You want to know the really funny thing? Traders and investors don’t care! All they care about is that Washington has Wall Street’s back. And that the Fed and the Treasury can keep on producing dollar bills like Willy Wonka produced Everlasting Gobstoppers.

In our eyes it’s no different to Bernie Madoff’s little scam. Big Wall Street players shoved money into Bernie’s Ponzi scheme knowing that the profits were ginned up somehow. But they didn’t care. They knew it didn’t really matter how Madoff was producing his profits; it just mattered that he was producing them. They knew that some poor schmuck down the road would get clobbered.

And that’s how it’ll be with this rally. When it seems like stocks are going up and will never come down… and the networks, giddy with excitement, can do nothing but praise God for the coming V-shaped recovery… and when every last mom and pop investor is sucked in… it will all come crashing down.

It may not be quite as spectacular as the end of the 48% 1930 bear market rally… But it will be ugly…

Of course, there are always pundits willing to give sensible reasons why stocks are defying gravity. Right now, there are three eminently sensible reasons being splashed around the mainstream press (hat tip, David Rosenberg):

Eminently sensible reason #1: Bernanke reappointedWe really fail to see how it could possibly be that the same central bank official, who, over a span of a decade, presided over two massive bubbles and their busts, can be viewed as being a positive force for the markets. Perhaps there is some solace in knowing that the same person who created this awesome and complex $2 trillion Fed balance sheet will be around to dismantle the largesse since he’s probably the only one that knows how.

Eminently sensible reason #2: The first monthly increase in the Case-Shiller home price index

As for the second point, there is a difference between a trendline and the noise around that trendline. Home prices are down a massive 31% from their peak and have been in a vertical-down pattern for nearly three years. Perhaps a respite is in order, but with the true underlying unsold inventory near 12 months’ supply, which is double what would typify a balanced housing market, it would seem like wishful thinking that we have suddenly achieved a fundamental low in residential real estate values (especially at the high end).

Eminently sensible reason #3: The seven-point jump in consumer confidence in August

With regard to point number three, we welcome any rise in consumer confidence but an honest appraisal of the data would show that 54.1 is still a very depressed level. In fact, the average index level during recessions is 73.0 – August’s reading was nearly 20 points below that. So, if the recession is indeed over and done, somebody forgot to tell this 70% chunk of GDP otherwise known as the consumer.

U.S. gross domestic product (GDP) shrank 1% in the second quarter, following the first quarter’s 6.4% drop. The $787 billion Obama stimulus package, smaller decreases in business spending and slowing erosion of the housing market all helped to slow GDP contraction, according to the Bureau of Economic Analysis. A poll of 78 economists surveyed byBloomberg News showed a median estimate of a 1.5% decline in GDP.

“The recession is slowing but we still need to get households and businesses to start spending again,” said Joel Naroff, president of Naroff Economic Advisors, Inc.

With such a dramatic drop in the rate of contraction, the third quarter could sport the first expansion in more than a year. The last time the GDP grew was the second quarter of last year, thanks in large part to the $112.4 billion in stimulus payments to taxpayers.

Despite rising unemployment and a looming jobless recovery, Naroff is optimistic about consumer spending.

“Vehicle sales were actually up from the first quarter and are likely to be even better this quarter, so consumer weakness should not be a major concern,” Naroff said, adding that he’s optimistic that strong growth isn’t far off. “[GDP growth] could be either the third or fourth quarter and could approach 5%.”

Still, until there is real growth in consumer spending, any recovery will be difficult to sustain.

“We’ll get more support from government programs in the second half, but if you want a strong recovery, you need a strong consumer, and we are not seeing that,” Nigel Gault, chief U.S. economist at IHS Global Insight Inc. told Bloomberg.

A recovery may have to rely on business and government spending. Business investments, while still falling, slowed to a rate of 8.9% in the second quarter, a far cry from the first quarter’s 40% drop. The decline equipment and software purchases also slowed, falling a modest 9% compared to 36.4% in the previous quarter.

On the government side, federal officials – including U.S. President Barack Obama – say less than a quarter of the stimulus package has been spent so far.

“You just can’t push [funding] out that quickly, partly, not just because the federal government has to process applications but also because states and local governments have to gear up to get these projects going,” President Obama said in an interview with Fox News earlier this month.

Without consumer spending, which makes up more than two-thirds of the economy, any recovery will likely be agonizingly slow.

