjustment strategy,”
Great! Thanks for the incomprehensible and totally impractical advice. This type of drivel simply solidifies our opinion that the IMF is a worthless institution and could be categorically ignored if it were not so insistent upon meddling in financial matters on a global basis.
Meanwhile, we are getting to see first hand what happens to a country that gives up control over its currency and then listens to the IMF for advice and is forced to take a loan from them. Greece, is giving the world a glimpse at how popular austerity is with the masses.
The scene that was carried out in the Middle East in the Spring is set to take place in Europe and England over the summer months.
How long until it crosses the Atlantic?
Another event that may occur as interested parties begin to reduce exposure to US Treasury debt is a liquidity crunch that will start in early July. Apart from the debt ceiling uncertainty, the Dodd-Frank financial reform rules are set to begin to do their damage to the financial system on July 15th.
If they do not forestall these rules as many banks are begging them to do, the US and global economy will take their first tender steps into the great unknown, a world without political or real capital to act a a backstop for failures.
It will be dangerous and exciting. And, just like a fireworks show, will be best enjoyed from a safe distance. Keep your money close at hand, meaning out of banks and preferably in precious metals or anything tangible, and enjoy the show!
*See the MINT Perceived target Rate Chart. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
Rationale: With the Greeks passing austerity measures in the face of widespread protests, the Euro got a temporary boost today. These types of jumps usually pull back in the short term. The Euro just double peaked on a triple top vs. the USD and is generally in a bear trend which should be reinforced post June 30th.
Result of Call for June 24, 2011:10 year US Treasury Bond yield to fall (price to rise). Was 2.87%, Currently 3.108%. Bad Call.
Calls to Date: Good Calls: 32, Bad Calls: 28, Batting .543
Daily Default:PMI Group, Inc., third largest guarantor of US Mortgages.
*See the MINT Perceived target Rate Chart. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
Rationale:Kansas Wheat was reported as 55% cut today and reports that the harvest is 100 million bushels lower than last year will weigh on prices as word spreads.
*See the MINT Perceived target Rate Chart. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
Today’s Call:Spain5yr Credit Default Swap to rise. Currently 315.20.
Rationale:Spain has been out of the news for some time as Greece’s debt problems have taken center stage. However, the chance of increasing unrest along with the realization that banks will likely have to roll over existing sovereign debt in Europe will likely raise risk premiums on all sovereign debt, with Spanish debt being one of the more vulnerable.
Result of Call for June 22, 2011:Yield on 10 US Treasury to fall, price to rise. Was 2.99%, Currently 2.93%. Bad Call.
Calls to Date: Good Calls: 31, Bad Calls: 27, Batting .534
*See the MINT Perceived target Rate Chart. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
With consumer credit in a long term downtrend, the US Congress unable to come to an agreement to raise the debt ceiling, and the Euro system on the verge of collapse, The FED appears desperate. Our speculation is that they are now plotting something we call “Helicopter Phase.”
Helicopter Phase happens when money is literally showered on the American people in a desperate attempt to keep the currency regime from disintegrating. Ben Bernanke attempts to describe it in his own words in the latest edition of Mint Finger Puppet Theatre:
Helicopter Phase will most likely take the form of the stimulus checks that have been mailed out to taxpayers in the past as giving away money to the banks, defense contractors, and other special interests has failed to create any long term growth.
In rural areas, however, we suspect that Ben Bernanke‘s famous helicopter method is likely to prove useful:
The Harlow Block, located at Glisan and NW 8th at the Northern end of the Park Blocks has sat shuttered and abandoned for as long as we can remember. It is a stark reminder that urban renewal occurs in fits and starts and can leave some buildings frozen in time.
We detected signs of life today outside of this once proud structure in the form of wooden artforms gracing the plywood which one normally encounters on a stroll up Glisan.
Today’s Call: 10 year US Treasury Bond yield to fall (price to rise). Currently 2.87%.
Rationale: Even though there will soon be a heightened risk of default by the US, moves such as releasing oil from the strategic reserve will give reason to believe that the US will make good on its obligations. With the debt ceiling talks stuck on taxes, soon demand for Treasuries will overwhelm supply. US Banks still reinvest in Treasuries and will likely continue to be obligated to do so.
*See FED Perceived Economic Effect Rate Chart at bottom of blog. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
Rationale:Oil was oversold today on the announcement to release 60 million gallons of oil into the global supply from strategic reserves with 30 million gallons coming from the United States reserve. The 60 million gallons does not even represent one day’s worth of global oil consumption. In other words, this is a token announcement. The world has more of a money supply problem than an oilsupply problem. Both are policy problems which will not be soon resolved. These problems will keep the price of oil in dollar terms on an upward trajectory.
