Gas in Europe up to $8.63 per gallon

No inflation? I don't understand what Ben Bernake is talking about in his testimony before Congress. Yes, the CPI you look at Ben is still in the range of 1.75-2% but that excludes food and energy. What kind of inflation indicator excludes food and energy? One that tries to hide the fact that we are seeing rampant inflation from Ben's crazy stimulus policies. This is getting insane. Isn't it a capital offense to lie to Congress? I think someone needs to be consulted about this.

• From Zerohedge:
  "And Americans are complaining at an average gas price in the mid $3 range. In Europe, gasoline has just hit an all time record of $8.632 per gallon! As HLN.be reports: "tomorrow the price of gas will reach an absolute record. Petrol 95 can hit €1.624 per litre. This breaks the 2008 record of €1.61 per liter." Translated into American this means that a gallon of gas in Europe is now an unprecedented $8.632 per gallon, which will certainly result in Europe literally and metaphorically grinding to a halt."

The chart below shows the increases over the last 2 years in Gasoline, Oil, Copper, Cotton, Silver, and the CRB Commodity Index......... I know what I see and I see inflation... Quit printing Ben.

Take a look at commodity prices!!!!

How does this all tie in to the turmoil in the Middle East? In the countries that have recently seen problems...Egypt, Tunisia, and Libya, food and energy expenses account for nearly 50% of peoples disposable income. When they see rampant inflation in these expenses it puts a major hurt on their standard of living, driving people below the poverty line and causing them to starve. Of course they are rebelling, it makes perfect sense. Why are these expenses rising so fast? We are printing money. QE I, QE Lite, ZIRP, and QE II are creating speculative bubbles in almost every commodity known to man.... to bad our Federal Reserve President is too blind and egotistical to see his own mistakes.

• From CNN Money:

"Countries that depend on imports and don't grow a lot of their own grains, like many Middle Eastern nations, are also feeling the pain from price pressures. The recent turmoil there, with outbreaks of riots and violent clashes with police and military forces, is partially related to surging food prices.

"What has happened in Tunisia, is happening right now in Egypt, but also riots in Morocco, Algeria and Pakistan, are related not only to high unemployment rates and to income and wealth inequality, but also to this very sharp rise in food and commodity prices," Roubini said.

I'm not sure how this will all turn out.... but I do know one thing, we need to quit printing money. This would send us into an ugly period of deflation with major liquidity concerns arising in the financial sector, but the "too big to fails" need to fail and the financial system needs to take another hit and go through the restructuring process that was intended for 2008 so this country can get back on the right track again.

Freeport-McMoran Short-sell Update

• Freeport seems to be acting as expected, watch for a further drop to at least $48. If that area of support breaks FCX will likely test the $38-36 zone in short order.

FCX Daily Chart

Freeport-McMoran looks weak here...

From Yahoo Finance - Freeport-McMoRan Copper & Gold Inc. engages in the exploration, mining, and production of mineral resources. It primarily explores for copper, gold, molybdenum, silver, and cobalt deposits. As of December 31, 2009, its consolidated recoverable proven and probable reserves totaled 104.2 billion pounds of copper, 37.2 million ounces of gold, 2.59 billion pounds of molybdenum, 270.4 million ounces of silver, and 0.78 billion pounds of cobalt. Freeport-McMoRan Copper & Gold Inc. was founded in 1987 and is headquartered in Phoenix, Arizona.

Freeport (FCX) is looking rather weak at this point. If the market enters a downtrend, as we have talked about in previous post, this could be a lucrative shorting opportunity. The stock charts looks wear, as do FCX's two main sources of revenue, copper and gold.

Freeport-McMoran (FCX)

Copper

Gold (GLD)

Disclosure: No Position

Portfolio Update

After two days of slight losses the long only portfolio will move to 100% hedged at the open tomorrow morning. Will it be a wise decision? I'm not sure, it depends on if the Fed can keep up it's POMO fueled market melt-up. If so we will return to a net long position as needed. More on the portfolio will be described in the first volume of the weekly newsletter due out on Sunday.

POMO (Permanant Open Market Operations) Schedule..ie "Money Printing"

• Thursday 2/24/2011 - $4-6 billion
• Friday 2/25/2011 - $6-8 billion

Good luck fighting the Fed.....

Risk is high in this area....

Right now risk, as measured by the Gold-to-Silver ratio, is at the same height as it was at the peak of the Dot.com bubble and the top of the housing bubble. It probably isn't a great time to be long the stock market right now without the appropriate hedges in place. I'm not calling for a crash, but I wouldn't be buying risk assets at the moment. Couple this with the second chart showing the S&P bouncing off of two VERY long-term resistance lines and you have the making of at least an intermediate term drop in the markets.

• Bottom line - if you're looking at purchasing a few shares of your favorite stock I would wait a few days to weeks to buy at lower prices.

Long Term Gold-to-Silver Ratio

Monthly S&P 500 Index

2/23/2011 - Noon Update

S&P 500 Index Daily Chart

• Wedge support has broken on the SPX watch for a further retrace to at least 1275, if that breaks watch for a move back to the 1220 area. Good luck.

Investment Newsletter coming this week!!

Starting this week Absolute Investments will be writing a weekly newsletter that will be published every Sunday night. It will give our technical and economic analysis, as well as two different portfolios to follow, one long only and one long short. The portfolios will only trade ETFs so as to to limit company specific risk and add to broad diversification. Look forward to it. If you'd like to subscribe to the newsletter just e-mail me at branthammer@gmail.com.

A quick update: Our last post was back in December where we identified a range breakout on the S&P 500 and predicted higher prices. That prediction came true. Today I'll provide two charts, the daily (short-term) chart and the longer term weekly S&P 500 chart. I'll explain more in this weeks newsletter, but the charts do a fairly decent job giving a market picture themselves.

S&P 500 Daily Chart

S&P 500 Weekly Chart