Wednesday, April 30, 2008
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 2 percent.
Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.
Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Read it again. Do you see the word pause in there? Neither do I. A number of Tom, Dick, and Harry's in the financial media seem to have seen it in there:
Fed lowers rates, hints cuts may be at end
The Fed is "basically telling you that unless their outlook for the real economy deteriorates further, they will stay at 2 percent," Mohamed El-Erian, co-chief executive officer of Pacific Investment Management Co, told Reuters.
"This statement strongly implies that the Fed will be on pause for some time," said Joseph Brusuelas, U.S. chief economist at IDEAglobal in New York.
Fed Trims Rate to 2%, Signals Ready to Consider Pause
``We do not expect to see a rate cut at the next few meetings without a substantial contraction of the economy,'' said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``We are not yet to Memorial Day weekend, but the Fed effectively told us today to take the summer off.''
``The two dissents show they are still worried about inflation,'' said Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc. ``This is a Fed ready to watch from the sidelines.''
Can you say "media hacks"? The headlines are completely misleading. How can they get away with it you ask. Simple. How many people actually heard or read the Fed's actual statement on interest rates today? Had you before you read it above? These clowns are simply towing the Fed's line, "everything will get better later this year". That's easy to say, much more difficult to make it happen.
The one sentence all of these hacks seem to be focusing on as "Fed Telepathy" is the first sentence in the last paragraph: "The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity," the central bank said. Hey, I'm sorry but that just doesn't seem to say "we're done cutting rates" to me. I'll tell you what it does say to me and what the fed should have said if they were honest [LOL]. It should have read this way: "The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, will help to promote considerable inflation over time and increase risks to economic activity." Because essentially that is what they are saying, that is what they have done, and this is what they are going to continue to do. How the fed can even suggest that they "expect inflation to moderate" going forward completely escapes me. How can it? They have done a great deal more to create inflation than have done to spur growth in the economy. The economy has turned into a minefield. Only a puppet would dare suggest that the Fed said anything regarding a "pause" in interest rates. If anything they said what they've said for months. They stand ready to do what they deem necessary should the need for them to do anything arises. In a nutshell, the Fed really hasn't changed a damn thing.
Yes, The aggressive rate cuts by the fed are probably over. They have now cut rates down to 2%. There is not a lot of room left to cut. If the Fed were to stop cutting rates, it certainly wouldn't be because they have succeed in "saving the economy". They'll stop because they will have foolishly succeed in raising inflation to historic heights. The economy remains in a bad way, and looks to be getting worse despite 1st Qtr GDP coming in miraculously at the exact same number as 4th Qtr GDP.
President George W. Bush on Tuesday said the economy faced a "tough time," a point underscored on Wednesday by a report that showed U.S. gross domestic product expanded at a slim 0.6 percent annual rate in the first quarter.
While the growth rate was a bit stronger than economists had expected, it reflected a buildup in inventories that may weigh on the economy in coming months.
Other details in the report were decidedly weak.
Consumer spending, which accounts for two-thirds of U.S. output, grew at the slowest pace since 2001, business investment fell and home building continued to nosedive, recording the biggest drop in 26 years.
The world's biggest financial companies have posted at least $312 billion in writedowns and credit losses since the start of last year as the subprime mortgage market collapsed.
U.S. foreclosure filings more than doubled in the first quarter as payments rose for subprime adjustable mortgages. One in every 194 U.S. households, or 650,000 properties, were in some stage of foreclosure during the quarter, according to Irvine, California-based RealtyTrac Inc., a vendor of data.
Oh yeah, the Fed has certainly fixed everything. Better dump that Gold and Silver and back up the truck to the Dollar Store. A lot of weaklings are kicking themselves at this hour. Their emotions won out over their convictions, and the TRUTH. 24 hours ago Gold was trading around 869. At this hour it is trading at +10 at 879. 24 hours ago Silver was trading around 16.50, it just hit 17. Is the correction in the Precious Metal over? Only time will tell.
Dollar Going Down
"Gold has a way of taking us right to the edge (as per Oct. 2006 or Aug. 2007), and then, when it has us scared to death, it makes a great move."
