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The Resourceful Bear Blog

Posts tagged with "U.S. Treasuries"

The Call Of Bill Gross For The Bail Out Of Freddie Mac And Fannie Mae Means Peak Treasuries

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Introduction
The quotes of Bill Gross of Pimco on September 5, 2008, document a clear and immediate call for the bail out of Freddie Mac, FRE and Fannie Mae, FNM, These quotes call for the Fed to use its recently granted authority by Congress to nationalize the US housing and home lending organizations. The result will be a tight integration of government and enterprise into a combine of state corporate rule.

Mr. Gross said: If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury ... [A] systematic debt liquidation is what confronts the U.S. and perhaps even the global financial system at the current time. Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami.

Debt will be turning lower in value
Mr. Gross' call will have the effect of turning debt lower; I provide charts of the following for historical record.
the US Treasuries ETF, TLT,
the zero coupon interest mutual bond fund, BTTRX,
the corporate mutual bond fund PBDAX,
the long term US Government bond fund PLGBX,
the aggregate debt, AGG,
the futures marketplace US Treasuries, $USB, will all be turning lower.

The bond marketplace will declare a defacto interest rate hike: the interest rate on the 30 year government bond, $TYX, and the interest on the 10 year government bond, $TNX, will be going up.

DXKLX Direxion 10 Year Note Bull 2.5 Fund will be going down

DXKSX Direxion 10 Year Note Bear 2.5 Fund will be going up

Stocks will rise in value
Stocks, especially the homebuilding, financials, and banks will move higher.

The stock value of Freddie Mac, FRE, and Fannie Mae, FNM, will fall in value.

The call of Bill Gross for the immediate bail out of Freddie Mac and Fannie Mae
Bill Gross of Pimco in September 5, 2008 article There's a Bull Market Somewhere? relates:

For the past several months our PIMCO Investment Committee blackboard has continued to display the following lesson plan:

What Happens During Delevering

1) Risk spreads, liquidity spreads, volatility, term premiums – they all go up.

2) Delevering slows/stops when assets have been liquidated and/or sufficient capital has been raised to produce an equilibrium.

3) The raising of sufficient capital now depends on the entrance of new balance sheets. Absent that, prices of almost all assets will go down.

It is the debt liquidation that potentially turns a stagnant/recessionary economy into something much worse.

In the housing market for instance, it is one thing to observe a 15% national decline in home prices. It is much more serious however, when margin calls in the form of monthly mortgage payments (many of which are in-creasing due to adjustable or option-related contractual provisions) lead to foreclosures, which in turn cause a debt liquidation. The bank in this case, takes possession of the home and dumps it back on the market, lowering the price even further, which leads to more foreclosures, which leads to …

This rarely observed systematic debt liquidation is what confronts the U.S. and perhaps even the global financial system at the current time. Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami.

Central bankers, of course, adopting the cloak and demeanor of firefighters or perhaps lifeguards, have been hard at work over the past 12 months to contain the damage. And the private market, in its attempt to anticipate a bear market bottom and snap up “bargains,” has been constructive as well. Over $400 billion in bank- and finance-related capital has been raised during the past year, a decent amount of it, by the way, having been bought by yours truly and my associates at PIMCO. Too bad for us and for everyone else who bought too soon. There are few of these deals now priced at par or above, which is bondspeak for “they are all underwater.” We, as well as our SWF and central bank counterparts, are reluctant to make additional commitments.

Step 2 on our delevering blackboard therefore has stalled and is inevitably morphing towards Step 3. Assets are still being liquidated but there is an increasing reluctance on the part of the private market to risk any more of its own capital. Liquidity is drying up; risk appetites are anorexic; asset prices, despite a temporarily resurgent stock market, are mainly going down; now even oil and commodity prices are drowning. There may be a Jim Cramer bull market somewhere, but it’s primarily a mirage unless and until we get the entrance of new balance sheets, and a new source of liquidity willing to support asset prices.

New balance sheets? Is this now some Deloitte & Touche metaphor? Hardly. What I mean, what our blackboard and our Investment Committee point out is that to ultimately stop this asset/debt deflation, a fresh and substantial new source of buying power is required. This became all too obvious as the Treasury’s attempt to entice additional capital into Freddie and Fannie came up empty. Yet this same dilemma is and will continue to confront all highly levered institutions in the throes of asset liquidation. Without a new balance sheet, their only resort is to sell assets, which in many cases leads to further price declines, or ultimately debt liquidation/default.

If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury – not only to Freddie and Fannie but to Mom and Pop on Main Street U.S.A., via subsidized home loans issued by the FHA and other government institutions. A 21st century housing-related version of the RTC such as advocated by Larry Summers amongst others could be another example of the government wallet or balance sheet that is required during rare periods when the private sector is unable or unwilling to step forward.

The bill for our collective speculative profligacy, obvious in the deflating asset markets, can be paid now or it can be paid later. Those aspiring for a perfect 800 on the Wall Street policy exam would conclude that the tab will be less if paid up front, than if swept under a rug of moral umbrage intent on seeking retribution for any and all of those responsible. Now that the Fed has spent 12 months proving that it “knows something…knows something,” it is time for the Treasury to do likewise.

Commentary
This blog continually communicates that state corporatism is continually on the rise. In order to keep things stable, industry and government leaders have been continually work together continentally and globally to integrate commerce, industry and trade with the government.

Example include
a) The announcement of the framework agreement of the Security and Prosperity Partnership of North America, the SPP at Baylor University
b) The announcement of the framework agreement to create a western world EU US Government at the EU US Summit of 2007.
c) The Federal Reserve's announcment of assistance for the buyout of Bear Stearns by JP Morgan
d) The Federal Reserve's announcement of framework agreements of TAF, TSLF and PDCF on March 18, 2008.
e) The granting by Congress to the Federal Reserve and the Treasury to lend to and capitalized the two GSEs Freddie Mac, FRE, and Fannie Mae, FNM.

And this blog continually communicates that the Liquidation Thesis is being applied: government services and payments, service sector jobs, public and private debt of all types, and unfunded retiree benefits are being contnually liquidated, that is done away with.

The call of Mr. Gross has moved up the action date for required Federal Reserve action to nationalize the GSEs; his call will be forcing the Fed's hand to acquire, that is seize, the GSEs this weekend.

Public and private debt is going to get a haircut, that is a writedown by Mr. Gross' call.

A run on the US Treasuries will get under way soon.

Financial Application
I am short the financial sector via a long position is SKF; Market action is going to go against me in the short term; I plan to keep the SKF as I see a financial collapse coming soon.

Suggested Reading
US Considering Government Takeover of Fannie and Freddie by Jesse 9:00 PM Friday August 5, 2008

The Russell 2000 Finally Falls Below 72

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Today's financial market report
Stockcharts.com chart of the Russell 2000, IWM shows trading below 72; it closed at $71.64.

The 3 month ongoing chart ot the Russell 2000 value shares compared to the growth shares, shows the growth share, IWO, falling more than the value shares, IWN.

Gold, GLD, was up more than UUP today.

Let's hope that the gold ETF, GLD, can overcome the bear cross that appeared in its chart today.

Gold, $GOLD, closed down just a hair at $802 today; unfortunately its chart shows a bear cross as well. Kitco.com provides the ongoing contract price of $GOLD.

The US Dollar, $USD, close up in a bull cross; but with a dragonfly candlestick in the daily chart. I keep hoping that Peak Dollar is here.

Jesse provides the article US Dollar Weekly Charts which shows the US Dollar has risen to strong resistance; again, I relate I am hoping that a market top is in for the US Dollar.

US Treasuries, TLT, manifested a dark cloud cover at 95.48; let's hope this is the top here.

And lets hope this is the end of the downturn, for now in the EUR/JPY, FXE:FXY Yahoo Finance quotes an end of day price to the EUR to JPY (EURJPY=X) at 153.89. Action Forex provides the EUR/JPY Daily Outlook. And FXStreet provides the ongoing EUR/JPY

And lets hope that next week the Yahoo Finance 5 day ongoing chart of the usd/jpy relative to the eur/jpy wil show that the USD/JPY will start to fall, and tht the EUR/JPY will rise. Yes let hope the commodity currencies go up, that is the Euro, the Australian Dollar, and the Canadian Dollar, rise; while the consumer currency, the US Dollar goes down ... Here is this weeks USD/JPY compared to the EUR/JPY Yahoo Finance quotes an end of day price to the USD to JPY (USDJPY=X) at 106.37. Action Forex provides the USD/JPY Mid-Day Outlook. And FXStreet provides the ongoing USD/JPY

The well springs of liquidity have run dry; and have gone toxic as well for investing long the stock markets.
The first well spring of liquidity was the easy credit provided by Alan Greenspan; credit flowed globally and locally into many investors accounts via credit margin and via low cost and practically no money down home loans.

Elaine Meinel Supkis in article When Magical Piggy Banks Fly writes of Greenspan, "He was the planet's #1 money making magician for many years"

Jan Allen wrote "He was the Purveyor of Credit Liquidity"

The second well spring of liquidity has been the 0.5% Bank of Japan carry trade window of lending; providing the Dollar Carry Trade, USD/JPY, and the Yen Carry Trade, EUR/JPY.

