WHERE IS BIG MONEY GOING? WHAT IS BIG MONEY LEAVING?

Barron's Big Money Poll highlights the bearish stance of Treasuries and Cash. Please be warned that acute crises, whether real or perceived, could make Bonds and Treasuries  rally.  You can use long and short ETF's to play the market to the bias. Be very careful to only TRADE those ETF's, they are not buy and hold instruments!

You could sell Bonds on rallies or take your chances. Also, I would not rush into China, Brazil etc just yet either. Timing is not a part of this poll. 

http://online.barrons.com/this_week?mod=BOL_hpp_tnav_magazine

Keep a Bucket Handy

The 10-Year Relationship Between the SP500 and Fed Funds Rate

Shaza has been hanging out with another blogger and I think "afraid to trade" has another good good post that she sent me today.

With April 28th’s Fed decision to keep the Fed Funds rate unchanged, let’s take a look back on the last 10 years to see the relationship between the Fed Funds Rate and the S&P 500 … which might be very surprising to you.

(Click for full-size image)

Starting our comparison in January 1999 and running to March 2010, we see the following relationship between Rates and Stocks over the last 10-year period.

I initially raised this topic (and the warning) after the Federal Reserve began its first rate cut in August, 2007, asking the question: “Is Fed Rate Easing Really Good for the Market?”

For the answer go to Afraid to Trade Blog

http://blog.afraidtotrade.com/the-10-year-relationship-between-the-sp500-and-fed-funds-rate/

Stock Market Video Analysis 4/28/10

Stock Market Video Analysis 4/28/10


http://www.alphatrends.net/2010/04/28/gold-stock-list/

SP500 Market Internals Update for April 27: Sell-off Edition

http://blog.afraidtotrade.com/sp500-market-internals-update-for-april-27-sell-off-edition/

Kind of a lazy post for me. I also like to post the link to a blogger rather than copy and paste his or her work. Nice charts about yesterday. Afraid to trade is always available from my blog list.
Thank you Shaza for finding this. I am so behind on my reading.

I also tossed this in Dr Faber in Vienna and speaking German with subtitles.

Greece cut, Street bleeds

Dow down more than 200 points, loses grip on 11K

http://www.marketwatch.com/story/us-stocks-end-sharply-lower-dow-off-213-points-2010-04-27?dist=afterbell

Compliments of Shaza

Rogoff Says Greece May Not Be Europe’s Last Bailout

By Simon Kennedy

April 26 (Bloomberg) -- Greece is unlikely to be the last euro nation to need an International Monetary Fund bailout, with Ireland, Spain and Portugal “conspicuously vulnerable,” said Harvard Professor Kenneth Rogoff.

“It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” Rogoff, a former IMF chief economist who has co-authored studies of financial and sovereign debt crises, said in a telephone interview. “The budget cuts needed in Europe in many countries are profound.”

Portuguese, Spanish and Irish bond yields jumped last week as investors questioned their ability to reduce budget deficits and avoid Greece’s fate. Greece on April 23 triggered a 45 billion-euro ($60 billion) rescue package from the IMF and the euro region after its soaring deficit sent borrowing costs surging and sparked concern about a default.

At 14.3 percent of gross domestic product, Ireland had the euro region’s largest deficit last year. Greece’s was 13.6 percent, Spain’s was 11.2 percent and Portugal’s 9.4 percent.

The likelihood is “better than 50-50” that others in the 16-nation euro area will end up requiring help from the Washington-based lender, said Rogoff, 56. He expects the IMF will eventually dispatch more loans to Greece than the as-much- as 15 billion euro it’s currently offering.

High Stakes

“The stakes are very high for Europe as it wants to avoid contagion,” said Rogoff, who in 2008 predicted the failure of some large U.S. banks prior to the collapse of Lehman Brothers Holdings Inc.

Any Spanish bailout would dwarf that for Greece as its economy is four times bigger. Although Spanish debt as a share of GDP is 53.2 percent compared with Greece’s 115.1 percent, it’s still worth 560 billion euros, more than double Greece’s burden. Ireland has debt of 105 billion euros, or 64 percent of GDP, and Portugal has 126 billion euros, equivalent to 76.8 percent of GDP.

Investors are expressing their concern by charging countries with large deficits increasingly more to borrow for 10 years than they do Germany, the euro-area’s largest economy and issuer of its benchmark debt.

