Market Drops as Fears of a Double Dip Rise

Gotta love Opex days.  They are always full of surprises.  Stocks fell sharply today as poor earnings from BAC, Google, and GE increased fears that the economy may be headed back into recession.

A collapse in consumer sentiment added to the fears that a double dip is on the way:

Consumer sentiment was way below consensus:

"July 16 (Bloomberg) -- The Thomson Reuters/University of

Michigan preliminary index of consumer sentiment fell to 66.5 in
July from 76 a month earlier.
The gauge was projected to fall to 74, according to the
median forecast in a Bloomberg News survey of 62 economists.
Estimates ranged from 71 to 78."

My Take:

As you can see this was a huge swing and a miss.   Should we be surprised?  You know my answer.  I have been preaching for weeks that the consumer is dead until he deleverages his or her balance sheet.  Folks this process is going to take years and years not months or a few quarters.

The Fed served it up to you on a silver platter this week:  They are predicting that it will take 5-6 years for this deleveraging process to work itself out.  I predict it will be much longer than that but I will save that argument for a later day.

The staggering losses that have to be taken in housing will only exacerbate dire situation that the consumer faces.  When the sheeple actually realize how much they have lost on their homes I expect that they will start hoarding their cash as they become increasingly worried about both their debtloads and job security(that is if they have one).

The consumer data today tells you that this hoarding process might have already started.

Folks, all signs are telling us that the economy basically hit a wall in the May/June time frame.

This reminds me of the way the economy stopped in late 2008.  The consumer is once again about to disappear after temporarily spending since the lows last March.

Making matters worse for the consumer is the fact that unemployment benefits are starting to run dry.  I believe over 1 million people have run out of unemployment benefits in the last couple months.

This will make the double dip feel even worse this go around because we didn't have this issue back in 2008.

The Bottom Line

Things are bad and getting worse. 

Another thing to note also note here is the continuing unwind of the USD.  I warned about the possibility of this earlier in the week.  Yesterday the dollar got crushed.  The FOMC minutes was the trigger for the selloff according to most of the media outlets.

The perception out there in the credit markets is that Europe is heading in the right direction via austerity at the same time the USA is heading in the wrong direction via continued stimulus and the risk of a potential QE2.

The bankers are addicted to easy money and the Fed has shown zero signs of changing this.

The problem is the rest of the world is heading in the opposite direction.  This is a huge problem for the Fed because then FX markets are now hammering the dollar as a result of our financial recklessness.

I double dog dare Ben to attempt a QE2 at this point after seeing what the FX markets did to the dollar this week following their wimpy statement.

Remember folks, crushing a countries currency is just as damaging as refusing to buy it's debt(treasuries).

In either scenario the Fed will be forced to raise rates because they will not be able to fund their spending. 

Rising rates would then flush the banks and their worthless balance sheets right down the toilet.  It's pretty much game over at this point.

Let's all pray the Fed doesn't attempt another QE.  As you can see the shills on CNBC are already begging for it:





Expect to hear more QE2 bubble talk from the bankers in the coming weeks.

Can't you just hear the desperation in their voices?  THEY KNOW THE PARTY IS OVER WITHOUT MORE EASY MONEY VIA QE FROM THE FED.

We CANNOT let them do this!

The government MUST say NO.  We risk an outright currency collapse if we attempt more easing when the rest of the world is heading in the other direction.  The the bond and currency markets could very well throw us right under a bus in response to this!

Stay the hell out of this market until we get some clarity here.  This thing could unwind in a hurry if Bernanke continues to risk the solvency of this country in an attempt to save the financial elite in this country.

The $20 Trillion Dollar Showdown

Not that I am surprised:

"July 15 (New York Times) -- Goldman Sachs has agreed to pay
$550 million to the Securities and Exchange Commission to settle
charges of securities fraud linked to mortgage investments sold
to investors, a person briefed on the matter told The New York
Times's Edward Wyatt."

Quick Take:

This ruling is just further confirmation that the elite of this nation control this country.  According to the settlement:  Goldman also doesn't have to admit guilt which will protect them from being sued.

Needless to say I am extremely disappointed in this result.  When is this country going to stand up and do the right thing?  This firm was selling CDO's at the same time they were shorting the same paper with the firms own money.   This is blatant fraud and all Goldman gets from the SEC is a slap on the wrist.

