China needs to allow their economy to grow naturally so that it can purge corrupt practices and unprofitable industries instead of protecting them. C

China needs to allow their economy to grow naturally so that it can purge corrupt practices and unprofitable industries instead of protecting them. Currency manipulation rewards waste and corruption.

China's use of a devalued currency to wage economic war on the West could now lead Obama to wage a tariff war like the one that contributed to the FDR depression of 1933 to WWII. If Obama would read a few books instead of just a teleprompter he would find out that tariff wars have no winners.

The chaos of democrat-socialism inundates corporate America with misinformation paralyzing rather than stimulating a recovery. Americans still do not know what Obama hid in his health care bill other than money to create his own personal domestic liberation army. One has to wonder what people Obama intends to arm. Obama changes his mind every day. He no longer attracts swarms of university slow-learners to his speeches. Now he has the image of a Caesar Chavez dictatorial pariah.


World Markets:
Normally unemployment in the socialist EU is about twice that in America. At best Spain gets down to 8% but today in Spain unemployment is at 20%.

Japan is less likely to allow China to manipulate the Japanese currency as China manipulates other currencies. Yet the balance of trade gives China that temporary power. The down side for China is that manipulation creates an unsustainable boom in the Chinese economy which will eventually collapse under the weight of China's coming currency losses. China must learn that manipulation is only a temporary benefit and then becomes a trigger for China's economic meltdown. China needs to allow their economy to grow naturally so that it can purge corrupt practices and unprofitable industries instead of protecting them. Currency manipulation rewards waste and corruption. Japan was the world's currency manipulator until their deflation period that began in the late 1980's.

Economic Calendar
Case-Shiller 20-city Index of home prices in Jul rose 3.2% vs. 4.2% last month a weakening in home price increases but still good.
Consumer Confidence Sep decreased to 48.5 from53.5 last month and that is quite bad.
Crude Inventories 09/25 fell 500,000 barrels and the price of oil is increasing again.
GDP - Third Estimate Q2 is now 1.7% growth, better than the second estimate of 1.6%.
GDP - Deflator Q2 remained at 1.9%.
Initial Claims 09/25 still too high at 453K and still manipulated by waiting to tell the truth a week later.
Continuing Claims 09/18 dropped to 4457K from 4489 initially reported last week but then raised (manipulated) to 4540K. That is a +52K upward change, which shows that last week, was also originally manipulated by -51K. The manipulation exceeds the variance of the data. These manipulations are larger than the real changes they are measuring.
Chicago PMI Sep rose to 60.4 from 56.7 last week, a good trend.

Friday
Oct 1 8:30 AM Personal Income Aug
Oct 1 8:30 AM Personal Spending Aug
Oct 1 8:30 AM PCE Prices - Core Aug
Oct 1 9:55 AM U Michigan Consumer Sentiment - Final Sep
Oct 1 10:00 AM Construction Spending Aug
Oct 1 10:00 AM ISM Index Sep
Oct 1 2:00 PM Auto Sales Sep
Oct 1 2:00 PM Truck Sales Sep


Market Outlook Oct 1, 2010

We need to remember that in 1980 gold began to rise to current levels only as money market rates approached 16%. Gold and silver rising at this point cannot be sustained. They are however excellent for range trading. Right now they are at the tops of their trading ranges and very dangerous to buy or hold.

Profit taking is advisable especially in commodities like silver that do not realistically have any probability of immediate increased demand. In fact silver is a byproduct of copper production which is increasing supply. The rise in supply of silver creates a growing imbalance that will overtake foolish hoarding at this time. Gold is used as a hedge for possible European currency devaluation.

China is now letting the dollar drop and that is good news and just what the FED wants. The best of both worlds is inflation expectation that drops the value of the dollar and simultaneously increases the buying pressures for American products to avoid future price increases. In the past month the price of silver ETFs rose 35% which at America's normal inflation rate is about a 32% overshoot. It will take about 11 years for silver to stabilize at today's price so we expect a sharp plunge soon.

The two main costs of American Health care are corruption and litigation not the health care itself. 60-minutes year after year has exposed the fact that the government does not certify that health care related providers are real let alone honest before the government pays them for the billed services. What they show is $billions being paid to phony companies. Litigation costs are paid for by doctors requiring additional unnecessary tests to avoid manufactured phony malpractice litigation by trial lawyers. America has four times as many lawyers per capita as Germany and Japan, and China has no litigators. Think about how much better it would be if all those American lawyers were investigating government agency related fraud instead.

Deflation remains the world's greatest threat, so the FED is trying to raise inflation expectations to unleash the cash being held back due to Obama's incoherent tax policies.

World Markets
Asian markets were up last night. China's markets closed, India up 1.3%, and Japan up 0.4%.

European markets are up this morning in a range of about 0% to 0.9% about half way through their day.

US pre-market futures were up 0.1% to 0.4% at 8 AM EST.