Tuesday, June 30, 2009


is the name of the FIRST LINK in my list, about 2/3's down the sidebar.

The first chart is Hi-Grade Corporate Bonds [ LQD ],
divided by Treasury Securities [ IEF ].

Like the Euro-YEN currency pair does in currencies, the LQD: IEF shows the willingness of Bond Holders to step outside their "Comfort Zone" towards RISK.

Generally speaking, this relationship addresses how much funds the Treasury is
injecting into subject market via REPO's, and other devices. Intervention trackers do a good job of sniffing them out.

Check the correlation against EQUITY MARKET Moves,
and IMO, the link is DIRECT. Viewed thru a shorter lens, it is not so glaringly apparent, as it is via the longer charts.

More to the point, there are always apparent "EXPLANATIONS" WHY, offered by TALKING HEADS and "Monetary Authorities" and 'Officials'. SMOKE & MIRRORS ! ! !

Gold does a good job sniffing certain moves, and Silver as the more volatile of both PM's vibrates incessantly when the Monetary Authorities play their games thru their "Dealers".

Watching a number of indicators MIGHT help, but in the end its the PUMP that matters, and as long as they are pumping Liquidty, the upward curve, ever increasingly subject to Gravity and the law of decreasing returns, will try, try, try
to climb THE HILL, and at some point will cease to be as effective as previous.

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Hints, Clues, Whispers or SHOUTS !

I WOULD PAY ATTENTION TO THIS -> THIS Might be the tip of the iceberg
This may be a clue what might be taking place
as we move towards the middle of JULY , and the MAJOR BRADLEY TURN Date.

Please refer to a chart of any popular average from the winter of 2007 forward to get an idea of what might be going on.

In any case, simply recall what took place in the past and make sure you are protected. If this is the OTHER SHOE dropping, you will find liquidity draining away, and that will include all asset classes.

" On June 23, the European Central Bank (ECB) announced its first ever offer of UNLIMITED one-year funds!

The ECB has only done something like this once before, in a single ECB operation back in December 2007 when the world’s international payments system seized up. Then, Europe decided that this time, their internal payments system would not be allowed to freeze up as it did back in the early 1930s.

This Starts The Global Credit Crisis - AGAIN ! :

Across the Atlantic in the US, the FDIC was the first cab off the rank in response. The FDIC said it will be guaranteeing $US 700 Billion of the debt of about 7,100 US banks and institutions in its transaction account program. Banks, including the biggest US lenders, can now tap UNLIMITED coverage by
paying 10 cents per $US 100 on customers’ deposits. The FDIC has $US 13 Billion left of its own funds.

What the ECB did back in December 2007 was a reaction to financial events which made the world’s international payments system seize up. The ECB hammered 348 Billion ($US 485 Billion) straight into the European payments system so that all the other financial participants could make or receive payments. This was a “one-off”! But now, the ECB has done it, again - on a scale which vastly exceeds what it did back in December 2007. This is not a “one-off”. This time, it is supplying unlimited funds for a year!

The problem which the ECB sees rolling over the world horizon has to be of a near similar magnitude in size. Why otherwise open its doors again for unlimited funds? Further, why would the ECB keep its doors open for the issuance of these funds for a full year if the ECB did not expect this approaching world crisis to last for at least this length of time? Searching for answers to this, The Privateer can only use similar historical instances. The first of these has to be a gargantuan bankruptcy of a pillar of the western world’s huge “money center” banks. The second of historical instance has to be a debt default by one of the western world’s major governments! The third has to be a combined political and economic disaster. An example of this is when France refused to roll-over its loans to Austria’s Credit Anstalt in the late 1920s and then demanded repayment of its past loans. That demand brought the Credit Anstalt down. The Credit Anstalt, in a desperate attempt to get the funds and to repay France, called in its own loans to German commercial banks, in the process causing a fast sequence of bank failures across Germany.

In the early 1930s, western banks recoiled in horror from each other. They all started to recall their own short-term loans from each other while refusing to make any new loans. The entire western world’s international payments system broke down as the banks failed in their thousands all across the world. With this offer of unlimited funds, the ECB has acted to try to prevent a similar sequence, at least inside the Euro region. The European payment system will therefore survive - for at least another year.

But, if the crisis foreseen by the ECB is a debt default by a big government, then the global final outcome becomes extremely doubtful. It will be the present lenders to the default government which will take the full hit, their loans made to it all being worthless. Their finances and payments systems might not be able to handle that. If they can’t, then the whole world could face a sequence of national debt defaults, which will carry with it consequences we all will share."

The choice is clear: Balance the budgets and roll back the stimulus or die as the stimulus explodes....... Guess what's next.


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