Why isn't anyone going to prison for this.  The housing bubble was the largest fraud in the history of this country. 

America was scammed to the tune of $7 trillion dollars:

Why are the banks allowed to get away with this?   Look at the chart folks.  If you bought a house within the past 5 years you were sold a bill of goods.  The suckers that were sucked into this Ponzi scheme have now taken a $7 trillion dollar loss on their $20 trillion dollar housing investment.

And prices are still dropping!

Buying a house during this period was similar to buying a car: Both purchases lost 30-40% of their value as soon as the ink dried on the loan papers.

The American dream of owning a home has quickly turned into the American nightmare! 

There will be no strong recovery in this country for a generation because the banks have turned every Mcmansion homeowner with a mortgage into 30 year debt slaves.

Everyone is nor running away from housing in droves now that everyone realizes they were scammed.

Sales have now fallen off a cliff:

What a disaster this whole thing is.

How does the SEC give Wall St a free pass after sucking every last nickel out of America between home loans and credit cards?

More importantly, how do we even begin to recover from such massive losses that need to be taken on these Ponzi investements?

The reality here is most of the people that bought these homes cannot afford them and are now defaulting or deciding to "walk away".  Foreclosures continue to soar and god only knows how much shadow inventory the banks are sitting on. 

Even the rich who can afford them are deciding to walk:

"LOS ALTOS, Calif. — The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.


Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars is seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.
“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist."

Continued Take:

This is what happens to Ponzi bubbles once they start deflating.  When the game is over everyone heads for the exits.  The problem we have here is there is $20 trillion dollars in mortgage debt that hangs in the balance as people start running away.

This is all well and good up until now because the homeowners were allowed to walk away because the banks were allowed to hide their losses on their balance sheets.

The problem is this model is not sustainable because the losses must be taken at some point.

As expected, Fannie and Freddie are rapidly waking up and realizing that this "walking away" thing is rapidly turning into a potential financial catastrophe:

"NEW YORK (AP) -- Government-sponsored mortgage purchaser Fannie Mae is trying to encourage distressed homeowners to find alternatives to foreclosure by banning those who walk away from getting new loans for seven years.
Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy announced Wednesday.
"Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting," said Terence Edwards, executive vice president for credit portfolio management.

A strategic default occurs when a homeowner stops making payments on a mortgage despite being able to do so. It has become increasingly common in communities where housing values fell sharply and homeowners are "underwater," or owe more than their houses are worth.
Fannie Mae said that in locations where the law allows, it also plans to take legal action to recoup outstanding mortgage debt from borrowers who strategically default. The company plans to instruct its servicers to monitor delinquent loans facing foreclosure and recommend cases to pursue for such judgments."

The Bottom Line


Things are about to get really dicey folks.  The smart ones that walked away were the ones who made this move early.

From here on out you can expect the banks and the government(who back the paper) to start going after all assets in order to get their money back.

If you don't have the assets then they are going to go after your paycheck.

So we now have this "lovely" situation where houses continue to drop in price which forces more people to run for the exits which now is going to force the banks to take the borrowers to court in an attempt to get their money back.

There is  no other option because they can't afford to take the losses on the $20 trillion dollar housing Ponzi scheme.

This process is going to take decades to be worked out of the system.  The consumer is going to fall off a cliff once they realize they must continue to pay on their "loser" investment. 

The days of "squatting" and  "walking away" are now history folks!

The government and the banks can no longer afford to turn a blind eye to the housing mess.  This "realization" is happening at the same time the sheeple are realizing they were scammed for $7 trillion by the banking/housing industry. 

Now they want out and they are in the process of being told that they can't.

With $20 trillion on the line the banks and the government have no other choice but to force you to pay for that American Dream.

How anyone can be bullish long term on the economy once the consumer realizes the party is over in housing.

I can't wait to see how unemployed Americans react to actually being forced to make good on a bad investment that was based on a fraudulent Ponzi scheme. 

The fact that Goldman was able to walk away today without being forced to be held accountable tells you all that you need to know when it comes to who actually is going to end up paying for this $20 trillion Ponzi scheme.

Forcing $20 trillion down the throats of the US taxpayer is going to be interesting to watch. 