Sentiment recently turned negative on the Dollar Carry Trade and it has started to unwind sending US Stocks lower.

And the Yen Carry Trade has unwound and has commenced Kondratieff Winter.

Currency trading professionals confirm it's not profitable to stay invested long in traditional carry trade positions
Agnes Lovasz and Stanley White of Bloomberg in article Yen Rises Against Euro, Dollar on Deepening Recession Concerns reports that the yen climbed to the highest in more than a year against the euro on concern the credit-market slump will lead the world into a recession, prompting investors to sell higher-yielding assets funded in Japan.

The dollar fell versus the yen before a U.S. government report that will probably show employment dropped for an eighth month. The yen also jumped to a two-year high against the Australian and New Zealand dollars as investors reversed so- called carry trades after stocks and commodities slumped. The pound weakened for a ninth day versus the dollar.

``There is a big move in terms of risk aversion and we can see the yen getting stronger from here,'' said Martin McMahon, a currency strategist in Zurich at Credit Suisse Group. ``The world is not particularly rosy and the credit crunch and financial problems haven't gone away. It's not appealing to stay in carry-trade type positions.''

Currency traders force central bank sales.

``This issue is serious and the yen is the safest place in this massive geopolitical problem,''' said Toshi Honda, a currency strategist at Mizuho Corporate Bank Ltd. in London. ``The yen move is all due to risk aversion and the risk is mostly deriving from the deterioration of relations with Russia. The yen is enjoying a safe-haven status.''

Russia's ruble snapped three days of declines after the central bank said it sold a ``significant'' amount of foreign reserves yesterday to prop up the currency. The ruble rose to 30.3847 against the central bank's dollar-euro basket, from 30.4045 yesterday.

South Korea's won rose 1 percent to 1,117.95, reversing an earlier drop of as much as 1.2 percent, on speculation the central bank is buying the currency to halt its declines. The nation's foreign-exchange reserves fell by $21 billion in the five months through August to $243 billion as the Bank of Korea bought the won.

Banks in the PIGS, Portugal, Italy, Greece and Spain, as well as in Ireland will now get a haircut on all loans.

Concern that the financial crisis will deepen was heightened as the ECB said yesterday banks in the U.K., Spain and Ireland that have relied on the central bank for low-cost funding will soon have to pay more. The ECB will increase the so-called `haircut' on most asset-based securities from Feb. 1 to 12 percent from as low as 2 percent, the central bank said yesterday. That means it will lend just 88 percent of the value of the paper.

My investment recommendations remain unchanged
I recommend the use a trust account to
1) buy SKF,
2) short sell of MBI, ABK, and RDN, SCA, MTG, RAM, SUR, and AGO.

I recommend a small short position in USD/JPY in a Forex account.

And I recommend the purchase of gold at BullionVault.com and GoldMoney.com as protection against systemic risk events.

For corporations I recommend a purchasse of DXKSX.

The other reason for buying gold is that the former well springs of liquidity, the USD/JPY and the EUR/JPY, have now gone toxic on risk aversion to inflation, debt and decreased profit and growth opportunity.

These currency pairs will now be saws of destruction working to cut asunder fiat wealth; and in the process of sawing, gold will fall out as the worlds's currency and measure and means of garnering and preserving wealth.

In as much as gold relative to US Stocks GLD:VTI is above 1.15, I believe there is an ongoing investment demand for gold.

US Treasuries are no longer a lifeboat of safety as they seem to be topping out -- look for gold to soon arise as the defacto world currency and measure and means of garnering and preserving wealth as people flee fiat assets and world conflicts escalate.

Gold Falls To $796 As The Dollar Carry Trade And Euro Carry Trade Unwind Sending Stocks Lower World Wide

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Currency analysis
The Yahoo Finance 5 day ongoing chart of the usd/jpy relative to the eur/jpy shows that the USD/JPY fell less than the EUR/JPY: thus the commodity currencies fell heavily, while the consumer currency, the US Dollar rose; and as a result US Treauries, TLT, BTTRX, rose and gold fell ... $GOLD fell to $796.

Ino.com shows that the US Dollar DX, moved higher to 78.90: the fall in the Euro in the EUR/JPY overwhelmed the fall in the USD/JPY, sending the dollar up: the flight out of high yielding currencies benefited the US Dollar again today.

The Yahoo Finance 5 day ongoing chart of USD/JPY communicates how a falling USD/JPY sent US stocks, especially the growth stocks falling such as the Nasdaq 100, QTEC, and consumer electronics, PXQ.

James Chen in FXStreet article Chart of the Day USD/JPY shows a helpful chart of the USD/JPY; its fall was significant; but not as significant as the greater fall in the EUR/JPY. His chart was also published here on ForexFactory.

ActionForex shows the close of the USD/JPY at 106.50 in article USD/JPY Daily Outlook.

'Peak Stock Wealth' followed in the period of August 11th to August 15, 2008 as is seen in the ongoing MSN chart of the financial ETFs iwn, iwo, jkh, xhb, xrt .... IWN, IWO, JKH, XHB, XRT. And now the growth shares such as XHB, and IWO, and JKH, are turning down faster than the value shares IWN.

The Yahoo Finance 5 day ongoing of the EUR/JPY shows how a falling EUR/JPY continued to decimate natural resource stocks such as XME, SLX, KOL, and invesments in the emerging nations, especially the BRICS -- Russia, Brazil, India and China.

ActionForex in article Massive Carry Trade Unwinding ahead of Non-Farm Payroll shows the the chart of the massive unwinding of the yen carry trade or better called the euro carry trade.

The currency traders now as in the past have been the major movers of stock marekts. Granted stock prices have moved up via the use of margin, it has been the Bank of Japan 0.5% interest loans that have dramatically moved currenices and driven stocks higher.

Masayuki Kitano and Wayne Cole of Hemscott in article Yen jumps as investors dump carry trades, flee risk report that the yen surged to a 13-month high against the sliding euro on Friday as investors fled risky positions such as leveraged carry trades. Escalating worries about global economic growth fed risk aversion among investors and hammered equities, with Japan's Nikkei share average tumbling 2.8 percent after a sell-off on Wall Street. Market players said investors were bailing out of leveraged carry trades, or positions funded by borrowing yen at low rates to buy higher yielding currencies and commodities.

The yen rallied broadly, hitting two-year highs against the Australian and New Zealand dollars. The dollar also climbed, touching a 10-month high against the euro and its highest in about 2- years against sterling.

'Position unwinding is taking place globally and it is becoming a big wave,' said Tokichi Ito, deputy general manager for the Trust & Custody Services Bank's foreign exchange team.

Traders cited talk of more hedge funds going under after news that Ospraie Management LLC, the world's biggest commodities hedge fund, was forced to close its flagship fund this week.

'This is not a flight to quality, it is simply a flight,' said Alan Ruskin, chief international strategist at RBS Greenwich Capital. 'Gold for example has failed to benefit, cash is king -- even the greenback, warts and all, or the yen, zero rates and all.'

Stock analysis
RSX Russia-7%, fell heavily on risk aversion rising due to the 'War in the Caucasus'. The 3 month Yahoo Finance ongoing chart of RSX compared to the BRICS, EEB, shows how Russia shares have sold off heavily since the 8-7-2008 war began .... RSX and EEB

QTEC Nasdaq 100 -6%, The Masdaq is the epitomy of growth stocks; the 3 month ongoing Yahoo finance chart shows these growth shares are now falling faster than the value shares such as high yield dividend payers, PEY

XME Metal Manufacturing -6%, The metal manufacturing mining shares have been groud zero for falling commodity currencies such as the Euro, the Australian Dollar, and the Canadian Dollar. Decreased growth opportunities have caused investment flight from these shares. The 3 month ongoing chart of XME, compared to DXKLX and UUP confirms July 25, 2008, was 'Peak Currencies' as a falling Euro, Canadian Dollar and Australian Dollar sent the metal mining shares tumbling .... XME, compared to DXKLX and UUP

DRF World Financials -6%, DRF was -6% today vs IYF -4%, The 3 month ongoing Yahoo chart of the two communicates that the strength of the US dollar is helping the US financials compared to the world financials.

SLX Steel -6%, The yen carry traders are selling their formerly favored investments as the Euro falls. The fall in the steel stocks is really an expression of the loss of favor in former high yielding commodity currencies.

EWZ Brazil -6%, Brazil fell heavily as it is laden with metal manufacturing and steel shares.

EWS Singapore -6%, The asia stock such as Singapore and Taiwan fell more than China.

EWT Taiwan -5%,

FXI China -5%,

EWK Belgim -5%, Belgium fell heavily on concerns of civil security and divisive governance.

EEB Brics -5%,

PXQ Consumer Electronics -5%, The networking shares fell as the end of the age of growth investing has arrived, as evidenced by the fall in Dell shares as it reports diminished growth expectations.

TUR Turkey -5%, Turkey, like Belgium, continues see strong investor disinvestment.

IAI Stockbrokers -5%, The stock brokers and dealers moved up quickly with the Stock Dollar Rally of July 14 to August 15, 2008, now they are falling quickly.

PIO Water Infrastructure -5%, The six month ongoing Yahoo Finance chart of PIO relative to EEB shows that the two have the same wave structure at the current time.