“We’re going from recession to recovery, but at least early on, it’s not going to feel like one,” said the chief economist at Moody’s Economy.com, Mark Zandi in an interview with The New York Times. “For economists, this is a seminal part in the business cycle, but for most Americans, it won’t mean much.”

Indeed, the unemployed or the underemployed struggling to make ends meet it’s hard to be optimistic, even as the markets, corporate profits and other economic data show improvement.

“At some point it becomes Obama’s economy, not Bush’s economy anymore,” said Dean Baker, co-director of the liberal research group Center for Economic and Policy Research told The Times. “He made a big mistake in overselling the first stimulus, and then in celebrating all the ‘green shoots.’ That just opens the door for people to say, ‘Where are my green shoots? I still don’t have a job.’ ”

Source: U.S. GDP Contraction Slows, but the Road to Recovery Will Be Rocky

That prompted investors to shun risk and weighed on U.S. stock futures. The euro also pared gains versus the dollar after the report.

The U.S. economy contracted at a 1.0 percent rate in the second quarter, according to government data on Friday. Analysts polled by Reuters had forecast GDP falling at a 1.5 percent rate.

Despite the fact GDP fell less than expected, investors focused on the consumer spending component, which showed a 1.2 percent drop after a 0.6 percent rise the previous quarter.

Consumer spending accounts for over two-thirds of U.S. economic activity.

“The better-than-expected number seems to be offset by a renewed decline in consumer spending,” said Ashraf Laidi, chief market strategist at CMC Markets in London.

“This report has written all over it the continued divergence between consumers and businesses. Consumers are still struggling. I don’t expect this to be a big boost for risk appetite.”

In early New York trading, the dollar fell 0.2 percent against the yen at 95.28 yen compared with 95.75 before the GDP report.

The euro was at $1.4112, up 0.3 percent on the day, but was down from $1.4135 before the data.

NEW YORK, July 31 (Reuters)

Spot gold was bid at $935.10 an ounce at 1325 GMT, against $933.30 an ounce late in New York on Thursday. It earlier hit a session high of $939.65. U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange edged up 50 cents to $935.40 an ounce.

The euro gave up ground against the U.S. currency after data released on Friday showed the U.S. economy contracted at a slower-than-expected pace in the second quarter, which analysts said backs views the recession is winding down.

“The U.S. GDP data was fairly good; it is still contracting but at a much slower pace, much better than the first quarter,” said Andrey Kryuchenkov, an analyst at VTB Capital.

“But the personal consumption data wasn’t so good,” he added. “Inflation is not there yet, that would weigh on gold.”

Gold is broadly tracking moves in the dollar within a narrow range. Dollar weakness tends to benefit gold, as it makes the metal cheaper for holders of other currencies.

The dollar fell versus a basket of currencies in earlier trade as a rise in stock markets sharpened appetite for currencies seen as higher risk.

But equity markets fell in Europe and stock index futures weakened in the United States after the data, which also showed the economy contracted more than previously reported in the first quarter of the year.

Oil prices also fell more than 2 percent as investors worried about demand weakness. Strength in crude can benefit gold, which is often bought as an inflation hedge.

DEMAND TAILS OFF

Underlying demand for gold remains weak, with a pick-up in sales in leading gold market India midweek tailing off towards the weekend and flows into gold-backed exchange-traded funds still stagnant.

But a World Gold Council official told Reuters India’s gold demand may pick up from August as pent-up demand is seen boosting sales.

Meanwhile Africa’s top gold producer AngloGold Ashanti said it will miss its output target for the year, adding that it will wind up its hedge book of forward sales by 2014.

Elsewhere silver was flat at $13.45 an ounce, platinum was at $1,184.50 an ounce against $1,179.50, and palladium was at $255.50 against $256.50.

Aquarius Platinum Ltd said on Friday its quarterly attributable production was up one percent from the previous quarter to 98,258 ounces.

Prices of platinum — consumed primarily by the car industry for use in catalytic converters — edged above $1,200 earlier this week on hopes economic stability would lift car demand.

But despite an expected fourth-quarter recovery in the European car market, analysts were cautious towards platinum.

VM Group analyst Matthew Turner said a third-quarter demand slump in Europe, a key market for platinum as its cars are usually diesel-fuelled and therefore use a higher proportion of the metal in their autocatalysts, could hurt prices.

“In the last few months car production has started to pick up again,” he said. “The problem is that a lot of the car sales in Europe are artificially boosted by government incentive schemes. That is probably bringing demand forward, it’s not increasing demand.”