I wonder how many bankers will be hanging from lamp posts after millions of broke borrowers are told in court that their wages are going to be garnished for the next 30 years after being fraudulently being suckered into overpaying for a house?

To be fair there is a lot of blame to go around here.  The realtors,  buyers, appraisers, and the banks are all responsible.  The problem is the music has stopped and the banks are being allowed to walk.

This means YOU are on the hook for the $7 trillion in losses. 

Meanwhile, as of today, the bankers have been told they get a free pass.  What makes this even more disgusting is the fact that they get to keep the billions that they made of this scam.

Anyone starting to get angry yet?  If your not then you should be.

Disclosure:  No new positions taken at the time of publication.

Is the Fed Running Out of Bullets?

A little humor is always needed during times like these so I thought I would start out with a little Jon Stewart.

Funny Stuff!:

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
America's Got Nothing
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

Is The Fed's Bazooka Empty?

If you read the FOMC minutes today it sure sounded like it.

Let me highlight a few of the statements from the Federal Reserve in today's minutes:

"Overall, participants continued to expect the pace of the economic recovery to be held back by a number of factors, including household and business uncertainty, persistent weakness in real estate markets, only gradual improvement in labor market conditions, waning fiscal stimulus, and slow easing of credit conditions in the banking sector.

Participants generally anticipated that, in light of the severity of the economic downturn, it would take some time for the economy to converge fully to its longer-run path as characterized by sustainable rates of output growth, unemployment, and inflation consistent with participants' interpretation of the Federal Reserve's dual objectives; most expected the convergence process to take no more than five to six years.

Fiscal policy was also seen as currently contributing to economic growth, although participants expected that the effects of fiscal stimulus would diminish going forward and also anticipated that budgetary pressures would continue to weigh on spending at the state and local levels.

Participants noted that financial conditions had tightened somewhat because of developments abroad. The effects of a stronger dollar, a lower stock market, and wider corporate credit spreads were expected to be offset only partially by lower oil and commodity prices and a decline in Treasury yields.

Many participants anticipated that the economic expansion would be held back by firms' caution in hiring and spending in light of the considerable uncertainty regarding the economic outlook, by households' focus on repairing balance sheets weakened by equity and house price declines, and by tight credit conditions for small businesses and households.
"

My Take:

Translation?

We have done everything that we can and it hasn't worked. Our Ponzi government spending has been a short term positive for GDP as we use our balance sheet to replace the consumer.

However, because this massive government spending is unsustainable, we don't expect that it will have a positive effect on GDP going forward because we will blow ourselves up if we continue spending at this pace.

Therefore, we give up and you are on your own. Things should look a lot better in 5-6 years as prices collapse as the banks and consumers continue their deleveraging.

Until then you are on your own because there is nothing else we can do...Good Luck!!!!

Alright let me turn my scarcasm down just a tad. The reality here is this is what they are really are saying in my view, however, I don't believe for a minute that they are going to sit on the sidelines and allow the destruction that they describe above to happen without taking drastic action.

If you read between the lines here I believe we are getting setup for another spending spree(QE2) by the Fed.

Bonds soared after the FOMC minutes hit the wires. The talk of the bond market was the dire unemployment situation that was described by the Fed.

Can you blame them? What they are thinking is this: How can we recover if people don't have jobs?

The Fed pretty much admitted today that we are about to see another 5-6 years of anemic growth. This is really an admission of another "lost decade" when you consider the fact that we got into this mess 4 years ago.

This is a pretty startling revelation when you when you think about it.

The Bottom Line


The Fed pretty much painted a dire picture of deflation today.

They amusingly predict that this process will only lead to slower growth and then reconfirmed that they don't believe that this will lead to another "double dip" recession.

Oh really? Why doesn't Ben give Japan a call and see how this deleveraging via deflation worked out for them? The NIKKEI has gone from 39,000 down to 10,000 in the 20 years since their credit bubble burst.

I think this is a bunch of hogwash. They know darn well that the consequences of delation will be catastrophic to the economy as the process of deleveraging continues via lower prices and slower demand as unemployment continues to stay high.

This "doom talk" is merely a setup for futher action down the road. I expect that the statements out of the Fed will sound increasingly bearish moving forward as they attempt to scare Congress into another spending spree.