The gap between German and Greek bonds widened 76 basis points to 635 basis points as of 10:41 a.m. in London today. That’s the highest since at least March 1998, when Bloomberg began compiling the generic prices.

Portugal was charged 213 basis points more to borrow than Germany, and Spain was 99 points. The spread for Ireland widened to 182 points, the most since the country’s 2010 budget was published on Dec. 9.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aNRALsDsKiKc

INSIDE JOB

Courtesy of Shaza
I urge all of the Hive readers to listen to this podcast from THIS AMERICAN LIFE before Tuesday when GS will be 'questioned' by Congress! It is a series of scenarios looking at 'inside jobs'...Act 2 , EAT MY SHORTS is an excellent primer on the complicity Magnetar , GS and the subprime meltdown. And BE SURE to watch the video of the music too, Bet Against the American Dream:

http://podcast.thisamericanlife.org/special/405_Bonus_Bet_Against_the_American_Dream.mp3

To hear the program hit 'stream the episode' or download from iTunes.

http://www.thisamericanlife.org/radio-archives/episode/405/inside-job

PROLOGUE.

Ira talks about a friend who for years had a very trusted business partner and bookkeeper, until one day when he ran away with all of her money. (1 1/2 minutes)

ACT ONE. EAT MY SHORTS.

A hedge fund named Magnetar comes up with an elaborate plan to make money. It sponsors the creation of complicated and ultimately toxic financial securities... while at the same time betting against the very securities it helped create. Planet Money's Alex Blumberg teams up with two investigative reporters from ProPublica, Jake Bernstein and Jesse Eisinger, to tell the story. Jake and Jesse pored through thousands of pages of documents and interviewed dozens of Wall Street Insiders. We bring you the result: a tale of intrigue and questionable behavior, which parallels quite closely the plot of a Mel Brooks musical.

If you have any questions after hearing this story, you can email the ProPublica team for an answer. (40 minutes)

Links to follow:

http://www.npr.org/money

http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/

How Ayn Rand caused the GFC

MATT TAIBBI

April 25, 2010Hat tip to Shaza for the contribution

SO GOLDMAN Sachs, the world's greatest and smuggest investment bank, has been sued for fraud by the American Securities and Exchange Commission. Legally, the case hangs on a technicality.

Morally, however, the case may turn into a final referendum on the greed-is-good ethos that conquered America in the '80s - and in the years since has aped other horrifying American trends in spreading across the Western world like a venereal disease.

When the globe was engulfed in the flood of defaults and derivative losses that emerged from the collapse of the US housing bubble two years ago, few understood that the crash had its roots in the lunatic greed-centred objectivist religion, fostered in the '50s and '60s by ponderous emigre novelist Ayn Rand.

Outside America, Russian-born Rand is probably best known for being the unfunniest person Western civilisation has seen since maybe Goebbels or Jack the Ripper, but inside America she is upheld as an intellectual giant. Her ideas are worshipped even by people who've never heard of her. The right-wing Tea Party movement is just one example of an entire demographic that has been inspired to mass protest by Rand without even knowing it.

Last year I wrote a brutally negative article about Goldman Sachs for Rolling Stone (I called the bank a ''great vampire squid wrapped around the face of humanity'') that sparked a heated debate. On one side were people who believed that Goldman is little better than a criminal enterprise that bilks the market, the government, and even its own clients in a bewildering variety of complex financial scams.

On the other were those who argued Goldman wasn't guilty of anything except being ''too smart'' and really good at making money. This was based almost entirely on the Randian belief system, under which the leaders of Goldman Sachs appear not as the cheap swindlers they look like to me, but idealised heroes, the saviours of society.

In the Randian ethos, called objectivism, the only real morality is self-interest, and society is divided into groups who are efficiently self-interested (the rich) and the ''parasites'' who wish to take their earnings through taxes. Rand believed government had virtually no natural role in society. She conceded police were necessary, but refused to accept any need for economic regulation.

Rand's fingerprints are all over the Goldman story. The case involves a hedge fund financier, John Paulson, who went to Goldman with the idea of a synthetic derivative package pegged to risky US mortgages, for use in betting against the mortgage market. Paulson would short the package and Goldman would then sell the deal to suckers. The SEC's contention is that Goldman committed a crime when they failed to tell the suckers about the vulture betting against them on the other side of the deal.