TAO Chines Reeal Estate -5%,

DDI World Inudustrials -5% DDI was -5% vs XLI -3% The one year on going Yahoo finance chart of these two shows how the Dollar held up US industrials compared to world industrials, preventing demand destruction from harming the US shares.

IYZ Telecommunication -4%, Telecommunications fell on concerns of rising inflation

This 3 month ongoing Yahoo Finance chart of GDX compared to GLD and EEB shows the steady disinvestment in the BRICS based upon the May 19, 2008 Bank of Japan announcement that inflaton is an investment risk concern; and how on July 15, the yen carry traders abandoned investments made deep that is long ago in the gold mining stocks ... GDX, GLD, EEB ... GDX, GLD, EEB

KOL Coal -4%,

XHB Housing stock -4%, These rose rapidly in the US Dollar stock rally from July 14, 2008 to August 15, now they are selling off rapidly.

IAT Stockbrokers -4%, Stockbrokers, IAT, sold off heavily -- they moved up rapidly in the stock Dollar Rally of July 14 to August 15, 2008, and are now selling quickly.

KCE Investment Bankers -4%,

RWX World Real Estate -4%, RWX -4% compared to RWR -3% The ongoing Yahooo Finance chart of the two shows how the Dollar has been holding up US real estate compared to world real estate .... RWX compared to RWR

IYF financial -4%,

IWO Russell 2000 Growth -4%, IWO -4% compared to IWN -3% The ongoing Yahoo Finance chart 3 month char of the growth shares compard to the value shares documents that the growth shares are selling off more rapidly than the value. Risk aversion is centering on lack of growth rather than on level-two and level-three assets .... IWO compared to IWN

INP India -4%

GDX HUI Indexed Precious Metal Mining shares, -4%, the ongoing Yahoo Finance chart of GDX relative to GLD, shows thos these gold mining stocks have continued to disconnect from the price of gold again today; they once were the best rewarding stocks, now they are loosing their stored value quickly as the spigots of liquidity that being the yen carry trade and easy margin credit from the banks via the Federal Reserve have been turned off.

When the carry traders sold out of oil on July 14, 2008, to take profits and invest in the financial sector and the US dollar, profitable natural resource investing ceased.

The well springs of liquidity for investing long the market have gone toxic on rising risk aversion to inflation, decreased growth opportunities, and levele two and level thre assets at financial organizations.

US Treasuries rose and interest rates on US Government Debt Fell as the US Dollar moved higher.
The formerly low yielding currency, that is the US Dollar, $USD, closed up at 78.64.

The falling stocks and the rising dollar sent US Government Bonds, TLT, to 95.53 and the zero coupon bond fund, BTTRX, to 59.20.

DXKLX Direxion 10 Year Note Bull 2.5x Fund rose to 24.95

DXKSX Direxion 10 Year Note Bear 2.5x Fund fell to 13.34

UUP PowerShares DB US Dollar Index Bullish rose to 24.34

The Dollar Rally in currencies can be seen in the ongoing 3 month Yahoo Finance of UUP, DXKLX, BTTRX, TLT, and GLD ...... UUP, DXKLX, BTTRX, TLT, and GLD

The Dollar Rally in stocks is over; it ended between August 15, 2008 to August 12, 2008, as can be seen in the ongoing MSN Finance chart of the the value shares iwn staying up and the growth shares iwo, jkh, qqqq, xhb, xrt falling .... iwn, iwo, jkh, qqqq, xhb, xrt

The ongoing Yahoo chart of the value shares iwn, compared to the growth shares iwo, jkh, qqqq and XHB shows the same as well .... iwn, iwo, jkh, qqqq, xhb

Govenment bonds worldwide rise on a higher yen and being a perceived lifeboat of safety
ActionForex.com reports the Nncy Gergis CEP News article Asia-Pacific Market Recap: Japanese Bonds Higher After Falling Capital Spending that investors are fleeing asian stocks and seeking perceived safe harbor in Australian 10 year notes and Japanese 10 year notes.

The Nancy Gergis article European Market Recap: European Bonds Rise Ahead of ECB & BOE Rates relates much the same.

Bear Market ETFs
EEV rose to 110 on a falling EUR/JPY Some investors foreseen a falling Euro, went short the emerging markets with the Proshares 200% Bear Market ETF.

FXP rose to 100 on a falling EUR/JPY

SSG rose to 81 on a falling Nasdaq 100 and falling semiconductors; The ongoing 3 month yahoo finance chart of SSG, compared to QID, and the growth shares iwo, smh, qqqq documents how the Dollar Rally ended in stocks on August 15, 2008 as investrs took flight from grwoth shares ..... SSG, QID, and IWO, SMH, QQQQ

SKF rose to 118 on falling finanicals.

Unseen and unheralded systemic risk is significant and suggests an investment in gold even though its price is falling.
The formerly high yielding currencies such as the Euro, FXE, the Australian Dollar, FXA, and the Canadian Dollar, FXC, have been falling terrifically in value causing disinvestment from the India, INP, the BRICS, EEB, and the emerging markets, EEM, sending bear market ETFs, EEV and FXP higher as well as sending the US Dollar, $USD, and Treasuries, TLT, and the Bull 10 Year Note Bull mutual fund DXKLX higher.

The latter three -- the Dollar and government bonds are not safehavens as a financial breakdown can come at any time which will likely see the civil security provisions of the Security and Prosperity Partnership, the SPP enforced, and tax exempt municipal bond funds, money market accounts, brokerage accounts, and bank accounts frozen and redeemed upon opening at less than full former value.

I strongly suggests that one go short the mortgage suretors, such as Radian Group, RDN, and the government bond insurers, Ambac, ABK, and MBIA, and invest in the 200% inverse of the financial sector SKF all within a trust account and not a brokerage account.

When the systemic risk event unfolds there will be a scramble for for gold and its price will rise. The safest place for investing in gold is in GoldMoney.com, BullionVault.com and in a trust account holding GLD.

Short sighted investors overlook the ongoing and abiding investment deman for gold.

Gold has retained its value relative to stocks since December 11, 2008 when the Fed announced a whopping 0.75% cut in the central bank interest rate: this is seen in the chart of the gold ETF, GLD relative to the overall stock market VTI. The ratio of GLD:VTI remaining above 1.20 suggests that gold is a better investment than stocks or US Treasuries.

And for corporations, I also suggest that they 'dollar cost average' a buy in DXKSX Direxion 10 Year Note Bear 2.5x Fund, as I expect that soon Treasuries will loose their 'marketplace AAA' rating as the systemic risk event or events unfold.

ActionForex.com provides the chart article EUR/USD at Key Trend Line Support ahead of ECB Meeting and EUR/USD Daily Outlook which shows the unwiding of the yen carry trade or better called the euro carry trade, which has devastated formerly highly rewarding investments in the BRICS, EEB, that is Brazil, EWZ, Russia, RSX, India, INP, and China, INP, as well as formerly highly rewarding stock investments in the energy service providers, OIH, as well as the HUI indexed precious metal mining manufacturing companies, GDX, and the metal mining industries, XME, as well as steel, SLX, and coal, KOL.

Yasuo Ota in August 27, 2008 NikkeiNetInteractive article BRIC Bubble On Verge Of Collapse reports that: "In the past year, the Shanghai A-Share index has plunged 60%, India's Sensex index 33%, Russia's RTS index 32% and Brazil's Bovespa Index 25%.

The only thing that has saved the gold from falling further has been a fall in the USD/JPY.

A fundamental and important question is: Will the central banks race to zero percent interest
The currency traders and their Forex news services are pushing the central bankers to reduce their interest rates.

Here are some, just some, of the many, many articles demonstrating the call for lower interest rates:
ECB to Downplay Decline in Headline Inflation

ECB: "Downside Risks Have Materialised"

Euro May Extend Decline to $1.3355 on Charts, Citigroup Says

Whether central bank interst rates will fall or rise is really unknown at this time.

Unfortunately, the currency traders definitely have had the effect of moving the price of gold lower.

Perhaps, now a support level for the Euro will come in, and the EUR/JPY might bounce up, and the USD/JPY might fall; this would send the US Dollar lower and gold higher.

The bottom line here is: "it is likely going to take a systemic risk event to occur before the price of gold stabilizes"; and then investors will be crying because their money will be worth significantly less and will buy considerably less gold.

My investment recommendations remain unchanged

I recommend the use a trust account to
1) buy SKF,
2) short sell of MBI, ABK, and RDN, SCA, MTG, RAM, SUR, and AGO.

I recommend a small short position in USD/JPY in a Forex account.

For corporations I recommend a purchasse of DXKSX.

And I recommend the purchase of gold at BullionVault.com and GoldMoney.com as protection against systemic risk events.

The other reason for buying gold is that the former well springs of liquidity, the USD/JPY and the EUR/JPY, have now gone toxic on risk aversion to inflation, debt and decreased profit and growth opportunity.

These currency pairs will now be saws of destruction working to cut asunder fiat wealth; and in the process of sawing, gold will fall out as the worlds's currency and measure and means of garnering and preserving wealth.

In as much as gold relative to US Stocks GLD:VTI is above 1.15, I believe there is an ongoing investment demand for gold.

US Treasuries are no longer a lifeboat of safety as they seem to be topping out -- look for gold to soon arise as the defacto world currency and measure and means of garnering and preserving wealth as people flee fiat assets and world conflicts escalate.

