Euro Pacific Capital � John Browne's Market Commentary

Country at a Crossroads

Wednesday, November 18, 2009

The U.S. economy is in uncertain times. Analysts are split between those seeing recovery and those fearing a second downturn. This confusion is being echoed in the highest levels of government as President Obama simultaneously speaks about the need for more federal spending and warns of the dangers of increased debt. As the volatile markets indicate, investors are not only confused � they are seriously concerned.

A Toxic Cocktail

Wednesday, November 11, 2009

Last week, the Fed extended its emergency economic powers, which include lending to the money center banks at zero interest. A few days later, the Fed's plan was reinforced by similar announcements from the rest of the G-20. The road map the authorities are providing for the near-term global economy can't be much clearer. There will be no cessation of the seemingly endless supply of cheap dollars being pumped into the financial system. With the world apparently in complete accord on the need for ever more liquidity, stock markets are staging an easy-money rally. The main line media is almost euphoric. But what should investors make of this seemingly good news?

Boasting of Glory

Tuesday, November 03, 2009

Last week, to the delight of its media cheerleaders, the government announced that economic growth had returned and the recession had ended. But before we start celebrating one quarter of modest growth, we should realize the only force driving this apparent recovery is an enormous increase in government spending. To finance its largesse, the government is now borrowing at a rate that has ordinary citizens and the international community extremely concerned.

Inflation by Stealth

Wednesday, October 28, 2009

Over the past two years, the federal government and the Federal Reserve have dispersed trillions of public dollars, run up enormous deficits, and kept interest rates at zero. In just about any economic textbook, this combination of policies would be described as the perfect recipe for inflation. Yet, with the exception of the usual increases in health care and education, prices by and large are not rising. Many have concluded that our economic leadership has simply outsmarted the textbooks.

Media Litmus Test

Wednesday, October 21, 2009

In a small bit of Washington irony, a government panel convened this week under the guise of ensuring �expressive freedom� on the Internet, while at the same time the Obama Administration put Fox News on notice that ideological rectitude would be a prerequisite for White House engagement.

US Markets Disconnected from Reality

Wednesday, October 14, 2009

Earlier this year, I predicted that the 2009 rally in U.S. stocks could bring the Dow Jones Index as high as 10,000. It looks like that level has been achieved. If, at this point, the index reverses course, I would have made a fairly good prediction.

The Currency Cabal

Wednesday, October 07, 2009

On October 6th, The Independent newspaper of London set off shock-waves around the world with a report that secret meetings were held between the OPEC states, China, Russia, and others, in which the participants charted a course toward a new world reserve currency. Not surprisingly, the U.S. dollar nosedived on the news. The rout was only stemmed by Saudi and Chinese officials publicly denying the story.

A Somber G-20

Wednesday, September 30, 2009

As a part-time member of the press corps, I had the good fortune to attend many of the public sessions at last week's G-20 meeting in Pittsburgh. As impressive as it was to closely witness the gathering of countries representing some 85 percent of the world�s GDP (along with the governors of the World Bank, the IMF and the European Central Bank), it was equally remarkable to witness the immense security forces deployed to restrain those who feel the gathering harbored the forces most responsible for the world�s economic and financial problems.

Trade Battle Explained

Wednesday, September 23, 2009

The Obama Administration waited until the wee hours of September 11 th , 2009 to quietly inform Americans of its decision to slap new tariffs against low-end tire imports from China. Coming only days before this week�s important G-20 meeting in Pittsburgh, an occasion when China will likely renew its campaign to push the world towards a post-dollar economy, the timing of the announcement seems particularly ill-advised. To be frank, it is like waving a red flag in front of a bull. It is not surprising that China instantly retaliated with their own duties on U.S. auto parts and agricultural products.

Bullish Stance Wears Thin

Wednesday, September 16, 2009

Readers familiar with my views know that I believe that the current stock market rally is a bullish chapter in an otherwise bearish novel. In the spring of this year, I had said I would not be surprised if the Dow were to hit 10,000 by the end of summer. While I was a little too optimistic on that particular forecast, it now looks as if U.S. stock markets are a bit �toppy� and a reversal may be in the cards. Seven factors, five tactical and two strategic, cause me to see a change in the wind.