Arab Spring-American Fall?
Research for Online Investors

by John Dalt

8/10/11

Riots continued in Britain last night.  Over 16,000 police were called out in London’s poor neighborhoods, so trouble moved to other areas.  Reuter’s reports street thugs in running battles with police in Manchester and Liverpool.  The government has authorized police use of water cannons and baton “rounds.”  These are cylinder shaped projectiles that do not penetrate the skin.  They can be made of foam, rubber, or wood.  The latter have the longest range and are the most potent.

The usual navel gazing is occurring in the British press.  They ask, “What can we do to understand why these poor people don’t feel a part of our society?”  Nothing like blaming the victim.

Protests are also occurring in Israel.  Last Saturday night 250 thousand people took to the streets to protest their perceived growing inequity in the society.  A Los Angeles Times Op-Ed quips that protesters are “rekindled the spirit that built the nation.”  This started last month when people set up a tent city in Tel Aviv to protest soaring housing prices.

Financial Times reports that protester’s demands have grown.  Along with more affordable housing, the list of demands includes lower indirect taxes (sales tax) and higher direct taxes (class warfare), free education and childcare, public housing and transport.  Some are demanding price controls to blunt inflation in food and fuel.

Leave. Egypt, It's Here.

How long will it be until the “Arab spring” makes it to U.S. city streets?  Will we have an American Fall?

The market had the jitters this morning on concern from the eurozone…again.  We have talked about the bond vigilantes many times before.  The concern this morning was centered on France.  Not the country itself, but the country’s big banks.  They have been big buyers of dodgy debt from Greece and other troubled eurozone countries.

We know, the big banks in the eurozone will have to take write downs on their Greek debt.  The “voluntary” measures taken by eurozone leaders require any maturing debt be rolled over into longer term debt at lower interest rates than the original bond.

Concern about the solvency of French banks bled off to concern about U.S. banks that may have exposure on their balance sheets.  Societe Generale (SCGLF) fell 14.7% and BNP Paribas (BNPQY) lost 9.5% on their share values.

Societe Generale is down 49% in the since July 1st, and 61% in the last eleven months.  BNP Paribas is down 34.5% since July 1.

The market looks like it wants to give back all of the gains from yesterday.  Gold has been hitting new highs almost every day since July 13th.  The shiny metal is up 14.2% in the last four weeks.  South Korea announced last week the government bought 25 metric tons to more than double their holdings.

The Wall Street Journal reports that Russia, Thailand and Mexico have also been buying gold this year.  The World Gold Council reports that governments have bought 203.5 metric tons of gold this year.  Government purchases in 2010 were reported at 76 metric tons.  China bought gold last year.  We wonder.

Our premium service subscribers are long silver.  The “poor man’s gold” was knocked down by higher margin requirements last spring.  It has not kept up with gold’s move higher.  We think it will.  We also like the fact Hong Kong has set up gold and silver trading for smaller quantities.  Read our article, Buy Silver on Dips.

Quote:  I could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than three percent of GDP .......all sitting members of congress are ineligible for reelection.---Warren Buffett

Reflex Rally?...Try Acid Reflex---Long-Term subscriber J.P.

John’s reply:  I am suspicious that the selling was manipulation to start the fall then whip saw the shorts and sling-shot the market higher.  The action within a few minutes after the FOMC statement release seemed coordinated.  I could not believe the volume when it started.  This was not millions of people entering small orders.

Editor’s note:  To all concerned about D.M. with his razor blades and box cutter.  D.M. called last night, amused I had put his “joke” in MarketToday.  We knew it was, but offered him our Social Security number and full name if he was ready to end it all.  D.M. was our host at the Berkshire Hathaway shareholder’s meeting in Omaha.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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