The Resourceful Bear Blog

The Yahoo Finance chart of USD/JPY compared to EUR/JPY, UUP, DBV, and GLD communicates that gold fell lower on a rising US Dollar.

World stocks fell 6.5% and US stocks 5%; and large fellers included XME, SEA, and MOO: Metal manufacturing, XME, 11%, Shipping, SEA, 9%, Agriculture, MOO, 9%.

The Saudi's have been long the US Dollar, $USD, since the yen carry traders sold oil, USO, commodities, RJI, and gold, GLD, to take profits and go long the financial sector and banks on July, 14, 2008. But today they sold, and others went short the US Dollar, as the McCain-Palin ticket failed and the Obama-Biden team won the US election. The US Dollar closed at $84.59 ... $USD

I take the Jack Chan chart of UUP from his JC's Buy and Sell Signals chart site on Stockcharts.com to mean the US Dollar is to be sold ... UUP

Jesse's chart report US Presidential Election Results communicates to me that the only states that went for McCain were his home state and the rural agricultural states.

The Yahoo Finance chart of USD/JPY compared to EUR/JPY, UUP, TLT and GLD communicates the rise of the US Dollar, the so called "flight to safety" in the US Dollar, the sell of the USD/JPY since 9-11-2008 when lending collapsed, and the unwinding of the yen carry trade, which has lived up to its name of the armageddon trade, because of its deflationary destruction of wealth globally ... USDJPY, EURJPY, UUP, TLT and GLD

The five day chart of the gold etf, GLD, compared to the dollar bullish ETF, UUP, reflects the strong reaction that gold had to the fall of the US Dollar ... Five day GLD UUP

The 3 month chart of the gold etf, GLD, compared to UUP, shows how gold has been decimated by a rising US Dollar, and it reflects the rise of gold beginning on 9-11-2008, only to fall as the Federal Reserve facilities provided liquidity and stability ... 3 month GLD UUP

Gold, $GOLD, rose to $757 today; will it continue to rise now that the USD/JPY is likely to fall lower; or will gold fall continually lower with an ongoing fall in the EUR/JPY?

Most likely, gold simply pushed its way up to resistance to be taken lower by a falling commodity currencies such as the Euro, FXE, the Australian, Dollar, FXA, and the Canadian Dollar, FXC; and gold is likely to fall lower with oil, USO.

The chart of the gold ETF, GLD, courtesy of Jack Chan from JC's Buy and Sell Signals, communicates quite well the deflationary pressures in gold ... GLD

The Privateer's $US 2 x 3 Gold Chart shows the deflationary hurricane in gold as well ... Privateer $US 2 x 3 gold chart

Having said that, I continue to favor an investment in physical gold as I do not trust the "insurance" provisions of central bankers with regard to savings accounts, money market accounts and brokerage accounts; and I do remind that numerous coin store, dealers and jewelrs have no physical supply of gold on hand -- that's bullish gold ... $GOLD

I believe that the US Dollar, will now fall lower into The Abyss, will all fiat wealth; that is with all currencies, DBV, debt, AGG, foreign stocks, EFA, and US stocks, VTI, and that gold will arise as the means of preserving wealth as well as become the defacto international currency; this being communicated in the chart of UUP, DBV, AGG, EFA, VTI and GLD ... UUP, DBV, AGG, EFA, VTI and GLD

While the US has recently lowered it's central bank interest rate to 1%, the bond market place has been calling interest rates higher since a credit gridlock developed 9-11-2008, as is seen in the interest rate on the 10 year US government note going higher to today's 37.65 ... $TNX

The chart of the yield curve interest rates steepened dramatically today, $TNX:$UST2Y popped, this is highly inflationary. Richard the Resourceful Bear says: "Rising interest rates, and a steeping yield curve, are a bond killer and a gold thriller." ... $TNX:$UST2Y

The chart of the US government bond ETF, TLT, courtesy of Jack Chan from JC's Buy and Sell Signals shows consolidation; and I believe it shows that a run on US government bonds is underway ... TLT

I recommend that one buy gold and put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.

Stocks rose today and some really popped higher manifesting as great short selling candidates; these include, Terra Nitrogen, TNH ... TNH

The world is a better place but economic horrors await
Opportunistic trader Tim Knight relates "Barack Obama was declared the winner of the Presidential election. Amazing.

When I was about eleven years old, I asked a black kid in my class to come over to my house. He wanted to, but he asked, "Are you sure your mom won't mind?" I honestly didn't know what he was talking about. "Why?", I asked. He answered, "Because I'm black."

The United States is a better place today. The coming years are going to be horrible, and Obama will probably get some of the blame (undeservedly). But this is going to give people some hope, at least for now."

The BoJ cut its rate to 0.3% and will provide stimulus; its actions provide only an abeyance and not an abatement of future global economic collapse
Edward Hugh writes in Seeking Alpha that the Bank of Japan cut its benchmark interest rate today to 0.3 percent and also decided to begin paying interest on reserves commercial lenders hold at the bank to provide liquidity to the financial system and trimmed the Lombard rate - the cost it charges for loans made directly to member banks - to 0.5 percent from 0.75 percent.

