A Melman Minute — February 4, 2011

Dear Readers:

I am writing this from beautiful Asuncion Paraguay. While the city may be beautiful, unfortunately their power system is not and our hotel current is interrupted by frequent short outages, which plays hell with anyone attempting to compose a lengthy report - such as your editor. However, I will do my best because a major chart development has occurred, one which could have truly important implications.

As you may note, after a great deal of backing and filling in the area of 4.6%, the interest rate on 30-year U.S. government paper has suddenly risen to above 4.7% and there is little overhead chart resistance. At TMR, we believe this has major implications and could spell trouble for the US economy at large by directly affecting real estate mortgages, auto loans and other big-ticket credit purchases.

It appears the negative employment report for January which saw just under 40,000 new jobs created, far under published expectations of about 150,000, may have convinced observers that we face additional and perhaps accelerating programs of Quantitative easing, leading to higher inflation and even more interest rate increases down the road.

We shall see.

Unfortunately, our schedule is full at the moment and a lengthy flight back to Buenos Aires, then Dallas, Texas and finally Vancouver awaits. However, I will be back at my desk by Sunday evening and will report on these developments and others, including our interpretation of the high levels of unrest in Egypt in Monday's Melman Minute.

We also plan to comment on the results of decades of terror-driven dictatorship which Paraguay has undergone in its history. Such impositions truly leave their mark on the society and Paraguayans are desperately attempting to step fully into the modern era.

Adios from Paraguay.

Leonard

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