The FED needs to increase interest rates to foster a more solid U.S. economy.

The FED needs to increase interest rates to foster a more solid U.S. economy.
Moving rates modestly upward still represents highly accommodative monetary policy. Such action is necessary if to deflate the bond market and ensure a more stable economy that can raise the cost of holding money on the sidelines and under the bed. It would end the expectation of older bonds appreciating in capital gains as rates drop. A $1000 bond at a 0.25% rate is worth #2000 at a 0.125% rate if you sell it then and invest it in the stock market or real estate. It is worth only $500 if interest rates rise to 0.5% and then you get stuck. The down side is that many bond investors are not aware that once rates start rising they will be locked in until the bonds mature or else face enormous losses.

Hoenig also said that the U.S. needs to reduce government intervention and public subsidies in housing because they have “distorted the market” and the nation can’t afford to continue with such expenditures as the federal budget deficit grows. Fannie Mae and Freddie Mac, the mortgage firms backed by the FED may already cost taxpayers as much as $685 billion as the U.S. covers losses and overhauls the housing-finance system, Standard & Poor’s said Friday.

“Given the costs and market distortions these government- supported institutions brought with them, we should be confident that they should not be allowed to operate in the future as they have in the past,” Hoenig said. “We must move toward a system with fewer subsidies and misdirected incentives.”

World Markets:
It is likely the EURO will come under pressure now and the dollar will rebound because Spain and Ireland still have major problems. QE1 had little effect on the dollar and there is little reason to suspect Qe2 will have much more.
Silver and copper are not reserve currencies but hoarding of copper and coal resources has already begun in China. Gold prices have peaked as have silver but there is apparently manipulation of the silver pro-shares.

Is this fact or fiction? China's factories ramped up their production last month and were buoyed by an influx of new business, highlighting the strength of the world's second-largest economy. The official purchasing managers' index (PMI) rose to 54.7 in the month from 53.8 in September, blowing past expectations. The HSBC PMI, a private survey, climbed to 54.8 from 52.9. Is this totally from internal growth because the international growth is not evident?

The Baltic Dry Index (Jimmy Cramer's gauge of the world economy) has continued to bump downward. Look at the last five years (5Y) and move down the screen and you can see it is on its second declining bump down. This throws into question whether the Asian market recover is fact or fiction. How can Asia grow at their advertised rate when international dry goods trade is down 75% and still declining?
http://www.bloomberg.com/apps/quote?ticker=BDIY:IND

Muslims filed suit to block a measure that bars courts from considering Islamic religious law on the basis that the Constitution does not impose separation of state and church as Obama and other American Marxists claim. Obama has apparently never read the American Constitution nor have the ELCA and other Marxist liberated American Christian churches. Only the Muslims stand up to Marxism in America. The Liberals/Marxists do not know that the founding fathers protected freedom of religion. They did not outlaw it the way the Liberal/Marxists preach in their belief system. The ELCA, NAMBLA, and Obama are a growing embarrassment to America, a display of American ignorance and perversion of truth on a wide scale.

Economic Calendar
Last Friday.
Nov 5 8:30 AM Nonfarm Payrolls Oct including government up 151K after being down -41K last month
Nov 5 8:30 AM Nonfarm Payrolls - Private Oct up 159K this month an up 107K last month
Nov 5 8:30 AM Unemployment Rate Oct remained at 9.6%
Nov 5 8:30 AM Hourly Earnings Oct - increased 0.2% after increasing 0.1% last month.
Nov 5 8:30 AM Average Workweek Oct - at 34.3hr up from 34.2 hr last month.
Nov 5 10:00 AM pending Home Sales Sep slipped down -1.8% after rising 4.4% last month
Nov 5 3:00 PM Consumer Credit Sep showed debt increasing 2.1B after declining -3.3B last month

This week:
Nov 9 10:00 AM Wholesale Inventories Sep -
Nov 10 7:00 AM MBA Mortgage Applications 11/05
Nov 10 8:30 AM Initial Claims 11/06 -
Nov 10 8:30 AM Trade Balance Sep -
Nov 10 8:30 AM Continuing Claims 10/30 -
Nov 10 8:30 AM Export Prices ex-ag. Oct -
Nov 10 8:30 AM Import Prices ex-oil Oct -
Nov 10 8:30 AM Trade Balance Sep
Nov 10 8:30 AM Export Prices ex-ag. Oct
Nov 10 8:30 AM Import Prices ex-oil Oct
Nov 10 10:30 AM Crude Inventories 11/06
Nov 10 2:00 PM Treasury Budget Oct
Nov 11 8:30 AM Initial Claims 11/06
Nov 11 8:30 AM Continuing Claims 10/30
Nov 12 9:55 AM Mich Sentiment Nov -

Market Outlook Nov 8, 2010
Since Oct 28, 2009 our market cash flow index has shown cash flow out of the market and the flow out hit its peak the third week of May. Cash has recently been flowing in but has stopped again and on a cash flow adjusted basis the recent highs in the market averages did not surpass the previous high and it is still as low as during the free-fall following Lehman's collapse. Therefore it tells us this mini-bear market is still active. It probably would be a bad idea to short commodities even though we do expect another decline soon. We do expect the FED to be successful and for deflation to end this year. We would buy at cyclic lows and be wary of shorting the market other than to balance out alpha trades where quality is bought and weak companies in the same sector are sold short.

The regular market indices shot up Friday to the level just before Lehman's collapse. We would finish taking profits at this time and stay out or begin a balanced plan to buy and short the market. World dry goods trade remains at about 75% below its May 16, 2008 high. One thing pushing up the market is hedge fund income reporting. The funds like to spruce up their annual report by buying more of what they already have so that their prices peak near their reporting date.


Silver is at a new high of $26.7/oz. This makes no sense other than if the silver market is being manipulated higher. Silver is not a reserve currency and there is currently no significantly rising industrial demand for silver. This appears to be something weird George Soros would do. George Soros is also funding the potheads that are trying to legalize Marijuana in America. George Soros is a sick, sick man.

How can Asia grow at their advertised rate when international dry trade is down 75% and still declining? Also oil prices are stagnant <$80/barrel indicating energy demand is not rebounding. All we seem to have is manipulation of a few commodities.
http://www.bloomberg.com/apps/quote?ticker=BDIY:IND

The defense contractor General Electric/MSNBC/Pravda was appalling and a national disgrace during the elections.

World Markets
Asian markets were up last night. China's market was up 1%, Hong Kong up 0.4%, India down 0,7%, and Japan up 1.1%.

European markets are mixed this morning in a range of about 0.2% to -0.3% about half way through their day.

US pre-market futures were down about 0.3% at 8:30 AM EST.