US ADJUSTED MONETARY BASE - Chart from St Louis FED

Clearly there's more stimulus to come, as the never ending recovery from those dark days in 2008 continues. The FED really has a tough job on its hands.
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Talks of a possible QE3 could add more fuel to rising commodity prices, while a cancellation of a proposed plan for QE3, will not go down well in these jittery markets!

Below are two Charts of the Adjusted US Monetary Base. (5year + Long Term)
2011 has seen the graph spike sharply updards, a trend that is clearly not sustainale !












Meanwhile the Precious Metals sector has had quite a rally over the past week, with Gold prices topping $1600, and Silver just about getting over the $40 level. Perhaps, the Gold market is pricing in a possible QE3 further down the line.
I continue to be cautiously optimistic on the precious metals sector over the next month and a half; i.e. until the end of August 2011. These summer months have traditionally been seasonally weak for the PM sector.

THE FED & the US ADJUSTED MONETARY BASE

Here is a follow up post to my March 15, 2011 post on the correlation of the S&P 500 with the size of the FED Balance Sheet.

Graham Summers of ''Gains Pains Capital'' has also put up a detailed note on the US Monetary Base.

LINK:

http://www.gainspainscapital.com/index.php?option=com_content&view=article&id=244:graham-summers-free-weekly-market-forecast-the-fed-is-terrified-edition&catid=39:stocks&Itemid=58

Below is a chart from the above mentioned article.

GOLD : The Bull Market continues

Gold has continued to ''shine'' as a store of value and an excellent portfolio hedge in a volatile and uncertain global economy.

Sovereign debt worries and an ever increasing supply of paper currencies continue to provide fuel for the ongoing gold bull market.

At this stage it's worth pointing out, that gold could correct substantially (yes even to $1000) without breaching any crucial long term support (green line in chart).

In the second half of 2010, I expect a correction in the equity markets.
Markets have been far too optimistic of earnings estimates and are thus likely to be disappointed with earnings numbers when they come out.

As David Rosenberg says, the aftermath of a credit bubble collapse is '' no garden variety recession.''

At that point in time, gold may correct along with the markets, thus providing an excellent buying opportunity.

It's so surprising how experts and brokers continue to push stocks, while totally ignoring Gold - the best performing asset class of the last decade.

REAL ECONOMY vs PAPER ECONOMY

Came across 'Planet Real vs Planet Paper' in the Taipan Daily, 24th February, 2010.

At a time when Wall Street seems to be totally ignoring Main Street, it's always worthwhile to take a step back and analyse the 'real' vs 'paper' economy.

BUYERS OF U.S. GOVERNMENT DEBT - It's not all China!

Hat tip to David Rosenberg for the link to Floyd Norris' article in the NY Times

Off the Charts - The Treasury's Debt Burden Now Rests More on ...

Permalink:http://www.nytimes.com/2010/01/23/business/economy/23charts.html

As the U.S. looks to take on more debt this year and roll over part of it's existing burden, it will be interesting to see how things turn out. Who's going to step up to the plate?

U.S. Adjusted Monetary Base -> Uncharted waters

Over the last few days, the USD has been 'sliding' against most global currencies.

The FED has been working over-time, bailing out one bankrupt and insolvent institution after another. Maybe the state of California is next in line for the intensive care unit at the Fed/Treasury

The 'Adjusted Monetary Base' has exploded.
While the 'market meltdown' has resulted in a collapse of paper profits and wealth supported by debt, we may be setting up the foundations of a massive surge of inflation!

How exactly does the Fed propose to 'take away the punch bowl' at some stage in the future?
For now, rising Treasury yields will mean that the borrowing costs of the US government will rise just a time when its borrowing program steps into overdrive.
The Fed will have to step up its purchases of US Treasuries, so that it can stem the upward rise in Treasury yields

The quantitative easing/ money printing / 'Bailout everyone' experiment is getting more complicated by the day.

The charts below have been sourced from http://research.stlouisfed.org/fred2/