Thomas MacLeod submits:This is a more serious and depressing article than normal.With all the talk about money printing and buying back of treasuries, we felt it was time to see how the US Monetary Base is getting on. [For those too lazy to click on the the link, a country's monetary base can loosely be defined and measured as the sum of currency in circulation - depending upon who calcuated the figures it may or may not include 'commodity' moneys (gold, silver, etc) - if you need more, look it up].We knew that it had got a little exuberant late last year but we have neglected to look at it seriously for a few months.US Monetary Base 1998 - Presentclick to enlargeThose two little insignificant blips on the left of the graph were the Y2K thingy and 9/11. Which nobody, at the time, felt were insignificant!Let's get a little more historical perspective.US Monetary Base 1970 - Present I think the technical term is: "Dude, a metric bucket load of additional capital has suddenly appeared in our circulation."We can see no end, or even the beginning of the end, in sight.If you want to know where the bubble is in world markets, it is to be found in the chart above. Everything else we are seeing in the world right now is merely a symptom of the Fed and/or US Treasury having gone completely mad, or perhaps desperate.Clearly there is a serious problem. To be honest we are having a lot of trouble comprehending the likely consequences. Can any readers state a reasonable case as to why we are not going to see inflation at levels that will make the 1970s look like child’s play? By this we mean before year-end 2010, crude will be above $200, gold above $2,000 and yields on US 30 Year Treasuries above 8%.Yield on the US 30yr Treasury 1980 - PresentWe get this sinking feeling that yields on the US 30yr are going to also blow up like we have not witnessed in modern history. Goodness knows what other economic effects that will have as well. Again, any reader with a sensible view please add your comment for or against.After this exercise I can look in the mirror and while things may still look the same, the way I see things has definitely changed.Disclosure: Long OTM call options on DBC and OTM puts on TLT.Complete Story »

  Global Investing Editor submits:Amidst the festivities last weekend over the fall of the Berlin Wall (on what Germans call 9/11, in 1989), there were a few sour notes. Grumbles against heartless capitalism, globalization, and non-German governments, particularly the Obama Administration, were audible from the Left Party, trades unions, and grumbly Berliners.The complaints came over the unraveling of the complex joint venture whereby Magna of Canada (MGA), a Russian automaker, and the German State would take over Adam Opel AG, the German car-maker. Last week, the board of Opel's owner, General Motors, flush with $50 bn in US subsidies, vetoed the arrangement.Complete Story »

  The LFB submits:There were references to quantative easing at the G-20 meeting in Scotland this weekend, and the speed that the developed economies can be taken off the drip-feed of central bank liquidity. "It is too early to start to lean against recovery," said U.S. Treasury Secretary Tim Geithner in his speech. "The classic mistake in past crises was to put on the brakes too quickly."Complete Story »

  Brett Steenbarger submits: The recent post noted weakness in the number of stocks registering fresh 20-day highs vs. lows. Above we can see a contributor to that weakness: the relative underperformance of Russell 2000 stocks (IWM) relative to S&P 500 large caps (SPY) since the momentum peak in September. Interestingly, small caps were outperforming large caps by about 6% on the year in September; since then, however, small caps have actually moved to a slight underperformance on the year. This suggests a potential narrowing of the base of the market rally, something I'll be watching for this coming week.Complete Story »

  Brett Steenbarger submits: On the radar: we see generally rising prices for the S&P 500 Index (SPY; blue line above), but a recent pattern of weakening 20-day highs minus lows among NYSE, NASDAQ, and ASE stocks, as reported by the excellent Barchart site. Much of that weakness can be traced to relative weakness among small cap stocks. For example, my ever-trusty Decision Point service notes that 58% of S&P 500 large cap issues are trading above their 20-day exponential moving averages, but only 38% of S&P 600 small caps and 45% of S&P 400 midcaps. I will be watching closely early this week to see if the market bounce from recent lows can broaden. If not, I will be viewing that bounce as part of an longer-term topping process that goes back to momentum highs in September.Complete Story »

