The Market Guardian

The Food and Drug Administration Thursday approved a new type of prostate cancer treatment from Dendreon Corp. The therapy, Provenge, is approved for certain men with advanced prostate cancer who have failed treatment with hormone therapy.

“The availability of Provenge provides a new treatment option for men with advanced prostate cancer, who currently have limited effective therapies available,” Karen Midthun, acting head of the FDA biologics center, said in a statement.

MarketClub has an interesting take on today’s DNDN action. Click Here for today’s FREE Trading Report + 100 score is given.

FREE DNDN Stock Analysis

Courtesy of www.Fmxconnect.com
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The Pragmatic Capitalist

It’s almost like bad case of 2008 deja vu. Goldman Sachs says oil is going to $99 in the next 12 months as Bernanke’s reflation experiment drives prices higher. According to their analysts energy and metals prices have “broken out” of their trading range and could head higher:

“Energy and industrial metals prices break out of recent trading ranges, rising to the highest levels seen since 2008. After trading in an increasingly narrow range in March, energy and metals prices broke out to the upside as March rolled into April, with WTI crude oil prices rallying above $85/bbl.”

“We expect the supply-demand balance to continue to tighten in 2010 as the global economic recovery continues to strengthen demand, draw inventories and draw OPEC spare capacity back into the market.”

Based on the improving fundamentals they see oil prices touching $99 at some point in the next 12 months. Of course, this doesn’t mean the oil market is without risk. Goldman sees potential policy risks and still believes the economic recovery could falter:

“While we remain confident that oil prices will continue to strengthen as the global economy recovers against a supply backdrop that remains constrained, policy risks to the economic recovery remain. While we continue to expect the supply-demand balance to tighten, significant downside risk remains should the market’s concerns regarding a slowdown in economic growth be realized. As we move further into 2010 and even 2011, we think the market’s focus will increasingly turn from the downside risk from demand to the upside risk from supply.”

How to play it?

Goldman wants to buy December 2010 NYMEX WTI and June 2010 NYMEX WTI call struck at $85/bbl.

Source: GS

Joe Weisenthal of Money Game

Here’s an important heads up.

Today at 10:00 AM Ben Bernanke will attending a hearing on “The Economic Outlook.”

There’s always some nervousness before he speaks (will he all of the sudden sound more hawkish?).

Let us give you a preview of some things that might come up:

• On the deficit, Bernanke will say it’s a serious issue, but that it’s too soon to do anything about it. At some point it will have to be dealt with. You know, after everyone that’s in office now is out office.
• On entitlements, Bernanke will say they have to be fixed. At some point.
• That may involve some discussion or raising taxes (not his problem).
• He’ll say the economy is strong…
• But not so strong that we’re out of the woods yet (this will be the money line, when stocks will go nuts, because investors will know that this is a code word low rates).
• If Ron Paul is there, that will produce something YouTube-worthy.

From the National Federation of Independent Business: Small Business Optimism Declines in March

The National Federation of Independent Business Index of Small Business Optimism lost 1.2 points in March, falling to 86.8. The persistence of index readings below 90 is unprecedented in survey history.

“The March reading is very low and headed in the wrong direction,” said Bill Dunkelberg, NFIB chief economist. “Something isn’t sitting well with small business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy.”
…
After a devastating period of employment reductions, employment change per firm hit the “zero line” in March. …. While actual job reductions may have halted, plans to create new jobs remain weak. … Only nine percent (seasonally adjusted) reported unfilled job openings, down two points and historically low, showing little hope for a lower unemployment rate.

Gold Scents

Several weeks ago I speculated that we were “On the brink of an asset explosion” . So far events are unfolding about as expected. I might even say they are moving more aggressively than I thought. Well actually, there’s no doubt this cyclical bull is unfolding much more aggressively than anyone expected.

Compare the angle of assent of this cyclical bull to the last one.

The first two legs of this bull gained 300 and 275 points respectively. I wouldn’t be surprised if the last leg gains another 300+ points before the whole house of cards comes crashing back down.

And what is going to bring it down? The same thing that destroyed the economy in 2008 …oil!

Without exception, every time oil spikes 100% or more within a short period of time (one year or less) it has eventually led to a recession. Well Bernanke’s insane monetary policy has virtually guaranteed that will play out again as oil has now risen over 140% since this cyclical bull began.

Amazingly enough oil has done this in a very low demand/high supply environment. This fact could only be true if the cause for oil’s rise in price is directly attributed to the Fed’s monetary policy.

Once the market corrects I think we can back up the truck in virtually any asset class for the final parabolic move as the Fed completely loses control of money supply. We just need to keep in mind this will be an end game not the beginning of a new secular bull.

Courtesy of Mish

In a candid attack on his former colleagues, Poole Says Fed Has ‘Tilted Playing Field’

“The Fed did not provide assistance to all on an equal basis but tilted the playing field,” Poole said in remarks prepared for a lecture at the University of Delaware, where he is a scholar in residence. “Why should the Fed have had a program to buy commercial paper from large corporations and no program to help small businesses starved for funds?”

The Fed’s program to purchase $1.25 trillion in mortgage- backed securities issued by government-sponsored enterprises probably contributed to the demise of the market for non- government mortgage-backed securities and will “complicate monetary policy in the years ahead,” Poole said.