The instruments in question - collateralised debt obligations and credit default swaps - fall into the category of derivatives, which are virtually unregulated in the US thanks in large part to the effort of former Federal Reserve chairman Alan Greenspan, a staunch Randian. In the late '90s, Greenspan lobbied hard for a law that deregulated the sort of interest-rate swaps Goldman used in its now-infamous dealings with Greece.

In the Paulson deal the suckers were European banks such as ABN-Amro and IKB, which were never told the stuff Goldman was selling to them was, in effect, designed to implode; in the Greece deal, Goldman used exotic swaps to help the country mask its financial problems, then bet against Greece by shorting the debt.

Confronted with public outrage, the leaders of Goldman will often appear genuinely confused. It's not an act. There have been a lot of greedy financiers and banks in history, but what makes Goldman stand out is its truly bizarre cultist/religious belief in the rightness of what it does.

The point was driven home in England last year, when Goldman's international adviser, sounding exactly like a character in Atlas Shrugged, said ''The injunction of Jesus to love others as ourselves is an endorsement of self-interest.''

Even if he stands to make a buck at it, your average used-car salesman won't sell some working father a car with wobbly brakes, then buy life insurance policies on that customer and his kids. But this is done almost as a matter of routine in the financial services industry, where the attitude after the inevitable pileup would be that that family was dumb for getting into the car in the first place. Caveat emptor, dude!

This Randian mindset is now ingrained in the American character.

This debate is going to be crystallised in the Goldman case. Much of America is going to reflexively insist that Goldman's only crime was being better at making money than IKB and ABN-Amro, and that the meddling government (in the American narrative, always the bad guy) should get off Goldman's Armani-clad back. Another side is going to argue that Goldman winning this case would be a rebuke to the whole idea of civilisation - which, after all, is really just a collective decision by all of us not to screw each other over even when we can.

It's an important moment in the history of modern global capitalism: whether or not to move forward into a world of greed without limits.

This video that Shaza sent me goes with the article
http://www.msnbc.msn.com/id/21134540/vp/36522064#36522064

Goldman Eyed 'Serious Money' From Subprime: E-mails

Goldman Sachs officials discussed making "serious money" in 2007 off the subprime crisis as mortgages were starting to falter in rapid numbers, according to a collection of e-mails released by a Senate panel on Saturday.

"Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts," Goldman Sachs Chief Executive Lloyd Blankfein said in an e-mail dating from November 2007.

"Sounds like we will make some serious money," said Goldman Sachs executive Donald Mullen in a separate series of e-mails from October 2007 about the performance of deteriorating second-lien positions in a collateralized debt obligation, or CDO.

The Senate Permanent Subcommittee on Investigations is holding a hearing on Tuesday with Blankfein and other Goldman executives, scheduled to testify about the role Goldman Sachs played in the financial crisis. The firm has been sued for civil fraud by the Securities and Exchange Commission over its marketing of a CDO.

Commenting on the emails, Sen. Carl Levin, chairman of the subcommittee, said that they showed Goldman "made a lot of money by betting against the mortgage market."

The complete article is here:http://www.cnbc.com//id/36753293

Concern about increased investment in rural property

By Mary Goode
Thursday, 22/04/2010
The Real Estate Institute of Australia has launched a review of foreign purchases of Australian farms, fearing agriculture could suffer.
Some real estate agents suggest there's been a tenfold increase in investment, particularly from Chinese buyers in the past six months.
Institute president David Airey says he's not willing to speculate on the level of investment, but says it's mainly Asian buyers who are bidding up big, pushing up prices and shutting locals out of the market.
He says he's concerned that Australian agriculture could suffer if investors decide to leave the land empty and unproductive.
"We don't have any anecdotal evidence on that, but that's something we'll be surveying," he says.
"In fact, yesterday, the Institute in Canberra launched a survey amongst all our members, so we can try and provide the government and the Reserve Bank with some evidence on these issues."
But Professor Zhangyue Zhou from James Cook University, doubts that Chinese investors are buying big properties. He says they're more likely buying smaller ones, because of the high price of Australian land.
He also says it's unlikely that the investors would leave the land empty, and says it just doesn't make business sense to do so.
Professor Zhangyue Zhou says the move to buy international land is coming from the Chinese Government, which wants to ensure the country has food security for the future.
He says if need be, food could be sent back to China from farms purchased by Chinese businesses.
Chinese investors are showing interest in buying Tasmanian dairy farms.
A real estate agent from Smithton says potential buyers are organising visas to visit the state soon.
Betty Kay, from Landmark Real Estate, says for farmers whose properties have been for sale for more than a year, the interest is welcome.
But she knows the offshore investment could cause upset in the region.
"Each week, I'm still having farmers wishing to know if there's anything happening," she says.
"While it's probably not their ideal situation to sell to investors outside of Australia, I think most of them wouldn't worry who's going to buy the farm, because once they go, that's it."