-Howard S. Katz
Crisis Over, the Old Crisis Returns
So maybe a bigger crisis is developing on Ben Bernanke's watch; maybe the much-needed foreign bond-buyer is going on strike, just when the Treasury needs him most – to pony up for tax rebates, investment bank bail-outs, and the first raft of post-Election housing aid.
"Exploding fiscal deficits, the housing correction, protectionist threats and $200 billion in tax hikes scheduled for 2011 are fueling loss of confidence in the US Dollar," as John Chapman, a research fellow at the American Enterprise Institute, notes for the Wall Street Journal. "If foreign holders of Dollars or Dollar-denominated assets sell them, all the good effects of being the de facto international reserve currency start operating in reverse. Until fiscal and monetary policies change, all this implies future inflation and higher interest rates."
Fed cuts again! Dollar doomed!
The Fed just cut interest rates by a quarter point, again!
But this time it's trying to turn up the volume a bit on its anti-inflation rhetoric — trying to send the message that it "really means it."
HOW TO SELL THE DOLLAR, PART I
The dollar is the single biggest element of risk in the world of finance today. Rearrange the current system of world finance ever so slightly, let confidence in the greenback falter, and the mighty dollar could go up in flames. There are many ways to hedge against this risk. Better still, there are many ways to profit from the likelihood the dollar will fall. Some methods are direct, some indirect. Some are leveraged, some unleveraged. There is a methodology for every taste, but before explaining the specifics, we ask: What ails the dollar?
The dollar is a victim of its own success. It is America’s most successful export ever – more successful than chewing gum, Levi’s, Coca – Cola, or even Elvis Presley, Britney Spears, and Madonna put together. Trillions of dollars flow through the global financial markets every week, and they are readily accepted at large and small – and clandestine – business establishments from Kiev to Karachi.
Today, there are simply too many dollars in circulation for the currency’s own good. Why? Americans have been living beyond their means for more than two decades. The U.S. dollar’s problems stem from a single cause. “If there’s a bubble,” wrote David Rosenberg, chief economist at Merrill Lynch, “ it’s in this four – letter word: debt. The U.S. economy is just awash in it. ”
You’ve seen it firsthand: John Q. Public now holds more credit cards and outstanding loans – with a higher and higher total debt load – than ever before. Outstanding consumer credit, including mortgage and other debt, reached $ 9.3 trillion in April 2003 – a significant increase from its $ 7 trillion total in January 2000 – but by the third quarter of 2007, debt had nearly doubled since 2000, to $ 13.7 trillion. With consumer spending alone responsible for approximately 70 percent of U.S. GDP, that’s quite a hefty personal debt load.
The corporate debt picture is no better. American companies have never depended so much on sales of their corporate bonds. Between 2002–2007, investment – grade corporate bond sales increased nearly 60 percent, growing from $598 billion to $951 billion. But junk bond sales for that same period broke the bank, surging from $57 billion to $133 billion.
The third leg of the debt problem, following consumer and business debt, is Uncle Sam. Government debt as of November 7, 2007, officially passed $ 9,000,000,000,000. That’s about $ 30,000 for every man, woman, and child in the country. This total includes debt owned by many types of investors, from individuals to corporations to Federal Reserve banks and especially to foreign interests. (By 2004, foreign central banks had stockpiled more than $ 1.3 trillion worth of dollar – denominated Treasury bonds and agency bonds at the Federal Reserve. By 2007, foreign debt had nearly doubled, to $ 2.033 trillion.)
What the $ 7.8 trillion figure does not account for are items like the gap between the government’s Social Security and Medicare commitments and the money put aside to pay for them. If these items are factored in, the government debt burden for every American rises to well over $ 175,000.
Still got yer Gold and Silver? Better git more.
Tuesday, April 29, 2008
We all need a little humor after a pathetic day like today in the Precious Metals. No spin here. Today SUCKED. But, ...it was just one day. One day filled with more noise than the previous thirty days combined.