Ben will not allow the word "deflation" to be printed on his gravestone. He wants to be the central banker who finally defeated deflation.

He doesn't want us to start the healthy process of beginning to live within our means via deleveraging/deflation.

Bernanke wants us all to keep borrowing dammit! The Fed needs us to spend spend spend until we all end up being debt slaves for the rest of our lives!

The whole thing is so insane when you really think about it. The reality here is the deleveraging process cannot be stopped because we longer have the ability or desire to borrow more money.

Without the velocity of money via borrowing the game is over for the banks and Ben knows it.

He also knows that the Fed has used all of the ammo left in his repitoire.

Lending rates are at all time lows and it has done nothing to increase the demand for lending or consuming. What else can he do? Bernanke can't reach into our pockets and force us to buy a flatscreen TV that we can't afford.

It's over but that doesn't mean the Fed won't go down without a fight.

The war of deflation vs. inflation is far from over. Both will have their time in the sun over the next several years.

So which side wins? A lot of it is going to depend on Fed policy and who is in power down in DC.

If the Fed stays on the sidelines as it hinted above then the short term risk is severe deflation followed by a severe inflation a couple years out.

If the Fed goes to far to fight deflation via QE2 then the inflation crisis will come that much quicker.

In the end prices will drop unless the Fed prints or devalues our currency. Regardless, rates will have to rise down the road either way because the money creation has already been severe, and the smart money realizes that the best of printing is yet to come.

Stay tuned!

Disclosure: No new positions taken at the time of publication.

Is the US Dollar in Trouble?

Good Afternoon All!

The rally rolls on.  We closed just below 1100 on the S&P.  The futures are up strong after the close as the bulls continue to get emboldened by their recent winning streak.

I am not surprised we got back up here.  I had said a few days ago that the market becomes an interesting short at the 1100 area.  However, I did not think we would get here so quickly so this rally may have some more legs as we head into OpEx.

With all of the speculation that we are seeing in the markets the economic data simply doesn't matter right now.  Traders have gone hog wild buying calls as the shorts are forced to cover which exacerbates moves higher in the market.

This is why I basically avoid the market all together at this point.  As I have said many times recently:  The stock market has turned into nothing but a speculative casino where the odds are stacked against you because you are not on the inside.

If I want to gamble, I would rather take some money out of the ATM and go to the casino and play some craps.  This seems far more prudent versus trying to trade or invest your life savings in the Wall St casino.

The idea of "buying and holding" makes even less sense if you have a bearish fundamental view as to where we all end up when this roller coaster ride finally ends.  I expect equities to look like the the NASDAQ did in 2000/2001.

Like all gamblers, most of the traders will end up broke.  The problem this go around there will be no jobs to make back their losses this time like they were in 2001 as the housing bubble got started.

Some final advice on trading before I get into some analysis:  If you decide to speculate in this market, use the same amount of money you would take to a regular casino.  Expect to lose it.  If you make some good calls then take some profits and save them.  You are going to need the money to survive on when this whole economy collapses.

Please don't get stuck holding the bag like many did earlier this decade.

Alrighty, let's get to Mr. Market:

Is the US Dollar in Trouble?

I am seeing some really smart money starting to bet on a weaker US dollar and inflation.

I will explain why below.  First let's take a look at the Euro versus the US dollar the past couple weeks:

My Take:

As you can see, the Euro has been soaring in recent days versus the USD.  What's interesting about today's move is the Euro rose sharply despite the bearish news on Portugal:

Portugal’s government bond ratings were cut to A1 from Aa2 at Moody’s Investors Service today.

So why didn't the dollar strengthen against the Euro after such bearish news?

IMO, investors are starting to change their views since Europe has announced severe austerity measures.  If they are able to implement these austerity measures things will dramatically improve when it comes to their debt markets.

If the United States does not come along for the ride its going to find itself in hot water.

As Europe begins to dig themselves out of debt, the bond market will start worrying less about debt downgrades in Europe because they understand that things should improve following massive spending cuts.  We saw an example of this today when the Portugal news was basically ignored.

I think the smart money is beginning to bet that the US does not have the political will to implement severe austerity measures.  The Fed appears to still want to spend like drunken sailors.  They have given us no other indications to think otherwise.  