Don’t Look Now, but the US is Outperforming All Developed Markets YTD

• Joshua M Brown
 
• April 21st, 2010

The US stock market is outperforming all BRICs save Russia and every major developed market in the world.  Huh?  Yup. 

From my pals at the Notorious B.I.G. (Bespoke Investment Group) -

And to think, it only took zero percent interest rates for 2 years.  LOL.

Source:

US Equities Continue to Outperform in 2010 (Bespoke)

Why the Gold Price Doesn't Matter

by Tarek Saab

Unlike mining stocks, gold is not an investment. Gold is money. It is a store of wealth. Gold's 5x growth this past decade is significant not because it's nominal price has increased, but because the prices of most other assets have increased less.

The gold price simply doesn't matter. Gold's value as measured in a fiat currency is arbitrary. Sure, adept traders can take advantage of short term price fluctuations, but bullion owners invest for the long term, and they do so to protect their wealth.

Some are calling for $5,000 (or even $10,000) gold. It might happen. Who knows? But if all other assets grow at the same rate, the sum gain is zero. Gold growth in dollar terms does not guarantee increased wealth.

On the contrary, it is wholly conceivable that the gold price could fall and you could make a fortune! If gold settles at $1,000/oz, but the DJIA, S&P, home prices, car prices, etc, all fall at a greater rate, your net gain is the difference to the downside. In other words, your net purchasing power would increase!

Purchasing Power

The real statistic worth measuring is purchasing power.

The graphs below depict what I mean. Gold's real value is determined not in the price of a fiat currency, but as a ratio to other assets, and this is where gold has really shined over the past decade.

During the "lost" decade, in which the Dow and the S&P 500 flatlined, gold's performance became all the more significant for owners who had the foresight to hedge against a deadening economy.

*Gold divided by DJIA

*Gold divided by S&P 500

Despite the incredible housing bubble in the middle part of the decade, gold consistently rose against home values. In 2000, it took 705 ounces of gold to buy the same house you can purchase today for just 253 ounces.

*Reference for average new home prices here (24k pdf)

Are food prices rising? You bet. But not as much as gold, according to the Bureau of Labor Statistics.

*(Bureau of Labor Statistics, US City national average composite of prices: Pasta, Flour, Bread, Ground Beef, Turkey, Milk, Butter, Cheddar Cheese, Apples, Bananas, Potatoes, Lettuce, Broccoli, Sugar)

In 2001, it took 95 ounces of gold to buy the same car you can purchase today for just 25.5 ounces, according to the National Automobile Dealers Association.

*Source National Automobile Dealers Association, www.nada.org

Sure, for gold bulls it can be an obsession waking up every morning to check the Kitco spot price. But in the long term, the move to gold holds far more significance than a ten or twenty-dollar price swing. If you can keep your head (and shirt) when all about you are losing theirs, that in itself will be a great triumph.

History will record our age as the time of the greatest economic meltdown the world has ever known. In the end, it won't matter if gold is selling for a trillion dollars or fifty dollars. What will matter is what you can buy with it.

'Til next time, that's my Saab Story.

Tarek Saab is the President of Guardian Commodities and a former finalist on NBC’s “The Apprentice” with Donald Trump. He is an international speaker and syndicated author.
www.GuardianCommodities.com

S&P 500 Levels & Video Analysis for 4/21/10

Greek 3-Month Bill Yield Doubles on Default Concern

By Paul Dobson

April 20 (Bloomberg) -- Greece’s borrowing costs more than doubled at an auction of 1.95 billion euros ($2.6 billion) of three-month bills amid concern the nation will default unless it taps a bailout package brokered by the European Union.

Greece sold the 13-week securities today to yield 3.65 percent, compared with 1.67 percent at a sale of similar debt on Jan. 19, according to the Athens-based Public Debt Management Agency. Investors bid for 4.61 times the securities offered, up from 3.23 at the last sale, the PDMA said. Two-year notes erased declines following the auction.

