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  Jim Kingsland

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  6/18/12

  Short Post Today

  Today is moving up day at my youngest son’s elementary school. I’m out the door shortly.

  Me In The Media

  This appears in the print edition of IBD today on whether plastic currency will ever fly in the U.S:
  http://news.investors.com/article/614991/201206151431/plastic-money-unlikely-in-united-states.htm?p=full

  I don’t see plastic currency coming to the U.S.

  Did something Happen in Greece over the Weekend?

  Right, the big election. Buy the rumor, sell the news. The pro bailout folks have the upper hand for now. As suggested in Friday’s post, the situation will drag on and it looks as if it will drag on as long as the funny money is available. With Spain still struggling in credit markets, Italy waiting in the wings and all the rest, one should be wondering where all the back stop will be coming from. They won’t be able to continue to printing Ponzi forever.

  Key now is the forming of a pro euro (bailout) coalition in Greek parliament. With cash dwindling and another IMF shovel load of bailout money at risk, this is likely to be accomplished.  

  Futures have started off weak. That’s not a good thing – not even a relief rally which had seemed like a somewhat reasonable idea going into the weekend, or maybe it was just dumb. Europe is broken so all the bulls shall be getting are short term doses of hopium as it spirals down the financial toilet.

  The move of 10 year yields in Spain and Italy to above 7% is no doubt casting a pall on Wall Street thus far. A mysterious move below 7% could trigger a bounce higher for stocks.

  RELATED: No let-up for Spain, Italy pain after Greek vote http://reut.rs/Mh5DDf

  The credit indicators to watch are of course the pricing of credit default swaps. They are expanding again.

  Italian CDS 557 bps, +13

  600+ is a critical level in CDS land.

  Spain CDS 32bps wider at 627bps. Needless to say a record

  CDS blowouts at these levels increase the probability of coordinated central bank intervention for whatever that’s really good for.  

  This again shifts money flow toward king dollar which then results in gold drifting in the $1620s.

  The Fed

  Speaking of “hopium”, like a doggy looking with his kibbles and bits, the FED meets tomorrow and Wednesday. The funny thing with the Fed, which is really not so funny, is that the Fed will have to come up with a supersized, unofficial unlimited QE to keep any QE announcement from becoming a spike higher, then “sell the news” phenomenon. But aside from playing around with the bank reserve ratio, what else can the Fed do. Since America won the prize of its currency being designated as the reserve currency of the world at Bretton Woods, NH., the Fed gets to create reserve which is the technical term for printing. And for that matter, it’s not printing, it is really a creation of digi dollars done through keystrokes and not ordering up “paper” which actually is specially made “paper” that is actually composed of cotton and linen. Paper dollars are not a wood product. But I digress.

  The upshot of the Wednesday Fed announcement is to expect volatility. Even if the Fed sits on its hands and does relatively nothing, the markets (including gold) will go into a big dither.  

  EU. G20 meeting this week also promise to stir things up.

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