If we continue to spend as Europe tightens it's financial belt the US dollar is going to get slaughtered.  Inflation will then become a serious threat.

John Paulson seems to be taking this trade with his recent moves by going long housing mainly in Florida and gold.  Here is an excerpt from a recent speech in London:

"But Paulson's own investments -- his fund is rated no. 1 in the world by Barrons -- reflect his inflation concerns: His firm is the largest holder of gold exchange-traded funds in the world. Paulson told his London audience that he fears future currency instability and inflation "due to the large amount of quantitative easing."

Paulson said he denominates all of his assets in gold and is bearish on the dollar. And he thinks we'll see high single and perhaps even double-digit inflation in three to five years, which he why he has been known to advise buying as many homes as you can stuff in your pocket."

The Bottom Line

Now do I think John Paulson is really long housing?  Not one bit.  But he is scared to death of inflation.  One way to protect yourself from inflation is to own housing. 

If you are going to buy housing as a hedge to the dollar, the smartest way to do it would be to find the worst performing housing market and buy. Florida is the perfect place to do so because prices are 70% from the highs in some areas. 

I have been reading about other hedge funds that now share this inflation concern.  Bill Fleckenstein is another smart one who has the same take except he prefers gold.

The bottom line here folks is the world is understanding that Keynesian Ponzi spending isn't working.  Europe is finally concluding that the only answer to this crisis is to suck it up and start digging out of debt.

The problem we have over here is the politicians in DC and the Fed refuse to accept real austerity because it means that many of the elite in this country must be forced to take huge losses.

We are doomed in my opinion unless we are able make some serious changes in Washington.  We need to stop listening to the banking lobbyists and start doing whats best for the country fiscally.  If we attempt to ignore austerity and instead try to attempt a QE2 I think the US Dollar is in serious trouble.

I would advise that you hedge yourself out by holding some assets like gold, TIPS, and other commodities.

If you are 100% in the deflation trade then you risk holding a currency that might get destroyed as a result of our failure to realize losses and accept the pain that eventually will be unavoidable.

Disclosure:  No new positions at the time of publication.

Has America decided to "Walk Away" From the Stock Market?

Today was pretty much a snooze fest on Wall St but a few things did catch my attention.

Have Investors Lost Interest in Stocks?

It appears the retail investor has had enough of Wall St's stock bubbles:

As you can see above Americans are starting to bail on 401k stock funds in numbers that are now approaching the levels seen in 2008.  The way I see it:  The retail investor has finally had enough after seeing their retirements get cut in half in the stock market twice in the last decade.

A few comments from the piece linked above:

"Small investors' faith in stocks, which surged in the 1990s, has collapsed since the technology-stock debacle and the Enron and WorldCom scandals of 2000-2002. The 2007-2009 financial crisis only made things worse. Now, the pullback among ordinary investors means they are a declining force in a market that is increasingly dominated by professionals.


Some were tantalized by equities during the 70% rally that began in March 2009 and ran through April. But mutual-fund data and other clues suggest that that brief infatuation has ended.

In 2002, investors withdrew more money from mutual funds that invest in U.S. stocks than they put in. Then from 2007 through 2009 they withdrew money for three consecutive years. That marked the first three-year period of withdrawals since 1979-1981, according to the Investment Company Institute, a mutual-fund trade group. This year, U.S.-stock funds saw inflows in January, March and April, but net withdrawals resumed in May."

Final Take:

Can you blame them? 

Wall St has turned into a totally manipulated casino where the "the house"(the large banks and hedge funds) have a huge advantage because they get the inside info before we do on things like bailouts and reforms. 

They also benefit via "back room" conversations where the large trading desks tip off their best clients when they are about to make a huge play long or short.  This gives them another huge advantage versus other market participants..

What the "little guy" has finally figured out is that placing bets on Wall St is no different than placing bets at a casino in Las Vegas.  As we all know( and any smart gambler will tell you:  Betting against "the house" is a losers game because they hold a statistical advantage against you.  This means over time you lose.  Period.

You need to look no further than 2009 for proof:

How do you think Goldman Sachs had a month in 2009 where they had zero days of trading losses? 

Did you think they were geniuses that were doing "god's work" as they ended up in the black for 30 trading days in a row?......Ummm let me answer that one: NO!  They simply rigged the game via HFT's and other tools like any good casino does.

