Market Pulse

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 With commodities up, I'm in the mood for some more bearish talk. If the current loses continue, Nenner may have accurately predicted a top at 12,300 for the Dow-- back in November, which I believe was when these interviews were shot. Are we now spiraling down towards 5,000: that is the question.

Nenner is one of the odder characters around--although he did spend 12 years at Goldman, probably gouging investors.  One of his methods of forecasting is using the sun's patterns.

He makes interesting points in his arguments that we are actually in a deflationary period. Although we are heavily printing paper currency, real wages are not rising—don’t forget to add in unemployment and municipalities flirting with defaults. Banks have also also cut domestic lending.The only logical explanation for this would be gridlock in the flow of capital (deflation).

Money printing through bailouts is never an ideal scenario, but whats really preventing the US from getting any of the side benefits of inflation is the misallocation of funds-- which is precisely what’s going on. Bernanke is focused on bailing out the financial industry and a few other fortune 500 firms. However, mortgages remain underwater and productive industries have not been spurred on.  If he would have attacked the issues directly instead of pandering to the banking sector, we would have seen a turnaround in the economy.

Trickle down has been debunked. Yes, the liquidity is in the hands of the top 2-3 percent of the population, major investors, speculators and banks are moving paper currency around the world into emerging markets and commodities, but this is proving to be dysfunctional over long periods, especially for Americans.

And this is ties in exactly to where I would disagree with Nenner-- his bullish outlook on bonds and to a lesser extent, gold topping out at 2,500. I see bonds and as a terrible investment, especially as a safe haven through the economic downturn. I'd reweight the argument in favor of commodities and to a lesser degree, the emerging markets.

Market Pulse - Market Pulse

Image from WSJ Article: "States in the Red"

The dollar continues near its four month lows while oil and silver are picking up where they left off last weekend. Silver closed at $33.94-- breaking through its previous highs.  It’s starting to look like it may be telegraphing another week of gains. 

Oil is down, but it is holding up its resistance due to the ongoing turbulence in the Middle East along with the growing realization that peak oil may be more than just talk.  I’m not as certain on crudes short term performance as opposed to metals, but a floor could be forming. 

If you are in the paper oil & silver markets, another profit taking sell off may come within a few more weeks. However, it is clear that the residual bullish sentiment on equities, from the holiday months is well behind us. Things aren’t looking good for the dollar, municipal bonds and even stocks, as states flirt with insolvency.

Stocks are coming off their 52 week highs – spurred on by steady rounds of QE2, yet the underlying weakness in the economy, including joblessness remains unchanged.  This anomaly will continue to threaten to set the SP500 into a post-QE2 correction.  We are now flirting with another nosedive due to political destabilization-- as attempts at imposing austerity measures have been met with resistance within the Mid-East and here in Wisconsin. 

What the infamous Wall Street Journal map depicts is an overly leveraged and woefully mismanaged political structure that is on the verge of imploding due to years of catering to corporate demands, including tax credits, subsidies and a total lack of governance. Essentially corporations have either demanded to operate rent free here or chosen to go abroad and benefit from wage arbitrage. As a result, corporations and the ever increasing unemployed are creating huge voids in government coffers; as they’re now both on the doll.   All of this is being bankrolled by the US government’s ability to print money. We should see states seeking FED funding within the year. And if the states aren’t bailed out the municipal bond market will become the 2011 version of the mortgage back securities crash of 2008.

Eventually this domino line will stop at the US dollar. And we wonder why silver and gold investments are quickly becoming household names. 

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Relevant Articles:

WSJ- STATES IN THE RED

BusinessWeek- Dollar Drops to Almost Four-Month Low on Prospects for Fed, ECB

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