  Abbi Adest submits:Dollar General (DG), a KKR-backed small-box discount retailer with 8,700 stores in 35 states, is expected to float its IPO at the end of the week. The company is apparently booming despite, or because of, the economic crisis. According to the Wall Street Journal: "Through the worst of the economic downturn through 2008 and 2009, Dollar General did nothing but grow: Its sales, same store sales, total number of stores, and profits all rose."Business Overview (from prospectus)Complete Story »

  The currency carry trade is a strategy where the investor sells a currency with relatively low interest rate and buys a different currency yielding higher interest rates. Investors can also use the funds to buy other asset classes in different countries which would give superior returns. The U.S. Government and the Federal Reserve has kept the interest rates at a record low level so that the U.S. economy recovers. According to the policy, keeping interest rates artificially low would ensure that small businesses, consumers and even large corporations would get easy funds and that would help in spurring the economy. What the Federal Reserve has control over is to keep rates artificially low and throw enough money into the financial system. However, what the Federal Reserve has no control over is where this money goes (in terms of country or asset class). click to enlarge Complete Story »

  Jason Kelly submits: We shouldn't have been surprised. I'm right now working on a book that exposes anew our corporate-owned government, which didn't change in any way when hope was reported to have prevailed a year ago. The new day in Washington when lobbyists would supposedly take backseats to citizen needs became instead The Washington Post calling last summer the Summer Of The Lobbyist. We're seeing now that insurance industry lobbyists did their work well.Thus, I wouldn't get too excited about health care reform just yet. The word"historic" has been liberally tossed around everywhere since the House bill passed by five votes on Saturday night, but commentators in other countries noticed before the bill even made it to vote that it's ludicrously light fare compared to citizen health coverage in other countries.Complete Story »

  John Jansen submits: Prices of Treasury coupon securities are posting small (very small) mixed changes in overnight trading. Benchmark securities are either unchanged or a tad lower in price (and with the inverse relationship between price and yield constant, yields are a tad higher, unless somehow Goldman Sachs (GS) can change that mathematical relationship). The overnight news lacked a real catalyst for violent price change. The only noteworthy item is a healthy jump in German Industrial Production which rose 2.9 percent in September versus 1.8 percent in August. That leaves IP in that country declining at a YOY pace of -12.9 percent September versus -16.5 percent in August.Complete Story »

  Cam Hui submits: I have written before about what academics call anchoring, or expectations. My previous post was about the anchoring of inflationary expectations. This time, it’s about the social fabric of America, which is far more important.The American DreamThe mythic story of America has been the American Dream. America has long held to be the Land of Opportunity, where people like Michael Dell could build an empire by selling computers out of his college dorm.Complete Story »

  John Nyaradi submits: We remain in the "Red Flag" mode, expecting lower prices ahead, although that could change at any time in today's crazy world. We still have “sell” signals on most of our major indicators as we oscillate in a relatively narrow trading range.Here’s a picture of what the last month has looked like:Complete Story »

  IndexUniverse Europe submits: By Paul Amery I confess that at first glance I looked at Schwab’s (SCHW) ETF launch, with its promise of no-commission trading in the firm’s own funds, with a slightly jaded eye.Complete Story »

  I have written about Forest Laboratories, Inc. (FRX) before. FRX is a mid-cap player in the biotech and drug markets. It is characterized by steady growth in both sales and earnings. Call this a value play. Its new product pipeline is promising, and several products are now entering Phase 3 trials.For a detailed analysis of the company, go to https://measuredapproach.wordpress.com.Complete Story »

  Jack Miller submits: Before long, we will get the "official announcement" that the recession ended in June, five months ago. The end of the recession does not mean that we are back to old highs, but that the direction of the economy is once again up. While the report from the Gallup Poll suggests that some of the bounce in consumer attitudes might only be a reflection of the Halloween Holiday Spirit, a number of improving trends have developed. Employment is the forever lagging indicator; when there is a downturn, companies try not to lay off their employees, in hopes that the recession will be short-lived; when a recovery begins, companies are slow to hire, until they are sure that business is going to continue to improve. Stock prices, a leading indicator, falls early and rises early. Stock prices are up 60% since February. Complete Story »