Saturday, May 14, 2011


In a sentence......controlled, globally coordinated commodity takedown. Is it the end of the commodity trade? NO....not as long as you can read the bottom line. What is the bottom line you might ask? 14.6 Trillion of government debt. That is your headline today. But its not the 800lb gorilla. Its the state municipal and unfunded mandate. They are the ones that are gonna kill us.

Here are a few facts to consider: (Source: CIA Factbook)

1.The U.S. GDP is presently stated to be $14.7 Trillion. Consider that this number includes Government (Federal & State) of $6.7 Trillion. That leaves us with a non-governmental economy of a mere $8 Trillion, net.
2.This 8 Trillion Dollar Economy breaks out this way: Agriculture – $17.6 Billion, Industrial Output – $3.3 Trillion and the Service Sector – $4.6 Trillion.
3.U.S. Industrial Growth – 3.3% (World Ranking: 98th).
4.U.S. Federal Spending (2011) is estimated to be $3.7 Trillion. State & Local Government spending projected to be $3.2 Trillion.
5.Total U.S. Federal Debt: $14.3 Trillion (stated). Although if you add to this number the Federal Government Guarantees under TARP, FannieMae & FredieMac, FHA and the Global Banking System Float by the Federal Reserve then we would need to add, at the moment, an additional $9.3 Trillion. Lastly, if you really want a view in to the completely absurd then of course you will need to consider the Federal Unfunded Mandates toping out at a hefty $112 Trillion. Lastly,
6.Not included in the numbers above is the total Debt and Unfunded Mandates for the individual States presently slightly over $4.7 Trillion

Now that you have spit your rice krispies all over the you really think that they have a grip on this? SERIOUSLY!!!! If your answer is the obvious then you must agree that there will be continued monetization of this disaster.

The question will be at what point and in what form. Right now we are in a prolonged dollar move that will reset the EURO/USD.... I cannot tell you how long or how strong but as QE2 expires there will be a serious effort to manipulate public opinion in favor of more Fed intervention and strengthening the dollar should accomplich a much needed correction in commod prices and equities. As QE2 finished out we may see a move of equities over 1400 SnP before the final flush. After would put an exclamation on the success of QE for the Fed (haha) and provide a nice diving platform for a vicious correction. You of those corrections that drag in all of the Faux bulls as bears....especially the Gartman types...proclaiming the end of humanity. It will be beautiful. AND I might even be short if we got up into that zone in June.

That is all speculation so what is the real play? Longer term the Gold Silver play is intact. Commods....especially essentials may see a severe beatdown. Energy plays would take a hit. They are really needing a bounce here btw....which is why this market COULD be going up in June. All in all its a chop shop here but if you have a core of miners ....hold on. Gold miners like EGO GFI starting to blink blue light lets watch..


  1. FWIW -

    Don't forget the "moon" on the 17th.

  2. IMF chief arrested for raping a maid, 4th amendment repealed in Indiana.