A Melman Minute By: Leonard Melman   NOTE: In order to complete Mr. Melman's forthcoming book on the essential fundamentals of the developing international financial crisis and its relationship to gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday. Since the work has been expanded to include potential solutions to the growing list of seemingly insoluble dilemmas, the working title of the book has been revised to 'REVERSING THE WAY IN!"   MELMAN MINUTE - May 31, 2010 - - - - - NOTE:  As noted on Friday, we will be flying to Montreal and then on to northern Quebec Monday-Thursday as part of a rare earth minerals mining analyst tour.  Accordingly, we will not be able to write our regular up-to-date Melman Minute during this period of time.  In lieu of our regular entry for Monday, we offer this discussion of some of the major information categories we follow on a regular basis.   ............. Economic analysts share one particular feature with fans of the great game of baseball, namely a love of numbers.  Without a wide array of statistical information, each area of interest would lose much of its flavor.  As a result, in our ongoing attempt to keep current on economic matters, we regularly review a wide array of numerical economic information.  Here are some of those categories, along with our most current comments. * - World Value of the US Dollar -  Each week, we are able to monitor currency movements in more than 150 nations around the world.  Since many small nations tie their currency value to either the US Dollar or the Euro, many of these movements are insignificant.  However, some are quite important and one in particular, the Venezuelan Bolivar, has caught our attention with its devaluation from 2.147 per US$ to 4.294 during the past few months.  Obviously, we also monitor relatives movement between the world's major currencies on a regular basis. * - Federal Reserve Data Bank - The US Federal Reserve Bank issues data in a regular stream regarding such subjects as the purchase or sale of government securities; Reserve Banks credit standing; cash holdings and the "Monetary Base", which happens to have grown sharply during the past three years.  One of the most important statistics we follow on a regular basis is the Fed's report on "Foreign Holdings of U.S. Debt", which happens to have taken a dramatic plunge in momentum over the past three weeks from a year-over-year gain of $414 billion three weeks ago to the current reading of just $342 billion. * - Money Supply - Figures within this category relate to the generally accepted definitions of the amount of money available within an economic community.  In the case of most nations, there are three basic categories of money, named within the American system as:  M-1 - currency (coins and bills) plus checking account deposits; M-2 - M-1 plus savings account deposits; and M-3 - M-2 plus all other time deposits. While M-1 and M-2 continue to be reported on a regular basis, reporting of M-3 was terminated 3-4 years ago.  Many analysts believe this action was taken because the magnitude of money creation implied by the rapidly growing M-3 figure was becoming embarrassing to American monetary authorities. Over the past two years, M-1 and M-2 were growing at historically rapid rates until about six months ago when the rate of growth of both categories slowed down dramatically and we may indeed now be at a point of actual contraction, particularly in terms of M-2. * - American Debt and Deficits - This report is comprised of two basic entries; the annual operating deficit of the US government and the total accrued debt of that government.  If there is any report which is setting off 'alarm bells' around the world, it is this one.  At latest count, the U.S. debt is growing at a year-over-year rate of $1.694 trillion and the total debt is edging right up against the $13 trillion level.  Both figures are up dramatically during the past two years. * - Pulse of the Economy - This category contains over 80 different reports which provide information on everything from Production to Consumption to Employment to Real Estate to a variety of other general indicators.  Within the "Pulse" category, our attention is most closely focused on subjects such as the "Index of Leading Indicators", New Housing Permits and Starts; the latest Labor Department numbers; Inflation and Balance of Trade.  After residing in the 'negative' direction throughout most of 2008 and on toward fall 2009, our interpretation is that there is presently a precarious balance between negative and positive economic information of late. * - Key Foreign Stock Indexes - At present, there are 45 such market indexes we follow with the objective of reading investor sentiment around the globe.  Some of these relate to very important markets such as New York, London, Tokyo, Toronto, Frankfurt, Hong Kong, Shanghai or Paris, while there are also a multitude of smaller markets as well.  During recent weeks, while most major markets have turned down in line with New York, some have made exaggerated moves to the downside and within that category, we find Shanghai in addition to Lisbon (Portugal), Milan (Italy), Athens (Greece) and Madrid (Spain), the latter four reflecting uncertainty in the "PIGS" nations. * - Dow Jones Half-Hourly Average - This area of study reviews information on the movements of the four Dow component averages; Industrials, Utilities, Transports and Composite throughout the trading day.  By studying these movements we can attempt to determine whether the general market trends are bullish, bearish or neutral.  Our studies have led us to the belief that the averages tend to move higher in the last hour of trading inside bull markets, lower inside bear markets and relatively unchanged in neutral markets. * - Commodity Indexes - We follow several general commodity indexes to develop an evaluation regarding the overall price trends for the various commodity categories.  In our most recent readings, we find petroleum complex, grains, industrial metals and 'softs' to have been particularly weak so far this year while livestock and precious metals have moved higher.  Overall averages of the total index picture presently show a decline of about 10% for the year, which we consider to be a relatively negative indication toward nearby visible price inflation. * - Cash Commodity Prices - In addition to the indexes noted above, we also follow a host of individual commodities within those general categories.  One area which we find to be uniquely important within our context of overall worldwide price inflation is the general food category and inside that we find such items as barley, corn, oats, soybeans (plus 'meal' and 'oil'), wheat, beef, broilers (chickens), butter, cheese, milk, cocoa, coffee, sugar, hogs, pork bellies, corn oil and lard.  We must admit to some level of surprise that the entire grain complex has failed to rally to new highs for some years despite continued worldwide population growth and despite continued urbanization which encroaches on existing farmlands.  We believe that some time in the not-too-distant future, the grains could move sharply higher in price, exacerbating whatever visible price inflation might be occurring at that time. These are some of the indictors we follow and upon which many of our economic prognostications are founded. - - - - - Markets will be closed in America and several other nations on Monday, May 30 and so important areas of  this coming week's trading will be compressed into four trading sessions instead of five.  For this reason alone, we would expect some heightened volatility in coming days. As noted earlier, we will be traveling over the next few days and will add Melman Minutes on an as-able basis with our regular schedule set to resume on Friday, June 5.             ◄  Previous Minute                                                                                                        Next Minute  ►
		DISCLAIMER The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed.  Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only. Any investment decisions should be made only following consultation with registered investment professionals.