“Much more research is necessary to determine whether the Fed made the right choices; clearly, I have my doubts,” said Poole, 72. He was president of the St. Louis Fed from 1998 until retiring from the post in March 2008, the month that Bear Stearns collapsed.

Poole expressed concern about “an appalling lack of economic literacy in Congress” and said that neither the House nor Senate versions of legislation to overhaul financial regulation address the most important shortcomings.

Poole is correct about the Fed’s favoritism and the Fed buying mortgages. It is very doubtful the Fed helped housing much, but at some point the Fed has to get rid of that $1.25 trillion in mortgages. That will pressure mortgage rates.

Why did the Fed even purchase the last half-trillion? By then, the Fed was already discussing an exit strategy. It made no sense.

Certainly Congress does consist of economic illiterates, but the same thing can be said about the Fed. Pray tell what did Bernanke or Greenspan get right?

New York Faces $1 Billion Cash Shortage in June

In a scene playing out in nearly all states in varying degrees New York Faces $1 Billion Cash Shortage in June.

New York state faces a $1 billion cash shortage in June, budget director Robert Megna told reporters today.

The state is considering all options to deal with the shortage, including borrowing, Megna said. “We are significantly underfunded in the first week of June,” Megna said.

Soros Bought More Gold, Says Pound Devaluation Is Option For UK

Inquiring minds are reading Soros Says Pound Devaluation Is Option for Next U.K. Government

Billionaire investor George Soros said the next U.K. government after the May 6 election should decide whether to allow a further devaluation of the pound to rebalance the economy and assist the recovery.

Britain “has more room to use exchange rate adjustments as a way of adjusting the economy” than do nations that use the euro, he said in an interview yesterday in Cambridge, England. “It’s a question for the next government to decide. It has a number of options, of which a currency depreciation is one.”

The pound has dropped about 25 percent on a trade-weighted basis since the start of 2007, making exporters’ goods less expensive overseas. Bank of England policy makers are counting on sterling’s weakness to aid the recovery and rebalance the economy away from domestic spending at a time when the nation faces a record budget deficit.

“It’s a question now of, if you now cut the budget deficit and borrow less, you could probably keep the currency, raise the interest rate, you could keep the currency from going down,” he said. “Britain, by having kept out of the euro, has that option of allowing the exchange rate to adjust.”

Soros said that history shows Britain still has room to borrow more to bolster its public finances. Its debt levels have been higher, and Japan’s 10-year borrowing costs are about 1.5 percent even after its debt load swelled, he said.

“Probably Britain is not at the limit of its borrowing capacity,” he said. Still, “Britain is in a very difficult situation.”

At about 12 percent of gross domestic product, the U.K. deficit rivals that of Greece. Net debt climbed to 60.3 percent of GDP in February.

Soros Fund Management LLC manages about $25 billion. The firm increased its investment in SPDR Gold Trust, the world’s largest exchange-traded fund for the metal, by 152 percent in the fourth quarter. Soros told Reuters in an interview in January that he didn’t trade himself.

Is Devaluation That Simple?

Soros makes devaluation sound so simple. Is it? Please consider a definition of devaluation.

A deliberate downward adjustment to a country’s official exchange rate relative to other currencies. In a fixed exchange rate regime, only a decision by a country’s government (i.e central bank) can alter the official value of the currency.

There are two implications for a currency devaluation. First, devaluation makes a country’s exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports. As a result, this may help to reduce a country’s trade deficit.

In a genuine devaluation, the central bank would have to peg the rate to some other currency and defend that peg (buying or selling currency to enforce the target rate). Given that the British Pound floats, devaluation per se, is not exactly the right word.

Nor is the word “allow” the right word as in “The Bank of England should decide whether to allow a further devaluation of the pound”.

I seem to recall Soros collecting a $1 billion bet that the pound would crash whether Thatcher would “allow” the pound to drop or not. To be fair, there are some things Thatcher could have done to support the Pound, but she did not want to.

Likewise, there are some things the U.K. can do now to pressure the pound (such as spending ridiculous amounts of money) or dropping interest rates.

However, the Bank of England is right near zero-bound at .5% and wasting more money on fiscal stimulus is not exactly the most prudent thing to do.

For now, UK interest rates are on hold at 0.5% and the Bank of England also decided not to pump any more money into the UK economy under its policy of quantitative easing (QE).

Moreover, at zero-bound, quantitative easing does not accomplish much other than create an exit strategy problem down the road. Money just sits as excess reserves unless consumers want to borrow and banks want to lend, neither of which is happening.

Mike “Mish” Shedlock

Courtesy of The Pragmatic Capitalist

I wrote a pretty critical piece on Paul Volcker the other day for calling for higher taxes on the back of high budget deficits.  Unfortunately, Ben Bernanke, speaking this evening, has done exactly the same thing.  He said:

“To avoid large and ultimately unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.”

Unlike Volcker, I have never been a big fan of Bernanke’s, but I will spare everyone the rant on his mistakes and how we don’t fund our deficits with taxes.  This is more absurdity from our leadership.  Tax increases would crush any sliver of a recovery we might be seeing.  What we really need is more efficient spending (this is not the time for healthcare or paying banker salaries), lower taxes, and more regulation.  Of course, none of this surprises me.  I would be utterly shocked if we look back at Ben Bernanke in 10 years and describe him as anything other the second most destructive central banker in the history of the U.S. economy.  We are repeating all the same mistakes of Japan and Greenspan only on a much larger scale.

CalculatedRisk