Let's take a look at the headlines as they appeared this afternoon at 2:30PM est. on Yahoo Finance:
Consumer Confidence Drops to Lowest Point in 5 Years- AP
Soaring gas prices and weaker job prospects made Americans gloomier about the economy in April, sending a widely watched measure of consumer sentiment to a five-year low, a private research group said Tuesday.
U.S. Home Foreclosure Rate Soars 112 Percent- AP
Home Prices Plunge at Record Rate of 12.7 Percent- AP
Stocks Battle Back From Earlier Losses- AP
Confidence, Housing Data Test Bulls' Mettle- Tech Ticker
Merck Hit Hard By Cholesterol Drug Rejection- Reuters
Oil Drops as Demand Declines- AP
Millionaires More Bullish on Stocks, Real Estate- Reuters
Bernanke's Burden: Way Beyond This Week's Fed Meeting-
Boy, that sure makes me want to get on the phone ASAP and sell all my Gold and Silver. Things couldn't be rosier! Give me a freakin' break! I'm tellin' you here and now...a lot of people that sold their Precious Metals in a panic today are going to be kicking themselves down the street 24 hours from now.
Let's put to rest a few Fed myths here and now. The Fed has destroyed the US Dollar. Ceasing to cut rates is NOT going to save it...period! Understand this: the Fed is screwed. If they continue to cut rates, inflation will only get exponentially worse. If they raise rates the economy will evaporate...pfft! Any "pause" in Fed rate cuts will come about ONLY because, one, the next Fed meeting isn't until the end of June, and, two, interest rates will be at 2% if the Fed follows through tomorrow with a 25 point cut.
The Fed has to pause because they have just about run out of rate cut bullets, and let's face it, the 300 points they knocked off so far has done NOTHING to spur growth in the economy. Any and all growth in the economy now comes from exports. And strong exports are because of the weak Dollar. The last thing the Fed wants is for the Dollar to start rising. If the Fed was worried about the Dollar they wouldn't have knocked 300 points off the Fed Funds Rate over the past six months.
People, the Dollar is not going to go racing higher just because the Fed stopped cutting interest rates. And another thing, any pause in cutting interest rates IS NOT because the financial crisis has been resolved or is getting better. Far from it. Read the headlines above again. The economy keeps getting worse. Everyday another headline exposes the truth: Consumer confidence is on life support. 70% of America's economy is based on consumer spending. It's bad and getting worse. Go ahead and sell your Gold.
How many times have you heard, "the news has been discounted in the price already"? I am of the belief that we are staring that notion in the face as we look at Gold prices today. The media has done their job. Ya gotta tip your hat sometimes to a job well done. I tip mine. The public has been buffaloed by the media into believing the Fed has saved the day and that Precious Metals and commodities are dead. Bah! The Fed might be able to print money like it's going out of style, but they can't print corn, wheat, soy beans, Oil, or Gold and Silver. The only thing that is dead, is the US Dollar. The only thing missing is it's obituary.
The Fed is going to do their little song and dance tomorrow. There will be a 25 point cut. Then they'll pass down their "words" from the oracle. In the end they will say nothing more than that they are as concerned about slowing growth in the economy as they are surging inflation. Basically they will say they are "stuck between a rock and a hard place". And they are, and that leaves them virtually powerless. They've done a lot over the past six months to be sure. A lot to make people believe that they have done something to fix this, and save that. They really haven't fixed or saved anything. They have just put off the inevitable, and probably made things worse in the process. They have run out of fingers to stick in the dike, and the damn is about to burst.
Fed seen cutting U.S. rates as consumer hopes swoon
WASHINGTON, April 29 (Reuters) - The U.S. Federal Reserve began a two-day meeting on Tuesday that was expected to end with a small interest rate cut that could be the last in a string of reductions dating to mid-September.
Financial markets widely expect the Fed to lower benchmark overnight rates by a quarter-percentage point to 2 percent, which would the lowest since December 2004, and offer a hint the rate cutting may be at an end. Interest rate futures prices implied a small probability the Fed could leave rates unchanged.
