A preliminary apology is in order. What follows is uber wonkish and should be consumed preferably in small quantities. In fact, I am not sure that I have gotten everything right yet. Of course, we never are but in this case it is an important point to make up front. The argument is loosely built on my upcoming master's thesis which seeks to explore the connection between ageing and capital flows and specifically how and whether the former may lead to a state of export dependency; where export dependency is defined as a high and increasing sensitivity of the rate of change of national income to the rate of change of the current account. This is something I have discussed extensively on AS, but in this case I am trying to give it a thorough theoretical spin which means that any non econ-wonks are likely to be

Obama defends his policies…Commodity currencies should outperform…Global Power Shift Index…And Now… Today’s Pfennig!

Good day… And happy Thursday to everyone! Hope everyone made it through the ‘hump day’ with no worries. We started the morning here with rainshowers, but it ended up being a beautiful afternoon and evening. Currency markets were similar to the weather here, as most currencies started Wednesday in the loss column vs. the US$, but rallied as the day progressed. The dollar had strengthened over the past couple of days due to ’safe haven’ demand; but a surprisingly strong durable goods number (ex autos) combined with an ‘all clear’ signal from President Barack Obama had investors moving back into riskier assets. The commodity based currencies also got a boost as China signaled it would maintain an accommodative policy, easing speculation that the Bank of China would try to rein in bank lending. Lots to cover today, so

The International Monetary Fund’s prediction that the much-anticipated global economic recovery would be fragile kept sentiments under check in the early hours of trading Wednesday but stocks staged a late rebound as traders picked up defensive plays.  Despite persisting worries about how soon the economy would be out of recession, focus shifted to companies as the earnings season got underway with Alcoa (NYSE:AA) reporting its earnings after the close.  Expectations, however, are reasonably low as analysts expect a 36% drop in profit for S&P 500 companies. 

A three-month old rally lost steam in mid-June as grim economic posts and unemployment numbers failed to convince investors of an incipient economic recovery.  Those worries were punctuated by the June jobs report that was released last week and a separate survey which noted the unemployment rate jumped to 9.5% had investors scurrying to cut positions.  Moreover, the measure of market volatility, the

With the Rally Nearly Over the Germans are Buying Gold.

The Dow fell another 107 points yesterday. Oil held steady at $70. The dollar fell to $1.38. And gold rose $4 to 932.

What if the rally is over? Could be… It began on 9 March. That makes it more than 3 months old. Most likely, it will continue through the summer. But who knows?

The important thing to remember is this: there can be no major, sustained bull market without one of two things happening.

Either… the mistakes of the Bubble Epoque must be cleared away… allowing for a new era of genuine growth and real prosperity. At best, this would take a few years to achieve. Just imagine how long it will take to restructure GM into a profit-making business again. Just imagine how long it will take consumers to pay down their debts so they can begin to spend again. Just

Daedalus warned his son not to fly too close to the sun, nor too close to the sea. Overcome by the giddiness that flying lent him, Icarus soared through the sky curiously, but in the process he came too close to the sun, which melted the wax. Icarus kept flapping his wings but soon realized that he had no feathers left and that he was only flapping his bare arms. And so, Icarus fell into the sea. - Wikipedia entry on Icarus

Whether it is merely temporary or a sign of something more durable it is hard to escape the fact that as the discourse on green shoots and second derivatives linger we might be entering a new leg of this crisis. Thus, there should be no mistake. We are very much still stuck in the mire and especially so in the context of the so-called developed OECD economies

Euro climbs back to 1.30…  High Yielders bounce back…  Gold to hit $1,500?  Kurt Richebacher… And Now… Today’s Pfennig!

Well… We had a rally in the currencies yesterday and this time the rally wasn’t reversed overnight by profit taking! WOW! It’s been some time since we could say that! Maybe it was the good karma the overnight markets received by my little buddy Alex’s base hit last night to drive in 2 runs! Or, the good karma from a Cardinals pitcher going into the 9th inning of a game! WOW! Or… Maybe, just maybe, cause you never know, fundamentals are creeping back

The gold-to-oil ratio is at ten-year highs – a single ounce of gold can now purchase 22+ barrels of WTIC crude. But what does it mean? For individuals, gold remains the best insurance against future shocks and the best store of value. – William Rees-Mogg, Times Online

There has been a lot of talk lately about the gold-to-oil and gold-to-silver ratios. This is understandable, as both ratios are further out of whack than they have been for a long time.

The gold-to-oil ratio, for one, is now at ten-year highs.

The gold-to-silver ratio is similarly extended, though not by nearly as much as gold-to-oil.

For gold-to-silver, the 200-month moving average is 57 and the current value (as of this writing) is a touch above 69 – meaning a single ounce of

Mr. Gideon Gono, head of the Reserve Bank of Zimbabwe, suddenly shifted from adding zeros to subtracting them leading the world in deflation.More from Daily Reckoning’s Bill Bonner:

Zero is a perfidious number.  Nobody likes it.  Nobody wants to be “a zero.”  Nobody wants to get a zero on a test…or zero returns on his investments.

It is a line that leads nowhere…with no substance in the middle of it.  You can add a zero…or multiply by zeros; it gets you nowhere.  And is a zero?  Is it something?  Or nothing?  No one knows.

Some remarkable news in the history of zeros appeared last week.  Mr. Gideon Gono, head of the Reserve Bank of Zimbabwe, suddenly shifted from adding zeros to subtracting them.  Within the space of 76 hours, Zimbabwe led the world in two opposite directions.  On Monday, with prices rising at 231 million percent per

Retail sales disappoint….  Chuck’s views on the Lone Prop…  Waiting on the ECB…  Emerging market currencies sell off…  And Now… Today’s Pfennig! Good day… The big news yesterday was the retail sales numbers, which fell twice as much as expected. Chuck predicted a tough Christmas season, and the BHI was right again. Sales dropped 2.7 percent according to yesterday’s report from the Commerce Department. The falling home prices, rising job losses, and tighter credit have all combined to finally force US consumers to adjust their spending habits. No matter how low retailers slashed prices during the recent Christmas season, US consumers just weren’t buying. The economy is forcing consumers to wean themselves off of the dangerous drug of easy credit. In spite of Bernanke and Paulson’s attempts to get consumers borrowing and spending again, the economic slowdown is forcing the US consumers to reign in their spending. But while this

Give us Madoff! Give us Madoff!  “Oil rises to $39 on Bernanke comments…”  “Asian stocks rise after Bernanke remarks…” When they turned out the lights and closed the doors in New York last night, the Dow had lost 25 points and oil had gone down to $37. But this morning, investors seem to be feeling better about things. What did Bernanke say to bring about the turnaround?

We find the report on the front page of the International Herald Tribune:

“More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets,” said the main man at the Fed, speaking to an audience at the London School of Economics.

He went on to say that he didn’t necessarily like bailing out Wall Street, but it “appears unavoidable.”

Nothing particularly exciting about that. But then we turn to page 12:

“Bernanke warns that bigger bailouts needed around the world,” is the