Bill Fleckenstein: The Race To the Bottom Will Be Won By the Dollar

Submitted by Tyler Durden on 01/18/2011 23:00 -0500

"This printing money is going to lead to huge trouble. It’s going to lead to higher interest rates. It’s going to lead to more inflation and at some point there is going to be a train wreck in the currency and the bond market."
Market commentator and money manager Bill Fleckenstein sat down for a recent interview with ChrisMartenson.com and opened fire with both barrels on the Fed and the monetary policy it's pursuing. He and Chris discuss the factors that enabled Bill to be one of the first to accurately identify and warn of the housing and credit bubbles - and how history is now repeating itself via the profligate printing of US dollars. The interview covers a wide range of topics meaningful to the investor trying to make sense of where things are headed from here - including central banking culture, bubble psychology, high-frequency trading, inflation/deflation, and the true relative value of the dollar vs the Euro.
Click the play button below to listen to Chris' interview with Bill Fleckenstein:

Download/Play the Podcast
Read the Transcript of the Podcast
Report a Problem Playing the Podcast

In this podcast, Bill sheds light on why:

• The culture of the Fed reinforces a belief in its infallibility. That blinds it to the fact that its interventions cause market players to adopt irrational behavior leading to misallocations of capital that eventually need to be corrected by the system (e.g., busts). 
• Correlation between asset classes is the highest it's been in 60 years. This is a result of the Fed flooding the market with liquidity. It makes it very hard for investors to be anything besides speculators.
• The SEC has been asleep at the switch for the past 15 years, leaving the system vulnerable to exploitation - if which HFT programs are just the latest example.
• A funding crisis looks inevitable:   at some point the bond market or the currency market will revolt, resulting in a weak dollar and increasing bond rates - despite whatever the Fed wants
• It's perverse for the US to be rewarded for using a printing press indiscriminately without making any fiscal changes, while Europe is painfully adopting austerity and yet gets penalized.

Frontrunning: January 19

Submitted by Tyler Durden on 01/19/2011 08:10 -0500

• Define irony: Goldman among four underwriters picked to manage AIG share sale (Reuters)
• Prop trading is baaaack: Volcker Rule Should Require Sign-Off by Bank CEOs, Panel Says (Bloomberg)
• Wells Fargo Misses Profit Estimates as Mortgage Banking Weakens (Bloomberg)
• Asia to See Soaring Prices in 2011 (Reuters)
• Chinese Premier stresses stabilizing food prices, housing market in 1st quarter (Xinhua)
• China and U.S. Set to Square Off (WSJ)
• China Needs Urgent Guidance on Euro Debt Risk, Yu Yongding Says (Bloomberg)
• Gerova Hires Investigator in Bid to Refute Critical Report (NYT)... stock plunges again (report posted here first)
• José Sócrates reportedly begged for help last week as Portugal became the latest eurozone country tipped for a bailout (Guardian)
• European banks face tougher stress tests (Irish Times)

Life In America's Most Dangerous City About To Become

Life In America's Most Dangerous City About To Become "Living Hell" As Layoffs Of One Quarter Of Government Labor Force Begin

Submitted by Tyler Durden on 01/18/2011 13:22 -0500

Life in Camden, NJ has never been fun. Frequently ranked as America's most dangerous city, whose only claim to fame are the corporate offices of Campbell's Soup, Camden is about to get even more dangerous as it is among the first to experience wholesale cuts to its government labor pool. Bloomberg reports that "as many as 383 workers, representing one-fourth of the local government's work force, are expected to lose their jobs, including about half the police force and one-third of the city's firefighters." It seems cuts have already commenced: "police officers are turning in their badges as part of deep municipal layoffs that began Tuesday." It's a good thing then that unlike the rest of the world, New Jersey does not (yet) have surging food inflation as otherwise one may be tempted to argue this could be a rather interesting hot spot in the future, especially with the local police force deciding to find better pastures even as it starts collecting 99 weeks of unemployment benefits.
From Bloomberg:

Firefighters are planning to march to City Hall on Tuesday, and Mayor Dana Redd is planning a noon news conference to talk about the layoffs in a city facing a huge budget deficit and declining state aid.

The officers began turning in their badges Monday as it became clear that no last-minute deal was going to save many jobs.

Located directly across the Delaware River from Philadelphia, Camden is rampant with open drug-dealing, prostitution and related crimes. More than half of Camden's 80,000 residents, mostly black and Hispanic, live in poverty.

The anti-crime volunteer group Guardian Angels also says it will patrol Camden, as it has Newark, where there were major police layoffs in November.

The fire department, meanwhile, has already been relying on help from volunteer departments in neighboring towns. Interim fire chief David Yates, who retired Jan. 1, has warned that that layoffs will increase response times.

A local pastor says "the fear quotient has been raised," and a police union took out a full-page newspaper advertisement last week warning that Camden would become a "living hell" if layoffs were not averted.

Of course, this being Camden, the only thing that could really push the city to recreate the living conditions of Hades would be a surge not so much in the price of food, or even iPads, but crack cocaine. And according to the Chairman there is substantial slack in the drug production vertical. Which means there are at least a few months before Camden becomes ground zero for what happens when surging inflation and insolvent municipalities mix with curious consequences.