The cascading evidence of economic malaise -- likely to be reinforced when the government issues its first estimate of first-quarter gross domestic product at 8:30 a.m. (1230 GMT) on Wednesday -- means the Fed will likely say that it remains more concerned about economic weakness than mounting prices.
However, it may also draw attention to the deep rate cuts already put in place and imply it wants time to assess whether they are enough to foster a return to stronger growth later in the year.
The GDP report is forecast to show only a slight 0.2 percent annual rate of economic growth in the first quarter, down from 0.6 percent in the fourth quarter and teetering on the verge of outright contraction.
Earlier this month, Fed Chairman Ben Bernanke conceded the economy had weakened since January. "It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly," the Fed chief said.
'Ol Ben sure sounds less than enthusiastic about growth prospects for our economy. I doubt little or no growth will foster much support for the US Dollar, especially if it coincides with rising inflation. A "pause" in rate cuts is NOT going to help the Dollar at all. There are too many fundamentally negative issues standing in the Dollars way for it to advance. I have spent the better part of the past month pointing out these negative issues here, so there is no need to run through them again. Don't be at all surprised if tomorrow's Fed announcement is a non-event. The only thing shocking they could do is do nothing at all tomorrow. My hunch is that the Fed mumblings will be in the headlines under the absolutely abysmal GDP number that is going to be released at 8:30AM est tomorrow morning.
Gas prices hit a new record of $3.607 a gallon on Tuesday, according to a survey of stations by AAA and the Oil Price Information Service.
The economy has weakened meanwhile, strained by housing, credit and financial debacles.
Growth during the January-March quarter is expected to have slowed to an anemic pace of just 0.5 percent. The government releases a report on the first-quarter's performance on Wednesday. Bush said he hadn't been briefed on the figures but said "I think they'll show that it's a very slow economy."
A growing number of analysts believe the economy has fallen into a recession and is contracting now.
"People -- economists can argue over the terminology," Bush said, refusing to put a recession label on the economic climate. "These are difficult times," he acknowledged. "You know the average person doesn't really care what we call it," he said.
Consumer confidence, as measured by the Conference Board, sank to a five-year low in April, as rising gas prices and higher unemployment put people in a more gloomy mind-set.
Bush and Fed officials are hopeful that the government's $168 billion stimulus package -- including tax rebates, which started flowing to bank accounts on Monday -- will help give the economy an energizing jolt in the second half of this year.
"Hopeful" to say the least. Ben and George, and friends can hope all they want. The government's stimulus package isn't going to jolt a damn thing. By September of this year you won't even remember it. You'll be too busy screaming about inflation to even wonder if this magic money even nudged 2nd Qtr GDP by o.1%. LOL, $160 BILLION in a $14 TRILLION economy. Who's gonna notice?
Monday, April 28, 2008
LONDON - Any hopes that the dollar could regain some of its lost ground against the euro were dashed on Monday as the European Commission warned that it expects inflation within the 15 nation euro zone to rise to 3.2% for the year. This adds to pressure on the European Central Bank to refrain from a confidence-boosting interest-rate cut.
Trichet: Policy Stance Helps Achieve CPI Stability
VIENNA (Dow Jones)--The European Central Bank's monetary policy stance contributes to achieving price stability, but there is no cause for complacency, ECB President Jean-Claude Trichet warned Monday.
The euro is a stable and credible currency and has protected euro-zone economies from external shocks.
"Yet there is no reason to be complacent; the present circumstances continue to be very demanding," Trichet said in the text of a speech to be presented at an economics conference hosted by the Austrian central bank. "I am confident that the Eurosystem, through its stability-oriented monetary policy strategy will stand up to these challenges and be successful in maintaining price stability in the euro area."
Trichet reiterated that anchoring inflation expectations is particularly important during times of financial market turmoil. However, it is important to distinguish between policy and market liquidity operations, and policy decisions will be made on the basis of price stability alone.
Much of the basis for the belief that the US Dollar will stabilize and rise from recent record lows is the belief that the ECB is going to have to cut interest rates in the Euro zone the way the US Fed cuts them in America. Nothing could be further from the truth. The ECB members are steadfast inflation hawks. They will not cut interest rates because of political whim as they have here is the US.