Remember:  Wall St will take a buck from you anyway they can because the only thing that the street cares about is money.   This is why it makes no sense to jump into the snake pit and trade against them.  You might go on a nice tear for awhile but eventually they will catch up to you.

For Example:  They will hear news on some Fed backed real estate bailout and  go long as you pile in short when you think some sector like commercial real estate is going to hell.  

You can be fundamentally right on the short side and still end up broke.  Caution and a lot of luck is needed to have any chance under such conditions unless you are one of the 1% that is profitable trading.

It works the other way too:  You can go long after hearing the stock pumpers pump up a sector.  Meanwhile they are shorting the same stocks at the same time behinf everyone's back.

Goldman's MBS game was a perfect example of this.  They were selling these securities all over the world at the same time they were shorting housing with the firm's money.  If they weren't shorting the sector themselves they were creating a CDS swap that allowed John Paulson to short the same pieces of paper they were selling long all over the world via their sales force.

Wouldn't it be great if one day all of us just stopped playing their games and "walked away" from stocks?  We are already walking away from their houses.  I say let's take the next step and walk away from their  "Speculation on steroids" casino that they like to call the stock market.

Folks think about it:

Haven't they stolen enough already? 

-  They have stolen our taxpayer dollars in order to backstop their losses like a parent that backstops a child who has a gambling addiction.

-  They have stolen away our ability to make interest on our cash investments which has crushed many retirees.

-  They have stolen our ability to afford a house.

-  They have stolen 50% of our retirements:  TWICE.

-  They have stolen our jobs as a result of not lending and sending the economy into a tailspin as a result of their gambling losses.

-  They have stolen our political system with bribes which has allowed them to stay in power and not be held  accountable for any of their reckless fraudulent behaviour which almost destroyed the banking system and has since destroyed the economy.

-  In a nutshell:  They have stolen our country and it appears no one is willing to step up and stop them.

The Bottom Line:

I am sickened by what has happened to our capital markets.  The data continues to worsen.  Today we got this news about consumer credit:

"Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use,” according to the AP. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico"

Yikes!

The number of consumers with credit scores under 650 has actually risen up to 40% according to an analyst I heard today.  Folks, who is going to buy all of these homes when 40% can no longer qualify to buy.

Even worse:  Without access to credit how is the consumer going to buy anything? It takes 7-10 years for a person to re-establish credit after defaulting. 

How does a 70% driven consumer economy grow when almost half of them no longer have the ability to borrow and spend?

I guess we are in for another lost decade?

We also got this today on the Baltic Dry Index:

"The Baltic Dry Index, a measure of commodity shipping costs, fell for the longest period in almost nine years as declining Chinese steel prices erode the nation’s iron ore demand.


The index of freight rates on international trade routes fell 38 points, or 2 percent, to 1,902 points today, according to the London-based Baltic Exchange. Today’s drop was the 31st straight decline. That’s the longest since the 34 sessions to Aug. 15, 2001, according to Baltic Exchange prices. Charter rates for all types of ships tracked by the exchange fell."

More Green Shoots!

The recent 31 straight daily declines on the Baltic Dry Index represents the longest such losing streak seen since 2001 where we saw 34 straight daily declines.  We didn't see any type of dropoff like this at the peak of the collapse in 2008 which is amazing when you look how sharply the economy contracted during that period.

What scares me here is you would be thinking deflation here after seeing numbers like the ones above. 

However when you see the most recent news:  There is more and more talk about inflation concerns from some very smart guys including John Paulson which makes me believe that the Fed is preparing for another money printing helicopterfest.

If it's not a QE2 then it could be a currency devaluation.  Either scenario is really bad.  Now could these guys just be talkign their book?  Yes but when I hear it from several guys that I respect I have to take notice. 

A QE2 which I believed was impossible is now a risk.  The worse the economy looks the higher the risk we see some sort of second money printing act by the Fed.  As bearish as I am, I didn't think the economy would reverse this violently in a matter of a month.

As a result, I expect "helicopter Ben" is figuring out how he can scare Congress into giving him another $3 trillion or so which will do nothing but prolong the agony of this economic nightmare and increase the risk of inflation and a weaker currenct. 

Disclosure:  No new positions at the time of publication.