LONDON, July 31 (Reuters)

The President’s man at the Treasury, Tim Geithner, is also towing the party line. On Friday Turbo Timmy spoke of “substantial improvements” in trying to beat back the “worst recession globally we’ve seen in generations.”

Why the defensive posturing? Because the White House is feeling touchy and irritable as the polling numbers sink. The rotten jobs market, it seems, has cut into Mr. Obama’s popularity. A poll of Ohio voters showed approval numbers falling from 62% to 49% in a mere two-month span.

If the stimulus is “working,” then, heaven forbid how things might look had there been no stimulus at all.

Or hold on, wait a minute. How might things have looked really and truly with no stimulus? What would have been different?

Heads I Win, Tails You Lose

This is one of the challenges in dealing with a very sick patient (i.e. the U.S. economy). Sometimes the patient gets better all by himself. Other times, the medicine that is supposed to be helping actually makes things worse. Without the proper diagnostic tools, though, there’s often no way to tell.

And not all deeply ill patients die, of course. Some really do make a self-powered comeback. Shamans and faith healers often rely on this simple binary outcome to set up a “heads I win/tails you lose” type deal for themselves.

That is to say, if the sick patient gets better, then clearly it was the shaman’s powerful medicine that made it happen.

But there are other alternatives, each tailored to the situation at hand. If the patient fails to get better but still lives, then the shaman can take credit for keeping him from death’s door. And if the patient up and dies, well… then the shaman was called in too late. Or the family members did not have enough faith. Or there was a hidden mortal sin, or some other exculpatory thing.

That’s the trouble with big decisions and messy historical turning points. There’s no way to rewind the tape, so we can’t always be sure what helped or what hurt – or even which actions were justified in the first place.

The weight of history does suggest at least one thing. When it comes to intervention, the government’s track record isn’t so hot. In fact, not to put too fine a point on it, it stinks. And when you think about it, the logic as to why is fairly straightforward.

Take the whiz-bang idea of creating jobs, for example. Creating jobs – real, sustainable productive jobs – is no easy task. Just ask any hard-working entrepreneur. So why should the government be any good at it?

And if the government possessed half a clue when it comes to creating jobs, why wouldn’t that capability be rolled out in good times as well as bad? If the jobs genie is all he’s cracked up to be, why wait for history’s darkest hour to rub the magic lamp?

Quantitative Wheezing

And then there is quantitative easing, or QE for short. What does the historical record say about quantitative easing? Basically two things. “Japan tried it… didn’t work.”

Hugh Hendry, co-founder of London-based Electica Asset Management, had this to say about QE in a recent Financial Times interview:

…There is no precedent, no precedent, that says quantitative easing succeeds. None. I’ll give you one actually, there is one, because there was some quantitative easing exercised by the Federal Reserve in 1933-34, and it did initiate a dramatic economic recovery without inflation. But I hesitate to say that was actually a success of quantitative easing, because it was preceded by a 46% collapse in nominal GDP.

So perhaps if you’re telling me that nominal GDP will collapse by 46% next year, then I would believe, and I would come back to you and I’d say then quantitative easing might have a chance in succeeding.

For the record, U.S. GDP (gross domestic product) was an estimated $14 trillion to $15 trillion in 2008. A nominal 46% collapse would nearly cut that in half, taking us back to 1996 levels. The Dow was around 5,000 back then.

So What’s Worked Before?

This leads to an important question. What can history teach us about getting out of jams? The last economic jam we faced of comparable size and scope was the Great Depression. How did we beat it once and for all?

There are many different theories as to how America finally beat the Great Depression. Some give credit for the comeback to FDR (Franklin Delano Roosevelt) and his far-reaching policies. Others say no, FDR really didn’t help much at all (or even made things worse) – it was World War II that finally pulled us out. And still others say, simply, that “time heals all wounds,” even economic ones, and we simply had to slog our way through.

History rarely obliges historians by providing neat, packaged answers. Most sea-change type events have many factors involved, not just one. But still, your humble editor suggests there is one very powerful, yet generally overlooked element that brought us out of the Great Depression. That element was consumer savings.

Here is a statistic that will make you blink. According to journalist-historian William Greider, personal savings levels hit a whopping 25 percent of income in 1943 and 1944.

