New global currency or new regional trade units?

Rumblings out of the Kremlin for the creation of a new global currency.
click here

At the other end of the spectrum, bartering makes a comeback…
click here

The New Economy – Food banks, panhandling, and down time

Instead of writing about how many times Ali Velshi can be wrong and still have a job, I thought better to not focus on the negatives and instead start getting into the mindset of Disintegration 2010.

Dow Now and Then

BUY WHEAT. BUY GOLD. BUY SOUP.

WHEAT COULD REACH NEW HEIGHTS IN 2009

Droughts this year are going to squeeze already tight global wheat supplies. Parts of the US are severely dry like Texas and California. Elsewhere, China, Australia and eastern Europe are all experiencing extreme droughts. Financial mayhem has made it impossible for farmers to get credit for fertilizers so even with adequate rain, yields will be reduced. Another factor killing incentive to expand acres is the lower price compared to 2008. Liquidation continues with still almost 50% of open interest in wheat futures held by funds. A wild card is the stem rust fungus threatening wheat crops in Africa and moving west appearing in Iran. This is the making of another perfect storm with potentially devastating effects worldwide. Global stocks of wheat have recently come off 30 year lows. Even a modest reduction in 2009 yields could just be the trigger for civil unrest and mayhem. There are only 12 weeks of slack in the system. That’s it. It is not a pretty picture going into the summer of 2009.

Tea Party 2009, Chicago style

What will be the trigger in the US as this financial dustbowl bears down? Rick Santelli? Glenn Beck? When do people here just say enough is enough? Obama is now snowjobbing the cable outlets by throwing out some raw beef in the form of mortgage backstopping while they sneak through another 800 billion to aid swimming pool builders and teen STD angst. This is just like the auto sector snowjob which was highly effective in diverting public discourse away from TARP (trillions) and onto a pint-sized (10s of billions) problem.

If there is going to be a Tea Party 2009, it better happen quick because we’ve crossed the high water line on this river of debt.

Rick Santelli, you’ve got some momentum. The people are listening

We oughtta move to China if we want Capitalism – Rick Santelli

Gold nuggets and Santelli gone wild today on GETV. What is next for CNBC?

“Where is our frontier spirit?” Santelli asks the non-trader hosts. Maybe all it takes is a large long bond short position pummeled into the red by Hope Inc to get mad has heck and throw punches at the CNBC desk.

First gold nugget EVER SEEN on CNBC

CNBC snowjob team headline this video as “Invest in Ancient Money”. Ancient money? Wouldn’t you rather own ancient money than obsolete money like euros or USDs? Only the first 10 seconds of this useless video are interesting. Gold or bonds? Neither pay any dividends but which one has credit risk?click here

More gold snowjobs again on CNBC. Here at “gold parties” woman of Orange County sell bling for cash. What do these woman do with the cash? Who knows, but more gold just moves into stronger hands and likely out of US hands. click here

Goldman Sachs stock way off course here at $95

When you’ve got a lock on the Fed, Treasury and inside the White House, it’s a given you get title of Master of the Universe. Goldman has out-maneuvered lesser rivals using commonly accepted practices of frontrunning the Fed, FASB funny stuff, and naked shorting their pals to oblivion. Their only rival now, JP Morgan, will soon be drowning in another wave of toxic paper. Technically insolvent, GS will eventually fall to levels where it can be swept under the Treasury’s carpet, joining former high-fiving pals like Bear Stearns, Lehman, AIG, Fannie Mae, and the thousand or so regional banks dumpstered.

Relative Performance GS and JPM

What about Geithner? Instead of being a former CEO, he’s now hiring GS lobbyists to participate in Team Hope’s thinktank.

GS snowjob here

So what am I going on about? Golden Sachs (GS) looks like it has double topped out at $95 and is destined to break new low territory. It really has no business being over $5. Take the $90 as profit on any short.

Gold and Silver go Bonkers – Time 1980

A guy named AmericanPatriot posted this on Marketwatch:

“Gold and Silver Go Bonkers” TIME

“In one hectic week, the long surge in gold, silver and other precious metals crested into a wild pay-any-price frenzy. While bullion traders from Hong Kong to Zurich to Kansas City gaped in amazement, panicky investors big and small reacted to the worsening turmoil in the Middle East and the increasingly troubled world economy. They sent precious metal bars, coins and trinkets on the most dizzying roller-coaster ride in memory. Prices touched levels that were inconceivable a few months ago. Said a New York commodities expert, George Clarke, in a revealing if overwrought explanation of the market’s extreme volatility and nervousness: “In my opinion what is happening is that the world is looking at World War III.”

On a single day, gold climbed $74.50 per oz., or more than twice its total value as late as 1971. During the week, it climbed an incredible $148, to hit $660 per oz. before slipping back suddenly at week’s end to a still dazzling $603, or an overall gain of 18% in only five days.

The sell-off was spurred partly by rumors that the U.S. was planning a surprise gold auction of as much as 6 million oz. in an effort to break the price runup. Though the Administration denied the rumors, the U.S. could well afford such an auction. The nation’s gold reserves are still far and away the largest on earth, totaling some 276 million oz. At last week’s closing price, the reserves were worth some $165 billion, or more than twice as much as those of second-ranked West Germany. By comparison, the Soviet Union’s official reserves, though never disclosed, are estimated by the U.S. Central Intelligence Agency to be less than 45 million oz.

…full article

Has the deflation/deleveraging theme worn itself out?

Corresponding with near universal boredom of the deflation argument, the base metals have been showing symptoms of selling exhaustion. Pesky, unpatriotic hedge funds who ran up commodities in the first place are finished meeting nasty margin calls demanded by TARP-approved brokers. Whatever damage the paper world has inflicted, be sure creditor nations like China are furiously swapping USDs for hoardable metals. Not to be converted into electronic trinkets and plasma screens for western markets, but for domestic infrastructure with longer term focus. Most base metals are sitting at or below production costs so clearly anybody with money to burn is going apeshit over deals down at the LME. Why bother to mine it at all? Self-fulfilling as it is, capital eating up REAL metal supply is capital NOT spent on exploration and mining.

With little fanfare, or with all available fanfare being used up focusing on Team Hope, China has stopped buying US debt and is pouring zillions into internal stimulus programs. Of course the implications of this are enormous but lets continue to ignore what effects us most and instead, focus on what effects us least.

Teen tot mom killers anyone?

So here are some fascinating base metals charts put together by Richard Shaw on SeekingAlpha
click here

Base metals, agricultural, oil all bottoming out here

Company Guards at Old Dominion Mine, 1917

Keeping with the recovery/inflation theme of 2009, base metals, grains, and energy all appear to be have bottomed out and have started breaking out of their downward channels. Commodities are technically in deeply oversold territory and sellers have moved on. Clive Maund has posted some great commentary and charts on copper backing up my own observations that commodities are resuming an upward trend.

Clive Maund : COPPER – upside breakout imminent, implications for commodities…

Although copper may seem like a sideshow it is actually very important, for it is a barometer of changes in the world economy. In retrospect it is easy to see on its long-term chart below that its refusal to break higher for several years from what turned out to be a major top area was a warning that all was not well with the world economy. The breakdown from the lower support line of the top area led to a crash back to the first major support level where it has stabilized. It remains wildly oversold, as shown by the huge gap between the 50 and 200-day moving averages.
…more here

With silver now outperforming gold, more bang for the buck is likely to be in silver and base metals going forward – at least in the near term. If you are not in the futures market, exposure to metals can be had through ETNs like JJC and DBB or through common shares in FCX or PCU. In energy, expect Team Hope to push natural gas instead of clean coal as a clean energy.