*See FED Perceived Economic Effect Rate Chart at bottom of blog. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
We search for answers, yet the questions are trumping them right now. This phenomenon is inherent to human existence. People are always chasing after knowledge. In the Bible, the book of Daniel speaks of our times when the Angel tells Daniel in his vision:
“But you, O Daniel, shut up the words, and seal the book, even to the time of the end: many shall run to and fro, and knowledge shall be increased.”
A little bit of knowledge sparks a thirst for more knowledge, which, once quenched, sparks an even greater thirst for knowledge. Like Carmex, which soothes one’s chapped lips for a time only to dry them out again, which appears to create a perpetual “need” for to the product, knowledge provides answers and understanding which lead the enquirer to even more questions, and the cycle repeats itself.
The phenomenon expresses itself in markets in the form of a search for a “final price”. In a free, unfettered marketplace, this price, in money terms, represents all that is known about the value of the good that is being exchanged for money at that point in time. However, this “final price” is in and of itself a new data point to be considered, as is the exchange of goods which it represents. This changing data necessarily creates a new “final price” which, by definition, takes into account all factors know about the value of the good and so on.
Ever since we decided to eat the fruit of the tree of the knowledge of good and evil, the chase for knowledge has continued and will continue until Jesusreturns.
But what does this have to do with the US Dollar, let alone Beer?
We are glad you asked as we were getting a bit side-tracked. Our personal search for knowledge has brought us to the most recent of the endless questions that need to be answered:
When will Central Bank Currency Regimes and Sovereign Governments admit they are bankrupt and be allowed to default?
This is an URGENT and very important question as the entire financial world cannot progress until this question has been answered.
To be clear, most western governments and their Central Bank run currency regimes are now technically in default. They have been ever since they began to “solve” liquidity problems via money printing or “Quantitative Easing” (QE for short).
The acts of Quantitative Easing, which have been embarked upon by the US, Euro, and Japanese Central Banks is only necessary when the faith based currency regime in question has failed. The necessity to print money which is not demanded by the market nor provided at market prices provides concrete proof that people are no longer willing to further enslave themselves by incurring additional debt.
As we have explained in this space before, debt is the lifeblood of the currency regime. In these mindless confiscatory monetary systems where the only way to create money is to coax someone else into incurring debt, shrinking debt is the equivalent of someone pushing the currency regime’s self destruct button.
But instead of recognizing this fact for what it was, a failure of the system, much of western civilization continues in willful denial. Soon, however, everyone will be rushing for the exits.
But we promised you a beer, fellow taxpayer, so crack yourself a cold one (on your own dime, of course, this is, after all, a free newsletter) and see if you tell us what the Federal Reserve Notes that we currently use as money and Schlitz Beer have in common?
What do Schlitz and the Federal Reserve Note have in Common?
Need a hint? Think quality, or lack thereof.
Give up? Here are the answers, as always, we invite inquiring fellow taxpayers to add to this list by commenting below.
First, both Federal Reserve Notes and Schlitz were once the gold standards of their product class (currency and beer, respectively). Federal Reserve Notes took the place of US Dollars in 1913 and maintained the US Dollar’s tradition of quality and enjoyed increased market share until finally overtaking the British Pound Sterling as the world’s currency of choice. In the beer industry, Schlitz rose to overtake rival Pabst as the most popular beer in the world in 1902.
In the 1970s, the Schlitz brewing process was changed to make use of high temperature fermentation in order to further speed production. This change and subsequent changes in the formula had disastrous results which came to a head in 1982. On the US Dollar front, then President Richard Nixon began to tinker with the US Dollar formula in the 70s, namely making the US Dollar no longer convertible into gold. This watering down of the dollar supply had disastrous effects which also came to a head in the early 1980’s.
Both Schlitz and the US Dollar then continued to generally decline in status for close to 30 years.
In 2008, however, the old Schlitz formula was discovered and has been revived by Stroh’s Brewing Company to give new life to an old beer that everyone had left for dead.
Circa 2011, the US Dollar is still yearning to return to the “gold convertibility” formula that made it so insanely popular for the first half of the twentieth century.
*See MINT Perceived Economic Effect Rate Chart at bottom of blog. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
*See FED Perceived Economic Effect Rate Chart at bottom of blog. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
*See FED Perceived Economic Effect Rate Chart at bottom of blog. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
Rationale: News today that JPMorgan is being sued by the federal regulators on behalf of the NCUA regarding securities losses at corporate credit unions which failed at the height of the financial crisis. While $840 million is pocket change to JPMorgan, the resulting hit to their image as well as their loss of the Medicare payment processing business are recent indicators that even they are vulnerable to populist retaliation.
*See FED Perceived Economic Effect Rate Chart at bottom of blog. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.
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