EU ministers agreed on April 11 to a bailout plan to help Greece shore up its finances as it struggles to plug its budget deficit, offering loans of as much as 45 billion euros. While the cost of servicing the nation’s debt rose at today’s sale, the yield was less than some analysts forecast.

“I’m impressed that they did nearly 2 billion euros and it was covered 4.6 times,” said Steven Major, the London-based global head of fixed-income research at HSBC Holdings Plc, who predicted a yield of 4.5 percent. “The rate indicates that there is good demand for short paper. There is, however, a limit to how many Treasury bills Greece can issue because of the impact on average life and future roll-over risk.”

For the rest of the article
http://www.bloomberg.com/apps/news?pid=20601087&sid=afhSqD1Mas6c&pos=4

Chieftain Cosser eyes African ore

Author: SEM Contributor

THE untapped iron ore riches of Sierra Leone have attracted the attention of Australian pay-TV pioneer and all-round entrepreneur Steve Cosser (in photo). And he reckons he has landed a big one in the west African nation, known more for its strife and abject poverty than its potential mineral wealth.

The now London-based Mr Cosser told BusinessDay his privately held Africa Inc is to acquire a 3-billion-tonne high-grade coastal iron ore deposit near the town of Bagla Hills in eastern Sierra Leone.

”It’s the biggest [single] iron deposit in the world. Iron ore is the most in-demand mineral in the world and China is eating it up like you wouldn’t believe,” enthused Mr Cosser, an admitted occasional dabbler in resource opportunities.

”I have bought 100 per cent of it. I have also been made chieftain of Bagla Hills,” he said. ”The paramount chief [of one of Sierra Leone's four kingdoms] has awarded me citizenship of Bagla Hills and I’ve agreed to take care of the poorest city in the poorest country in the world.”

Mr Cosser said the iron ore deposit was currently the subject of a conservation order. ”But obviously they are going to lift it because of the wealth that can come into the country would be enormous,” he said.

The consideration in the deal is unusual. ”I’ve said I’ll fix this place up and I’ll do it quickly whether they lift [the conservation order] or not,” Mr Cosser said.

He said the government had been offered all sorts of deals for development rights to the iron ore deposit and all sorts of people had claimed ownership at various stages. Mr Cosser’s deal is with a local man, Jacob Barnett. ”The idea is to turn [Bagla Hills] into the gleaming diamond of Africa,” Mr Cosser said.

The Cyprus-registered Africa Inc is 100 per cent owned by Mr Cosser. A statement to be released today quotes Mr Barnett as saying that Africa Inc’s plans for ”my people made [it] head and shoulders above any other contender for the project”.

The plan is to list Africa Inc in New York. ”Will Cosser make money out of it? Of course he will. He always does,” said London-born, Brisbane-raised Mr Cosser.

His Australian media career began aged 17 when he became the youngest staff announcer with the ABC. He made a small fortune, reportedly $70 million, from the first pay-TV network in Australia, Australis, in the early 1990s.

Barry Fitzgerald, The Sydney Morning Herald, Australia

Real America: The 'Treasure Hunters Roadshow' and Their Small-Town Newspaper Grift

by Abe Sauer posted @12:50 PM

http://www.theawl.com/2010/04/real-america-the-treasure-hunters-roadshow-and-their-small-town-newspaper-grift

U.S. Stock Futures Fall as Goldman Faces Europe Probe

By Lynn Thomasson and Chris Nagi

(Corrects to say Germany in first paragraph.)

April 19 (Bloomberg) -- U.S. stock futures fell, extending the biggest one-day decline in more than two months, after the U.K. and Germany signaled inquiries into Goldman Sachs Group Inc.

Contracts on the Standard & Poor’s 500 Index expiring in June slipped 0.4 percent to 1,185.9 as of 8:13 a.m. in Tokyo. The benchmark index for American equities retreated 0.2 percent last week, halting the longest streak of gains in a year. Nasdaq 100 Index futures dropped 0.3 percent to 2,004.5 today.

Goldman Sachs faces a regulatory probe in Britain and scrutiny from the German government after the U.S. Securities and Exchange Commission sued the firm for fraud tied to collateralized debt obligations. U.S. equities decreased the most since February after the suit spurred concern fallout from the financial crisis isn’t over.