World War II played a clear role. As Greider writes, “with so many millions conscripted for war, unemployment vanished and scarcity became the problem.” Those who were not drawn into the WWII effort saw their income levels rise. Women saw as much demand as men, a new development for the times. And because the country was on a war footing, a sort of forced saving effort was in place. Families had to make do on an “austerity budget,” and wound up banking much of what they earned.

This huge build-up of savings – 25 cents out of every dollar earned – set the stage for an explosion of consumption in the years to follow. After the war, an era of new products came rushing in. And consumers had both the pent-up savings and pent-up desire to spend, spend, spend.

A Long, Long Road

So what does history have to say about our current predicament? Mainly that, when it comes to getting an economy back on track, there is little that the government can do (case in point Japan).

And secondly that, short of starting a new World War and railroading the nation into a forced austerity program, the country’s best hope probably resides in the U.S. consumer getting his fiscal house in order.

As Tom Petty once sang about love, “it’s a long long road.” That lone dip on the chart above shows where consumer savings rates actually went below zero at the height of the bubble. The impressively tall bar on the far right – representing one of the fastest savings upswings in more than a decade – tops out at just 4%.

U.S. consumers will probably never again save twenty-five cents out of every earnings dollar. There is too much financial innovation and benign leverage built into the system to dial back the clock that far. (And a little bit of leverage, like the kind that lets a young couple make affordable car payments, is a good thing.)

But could the consumer once again save at double-digit savings rates, as we saw not 20 years ago? Could the savings rate more than double from here, even as a hefty chunk of income goes towards paying off a serious overhang of debt? Absolutely.

And that’s why the U.S. economy is never, ever going back to “the way it was” – if by “the way it was” one means the gross runaway excesses of the past two decades. There will be new mistakes, new insanity, new bubbles… but for now and the foreseeable future, we’ve got a hell of a lot of saving to do.

Source: Guess What Really Brought Us out of the Great Depression?

• Declining manufacturing and construction sectors contributed tothe United Kingdom’s gross domestic product to fall by 2.4% in the first quarter, the most in more than 50 years, The New York Times reports. Citigroup Inc. (NYSE: C) economist Michael Saunders said the second quarter, which ended yesterday (Tuesday), would also probably show contraction but the recession should be nearing its end soon. Despite this, he said, “I don’t think the recovery will be strong in the U.K.”

• The hemorrhaging in the housing market is slowing as The Standard & Poor’s/Case-Shiller index of 20 major cities showed the smallest monthly decline in prices since June 2008. The index dropped by 18% in April from the year before, but for the third month in a row it was not a record decline. “It seems that some stabilization may be appearing in some of the regions,” S&P index committee Chairman David M. Blitzer told The Associated Press. A rising unemployment rate and foreclosures could halt any substantial turnaround as the number of homeowners at least two months behind or in foreclosure jumped in the first quarter from the previous quarter, the Treasury Department said yesterday (Tuesday).

• General Motors Corp. (OTC: GMGMQ) was in bankruptcy court seeking approval to sell its best assets to a new, smaller company supported by billions in government loans and unburdened by old debts. Judge Robert Gerber sorted through several motions pertaining to GM’s plan to emerge from bankruptcy as a leaner company, cutting off some arguments with “please do not duplicate any other objections,” according to an AFP report. Should the 850 objections by creditors be dismissed and GM emerges from bankruptcy, creditors can appeal.
• Fears of rising food costs were partially quelled as farmers planted an unexpectedly large crop of corn and soybeans this year, according to an Agriculture Department report. A record 77.5 million acres of soybeans were planted through June, while 87 million acres of corn were planted, up 1 million acres from last year and the second largest corn acreage in more than 60 years. The corn boost is giving new life to ethanol producers, who are slowly starting to ramp up production and look at reopening plants that were shut down last year when grain prices skyrocketed and oil prices fell, Advance Trading Inc. commodity research analyst Brian Basting told The Associated Press. “It appears to be a slow healing process” in the ethanol industry, Basting said. “We’re seeing the (profit) margins creep back into positive territory.”

• American International Group Inc. (NYSE: AIG) got a new board of government-approved directors at its annual meeting yesterday in New York, Reuters reports. The U.S. Treasury Department or the trustees overseeing the government’s stake in the company recommended the election of at least seven board members. Outgoing Chief Executive Officer Edward M. Liddy said he was confident the new board would name a new chairman and CEO. The U.S. government owns an almost 80% stake in AIG.

