Follow The Money

1.The lack of regulation that allowed A.I.G. to sell hundreds of billions of dollars in credit default swaps on mortgage-backed securities was a direct result of efforts by the Treasury (first under Rubin and then under Summers), the Federal Reserve (under Greenspan), and the Securities and Exchange Commission (under Arthur Levitt) to deregulate the derivatives markets. Summers, another Harvard professor, was the head of Obama's economic council until he jumped ship recently. Both Levitt and greenspan have admitted their mistakes, but Summers said "but what's happened at A.I.G. ... the way it was not regulated, the way no one was watching ... is outrageous." No wonder the economy looks like it does!

2.Nearly two years of recession have left Spain with a 21.3-percent unemployment rate — the highest in the 17-nation euro zone — and saddled with debt. The jobless rate, which has more than doubled since 2007, jumps to 35 percent for people aged 16 to 29. Many young, highly educated Spaniards can't find jobs as the eurozone's No. 4 economy struggles with low growth. Hundreds of thousands of Spaniards demonstrate across Spain.

COMMENT: First Greece and now Spain. Its spreading.....

3.Its finally happening. The Financial times reports that China has become a net seller of US treasuries over the last 4 months. According to FT, the Chinese are purchasing European Govt. Bonds. This comes after confirmed reports that Russia has reduced its US treasuries holdings from $175B to $125B in the last 7 months.

COMMENT: During uncertain times its safer to diversify.

4.For more than a decade starting in the early 1990s, U.S. inflation declined as low-wage workers in China and other developing nations joined the global economy and produced a tide of cheap goods that washed onto U.S. shores. That epoch appears to be over. Prices of imported goods are climbing, becoming a source of inflationary pressure. These changes are particularly apparent in apparel and footwear. U.S. consumer prices for apparel fell for 13 of the past 17 years, according to Labor Department data. Now, retailers and manufacturers warn of plans to push up prices on Nike sneakers, Hanes underwear, Abercrombie & Fitch and Polo apparel, Ugg boots and other products when fall lines hit the racks. Prices are expected to rise 4-6%.

5.Rare Earth prices soar as China stocks up. Prices of some Rare Earth metals have doubled in just three weeks amid heavy stockpiling in China that has raised fears over global supplies. China produces more than 90 per cent of the world's Rare Earths, which refer to 17 elements used in hybrid cars, fluorescent lights and many high technology applications.

COMMENT:It is finally sinking in on markets that the big news is China will set up a "strategic reserve" for heavy Rare Earths, echoing what it has already done with light Rare-Earth reserves. Another word for this is "hoarding"

Once you realize that there are no geniuses out there, you can think "I can do that" - Donny Deutsch