“You get a punch in the gut with these Goldman Sachs issues,” said Don Wordell, who oversees the RidgeWorth Mid-Cap Value Equity Fund, which has beaten 97 percent of its peers during the past five years. “It brings investors back to reality. There’s a tremendous amount of skepticism.”

Yen-denominated futures on Japan’s Nikkei 225 Stock Average expiring in June closed at 10,915 in Chicago on April 16, down 1.7 percent from 11,105 in Singapore. New Zealand’s NZX 50 Index fell 0.8 percent to 3,285.15 in Wellington today. Australia’s S&P/ASX 200 Index futures contract lost 1 percent to 4,950.

Weekly Decline

Goldman Sachs sank 10 percent last week, the most since March 2009, after the SEC sued the bank and one of its vice presidents. The 1.6 percent retreat in the S&P 500 on April 16 erased gains earlier in the week spurred by better-than- estimated results at companies from Intel Corp. to CSX Corp. and JPMorgan Chase & Co.

Goldman Sachs, the most profitable firm in Wall Street history, wiped out its 2010 advance and ended the week at $160.70, the lowest price since March 3. The SEC said the bank created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against them. Goldman Sachs said the claims are “completely unfounded.” Paulson wasn’t accused of wrongdoing.

Bank of America Corp., Morgan Stanley and JPMorgan Chase & Co. lost more than 4.7 percent on April 16. The lawsuit comes as President Barack Obama is trying to pass the most sweeping overhaul of financial regulations since the 1930s. The proposal would mean more oversight of derivatives trading and hedge funds, a consumer financial-protection authority and a system for unwinding large systemically important firms when they fail.

European Losses

Deutsche Bank AG, Germany’s largest lender, fell 7.3 percent to 55.99 euros on the day of the suit for the biggest retreat in more than eight months. UBS AG, Switzerland’s biggest bank by assets, slipped 2.8 percent to 17.93 Swiss francs. BNP Paribas SA, France’s biggest bank, slumped 3.8 percent to 55.35 euros.

U.K. Prime Minister Gordon Brown yesterday called for the Financial Services Authority to start an investigation, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.

Podcast: Mike Swanson Asks, Should you buy Goldman Sachs?

http://www.wallstreetwindow.com/content/node/15141

You are either a contrarian or a victim when it comes to Bonds:

Get ready to shift your mindset..do not fall into the trap of buying into Bonds when the whole world is rushing in to new Government  bond funds. You must think like a contrarian or be a victim. Louise Yamada, doyenne of Technical Analysis, explains from both a fundamental and Technical Perspective:

Kingworld interview below:

Louise Yamada is legendary for her technical work on Wall Street and has made some amazing calls in her career including as an example; water all the way back in 1995 when no one was looking at water. In this interview Louise covers gold, silver, the stock market, U.S. Dollar, bonds and interest rates, oil and energy, leadership going forward and much more.
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/4/17_Louise_Yamada.html

From Bloomberg

Treasuries Near ‘Structural Bear Market’: Technical Analysis

Share Business ExchangBy Cordell Eddings and Thomas R. Keene

April 12 (Bloomberg) -- Treasuries will enter a “structural bear market” if yields close above key levels, according to Louise Yamada, the former head of technical research at Citigroup Inc.

A close in the 30-year bond yield above 4.8 percent “will have completed the bottoming process that will initiate the new structural bear market,” Yamada, managing director in New York at Louise Yamada Technical Research Advisors LLC, said in an interview with Tom Keene on Bloomberg Radio.

“People who are putting long-term money into long-term bond funds may have it wrong,” she said.

The 30-year bond yield fell 0.03 percentage point to 4.71 percent today in New York, according to BGCantor Market Data. It reached 4.8559 percent on April 7, the highest level since October 2007.

Treasuries rose to record highs in December 2008, with the yield on the 30-year bond decreasing to 2.5090 percent and the 10-year note’s yield touching 2.0352 percent.

Yamada correctly predicted in January 2008 that the Standard & Poor’s 500 Index would fall into its first bear market since 2002. The index plunged 38.49 percent that year.

Technical analysts study charts of trading patterns to forecast price changes. A structural bear market is a general decline in the bond market over an extended period of time.