• Troubled Japanese chipmaker Elpida Memory Inc. has received a $1.7 billion bailout in public and private funds. The move is meant to salvage Japan’s only major maker of dynamic random access memory chips used in PCs, as well as 6,000 workers at Elpida, which suffered record losses last year when semiconductor demand went south. “It’s a fine balance,” Credit Suisse Group AG (NYSE ADR: CS) Chief Equity Strategist Shinichi Ichikawa toldThe New York Times. “Japan has decided it must save Elpida for the sake of Japanese industry,” but “going too far means keeping zombie companies alive.”

Source: Investment News Briefs Wednesday July 1, 2009

Bond investors are no doubt breathing a sigh of relief. Now that investors are waking up to the fact that a recovery is not “around the corner” after all, the yield on 10-year T-Notes is dropping and bond prices are rising again.

As long as investors have an appetite for low-yielding Treasurys (10-year Notes were yielding 3.53% yesterday), the government will have a tough time pushing its “green shoots” fairytale.

We challenge even the best paid of President Obama’s economic spin doctors to find the silver lining in the following two recent data points. This from MoneyMorning.com:

1. Unemployment claims unexpectedly rose yesterday, as the number of US workers filing new claims jumped by 15,000 in the week ended June 20 to a seasonally adjusted 627,000, the Labor Department reported. The four-week moving average of initial claims, a less volatile measure, rose to 617,250 from 616,750, signaling the US job market is stagnant.
2. US gross domestic product (GDP) contracted at a 5.5% annual rate in the first quarter after plunging at a 6.3% pace in the fourth quarter of 2008, the Commerce Department said yesterday (Thursday). That means the US economy just went through its worst eight-month period in more than 60 years, according to MarketWatch. The government last month estimated GDP fell at a 5.7% pace in the quarter ended March 31.

If you in any doubt about the dangers of relying on the mainstream media for your economic and financial information, here’s how the BBC, Britain’s state-sponsored news agency, had this to say about the worst eight-month contraction of the US economy in more than 60 years.

US economy better than expected

The US economy shrank at an annualised rate of 5.5% in the first three months of 2009, better than previously thought, government figures show.

This is pitiful. And it’s clear evidence that governments and mainstream media outlets really do believe that people are too stupid to notice what’s going on in the economy. Don’t be suckered. This kind of nonsense is dangerous: listen to it and you could get wiped out as an investor.

If you want to know why the economy is in the ditch… and ain’t “bouncing back” anytime soon, look no further than this chart. It shows the total level of equity in household real estate from 1952 to 2009. (Hat tip, The Big Picture.)

• Unemployment claims unexpectedly rose yesterday (Thursday), asthe number of U.S. workers filing new claims jumped by 15,000 in the week ended June 20 to a seasonally adjusted 627,000, the Labor Department reported. The four-week moving average of initial claims, a less volatile measure, rose to 617,250 from 616,750, signaling the U.S. job market is stagnant.

• U.S. gross domestic product (GDP) contracted at a 5.5% annual rate in the first quarter after plunging at a 6.3% pace in the fourth quarter of 2008, the Commerce Department said yesterday (Thursday). That means the U.S. economy just went through itsworst eight-month period in more than 60 years, according toMarketWatch. The government last month estimated GDP fell at a 5.7% pace in the quarter ended March 31.

• American International Group Inc. (NYSE: AIG) will repay part of its $40 billion debt to the U.S. government with $25 billion of preferred stock in two businesses Reuters reported. The two businesses – American International Assurance Co Ltd (AIA) and American Life Insurance Co (Alico) – will also be positioned for initial public offerings, should market conditions permit. AIG lost more than $99 billion in 2008 and U.S. taxpayers have committed up to about $180 billion to its rescue.

• Palm Inc.’s (Nasdaq: PALM) losses grew but it beat Wall Street’s revenue estimates for its quarter ended May 31. The company reported a net loss of $91.5 million, or 78 cents per share on revenues of $86.7 million. That compares to a net loss of $41 million, or 40 cents per share on revenue of $296.1 million for the same quarter last year. Analysts were expecting a loss of 62 cents per share on revenues of $80.6 million.

• Memory chipmaker Micron Technology (NYSE: MU) suffered a wider loss but beat analyst estimates for its quarter ended June 4. The company posted a net loss of $290 million, or 36 cents per share on revenues of $1.1 billion. That compares to a net loss of $236 million, or 30 cents per share on revenues of $1.4 billion in the same period the year before. Consensus estimates placed the loss at 43 cents per share on revenues of $1.1 billion.