Prime Minister Taro Aso decided yestreday to postpone the national election that polls suggest could have seen him and his ruling LDP party being pushed out of power. He also announced an "economic revival" package, worth an estimated $275 billion, of which $50 billion would come from new spending (and the quantity of new money needed would undoubtedly have been higher if the BoJ had not "conveniently" cut interest rates today. The details we have so far on the package suggest it is set to give large tax breaks to home mortgage holders, extend tax cuts for capital gains, lower highway tolls and give loans to small businesses.

Bank of Japan 0.5% yen carry trade financed traders started to go short the emerging markets, EEM, and the Japanese shares, EWJ, on May 19th, 2008, when the Bank of Japan met to discuss policy. Peak currencies occurred in late July 2008, when the BoJ 0.5% financed yen carry traders aggressively sold the EUR/JPY short; this stimulated a rise in the Yen, FXY, and a fall in the price of Japanese shares. A lending crises arose on September 11, 2008, that is 9-11-2008, when the bank found they could not issue stock to raise capital, this resulted in a breakdown of lending, that is a stoppage in lending, as is seen in the fall of HYG.

The ongoing Yahoo Finance Chart of EURJPY compared to EWJ, EEM and HYG ... EURJPY compared to EWJ, EEM and HYG

The up in everthing today pulled the EUR/JPY higher today as is seen in the Stockcharts.com daily chart of FXE:FXY ... FXE:FXY

The Bank of Japan's actions can only postpone and not stave off a soon coming world wide financial breakdown.

The Federal Reserve hired former Bear Stearns chief risk officer
Reuters reports that the Federal Reserve Bank of New York has hired the former chief risk officer of Bear Stearns Cos, Michael Alix, to advise on bank supervision, according to a release in the Fed's Web site.

I have to wonder who the next US Treasury Chief will be. Could it possibly be Timothy Geither who has called for unified regulation of banking globally -- that is a call for a global monetary authority?

Major trading symbols used in this report
UUP, GLD, TLT, AGG, EWJ, EEM, HYG, EFA, VTI, DBV, TNH

The Privateer's $US 2 x 3 Gold Chart shows the wisdsom of buying gold it it moves from its current $720 and breaks out above $730 ... $US 2 x 3 Gold Chart

Gold and gold only will preserve one's wealth from the soon coming world wide financial system collapse. I recommend that one buy gold and put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.

Krassimir Petrov, PhD, in FinancialSense.com article, Worse Than The Great Depression, writes: "Since August of 2007 we have witnessed the relentless escalation of the credit crisis: a steady constriction of credit markets, starting with subprime mortgage-backed securities, spreading to commercial paper, then to interbank credit, and then to CDOs, CLOs, jumbo mortgages, home equity lines of credit, LBOs and private equity markets, and then generally to the bond and securities markets.

While the media describes the problem as one of illiquidity and confidence, a more serious analysis indicates that boom-time credit has been employed unproductively and so losses must be incurred. In other words, scarce capital has been misallocated, poorly invested, and effectively wasted. No amount of monetary or fiscal policy can fix the errors of the past, just like no modern treatment can quickly restore to health a drug addict debilitated from a decade-long drug abuse.

Based on indicators like (1) global real estate overvaluation, (2) indebtedness, (3) leverage, (4) outstanding derivatives, (5) global bubbles, and (6) the precariousness of the global monetary system, I would argue that the accumulated imbalances in the current period surpass significantly those preceding the Great Depression. I therefore conclude that the coming U.S. (and possibly) global depression will be of greater magnitude than the Great Depression of the 1930s. It likely suggests that we are entering a historic period that will likely be known as The Greater Depression.

Investor beware! Only gold can protect you from the ravages of another Depression!"

Commentary
Finally, after a year of CNBC and similar investment reporting we have someone writing something sensible. Thank you sir.

Yes, gold and gold only will preserve one's wealth. I recommend that one buy gold and put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.

Jeffrey Garten expressed the vision of a global monetary authority in 2001.
Jeffrey E. Garten, while the dean of the Yale School of Management, on July 18, 2001, wrote in his NY Times article Free Trade Has to Be Managed, the genesis construct calling for a Global Monetary Authority, a GMA: "The forces that have increased flows of money, goods, services and information around the globe and helped create growth are now working to make the economic downturn deeper and more widespread.

Few mechanisms now exist to manage globalization. Cooperation among governments is increasing, but it is still uneven. We live in a world economy, but we lack institutions that could stabilize and regulate this economy.

President Bush and the other G-7 leaders have to decide whether they have the foresight to construct new systems that can regulate commerce across borders as well as act to moderate a worldwide recession".