Today May Have Been Peak Dollar

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Mid-day stock market report
Introduction
The US Dollar failed to move higher as the USD/JPY fell, even though the EUR/JPY fell lower decimating natural resource stocks.

Today may have been peak dollar.

Mid day trading action
The Yahoo Finance 5 day ongoing chart of the usd/jpy relative to the eur/jpy shows that the fall of the USD/JPY has put a cap on the US Dollar, DX, moving higher even though the yen carry trade fell lower today .... The usd/jpy fell lower as well as the eur/jpy

The Yahoo Finance 5 day ongoing chart of USD/JPY shows a close at 108.28. This is presented in ActionForex USD/JPY Mid-Day Outlook

The Yahoo Finance 5 day ongoing of the EUR/JPY shows a fall of the EUR/JPY to 157, FXE:FXY, continued to decimate natural resource stocks such as KOL, OIH, SLX, and XME.

The EUR/USD has finally hit the long-term uptrend support line that has been in place for at least two and a half years. Poking slightly below the line during the first half of European session on Wednesday, price has since rebounded somewhat to settle slightly above the trendline again at 145.01 in chart courtesy of OneBrownGuy. Greg Michalowski of FXDD reports that is 1.4357 is 38.2% retracement.

The HUI Indexed precious metal mining shares, that is the gold shares, GDX, got further disconnected from the price of gold.

Even the venerable fertilizer stock, POT, got further beaten down.

The Nasdaq 100, QTEC, and the Semiconductors, SMH, are taking the Nasdaq, QQQQ, down.

IndexTrader in article NDX: In Search of Support provides the chart of the $NDX falling out of a consolidation triangle.

The fall of the semiconductors, SMH, communicates that investing US growth stocks is over.

A rise in the financials buoyed the Russell 2000, IWM, which manifested a harami at 74.

The chart of the Russell 2000, IWM, compared to the Nasdaq, QQQQ, communicates that investors are selling out of growth stocks yet retaining the value stocks .... IWM:QQQQ.

The Russell 2000 value shares, IWN, compared to the growth shares shows, IWO, IWN:IWO shows how the US Dollar rally has benefited the value shares more than the growth shares. The harami shown will stay up, as long as long as the rally in the US Dollar itself and the financial shares stays up. But then, lookout below, the IWN, that is the value shares, will really go on a tear, and take the Russell 2000 lower.

While, financials, IYF, and homebuilding, XHB, and retail, XRT, are up.

The growth shares are falling, where as the value shares are holding up, on the financial, IYF, sector strength, as seen in this MSN Finance chart of growth shares jkh and iwo, compared to value shares iwn, xhb, xrt, rzv ... Growth shares jkh and iwo have turned down whereas as the value shares iwn, xhb, xrt, rzv are still up.

The Yahoo Finance ongoing 5 day solar stocks, TAN, shows that they have fallen lower with the growth stocks, semiconductors and oil. TAN fell lower with JKH, SMH, and USO.

Gainers today include
SSG on the fall of Dell computer ... up 10%
FXP on the fall of the EUR/JPY ... up 5%
SMN on the fall of the EUR/JPY ... up 4%
EEV on the fall of the EUR/JPY ... up 4%.
REW on the fall of Dell computer and the fall of the semiconductors ... up 4%
SFK on the downturn of the growth stocks ... up 3%
SDP following the coat-tails of SSG ... up 3%

LEH on rumors of Korean buying interest and rumors of Japanese buying interest

Elaine Meinel Supkis writing in Driving Global Banking Off The Cliff relates: Lehman is basically bankrupt. The Asian powers are like the vultures and in the case of China, the dragon that is picking at the corpse to see who gets what portion. One might get the belly. Another one, the eyeballs and tongue. Teeth rend at the inert body. Blood on fangs and noses, they shove each other aside. I wonder which unidentified bank in China is buying Lehman Brothers. I would not shock me to learn the buyer is someone I knew years ago. A high Chinese official told me, in my house, in New Jersey, 'I be BANK!' when he figured out how banks really work.

The mortgage related group rose today
RDN up 21%.
SCA up 28%
MTG up 14%
RAMR up 14%
SUR up 15%
AGO up 5%
ABK up 22%
MBI up 2%

Gold ... Not US Treasuries, or stocks is the real lifeboat of safety
The gold ETF, GLD, lost only 0.5%, and closed at 78.89 as the US Dollar, DX-Y.NYB, failed to move higher .... GLD compared to DX-Y.NYB.

Gold, $GOLD, closed at $800. I am a gold optimist -- I like to think that gold is in an Elliott Wave 2 Down ready to go in an Elliott Wave 3 higher.

Gold relative to the Euro, GLD:FXE Daily and GLD:FXE Weekly is at a critical juncture and needs to keep rising from 0.540

The US Treasury Bubble is about to burst and interest rates are going severely higher
Treasuries ETF TLT moved higher today to 94.77.

The futures Treasuries is calling a market top in Government Bonds, $USB.

The cash market place Treasuries is over extended in relation to the futures Treasuries: TLT:$USB

The chart of the zero coupon mutual bond fund BTTRX suggests that a market top is approaching in government bonds.

And the spike down in the interest rate on the 30 Year US Treasury Bond, $TYX, suggests the same as well.

Utility shares fell lower today: VPU Daily and VPU Weekly.

Higher interest rates and lower utility shares suggest that headline inflation, that is the prices people pay for basic living, will rise even if oil prices continue to drop.

We are transitioning out of the age of prosperity and into the age of financial ruin.
The fall in the USD/JPY today is communicating that the age of prosperity that came through investing in growth stocks is done and over.

We will soon see another fall in the financial shares, IYF, and that will continue to communicate that the age of prosperity that came through financialization is done and over.

Today we have likely seen the death of automobile lending and the death of home loan lending MockThe Market relates that US automakers reported continued declines in sales for the 10th straight month. August sales dropped 20% for GM, 27% for Ford and a whopping 34% for Chrysler. GMAC, the auto and mortgage finance company still partly owned by GM, has announced that it planned to eliminate 5,000 jobs at its Residential Capital mortgage unit and close all 200 GMAC Mortgage retail offices. The job cuts amount to roughly 60% of its workforce and a closure of all of its retail offices.

Soon the US dollar will be falling lower with the commodity currencies and gold will arise as the world's currency and measure and means of garnering and preserving wealth.

The very important economic report comes out on Friday, I hope it will be a turning point lower for the US Dollar, that is DX-Y.NYB, Here is today's chart of DX-Y.NYB; I hope this is as high as it goes.

The Dollar Bull ETF, UUP, shows the same topping out as the US Dollar, DX ... UUP

The gravestone doji in the Dollar, DX, in article Charts in the Babson Style Midweek 3 September 2008 is remarkeable. And note that this is full retracement to the October Citigroup CDO Bust. This gives extra credence to possibly finally being Peak Dollar.

If it is Peak Dollar, then the US Stocks, VTI, will fall; and the world stocks, EFA should rise. There is an ungodly harami candlestick in the weekly VTI:EFA that goes back to December 2006; the Dollar Rally when coupled with the unwinding of the yen carry trade has created a freak of nature in overvalued US stocks ... VTI:EFA

With the exception of XHB and XRT, the MSN chart of VTI and QQQQ suggests that August 15, was Recent Peak US Stock Wealth. VTI, QQQQ, XHB, XRT

As stocks fall lower the carry traders will sell the US Dollar and then the US Stocks will fall even more.

But then again, I thought time and time again we had arrived at Peak Dollar.

The currency traders, especially the yen carry traders, are destabilizing the world financial system and bringing on Kondratieff Winter
Those with access to the 0.5% interest loans from the Bank of Japan are destabilizing currencies world wide, and stock markets globally such as Brazil, EWZ, and South Korea, EWT.

Using the Bank of Japan lending window at the rate of only 0.5% the currency traders are able to destabilize whole countries such as South Korea, where they have gone short the Won and long the US Dollar. The M&C Business News article South Korea Currency Firms Briefly On Dollar-Selling Intervention reports: "The South Korean won was briefly lifted against the US dollar in morning trade on Wednesday, apparently due to suspected dollar-selling intervention by the government.

The slide was temporarily stopped after the South Korean currency fell to a session low of 1,159 won at one point late Wednesday morning. It is suspected that earlier losses were cut as foreign exchange authorities poured in an estimated 1.5 billion dollars.

'It is believed that the dollar selling took place for one hour this morning, as the government must keep the won value above the 1140-level, which is usually seen as the psychological threshold,' said one foreign exchange dealer in Seoul.

The South Korean won hit its weakest since August 18, 2004, on Wednesday with the benchmark index plunging to its lowest level in 17 months as a slowing economy pushed bond and stock funds to move money out of South Korea.

The won has lost almost 18 per cent versus the dollar so far this year, putting upward pressure on already high inflation.

The slowing global demand, combined with inflation has raised concern that a repeat of the 1997 financial crisis may strike Asia's fourth largest economy, which the government tried to deflect Wednesday.

'Our economy is expected to undergo significant difficulties,' said Lee Sung Tae, governor of the central Bank of Korea. 'But it is still my judgement so far that the economy won't go as badly as it was in the 1997 crisis,' he added.

