"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, February 28, 2011

CCI notches another new all time high - Bonds yawn - Equities cry "Yippee"

Strength across the broad commodity sector has lifted the CCI to yet again another new all time high. Seeing that it is the end of February, we have what now amounts to a new all time high closing price on the daily, weekly and monthly charts.

This continues to occur across a backdrop of a weaker Dollar and a soaring stock market. The Fed of course will continue denying that there is any connection whatsoever with these developments and its QE policies, but the charts tell a different story.

Bernanke and company wanted to produce inflation to stave off what they view as the more dangerous deflationary pressures. They got what they wanted.

Meanwhile the bond market remains in its "See no inflation" problems mind set choosing to instead view rising energy prices from a deflationary standpoint rather than an inflationary one.

It does however appear to be stalling out a bit in its recent rise as traders sort out the implications of a move that has gone nearly straight up for the last three weeks.

The bonds and the equity markets cannot have their cake and eat it too. If the spike higher in crude oil and the liquid energies is going to be viewed as a sort of tax on the economy and work to slow things down, bonds will move higher as they are currently doing. If however, that is true and higher energy costs are acting as a drag on the economy, then the equity markets should not be moving higher based on the "improving economy" theme. That theme did not include crude oil and gasoline prices rising to current levels.

There is a complete contradiction between the movements in the bond market and those of the equity markets.

In both cases however, it is liquidity injections both into the equities and the bonds that have created the utter contradiction as the Fed's involvement in rigging the interest rate markets have created another distortion that will have to be dealt with.


  1. Dan......$HUI close was very bullish....comments please on target?

  2. The markets will go higher to levels unimagined and if we're in Gold, we WANT that to happen. Anyone who wants them to tank doesn't know how this shit works. Why will they go higher? The price of oil will go back down. This spike is temporary. Regimes will change. The bulk of the oil will stay. I use the Beck/Boehner meter. The more they cry, the richer I get.

  3. "In both cases however, it is liquidity injections both into the equities and the bonds that have created the utter contradiction as the Fed's involvement in rigging the interest rate markets have created another distortion that will have to be dealt with."

    Dan, you said a mouthful there, brotha...

  4. @Bellbud
    "Beck/Boehner meter"

  5. The fed is pumping so much "credit" into the market that equities and bonds are becoming speculative. See this quote from Greenspan's 1966 essay: "The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence."
    Read full essay at http://www.constitution.org/mon/greenspan_gold.htm

  6. My God, it's like a perfect Keynesian storm. This is truly going to be ugly.

  7. The thing is, to ignore those types. They get paid to spread fear and when folks are afraid they stick whatever money they have left under the mattress when if they for once thought for themselves they would have noticed that Citibank was 1 dollar. Ford was 1 dollar. GE was 7 dollars! Being fear mongered into not acting on it cost them a small fortune, but better believe the big boys were all over that shit and did make a fortune while their mouth pieces had the masses looking for a stupid birth certificate! Moral of the story, don't let 'em take your eye off the ball. It happens repeatedly. Remember WMD? somebody siphoned off billions in oil at the port while Billy Bob was kicking around sand looking for stuff that never existed. 'nuff said. Notice The ONLY gauge is the real facts and nobody's gonna get 'em from what they see on the TV. A chart and a combination of stats points the way. What are those tools pointing to next? Ok, what do you get when interest rates AND housing prices are super low at the same time? Yup, a boom in Real Estate. Big money is already loading up while we're being told "how bad things are." I picked up ARCC, NCT and GKK. All real estate funds. All three seriously in the green with GKK up 270%. These type of funds are leading the way and housing will follow. People are buying 4,000sf houses in Vegas right now for 300K. They WILL be rewarded. So the next time you hear crap like "Gov't takeover of healthcare" "Gov't confiscating your guns" "Gov't taking over IRA's" remember it's all a distraction. Blue Cross, Signa, etc are all still private enterprises. No guns have been taken. I still have all my IRA's...do you? Oh and BTW, Death Panels don't exist. Don't take your eyes off reality and everything is juuust fine.

  8. Turd"er" (where do you guys keep coming up with these names!) - that is a terrific quote. Thanks for sharing it and the link.


  9. Great insights Dan. I foresee a corrective structure in bonds prior to lower lows. Perhaps today's doji is telling us the 'A' leg is ending.

  10. CNBC made the case for $130 Silver


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