In September 2008 Mr. Garten specifically called for a Global Monetary Authority.
On September 25, 2008, in Financial Times article, he wrote We Need A New Global Monetary Authority

In late October 2008, Australia Central Banker Guy Debelle states that US Federal Reserve Dollar Swap Agreements provide global financial stability and liquidity
Business Spectator presents the October 31, 2008 Reuters article RBA's Debelle Says Signs US Dollar Swaps Are Easing Liquidity Pressure which reports: "Top Australian policy maker on Friday said there were signs the Federal Reserve's massive expansion of US dollar swaps with other central banks seems to be working to ease liquidity pressures in global markets.

In a speech to a risk management conference, Reserve Bank of Australia, RBA, Assistant Governor Guy Debelle also said the domestic money market had proven resilient to the global crisis, thanks in part to an expansion of the central bank's liquidity operations.

Debelle, who heads the RBA's financial markets unit, said the Fed's expansion of US dollar swap agreements with an expanding range of other central banks seemed to be helping.

"Overall, it appears this has had some success with conditions in the US dollar swap markets improving over the last few weeks, and the cost of US dollar funding declining to more normal rates," he said.

The Fed established a dollar swap agreement with the RBA last year, essentially lending it US dollars that it can then lend out in return for collateral denominated in Australian dollars.

Just this week the Fed established $30 billion of swap lines with central banks in Brazil, South Korea, Singapore and Mexico, bringing the number of lines to 14.

Ten of the swap lines now amount to $255 billion, while those with the European Central Bank, the Bank of England, Bank of Japan and the Swiss National Bank are technically unlimited.

This sea of dollars seems to be meeting safe-haven demand for the currency across the world, helping pull down the three-month London interbank rate to 3.19 per cent on Thursday, from a ruinously high 4.82 per cent earlier this month.

Debelle said the RBA's expansion of its own domestic market operations had proved effective in meeting the demand for cash. It has widened the pool of eligible collateral for its repurchase agreements, extended the maturity of its lending and offered term deposits to commercial banks.

"In particular, the fact that the Bank has for a long time, dealt daily with a wide range of counterparties across a wide range of maturities has allowed us to respond quickly and flexibly," he said.

"Nevertheless, the Bank is continually reviewing all aspects of the operating framework to ensure that it is consistent with the evolving nature of the domestic financial market."

Will Dollar Swap Agreements lay the foundation and confidence for a Global Monetary Authority?
As evidenced by a pull down the three-month London interbank rate to 3.19 per cent on Thursday, from a ruinously high 4.82 per cent earlier this month, Dollar Swap Agreements are working to some degree.

The goal of a Global Monetary Authority is liquidity and stability, this is currently being provided by Dollar Swap Agreements, but the massive Dollar Swap Agreements are only part of the reason why the three month London interbank rate fell some. The other reason is that there has been profit taking on the unwinding of yen carry trade, better termed the euro carry trade, which is the EUR/JPY, which had fallen to the lowest level since 2003.

Stockcharts.com shows retracement in the yen carry trade ... FXE:FXY Daily ... FXE:FXY weekly

Cyclopip in BabyPips October 30, 2008 article Cross-Eyeing: EUR/JPY - Trade Adjustment shows the profit taking retracement in the chart of the EURJPY ... Retracement of the EURJPY

I think the effect of dollar swap agreements will be short lived. I expect a global financial breakdown is coming regardless of the US Central Bank dollar swap agreements.
My belief is that the 0.5% funded Bank of Japan currency traders will continue to short sell a number of currencies, and especially short sell the EUR/JPY, which will cause continued disinvestment globally. Interest rate differentials between central banks, as well as the indebtedness of emerging markets like the former soviet union nations of Ukraine, Hungary and Romania, traded by GUR, to the Austrians traded by EWO, will assure that stocks and currencies will continue to sell off with abandon. As I read, the Gaius Marius article CDS Funding Disaster, I can understand why the Fed has been aggressively pushing dollar swap lines and why it was so eager to "loan" AIG money. I look at the charts in Trader Tim Knight article Is It Back?, and concur that the markets are likely to fall lower again beginning tomorrow October 31, 2008.

Eventually a tough global monetary authority will arise.

Gold is the investment safe haven for those believe that the US Dollar has peaked in value and who want to be independent from a future Global Monetary Authority
Was a high been established in the US Dollar on October 27, 2008 at 86.75? Only time will tell! ... $USD Weekly ... $USD Daily

Jesse reports that Dubai runs out of gold.

The weekly chart of gold reads $738.50 ... $GOLD

Jesse shows that gold having hit $730 is likely to head higher.

Yes, gold is back to the $730 region of a year ago as is seen in the Kitco Alf Field Point of Recognition article of Oct 29 2007.

Is $730, strong support for gold? Tommorrow October 31, will likely tell.

I like to follow the five day Yahoo Finance chart of the EUR/JPY, USD/JPY, UUP, GLD, and RJI.

It's an ideal time to invest in gold: I recommend that one buy gold and put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.