South Korea currently holds 243.2 billion dollars of foreign exchange reserves, which is below the IMF-recommended level of 320 billion dollars. In 1997, the short-term foreign loan stood at 63.7 billion US dollars, which was three times as much as the foreign-exchange reserve.

As of the end of June 2008, short-term foreign loans stood at 175.8 billion US dollar, representing 72 per cent of total foreign-exchange reserve, according to the central Bank of Korea.

South Korean corporations have reduced debt rate. The average debt rate by major manufacturing companies reduced from around 400 per cent in 1997 to around 100 per cent in 2007."

Here is the ongoing MSN chart of the South Korean Market Shares KY, compared to the Russell 2000. KY compared to IWM shows that beginning in May, investors sold the Korean shares and the high yield dividend payers; but then the US Dollar Rally came July 15, which brought the dividend payers and the Russell 2000 shares back up ... KY compared to IWM.

The unwinding yen carry trade has acclerated Kondratieff Winter
Mike Head writing in World Socialist Website article Global Downturn Begins To Puncture Australian Mining Boom describes the personal misery and economic dislocation that comes as investors use 0.5% interest loans from the Bank of Japan "to go short the Euro, FXE, and long the Yen, FXY", in other words go short the EUR/JPY, to take advantage of the falling yen carry trade, and risk aversion to rising inflation and diminishing growth opportunities in the emerging markets. Mr. Head's article, reproduced below, documents the onset of Kondratieff Winter.

Since July, definite signs have emerged that Australia’s mining boom, a major factor in the country’s much touted economic growth during the past decade, has started to crumble under the weight of the world economic slowdown. Mineral export prices have begun to turn. The London Metal Exchange Index of six base metals, including copper, zinc and nickel, fell more than 20 percent from a peak of 4,400 in March to 3,400 in early August.

As a result, the Australian dollar has tumbled. After rising to near parity with the weakening US dollar in the first half of this year, it has become one of the world’s weakest currencies in recent weeks, falling well over 10 percent against the greenback.

While fluctuations in metal prices are certainly affected by speculative flows, the latest downturn is, at bottom, an expression of the markets’ reaction to what some financial commentators have called a “tidal shift” in the world economy. With the exception of China and India, all the major markets for Australian mineral and energy exports are now contracting or on the brink of recession: Japan, the US, Britain and the Euro zone.

While China, which last year overtook Japan as Australia’s largest trading partner, is still growing, its growth has slowed from 11.5 percent last year to less than 10 percent this year, and is expected to drop to 9 percent next year. An even sharper slowdown could be ahead, because about one-third of China’s growth is estimated to come from exports.

Over the past seven years, the Australian mining sector, has benefited from an extraordinary surge in world prices for coal, iron ore, base metals and natural gas. The Reserve Bank of Australia (RBA) Index of Commodity Prices rose by more than 250 percent between 2002-03 and mid-2008, reversing a long period of falling or stagnating prices.

Some of the key rises were even greater. Thermal coal rose fivefold, from $US25 per tonne in 2000 to $125 in the first half of 2008 (January to May); hard coking coal from $40 a tonne to $300; and iron ore from 27 US cents per dry metric tonne to 133. The World Bank’s natural gas index rose to 266.87 in the first half of 2008, from 100 in 2000.

In some cases, these increases are still accelerating. Prices for manganese, a key component in steel and iron production, have more than trebled since June 2007, largely because of a “drought” in manganese supplies, with no new mines on the near-term horizon.

Under contracts signed with Chinese steel manufacturers earlier this year, the coal and iron ore prices will remain at their stratospheric levels for another 12 months. In a June speech to a Canadian business summit, RBA governor Glenn Stevens boasted that iron ore and thermal coal prices would approximately double this year, while those for metallurgical coal would treble. He gloated that China was still “running hot”, whereas Canada’s main export market, the US, was “very weak”.

As a result, Stevens said, Australia’s terms of trade would rise by 20 percent in 2008, taking the total increase since 2002 to nearly 70 percent. He estimated the rise in real domestic income as about 13 percent of GDP, commenting, “We are talking real money here!”

In other words, an extra $A130 billion has flowed into corporate coffers and government tax revenues over the past six years. On the surface, the bonanza is still continuing. Over the past two weeks, the two biggest part-Australian-owned mining giants, BHP-Billiton and Rio Tinto, have announced record profits—$A17.7 billion in a year for BHP and $8 billion over six months for Rio.

Since June, however, spot prices for iron ore and coal have started to fall, along with steel. Iron ore landed in China has fallen from $US200 a tonne to $155; thermal coal at port in Australia from nearly $200 a tonne to $155, and steel is down 10 percent. Chinese steel production is still growing, but much more slowly. Indian prices are also falling.

Even as Stevens was speaking, it was already apparent that prices for other mining exports—freely-traded base metals—had turned downward. Between March and July, the RBA’s base metals index fell almost 16 percent in $A terms and 12.5 percent in US dollars. Some metals have plunged more sharply—zinc is down 37 percent since the start of March, and lead almost 50 percent.

Nickel rose as high as $US50,000 per tonne in May 2007, but it has since fallen almost two-thirds to $18,000. Gold hit an all-time peak of $1,032 an ounce in March and was trading at $965 in mid-July but has since dropped below $775. Copper has fallen almost 20 percent from $8,950 a tonne on July 2 to $7,335.

Particular factors have affected some of these movements. In the case of nickel, for instance, new mines have opened, stainless steel production has been cut massively and China has been substituting domestically produced low-grade nickel pig iron for refined nickel. More fundamentally, however, the falls express the verdict of the markets on decreasing global demand.

“Sentiment in commodity markets has swung heavily negative in the past month,” ANZ Bank senior commodity strategist Mark Pervan wrote in a note to clients this month. “The extent and speed of the declines has prompted us to downgrade our 2008-2010 prices forecasts.” The ANZ warned that the price fall had not ended. It expects the price of iron ore, Australia’s principal export to China, will tumble 10 percent in 2009 and again in 2010. Nickel is set to fall by another quarter this year, then 9 percent in 2009 and a further 19 percent in 2010.

Job losses are another early indicator of the turnaround. Although workers are still flooding into iron ore and coal mining areas, lured by the prospect of high wages, jobs have begun to be axed in other mines.

The lead, zinc and silver mine at Broken Hill in western New South Wales, is sacking more than 450 workers, or almost two-thirds of the workforce. Last month, Minara Resources retrenched nearly 200 workers from its Murrin Murrin nickel operation in Western Australia and Crescent Gold is said to have laid-off about 150 workers when it suspended operations at its Laverton mine in Western Australia. In June, CBH Resources dismissed 220 workers, almost 40 percent of its workforce, at the Endeavour silver, lead and zinc mine near Cobar in central NSW.

Given the dependence of all these sectors on China’s continuing growth, any fall off in Chinese demand will ever more sharply expose the Australian economy’s vulnerability to the global slump, belying claims that it has “de-coupled” from the financial crisis in the US because of the expansion of Chinese and other Asian markets.

The puncturing of the mining boom will have serious implications for the entire economy, not only by slashing jobs, consumer spending and government tax revenue, but also by further undermining debt-laden investment firms and financial institutions, including the major banks.

Commentators have begun voicing fears of severe economic dislocation. “Commodity booms end ugly, they always do, and there has never been an exception,” Access Economics director Chris Richardson told the Australian last week, warning: “The commodity markets are more central to Australian national income than either credit markets or share markets.”

VII. Kondratieff Winter Means An EU US Iran War, Fighting Terrorists, Military Conflict In The Black Sea and Syria Area, And Eventually The Outbreak Of World War III
EU US Iran War: A confrontation between the trans-Atlantic EU US Western World Government and Iran, is imminent over its nuclear ambitions, and will manifest as a military strike on Iran, by the naval armada currently residing in the Persian Gulf.

Fighting Terrorists: Umberto Pascali writing in GlobalResearch.ca article Obama's Running Mate Presents The Strategic Plan For The Next Administration quotes Joe Biden as saying at the Democratic Convention in Denver on August 27, 2008: "The fact of the matter is, al-Qaida and the Taliban - the people who have actually attacked us on 9/11 - they've regrouped in the mountains between Afghanistan and Pakistan and are plotting new attacks. And the Chairman of the Joint Chiefs of Staff has echoed Barack's call for more troops and John McCain was wrong and Barack Obama was right. Should we trust John McCain's judgment? When he rejects, when he rejected talking with Iran and asked what is there to talk about? Or Barack Obama, who said we must talk and must make clear to Iran that it must change?"

Military Conflict In The Black Sea Area And In Syria: RIA Novosti reports that Vladamir Putin Pledges Measured Response To NATO Warships In Black Sea.

World War III: F. William Engdahl writing in GlobalResearch.ca article Missile Defense: Washington And Poland Just Moved The World Closer To War

Who was Kondratieff and what was his Kondratieff Wave Theory?
Following is an part of the Who Was Kondratieff? article found on Kwaves.com and KondratieffWinter.com.

