Waving Bye-Bye to $47.2 Billion in Bond Purchases; 75% of American Families Living Paycheck to Paycheck; Golden Dominos Continue to Fall

Wayne Ellis

Waving Bye-Bye to $47.2 Billion in Bond Purchases (CNBC)
It all began a little more than a month ago today, when the minutes of the May 22 Federal Reserve meeting were made public.  On that date, the world began to turn on its ear for bond investors as Fed Chairman Ben Bernanke first aired his view that quantitative easing (QE) — the government-sponsored program designed to keep interest rates low and to boost stocks – could start to scale back its $85 billion a month in debt purchases any week. Since then, the combined worth of funds flowing out of bonds has been $47.2 billion, which blew away the preceding record of $41.8 billion. Not that it appears QE reduction will begin in earnest in October, bond investors need to brace themselves for what could be an historic three-month sales binge on bonds. Are you ready?

75% of American Families Living Paycheck to Paycheck (CNNMoney)
Despite the probability that neither of the stated goals of quantitative easing (QE)  stimulus will be hit by October (7.5 percent unemployment rate, or sustainable growth in terms of an expanding GDP), the perception remains that the U.S. economy will be strong enough to grow on its own when October arrives. While that situation may be true at some abstract, macro-economic level, it’s dead wrong when it comes to measuring economic strength at the country’s most basic level — that of the individual consumer in America. According to a recent Bankrate.com survey, 76% of all Americans live paycheck to paycheck, without any sort of emergency savings available, should a crisis arise. I don’t know about you, but it is hard to imagine a healthy, vibrant economy — one capable of growth without outside help — where only one in four families are capable of economic survival, should an unforeseen event strike. So, what happens next, as we get closer to October…

Golden Dominos Continue to Fall (Bloomberg)
In the wake of Newcrest Mining, Ltd.’s (Australia’s biggest gold producer), decision to write down the value of its assets by as much as $5.5 billion, gold competitors are feeling the pinch, as well. But that situation is to be expected when one of the industry’s titans takes an enormous hit on value, after a decade-long, $195 billion expansion binge. According to Bloomberg, gold has lost some $164 billion in market value since it peaked in September 2011. More recently, gold has lost 23 percent of its value this year alone. And Newcrest is an industry leader in this area — having lost 29 percent of its value since the company announced its intended write downs. And that could be just the beginning, according to Jeffries analyst, Jake Greenbert, “It seems obvious that a storm of write-downs is coming…” If you’re an investor who doesn’t mind rolling the dice on shorting companies, now may be your chance for enormous gains. Or, you can hang on, like the many others and start buying gold after the write-down storm has passed…

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