AGRI-FOOD THOUGHTS

Now this is some scary stuff. Queenbee
While out this week shopping at your favorite food store, do something for one of your grandchildren. Use that fancy cell phone to take a few pictures of those food stores. Be sure to get several of the store fronts with people entering. With those pictures you may be able to convince your disbelieving descendants that a time did exist when grocery stores did not have armed guards.

Each day brings the world one day closer to global Agri-Food inadequacy. On one side demand around the world continues to rise as the number of people increases and higher incomes allow those in China and India to buy food on world markets. As we have written many times, China has demonstrated that hunger is not a problem of inadequate Agri-Food. Hunger can be cured by higher incomes that allow consumers to simply buy Agri-Food in world markets. Such is the approach being implemented in China, and they may have the money to outbid many.

In our first chart above is plotted, using the green line and the left axis, China’s consumption of three of the most important grains. Shown is the sum of the corn, wheat, and soybeans consumed by people of China. Light green line is a linear regression, and the tight fit around that trend line should be noted. Historical data for this chart comes from the USDA, and that data was used to project 2011 values.

In the five years of the chart, China’s consumption of these grains will experience an increase of 40 million tons, or about 15%. To help put that quantity in perspective, the increase is greater than the total production of corn, wheat, and soybeans by Canada. Where will the world get another Canada with which to feed China over the next five years? And then, we will need another to feed India in the five years that then follow after.

Red line in that chart, using the right axis, is the percentage of the world’s production of corn, soybeans, and wheat consumed by China. In the Agri-Food price crazy year of 2008 that percentage reached  18.6%. 2009 was, according to the USDA, a great global crop year, and the ratio fell. USDA is now forecasting second year of good luck in the farm fields, and the ratio is expected to fall slightly again. In 2011, the USDA’s black hat of forecasts will probably be out of rabbits, and the ratio will rise back to 18.3%. The forecast difference between China’s share of global consumption of these three grains will be 0.3% shy of the 2008 level, when Agri-Food prices went up dramatically. And finally, note that China has about 20% of the world’s population. What happens to Agri-Food prices when, not if, they get their fair share?         

In the past decade the world got lucky as the increased production of Argentinian and Brazilian farmers prevented the world from being either hungrier or paying more for the Agri-Food. In that decade those farmers increased the acreage growing soybeans or corn by about 15 million acres, or by about a third. In the past five years, the increased production of soybeans by Argentina and Brazil represented about 65% of the increase in global soybean production. In case you are wondering why that matters, every meal you consume every day includes some vegetable oil, one likely made from soybeans.

So much for history, what about the future? The above chart helps to understand the limits of Agri-Food. In the early 1990s, Brazil and Argentina used less than 40% of their combined arable land to produce corn and soybeans. In recent years, almost 70% of the arable land in those two nations was dedicated to producing corn and soybeans. A quite reasonable assumption is that those two nations will need to grow something besides corn and soybeans. Limits to growth in Agri-Food do exist, and they are measured in acres. 

China will feed the nation in the years ahead as it will be generating the income with which to buy the necessary Agri-Food. However, the world does not have another Brazil and Argentina with which to keep Agri-Food prices from rising. And then in a few years, India will be in global Agri-Food markets buying also as incomes rise in that nation. Whether or not Agri-Food prices in the future  will be higher is no longer a relevant question. Rather, how high will Agri-Food prices rise and how will the rest of the world afford the higher prices?

Agri-Food prices, as we have reported many times in these articles, have risen at a rate far faster than the return produced by equity markets. Even with Gold, your portfolio may not be adequate to feed your family in the coming years. To help investors understand the returns generated by Agri-Food commodities, we recently released our quarterly report on the topic,Agri-Food Commodities: An Investment Alternative. You may read that report at this link:http://www.agrifoodvalueview.com/files/Agri-Food_Commodites_An_Investment_Alternative_2010_April.pdf

© 2010 Ned W. Schmidt

How Safe Is Your Money: International taxation, expatriation & the safety of bullion vaults

http://www.financialsense.com/fsn/main.php

Today I am just going to refer you to Financial Sense to listen to as much as you can. Great shows today. These are the topics today. Queenbee

HOW SAFE IS YOUR MONEY: INTERNATIONAL TAXATION, EXPATRIATION & THE SAFETY OF BULLION VAULTS

PROTECTOR TO PREDATOR: NAKED SHORTSELLING, GOLDMAN SACHS & CONFLICTS OF INTEREST

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