To introduce the Kondratieff Theory, we must go back over seventy years and examine a remarkable story in economic history, encompassed within the life of one still little known man. I am certain that, in time, Kondratieff will rank with the giants of discovery as Einstein and Newton. Like these men, his insights have begun to alter radically and permanently our perceptions of economic history. The Kondratieff wave cycle goes through four distinct phases of beneficial inflation (spring), stagflation (summer), beneficial deflation (autumn), and deflation (winter). Since, the last Kontratyev cycle ended around 1949, we have seen beneficial inflation 1949-1966, stagflation 1966-1982, beneficial deflation 1982-2000 and according to Kondratieff, we are now in the (winter) deflation cycle which should lead to depression.

Professor Nickolai Kondratieff ( pronounced "Kon-DRA-tee-eff") Shortly after the Russian Revolution of 1917, he helped develop the first Soviet Five-Year Plan , for which he analyzed factors that would stimulate Soviet economic growth. In 1926, Kondratieff published his findings in a report entitled, "Long Waves in Economic Life". Based upon Kondratieff's conclusions, his report was viewed as a criticism of Joseph Stalin's stated intentions for the total collectivization of agriculture. Soon after, he was dismissed from his post as director of the Institute for the Study of Business Activity in 1928.

He was arrested in 1930 and sentenced to the Russian Gulag (prison); his sentence was reviewed in 1938, and he received the death penalty, which it is speculated was carried out that same year. Kondratieff's major premise was that capitalist economies displayed long wave cycles of boom and bust ranging between 50-60 years in duration.

Kondratieff's study covered the period 1789 to 1926 and was centered on prices and interest rates. Kondratieff's theories documented in the 1920's were validated with the depression less than 10 years later.

Today, we are faced with another Kondratieff Winter (depression) when the majority of the world anticipates economic expansion. Each individual needs to weigh the risk of depression in light of Kondratieff's work.

In desperate times people look for a leader who promises change and deliverance
Sam Mathid in 321gold article How Obama Won the Election relates: "Obama will win this election ... The word 'Change' will be uttered more and more by Obama, and the need for change will become ever more pronounced as we approach voting day. The only pitfall is now behind Obama. That pitfall was selecting Clinton as VP. Clinton represents 'No Change' and would have killed off Obama's chances of the presidency. Every person who is in dire financial straits will vote for Obama ... McCain is not just old, he is old hat. He stands for no change. There is no chance of McCain being a good president. He is rock solid locked into a mindset that brooks no possibility of new thoughts. He is a man of fixed ideas, and those fixed ideas are the very exposed ideas of George Bush and the neo-cons. Couple that with a bad temper and you have a dangerous mix ... There is a possibility, albeit slim, of Obama becoming a good president because he is a charismatic man who stands for nothing. As such he has a chance of coming to grips with what is really happening in America right now. He is not committed to anything or anybody other than his own success ... McCain has fixed ideas and cannot change anything. Obama has no ideas and can change anything. That is the only message that will come across in November. It is the only message that matters. That is why Obama will win ... God help us".

These people have seen the Christ and his name is Obama; photo courtesy of Gene of the SayAnythingBlog.

Kondratieff Winter will see the rise of combined state corporate rule
State corporatism will replace capitalism: here framework agreements, such as the Security and Prosperity Partnership, the SPP, replace traditional and constitutional law. Stakeholders are appoined to govern in global governance principles of civil security, and decrees of working groups and councils such as the North American Competitiveness Council, the NACC. The stakeholders will oversee the factors of production and direct the use of natural resources for the purposes of the homeland.

Militaism and patriotism be synomous; and will be a cultural more.

Businesses will be tightly entertwined with government as we see from the Military.com and AdvertisingAge article Sears to Sell Army-Approved Clothing which announced that Soldier Chic isn't a new fashion trend, but now consumers will be able to buy officially endorsed military merchandise at their local department store. The U.S. Army has officially licensed its First Infantry Division marks and insignias to Sears.

Sears, Roebuck & Co. has signed a deal with the U.S. Army to launch the All American Army Brand's First Infantry Division clothing collection. It marks the first time the U.S. Army has officially licensed its marks and insignias; licensing fees will be used to support military programs for troops and their families.

Coming to Fashion Week

The president of Sears Apparel said the brand will be prominently featured during the retailer's Fall Forward fashion. The line will also be included in future marketing campaigns, including those slated for the holiday season.

"Over the years, military-inspired clothing has played a distinct role in shaping fashion trends," Mr. Israel said. "We are now able to exclusively offer a line that is pure to the origins of that inspiration."

Military booster

The collection aims to simultaneously raise the profile of the U.S. Army and round out Sears' military program. The collection dovetails with Sears' "Heroes at Home" program, which provides home renovations to military families and has been promoted through twice-a-year marketing campaigns. Sears also has an extensive military-support program that includes community outreach and employee assistance, among other things.

VIII. My investment recommendations remain unchanged
I recommend the use a trust account to
1) buy SKF,
2) short sell of MBI, ABK, and RDN, SCA, MTG, RAM, SUR, and AGO.

I recommend a small short position in USD/JPY in a Forex account.

And I recommend the purchase of gold at BullionVault.com and GoldMoney.com as protection against systemic risk events.

The other reason for buying gold is that the former well springs of liquidity, the USD/JPY and the EUR/JPY, have now gone toxic on risk aversion to inflation, debt and decreased profit and growth opportunity.

These currency pairs will now be saws of destruction working to cut asunder fiat wealth; and in the process of sawing, gold will fall out as the worlds's currency and measure and means of garnering and preserving wealth.

In as much as gold relative to US Stocks GLD:VTI is above 1.15, I believe there is an ongoing investment demand for gold.

US Treasuries are no longer a lifeboat of safety as they seem to be topping out -- look for gold to soon arise as the defacto world currency and measure and means of garnering and preserving wealth as people flee fiat assets and world conflicts escalate.

IX. Suggested Reading
The Building Storm: Gold, the Dollar and Inflation

Either the Fed Kills the Dollar or the Banks. Is It That Simple?

In the Eye of the Storm

The Big Question

Dollar Gaps Higher While Gold, Commodity Currencies, Resource Stocks Gap Lower As The Yen Carry Trade Unwinds And USD/JPY Rises

, , , ...

Introduction
The commodity currencies sold off; and as a result the consumer currency, the US dollar, rose.

Commodities such as gold, silver, agricultural commodities, grains, fell; as did the commodity stocks and the BRIC countries such as Brazil which produces the commodities.

Consumer stocks such as housing and retail rose.

The Yen Carry Trade, EUR/JPY, FXE:FXY, massively unwound; and the USD/JPY rose slightly.
The Yahoo Finance 5 day chart of EUR/JPY shows a fall to 157.8

Stockcharts.com FXE:FXY fell 1.5% to 1.58; this was an absolutely stunning fall in the yen carry trade. The Yen carry traders were very effective in terrifically unwinding the carry trade.

The Yahoo Finance 5 day USD/JPY shows a rise to 108.63. Valerie Bednarik, analyst and foreign manager at MolFX - Management, in FXSteet article
USD/JPY Up For Today, presents a helpful four hour chart showing the up in the USD/JPY.

As a result the US Dollar Gapped Higher.
The US Dollar, $USD, traditionally a low yielding currency, became the destination of interest rate investing by 0.5% Bank of Japan funded currency traders.

The chart of the US Dollar, $USD, shows a rise to $78.05. $USD 78.05 on September 2, 2008

The US Dollar, DX, rose to 78.054. The Yahoo Finance 5 Day chart of DX shows how the dollar gapped higher on opening.

The Dollar Bullish ETF, UUP, rose to 24.17. The Yahoo Finance 5 Day UUP gapped higher on opening.

Gold and oil gapped lower.
GLD -3% closed at $79.20

The Yahoo Finance 5 day chart shows how gold gapped lower on opening.

$GOLD, Gold -3.5% to close at $805.

USO -4%

Other commodities gapped lower as well
JJG Grains -2.5%

DBA Agricultural commodities -2.0%

Commodity currencies collapsed
FXC -0.75%

FXE -1.5%

FXA -3%

The British Pound continued to sell off
FXB -2.5%

Natural resources stocks fell sharply
GDX The HUI precious metal mining shares, the gold stocks, continued to disconnect from the price of gold -6%

XME The metal manufacturing companies -7%

SLX Steel producers -7%

KOL Coal Miners -8%

XLE Energy Producers -6%

OIH Energy service providers -5%

MOO the agricultural companies -4.5%

Asia Shares
EWY South Korea fell -7.5% on currency concerns.

EWT Taiwan -5%

Emerging Market Shares
FXI China -2%

EEM Emerging markets -3%

EEB The BRICS, -3.5%

EWZ Brazil -4% on steel and oil holdings.

THD Thailand -5% on political unrest

Proshares Inverse -- Bear Market ETFs did well on the unwinding of the Yen Carry Trade
EEV up 5%

FXP up 4%

Consumer shares rose
XHB Homebuilders rose 3%

XRT Retail rose 2% The gravestone doji on falling volume relates that the rally in stocks is likely over.

XRT Daily

COST

Cost Daily

IYF Finance rose 1.5%

FRE, Freddie Mac rose 15%

FNM, Fannie Mae rose 9%

RDN, Radian Group rose 7%

NASDAQ sold off some
QQQQ fell 1.25%

US Treasuries rose
TLT rose to 94.37

The unwinding yen carry trade has introduced Kondratieff Winter
Mike Head writing in World Socialist Website aritcle Global Downturn Begins To Puncture Australian Mining Boom describes the personal misery and economic dislocation that comes as investors use 0.5% interest loans from the Bank of Japan "to go short the Euro, FXE, and long the Yen, FXY", in other words go short the EUR/JPY, to take adavantage of the falling yen carry trade, and risk aversion to rising inflation and diminishing growth opportunities in the emerging markets. Mr. Head's article, reporduced below, documents the onset of Kondratieff Winter.

