Monday, March 14, 2011

T minus 1 minute and other stories for the week.

At 12 a.m. EDT, the hacker group "Anonymous" is set to release the story that Wikileaks hinted at, but never released, the one in which Bank of America is caught in massive fraud. The story is here at Gawker


Anonymous is also leading a campaign of "civil disobedience" until Bernanke steps down and the Primary Dealers that I've mentioned so many times in connection with POMO/Debt monetization, finally get theirs. Here's that story.


I talked a lot in December about the new pressures the Fed will face with Ron Paul heading up the Sub-Committee on Financial Oversight. This time Paul has scheduled his second hearing, titled something like, "CPI Lies and Fed Created Inflation", a clear reference to the released CPI data which excludes "volatile" food and gas, the two things every American uses everyday. I never understood how inflation could be truly measured without considering these two influential data points. Furthermore, we have talked at length here at WOWS about stealth inflation and a possible stagflation environment as manufacturing survey after survey (all seemingly bullish) all confirm rising input costs and lower orders. The net effect is inflation, but because companies will try to contain it as long as possible before passing it on to the consumer, it's likely that we will see a stealth, heavy hitting bout of inflation. Which leads to the second part of Paul's hearing-"Fed created inflation". This stealth inflation HAS BEEN 100% created by the Fed as they have the printing presses smoking and are nearly giving away money which has fueled unprecedented speculation in all risk assets including commodities. So the input costs aren't at all a sign of consumer demand, they are caused by rampant speculation in the commodities complex and this is because of the Fed keeping the lending rate near zero. This is also something we've been talking about for awhile-it can only end badly, whether stealth inflation hits or the Fed does what it has to and raises rates to absorb all of the cheap money they've put out there. In the meantime, because of their non-stop printing, the value of a dollar has dropped dramatically (part of the stagflation concept), but more importantly, punishing baby boomers who have saved for a lifetime in anticipation of retirement which kicks into high gear this year. Their money is worth less because of the Fed's actions, only the banking cartels are making out like bandits, Anonymous knows it and so does Ron Paul.


Here's an excerpt from the announcement of the hearing:


"Ron Paul hearing on CPI lies and Fed created inflation
Congressman Ron Paul, Chairman of the Domestic Monetary Policy and Technology subcommittee, announced that the subcommittee will hold a hearing to examine the relationship between monetary policy and rising prices (with a particular focus on food and energy prices).
 The hearing is scheduled for Thursday, March 17th at 10:00 AM, in room 2128 of the Rayburn House office building.
 
It is unconscionable that published government statistics mislead Americans regarding the true rate of price inflation, which is much higher than commonly-reported CPI numbers,” Paul stated. “It is also unconscionable that Federal Reserve Bank officials continue to deny the effects of their monetary expansion on consumer prices.  Inflation, properly understood, is a monetary phenomenon.  The price inflation Americans suffer today is largely the direct result of relentless monetary expansion by the Federal Reserve over the past decade.  Our witnesses will explore how current monetary policy, including QE2, directly impacts the standard of living of Americans in ways that are not reflected in official government data.”
 
Congressman Walter Jones, vice chairman of the subcommittee, stated, “The Fed has attempted to convince the public that its money printing campaign is necessary to stimulate America’s economic recovery.  Instead of recovery, the real effect of the Fed’s money printing has been monetization of America’s exploding fiscal deficits, devaluation of the dollar, and creation of inflation in asset prices across the board.  As a result, working people in places like Eastern North Carolina are being squeezed at the gas pump and the grocery store as they struggle to make ends meet in a world in which their salaries have no chance of keeping up with Mr. Bernanke’s printing presses.”


Get ready for the PIIGS contagion to comeback into rotation in the fear cycle. Last Friday Greek 2 year bonds fetched an amazing 17% interest rate. There's not a lot of confidence they can repay the bonds in two years, but more importantly, Spain is on the brink and the bailout fund can't handle it. As for a new bailout mechanism, it isn't going anywhere without Germany and Angela Merkel is on the wrong side of the issue as far as voters in Germany are concerned. We already talked about her crushing defeat in one vote of more then a dozen. Her party now has the support of 39% of the people, while the opposition party has 43%. The message the German people are sending is clear, NO MORE EURO ZONE BAILOUTS!" So watch for that to erupt this week. A ticker you might be interested in, EWP on the short side. I'll try to feature it tomorrow.

As for Japan, this is a hot one. They've lost 26% of the countries power generation. While ports and refineries are still shut down, look for a huge move up in oil as an alternative energy supply as soon as they reopen, THIS FITS PERFECTLY WITH OUR USO OUTLOOK!

Furthermore a 15 foot tidal wave is headed for the reactor complex, this after reactor #3 just suffered an explosion. Things are not going well as far as containment goes. This has led to the Japanese government or rather the Bank of Japan for only the second time, to inject money markets with 15 trillion Yen in liquidity to try to prevent a total collapse. At last look, the Nikkei was down 5% and was tripping circuit breakers.

In MENA (Middle East/North Africa) tensions have heated up again in Bahrain, so badly that there is a fear that the very social fabric of the country is about to tear. This is the first of the MENA falling dominoes to introduce sectarian violence (Shiites vs Sunnis) so things could get very ugly there. Bahrain's Crown Price has asked Saudi Arabia 9who has so far avoided their day of rage) to send their military into Bahrain to try to contain the situation. And don't forget Gadhafi. This week is likely to see a "No-fly zone" implemented, which means armed western intervention which will not go over well with Arabs or the Arab League. 

This promises to be a historic week. Make sure you use any strength to get your feet, not just toes, but feet wet in short positions. Raise cash and get off long margin. I've mentioned several possible short term outcomes, but I believe the big picture will be a massive market melt-down (no pun intended there at all) and this week could very well be the tipping point.

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