• A key senator said the health care proposal submitted to Congress by the Obama administration could cost as much as $1 trillion, but Republicans added there was no agreement on even the outlines of a bill, The Associated Press reported. “We have options that would enable us to write a $1 trillion bill, fully paid for,” Sen. Max Baucus, chairman of the Senate Finance Committee, told reporters. Baucus’ comments came one week after analysts estimated earlier proposals would cost $1.6 trillion over 10 years. While Baucus gave no details, others told The AP changes made in the proposal would lower the cost of government subsidies for those who cannot afford insurance, as well as scale back a planned 10-year series of rate increases for doctors serving Medicare patients. Almost 50 million Americans are without health coverage.

• Michigan has won a competition with two other states to buildGeneral Motors Corp.’s (OTC: GMGMQ) next subcompact car, based on the Chevrolet Spark, The Associated Press reported. The win will save about 1,200 jobs at the factory in Orion Township, which was due to close this year. All 17 members of Michigan’s congressional delegation sent a letter to GM last week saying that the state’s economic woes — including an unemployment rate that hit 14.1% in May — made the project important for Michigan.

Source: Investment News Briefs Friday June 26,2009

(Click here to see image: http://s.wsj.net/public/resources/images/ED-AJ638A_laffe_NS_20090609175213.gif)

This shows an explosion in America’s monetary base on an unprecedented level. According to Laffer, a former economic advisor to President Reagan and supply-side economist:

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10. It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless…

To date what’s happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5%…

This is bad news for America’s earners and savers. And good news for America’s debtors. That’s because inflation at this level would reduce the value of Americans’ savings and investments at the same time as it would reduce the value of the debt owed by America’s spenders and borrowers.

In a nutshell, this is why we believe that inflation will sooner or later win the day in the epic battle currently being fought between the forces of deflation (credit deleveraging, debt deflation, supply overhangs, higher personal savings rates, reduced consumer spending, etc) and the forces of inflation (record government spending and borrowing, Bush’s and Obama’s ‘stimulus’ programs, the Fed’s money printing, etc).

Inflation is simply the path of least resistance for Team Obama: it puts off America’s economic problems to a later date and favors spenders and debtors over earners and savers.

Without hesitating, the federal government has responded to the 2% drop annual drop in US GDP with a 100% increase in monetary base (the total quantity of currency in circulation outside of banks plus the currency held by banks or deposited with the Fed). As Porter put it last fall in DailyWealth:

The coming great inflation will destroy America’s economic leadership. It will lead – eventually – to the return of settling international obligations in gold instead of paper dollars. And this will happen much faster than anyone expects.

By the time Obama leaves office, you will not be able to exchange dollars for any sound currency in the world without permission from the US government. The price of gold will be well over $2,500 per ounce.

The big question for investors right now, says Porter, is: “How long will it be until this ocean of paper causes a severe decline in the dollar and a massive run-up in gold?” This from today’s DailyWealth:

We can’t know for certain. Nobody has seen anything like this, ever. But I believe it will take at least two years before the inflation that’s been put into the system starts to roil the real economy. (Of course, it might not take that long… oil prices have already nearly doubled from their lows.)

As I’ve said before, I’m not happy to be the one to tell you all of this. I hope I’m dead wrong. But, while I don’t believe we’re in immediate danger of inflation, it’s paramount you own some gold to protect yourself from what today’s chart shows.

The ‘big’ news yesterday was the Fed’s policy decision announcement. Of course, it wasn’t big news at all. The Fed’s June pep talk on the economy was the pretty much the same as its April one. Here’s what Peter Boockvar, equity strategist with Millar Tabak & Co, had to say about the news non-event (hat tip, The Big Picture):

The FOMC began with talk on the economy that was very similar to the April one. “The pace of economic contraction is slowing.” It followed with the caveats of constrained household spending due to job losses, lower housing wealth and tight credit and also referenced businesses cutting back on fixed investment and staffing and they believe the economy will be weak for a time. The main change came in the 2nd part when they mentioned the rise in commodity prices BUT they continue to hang their hat on the ‘output gap’ in giving them comfort that “inflation will remain subdued for some time.” The final part was identical to the April comments in saying the fed funds will be at an exceptionally low level for an extended period and maintaining their current QE plan. Traders were looking to see how the Fed was going to respond to the game of chicken with the bond market and the Fed somewhat turned their head and bonds are lower in response. Fed members can say they are not conducting the monetization of US debt as they couch it in helping the markets but it’s just semantics.