Since July, definite signs have emerged that Australia’s mining boom, a major factor in the country’s much touted economic growth during the past decade, has started to crumble under the weight of the world economic slowdown. Mineral export prices have begun to turn. The London Metal Exchange Index of six base metals, including copper, zinc and nickel, fell more than 20 percent from a peak of 4,400 in March to 3,400 in early August.

As a result, the Australian dollar has tumbled. After rising to near parity with the weakening US dollar in the first half of this year, it has become one of the world’s weakest currencies in recent weeks, falling well over 10 percent against the greenback.

While fluctuations in metal prices are certainly affected by speculative flows, the latest downturn is, at bottom, an expression of the markets’ reaction to what some financial commentators have called a “tidal shift” in the world economy. With the exception of China and India, all the major markets for Australian mineral and energy exports are now contracting or on the brink of recession: Japan, the US, Britain and the Euro zone.

While China, which last year overtook Japan as Australia’s largest trading partner, is still growing, its growth has slowed from 11.5 percent last year to less than 10 percent this year, and is expected to drop to 9 percent next year. An even sharper slowdown could be ahead, because about one-third of China’s growth is estimated to come from exports.

Over the past seven years, the Australian mining sector, has benefited from an extraordinary surge in world prices for coal, iron ore, base metals and natural gas. The Reserve Bank of Australia (RBA) Index of Commodity Prices rose by more than 250 percent between 2002-03 and mid-2008, reversing a long period of falling or stagnating prices.

Some of the key rises were even greater. Thermal coal rose fivefold, from $US25 per tonne in 2000 to $125 in the first half of 2008 (January to May); hard coking coal from $40 a tonne to $300; and iron ore from 27 US cents per dry metric tonne to 133. The World Bank’s natural gas index rose to 266.87 in the first half of 2008, from 100 in 2000.

In some cases, these increases are still accelerating. Prices for manganese, a key component in steel and iron production, have more than trebled since June 2007, largely because of a “drought” in manganese supplies, with no new mines on the near-term horizon.

Under contracts signed with Chinese steel manufacturers earlier this year, the coal and iron ore prices will remain at their stratospheric levels for another 12 months. In a June speech to a Canadian business summit, RBA governor Glenn Stevens boasted that iron ore and thermal coal prices would approximately double this year, while those for metallurgical coal would treble. He gloated that China was still “running hot”, whereas Canada’s main export market, the US, was “very weak”.

As a result, Stevens said, Australia’s terms of trade would rise by 20 percent in 2008, taking the total increase since 2002 to nearly 70 percent. He estimated the rise in real domestic income as about 13 percent of GDP, commenting, “We are talking real money here!”

In other words, an extra $A130 billion has flowed into corporate coffers and government tax revenues over the past six years. On the surface, the bonanza is still continuing. Over the past two weeks, the two biggest part-Australian-owned mining giants, BHP-Billiton and Rio Tinto, have announced record profits—$A17.7 billion in a year for BHP and $8 billion over six months for Rio.

Since June, however, spot prices for iron ore and coal have started to fall, along with steel. Iron ore landed in China has fallen from $US200 a tonne to $155; thermal coal at port in Australia from nearly $200 a tonne to $155, and steel is down 10 percent. Chinese steel production is still growing, but much more slowly. Indian prices are also falling.

Even as Stevens was speaking, it was already apparent that prices for other mining exports—freely-traded base metals—had turned downward. Between March and July, the RBA’s base metals index fell almost 16 percent in $A terms and 12.5 percent in US dollars. Some metals have plunged more sharply—zinc is down 37 percent since the start of March, and lead almost 50 percent.

Nickel rose as high as $US50,000 per tonne in May 2007, but it has since fallen almost two-thirds to $18,000. Gold hit an all-time peak of $1,032 an ounce in March and was trading at $965 in mid-July but has since dropped below $775. Copper has fallen almost 20 percent from $8,950 a tonne on July 2 to $7,335.

Particular factors have affected some of these movements. In the case of nickel, for instance, new mines have opened, stainless steel production has been cut massively and China has been substituting domestically produced low-grade nickel pig iron for refined nickel. More fundamentally, however, the falls express the verdict of the markets on decreasing global demand.

“Sentiment in commodity markets has swung heavily negative in the past month,” ANZ Bank senior commodity strategist Mark Pervan wrote in a note to clients this month. “The extent and speed of the declines has prompted us to downgrade our 2008-2010 prices forecasts.” The ANZ warned that the price fall had not ended. It expects the price of iron ore, Australia’s principal export to China, will tumble 10 percent in 2009 and again in 2010. Nickel is set to fall by another quarter this year, then 9 percent in 2009 and a further 19 percent in 2010.

Job losses are another early indicator of the turnaround. Although workers are still flooding into iron ore and coal mining areas, lured by the prospect of high wages, jobs have begun to be axed in other mines.

The lead, zinc and silver mine at Broken Hill in western New South Wales, is sacking more than 450 workers, or almost two-thirds of the workforce. Last month, Minara Resources retrenched nearly 200 workers from its Murrin Murrin nickel operation in Western Australia and Crescent Gold is said to have laid-off about 150 workers when it suspended operations at its Laverton mine in Western Australia. In June, CBH Resources dismissed 220 workers, almost 40 percent of its workforce, at the Endeavour silver, lead and zinc mine near Cobar in central NSW.

Given the dependence of all these sectors on China’s continuing growth, any fall off in Chinese demand will ever more sharply expose the Australian economy’s vulnerability to the global slump, belying claims that it has “de-coupled” from the financial crisis in the US because of the expansion of Chinese and other Asian markets.

The puncturing of the mining boom will have serious implications for the entire economy, not only by slashing jobs, consumer spending and government tax revenue, but also by further undermining debt-laden investment firms and financial institutions, including the major banks.

Commentators have begun voicing fears of severe economic dislocation. “Commodity booms end ugly, they always do, and there has never been an exception,” Access Economics director Chris Richardson told the Australian last week, warning: “The commodity markets are more central to Australian national income than either credit markets or share markets.”

Who was Kondratieff and what was his Kondratieff Wave Theory?
Following is an part of the Who Was Kondratieff? article found on Kwaves.com and KondratieffWinter.com.

To introduce the Kondratieff Theory, we must go back over seventy years and examine a remarkable story in economic history, encompassed within the life of one still little known man. I am certain that, in time, Kondratieff will rank with the giants of discovery as Einstein and Newton. Like these men, his insights have begun to alter radically and permanently our perceptions of economic history. The Kondratieff wave cycle goes through four distinct phases of beneficial inflation (spring), stagflation (summer), beneficial deflation (autumn), and deflation (winter). Since, the last Kontratyev cycle ended around 1949, we have seen beneficial inflation 1949-1966, stagflation 1966-1982, beneficial deflation 1982-2000 and according to Kondratieff, we are now in the (winter) deflation cycle which should lead to depression.

Professor Nickolai Kondratieff ( pronounced "Kon-DRA-tee-eff") Shortly after the Russian Revolution of 1917, he helped develop the first Soviet Five-Year Plan , for which he analyzed factors that would stimulate Soviet economic growth. In 1926, Kondratieff published his findings in a report entitled, "Long Waves in Economic Life". Based upon Kondratieff's conclusions, his report was viewed as a criticism of Joseph Stalin's stated intentions for the total collectivization of agriculture. Soon after, he was dismissed from his post as director of the Institute for the Study of Business Activity in 1928.

He was arrested in 1930 and sentenced to the Russian Gulag (prison); his sentence was reviewed in 1938, and he received the death penalty, which it is speculated was carried out that same year. Kondratieff's major premise was that capitalist economies displayed long wave cycles of boom and bust ranging between 50-60 years in duration.

Kondratieff's study covered the period 1789 to 1926 and was centered on prices and interest rates. Kondratieff's theories documented in the 1920's were validated with the depression less than 10 years later.

Today, we are faced with another Kondratieff Winter (depression) when the majority of the world anticipates economic expansion. Each individual needs to weigh the risk of depression in light of Kondratieff's work.

Financial commentary
My analysis and recommendations remain unchanged.

I recommend a purchase of SSG and SKF in a trust account along with a short sell of MBI, ABK, and RDN.

As well as the sell of USD/JPY in a Forex account. Hans Nilsson of CMS Forex writing in FX Street article Dollar Gains Continue relates support for the USD/JPY is much lower at 107.50 and 106.00

And the purchase of gold at BullionVault.com and GoldMoney.com as protection against systemic risk events.

Here is Jack Chan's chart of the NASDAQ, QQQQ, and Semiconductors, SHM, from JC's Buy And Sell Signals showing these going bearish engulfing today.

Given the above action in the NASDAQ, and the bearish harami in this week's S&P 500, SPY, I say go bearish 3/3 leverage with SDS. This contradicts the encouragement of the Lynn T in Safehaven.com article DOJI. Here is Jack Chan's chart of SDS Daily and here is Stockcharts.com SDS Weekly.

