1) Yesterday the Institute of Supply Management released its monthly Purchasing Managers Index and it showed unexpected strength. The media did cartwheels over the headline number and then moved on. HOWEVER, if you are like me, you want to see the details right? Here's the details and the data is heavily skewed to the upside by price inflation: LINK Now, please read the wikipedia description of how this index is constructed, and you will discover that it is constructed based on subjective questioning and response choices by industrial managers - i.e. very "touchy, feelie" (I would use the word for excrement but many of my clients read this blog and don't appreciate my foul mouth to the extent that I like to flaunt it lol). Here's the LINK The point here is that what looks like a strong number in the headline is largely a product of inflation and subjective adjectives.
2) Today the ISM released its manufacturing index. It came in a few points higher than expected and CNBC went bonkers. BUT, here are some comments from the respondents to this survey:
•"A continued weak dollar is increasing the cost of components purchased overseas. It is going to force us to increase our selling prices to our customers." (Transportation Equipment)For sure there will be some growth in demand for industrial products. The lower dollar is helping exports limp along and GM and Chrysler, the two automobile wards of the Taxpayer, are pumping out production that is mostly sold to and sitting on dealer lots. Both companies are getting some help from Government-subsidized lease-finance deals but that won't last. I know in January that a large % of GM's sales were still sitting in dealer inventory when the numbers were released on Feb 1 (see my blog post around then for the data). GM stuffed its dealer channel once again. Here's the report, with the dealer inventory information about halfway down: LINK
•"We continue to see significant inflation across nearly every type of chemical raw material we purchase." (Chemical Products)
•"Our plants are working 24/7 to meet production demands." (Fabricated Metal Products)
•"Prices continue to rise, while business limps along at last year's pace." (Nonmetallic Mineral Products)
•"Overall demand is off 10 percent." (Plastics & Rubber Products)
3) This one really cracked me up. Geithner made a speech today in which he said that we can't reform the housing market and related financing frauds too quickly because it will hurt the "recovery" in housing. Well, first there is no recovery. See previous recent posts of mine on this for truth and proof. BUT, essentially what Geithner is saying is that it's okay for financing fraud to linger as long as it helps hold up the value of housing. I can't say what I really want to say about and still be perceived as a gentleman. Here's a news report of his comments: LINK Suffice it to say that Geithner is an idiot.
4) Finally, Bernanke was in front of the Senate today pontificating about the low risk of inflation and promising that any inflation would be temporary. The golden truth is that the Fed officials are already setting us up for QE3 - more on that in a minute - and we are on the cusp of hyperinflation that will eventually hit the system, completely taking most people by surprise, and which will destroy the net worth of anyone not invested heavily in precious metals. Here is a quote from Ben Davies that I couldn't have said it better myself:
By June, the US will have monetized 100% of all of the debt issuance. This will lead to continued debasement of the US dollar. Fed Chairman Bernanke refers to commodity strength as a derivative of emerging market demand. This is the same man that suggested a savings glut from emerging markets was exporting deflation to the rest of the world a few years ago.Here's the LINK - please read that. Bernanke is outright full of shit and I'm sure he must know it.
Regarding QE3. Already a couple of regional Fed heads have made comments alluding to its possibility and even Bernanke has made comments which indirectly allude to its possibility. I've already counted QE3 as in the books and am taking over/under bets on when QE4 will hit. If anyone disagrees, then please tell me how the Government plans on raising more debt financing if the Fed does not print money and buy it? Anyone? I've been waiting for close to 10 years for someone to explain the solution to that math problem to me and the problem gets worse by the day. The alternative? Hyperinflation - it's coming but I won't stick a calendar date on when it hits. Just be prepared.
Anyone who does not have at least 50% of their assets in physical gold, silver and mining stocks right now has absolutely no understanding of what is going to hit the globe financially and geopolitically. I have over 90% in the sector and so do the high profile investors who have been communicating and accurately predicting what is unfolding for more than a decade (John Embry, Eric Sprott, Bill Murphy, James Turk, etc.). Hell, even the Ben Davies and John Paulsons and David Einhorns didn't get involved and start pontificating about this sector until the last couple of years. They have NOTHING on those of us who have analyzed and predicted the now-unfolding demise of our system. Even Jim Rogers and Marc Faber were poo-poo'ing gold until the mid-2000s.
"I think we are all doomed." I will end with a great quote on zerohedge.com from Marc Faber. I don't always agree with his market views but I am in full agreement with this statement of his:
I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it.Here's the LINK
What is most perplexing is that there are still many paper millionaires out there who I chat with about my fund and they think that having cash in the bank is bulletproof. But, just like in Weimar Germany, when the dollar finally collapses the value of that paper will be close to zero (it will have value as furnace fuel) and these fiat dollar millionaires will be fiat dollar paupers. Gold and silver are bulletproof, as they have been for over 5,000 years...