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 The U.S. dollar is down, today, and gold up. The euro and the pound sterling have risen a full cent each against the dollar. In Hong Kong, overnight, gold spiked $6, to $657. Gold and silver climbed 1.4% and 1.8%, respectively, last week.
“I expect more of the same in the coming week,” reported James Turk of Goldmoney.com. “Watch $672 on gold and $13.78 on silver,” he advised. “Those levels are a steppingstone to higher prices. When those levels are cleared, the probability will substantially increase that the lows in gold and silver are behind us.”
 The percentage of U.S. mortgages entering foreclosure is the highest in more than 50 years, the Mortgage Bankers Association reported on Friday.
The biggest jumps came in bubble states like California, Florida, Nevada and Arizona. But mortgage defaults were also high in states hit with the loss of manufacturing jobs -- Ohio, Michigan and Indiana.
“It is tempting to call the bottom,” wrote in Chris Mayer. “But the nature of bubbles is that they reach ridiculously absurd heights that few thought possible. Then when the bubble deflates, things usually reach an absurd low that few thought possible. They also tend to take some time to unwind. It would be an odd historical anomaly to have a five- or six-year housing bull market and then have the thing unwind in a one-year bear market.
“This is going to take some time to play out. At least a few years, I’d say. Therefore, as a generalization, don’t be tempted by housing stocks or mortgage lenders just yet.”
 Recent statistics reveal Wall Street analysts are more bearish than ever. From Bloomberg.com:
“Short” interest rose to 3.1% of shares listed on the New York Stock Exchange in May -- higher than any level since the Great Depression
“Sells” in the total market have increased to 6.9%, compared with 1.9% in March 2000, moments before the tech wreck
“Buy” recommendations fell below “hold” calls as a percentage of total U.S. stock picks for the first time since Bloomberg began tracking in 1997.
A bull market climbs a wall of worry, the old-timers say. Perhaps there is still room for new record closes on the Dow and S&P after all.
 Inflation is running at a little under 3% annually… or over 10%, depending on which president you ask.
“Restated using pre-Clinton (1990) methodologies,” writes our friend John Williams at Shadowstats.com, “annual inflation was roughly 6.0% in May.”
But if you restate the numbers using pre-Reagan (1980) methodologies, back when inflation was seen as a real threat to the economy, the annual inflation rate in May was about 10.3%, up a point from the 10.2% Williams calculated in April.
These are “core” numbers, of course, discounting both food and energy.
 Friday’s CPI numbers, however, also revealed some troubling increases in the cost of food:
In total, food and beverage costs are up nearly 4% since May of 2006.
“The real question is,” in the mind of our friend John Mauldin writing in his Thoughts From the Frontline e-letter, “can you credibly ignore rising food and energy inflation if you are a voting member of the Federal Reserve committee? I think not. And if China allows their currency to rise, that means we will be paying more for their goods, which is inflationary. It will also allow the countries that compete with them for the U.S. market to allow their currencies to rise, which will mean inflation across the board for a lot of goods.”
“The prospect of rising interest rates and stubborn inflation, and a Fed that cannot credibly cut rates for a lot longer than the market thinks, is very real.”
 “Japanese households are opening up margin trading accounts at a bubble-like pace,” reported Strategic Investment’s Dan Amoss. Carry trading the yen has become so routine that everyone and their mother is opening forex accounts… check out the trading strategy of Naoko Ogawa, a 34-year-old freelance writer from Japan with almost no trading experience (courtesy of Bloomberg):
“When the yen rose to a two-week high of 162.20 against the euro on May 25, Naoko Ogawa, a 34-year-old freelance writer, used a 1,000 euro ($1,300) deposit to buy 10,000 euros. She sold four days later, close to a then-record high of 164.29 yen.
“‘You just need to buy the dollar and the euro on dips, then sell them at a profit,’ said Ogawa, who added that she has made a 20% return on her 1 million yen trading account since December. ‘It's better than stock trading, as you can rely on daily interest.’
“You can’t blame the Japanese for wanting to get out of their own currency, considering that their government and central bank have a stated policy of destroying the yen at a faster pace than all other currencies,” commented Amoss. But what seems like an endless fountain of profits can turn into an overnight panic when everybody who’s shorted the yen looks to cover their position and buy at the same time:
“When the carry trade collapsed in 1998 following Russia’s debt default, the yen jumped 20% in less than two months,” continued Bloomberg. “The biggest challenge to the strategy this year came when Chinese stocks slumped on Feb. 27, prompting fund managers to cut riskier investments and pay back yen loans. The yen rose 2.3% in a single day, the biggest gain since July 2005.”
“When you see the next strong upward move in the yen, brace yourself,” Dan warns.
 “Most of the reports I'm getting form my network of farmers are gloomy, at best,” reports Kevin Kerr.
“Corn is rolling up at 10 a.m. in many states and doesn't uncurl until 3 p.m... very bad, indeed,” said Kevin. According to the network of Resource Trader Alert farmers and industry insiders, many corn, grain and bean crops are looking hopeless.
“Unlucky weather has many replanting efforts literally underwater,” says Kevin. “The only beans that will grow in this hot weather, at this stage, are magic beans.”
“Kevin,” writes one such member of the network, “this is your road worrier from Peoria. I just came home from a two-day trip down to the northern St. Louis area. I drove a lot of back roads… and saw many thousands of acres of corn with curled leaves along the way.
“Along the ol' Mississippi river, there was lots of winter wheat underwater or rotting. Fields along the road were ready to harvest, but the closer to the levies you got, the smaller the plants got, until the land became a mud flat. We saw lots of fields that were replanted... drill marks, but no crop growth. Or the beans or corn were less than 2 inches out of the ground. My winter wheat contracts just paid for another semester of college for my son. Thanks. See you in Vancouver.”
If you want to learn how to trade these conditions, join Kevin in Resource Trader Alert
 “All of the people poohing on ethanol for wasting corn are missing a huge point,” writes a reader. “There ARE other ways to make ethanol, without taking away from the food sources. Ethanol can be made from almost anything organic: grass, stalks, animal (and people) waste, etc. It's called cellulosic. Using food for fuel is wrong, but turning waste products into fuel is the right thing to do.
“What about ethanol from sugar cane?” asks another. “Is there a future for this energy source being grown in the U.S.? Brazil is doing fine on sugar cane.
“Energy IN/energy OUT: For corn = 1.3 For sugar cane = 8.2…”
Regards,
Addison Wiggin
The 5 Min. Forecast
P.S. “I get a kick out of the complaints you post,” wrote in Brian Trumbore of stocksandnews.com. “I became a Reserve member earlier this year; have already made a ton of money on picks like NOV, PICO and AKNS; and even went to China to check out another recommendation firsthand, CCGY. (This one is down, but now that I've seen the facility and met management, I'm not concerned.)”
“My point is I greatly appreciate the hard work the whole team is putting in at Agora Financial. We're all big boys and girls. Everyone is still responsible for their own homework, as well. But the only way to get ahead in life is to read, read and then read some more... and from all sides. Thanks for being an indispensable source.”
Brian, for the record, worked on Wall Street for 16 years and served as the executive vice president of Pimco Funds. Today, he pens an economic e-letter similar to The 5. Brian told us he’s already made enough money from our recommendations to pay for his Reserve membership “15 times over” -- in less than six months. Do you qualify?
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