Frank Barbera of FinancialSense.com relates: "Since mid-July, stocks have experienced a lot of short term volatility with the DJIA posting 13 sessions of the last 30 days with daily closes in excess of 150 points up or down. Today, was more evidence of this wild volatility with the market soaring higher at the opening and then giving back all of the gains. Since roughly mid-July 18th to present, the net gain thru last Friday's close was only a gain of 47.39 DJIA index points -- how ironic. Essentially, stocks have been riding the roller coaster up and down, but overall have really been going nowhere fast. Unfortunately, this is not a good sign in the larger outlook for stocks as very substantial oversold conditions, which had previously built up going into the lows in March and in mid-July, are beginning to unwind without the market averages having made enough progress to reverse the larger bearish tide. This type of failing price action is indicative of bear market rallies, rallies ultimately pre-disposed to roll over into even larger declines".

In as much as gold relative to US Stocks GLD:VTI is above 1.15, I believe there is an ongoing investment demand for gold.

Peak Dollar Means Gold Will Arise As The Measure And Means Of Wealth Preservation

, , , ...

I. An Early Morning Financial Market Report For Friday August 29, 2008

A. Dollar And Gold Traded Volatily As The Battle Unfolds For Rulership As The World's Currency
Charts from Kitco.com showed high volatility in gold, $GOLD, and the US Dollar, $USD today.

The Yahoo Finance 5 day chart of the gold ETF, GLD, and the Dollar ETF, UUP showed gold up and the Dollar down in early moring trading; but by the end of the day, the situation reversed as the Euro, FXE, fell throught the day ... GLD UUP at end of day shows UUP up 0.04% and GLD down 0.6% ... FXE fell throughout the day.

Of note: August was a very good month for the dollar with the currency seeing its strongest 1 month rally in more than 15 years.

Mr. Danish in FXDD article USDJPY Breaks Supports behind Japanese Economic Stimulus Package provides a handy chart of the USD/JPY.

The struggle between the US Dollar, $USD, DX, will soon be over with gold, $GOLD, rising supreme and the dollar vanquished

INO.com provides the ongoing US Dollar Index, DX, Dow and Gold, $GOLD, Chart page.

B. USD/JPY Fell Trading To Trade Around First Support Level Of 108.95
FXStreet reports that the USD/JPY fell to 108.7. The dramatic news here is that the dollar carry trade is unwinding.

PFGlobal provides an ongoing chart of the USD/JPY; it shows that the USD/JPY has fallen to the edge of its channel.

James Chen in article FXStreet article USD/JPY Update - Key 108.50 Level provides this chart of the USD/JPY.

My-Zue presents the article Action Forex Market Overview Aug 30 08 Yen Could Dominate in a Week of Central Banks and Key US Data which relates: "The Japanese yen was the biggest winner last week as seen with yen crosses topping the top movers chart. While most of the moves were done on Friday following the 170pts fall in Dow, such declines did have the significance of indicating that yen is regathering strength for medium term rally. As discussed before, most yen crosses should have topped out in Jul, except USD/JPY. The pair has been steady due to dollar's strength but upside momentum was seen diminishing after making at high at 110.66. Outlook is mixed in the pair for the moment with possibility of a reversal. And if the last defense is taken down and USD/JPY does reverse, further massive buying could be seen in the yen which pushes other yen crosses further lower. This will probably be the main focus in September."

Marketiva ocvers the USD/JPY and provides this hourly chart of USD/JPY trading on Friday August 29, 2008 as well as the daily chart which shows 'Peak Dollar' on August 15, 2008, and Friday's breakdown and fall through a 'broadening top pattern' at 109; one can see how the USD/JPY took the US Dollar Rally up both in the Dollar itself and in stocks on July 15, 2008.

The effects of today's fall in the USD/JPY are limited -- oil and gold are stabilizing, as well as the US Dollar. These are in a struggle of their life for supremacy and sovereignty as the global ruling currency.

Ye Xie and Gavin Finch of Bloomberg report that Dollar Falls Against Yen as Personal Spending Slows in July

C. The Dollar Rally Is Over
Although the Dollar is trading higher, the Dollar Rally in stocks is over as the financial sector, IYF, having risen to 50 day support is falling sharply; and as is seen in the ratio of US Stocks to World Stocks, VTI:VEU and VTI:EFA, turning lower on August 15, 2008.

The fall in the financial sector has caused the Russell 2000, IWM, $RUT, to fall, causing a doji candlestick to form at 73.83 which is immediately below strong resistance at 74.00. Support lower for the Russell is found at 73.40, 73.00, 72.00, 70.75, 70.11.

The chart of the Russell 2000 Value share compared to the growh shares, IWN:IWO, shows a dark cloud cover candlestick, suggesting that the value shares, IWN, are now going to start to fall faster than the growth shares, IWO.

Of all the indices, the Nasdaq, QQQQ, $COMPQ, is off the most, that is 2.2%, being taken down by the Nasdaq 100, QTEC, which is off 2.9%.

Semicondutors, SMH, are off 3%.

Google, GOOG, is off 2%.

Just as a rising USD/JPY was benefecial for the dollar driven stocks of the Nasdaq; a falling USD/JPY is now going to be bearish for rimm, adbe, csco, ctsh, orcl, intc, aapl, mcd, hd.

And vice-versa as well; falling Nasdaq stock prices are going to pull the US Dollar down

Losses for these lynchpin stocks are as follows:
RIMM -4%
ADBE -3%
CSCO -2.5%
CTSH -2.5%
ORCL -4%
INTC -3%
AAPL -2%
MCD -1%
HD -.5%

D. The EUR/USD Moves Down Below Pivot Level 1.4729
FXStreet reports that the EUR/USD fell to 1.470. The EUR/USD has its biggest monthly fall ever, this August.

This action came as the yen carry trade unwound as described below; ActionForex provides charts of the EUR/USD in article EUR/USD Weekly Outlook Aug 30 08.

E. The EUR/JPY Moved Down Below 1.60
FXStreet reports that the EUR/JPY to 159.38. The dramatic news here is that the yen carry trade is unwinding which is powerfully seen in the Yahoo Finance 5 day chart of FXE and FXY. Had not the USD/JPY fallen, gold and oil would have fallen significantly.

ActionForex provides charts of the EUR/JPY in article EUR/JPY Weekly Outlook Aug 30 08.

The HUI Indexed precious metal mining shares, GDX, are disconnecting from the price of gold, and are falling lower with the metal and mining shares, XME, the Brics, EEB, the emerging markets, EEM, and China, FXI, as the latter falling the most as it had risen the most up to 50 day moving average.

I have continually documented that the gold shares have been falling relative to physical gold ever since early November 2007 2007; and today is no exception: GDX is down 0.7 while GLD is up 0.5%. The Yahoo Finance ongoing 1 year chart of GDX compared to gold shows the disconnect quite well. The Yahoo Finance six month chart of GDX relative to gold shows the disconnect picked up steam in mid-March 2008 as the Fed announced facilities of TAF, TSLF and PDCF ... One year GDX GLD .... Six month GDX GLD

The Yahoo Finance 3 month ongoing chart of the energy service providers, OIH, compared to gold, GLD, shows that the yen carry traders began to sell their deep investments, that is investments made long ago in the energy service companies, in mid June 2008, as risk aversion grew to decreased invesment opportunities, caused by dwindling growth world wide, and as the announcements of the May 19, 2008 Bank of Japan meeting were released, and carried by news services such as CEP News on Forex websites such as ActionForex.

The unwinding yen carry trade has induced the British shares to fall significantly lower as Lukanyo Mnyanda and Andrew MacAskill of Bloomberg report Pound Set for Monthly Loss as Confidence Holds Near Record Low.

Part of the reason why the yen carry trade unwound today is that Aaron Pan and Tracy Withers of Bloomberg are reporting that Australia, New Zealand Dollars Log Monthly Drop on Rate Outlook.

The unwinding yen carry trade also induced the other commodity currencies Swiss Krona, FXS, and the Canadian Dollar, FXC, to fall.

II. End Of The Day Comments
We are on the verge of an epic investment shift: gold is soon going to arise as the defacto world currency and means of garnering and accumulating wealth.

The struggle between the US Dollar, $USD, DX, will soon be over with gold, $GOLD, rising supreme and the dollar vanquished.

The Yahoo Finance 5 day ongoing chart of the Euro, FXE, compared to the Yen, FXY shows how the yen carry trade unwound this week.

Even though the USD/JPY unwound some as well, the lower Euro, FXE, that came via the unwinding yen carry trade, kept the US Dollar high as is seen in the chart of the Yahoo Finance 5 day ongoing chart of UUP vs GLD. And gold rose 1% on the week, as lack of supply at coin dealers and jewelrs maintained price up.

The Yahoo Finance 3 month ongoing chart of the energy service providers, OIH, compared to gold, GLD, is most helful in understanding the dramatic shift that is about to take place ... 3 month OIH compared to GLD

July 25, 2008 definitely marked 'Peak Currencies', this is seen in the fall of both Gold, GLD, and the natural resource stock leader OIH, falling lower seen in the chart.

August 15, 2008, through today August 29,2008, for all practical purposes has marked '