There is also the false hope here in the US that the Dollar will stabilize because of the belief that smaller interest rate cuts by the Fed, couple with a pause in cuts, signals that the "all clear" for the financial hurricane has been sounded. Again, nothing could be further from the truth. Any pause in Fed cuts will be simply because the Fed doesn't have much left in the way of ammo to cut rates further at this time. They have to keep a little of their powder dry just in case of [another] crisis. Perhaps their assurances that the Bush Stimulus Package will stave off a recession, and save the economy, will prove to have been wishful thinking [likely scenario]. Perhaps their assurances that inflation will moderate in the second half of this year will also prove to have been wishful thinking [again, likely scenario]. Perhaps the truth about Alt-a mortgages and commercial real estate CDOs will come to light and accelerate and exacerbate the ongoing credit crisis [very likely scenario]. Or maybe one of these conniving ratings agencies will finally down grade Ambac Financial Group and touch off a bond catastrophe as the truth about Ambac's ability to insure all the bonds it stands behind comes into question. Why this hasn't happened already is one of the greatest untold travesties of this entire credit crisis to date. It is an outrage... Read more about that below in an essay from by Martin D. Weiss, Ph.D.
The Great Bond Insurance Cover-Up
Our nation's largest bond insurers are collapsing as we speak, but Wall Street's leading rating agencies are covering it up while regulators look the other way.
Just last week, Ambac Financial Group, the parent of the second-largest bond insurer, shocked analysts with first-quarter losses of $1.66 billion — on top of $3.64 billion in the previous six months.
And the underlying facts denote a company in a death spiral...
...devastating losses, its entire business model on the rocks, a cash squeeze and even questions being raised about its future solvency — you'd expect Wall Street's rating agencies to immediately announce deep downgrades in one fell swoop.
But they did precisely the opposite. On Wednesday, Standard & Poor's announced that Ambac's triple-A is "solid," and on Thursday, Moody's also reaffirmed its Aaa rating of the company.
The essay is a must read. It is sure to piss you off. As each day passes I am more shocked at what the government is not only doing, but condoning, in the name of "the public's interest". Poppycock! The government is colluding with the banking industry to save the banking industry's asses at the expense of the taxpayer. The have no other interest in the public's well being other than to fleece them for all they can. The people elected this government, it's high time they elect to replace them.
The Truth About the Gang of 545
by Charlie Reese
“Politicians are the only people in the world who create problems and then campaign against them.
Have you ever wondered why, if both the Democrats and the Republicans are against deficits, we have deficits?
Have you ever wondered why, if all the politicians are against inflation and high taxes, we have inflation and high taxes?
You and I don't propose a federal budget. The president does.
You and I don't have the Constitutional authority to vote on appropriations. The House of Representatives does.
You and I don't write the tax code, Congress does. You and I don't set fiscal policy, Congress does.
You and I don't control monetary policy, The Federal Reserve Bank does.
One hundred senators, 435 congressmen, one president and nine Supreme Court justices - 545 human beings out of the 300 million - are directly, legally, morally and individually responsible for the domestic problems that plague this country.
I excluded the members of the Federal Reserve Board because that problem was created by the Congress.
In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered but private central bank.
I excluded all the special interests and lobbyists for a sound reason. They have no legal authority.
They have no ability to coerce a senator, a congressman or a president to do one cotton-picking thing.
I don't care if they offer a politician $1 million dollars in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislator's responsibility to determine how he votes.
Those 545 human beings spend much of their energy convincing you that what they did is not their fault.
They cooperate in this common con regardless of party.
What separates a politician from a normal human being is an excessive amount of gall.
No normal human being would have the gall of a Speaker, who stood up and criticized the
President for creating deficits.
The president can only propose a budget.
He cannot force the Congress to accept it.
The Constitution, which is the supreme law of the land, gives sole responsibility to the House of
Representatives for originating and approving appropriations and taxes.
Who is the speaker of the House?
She is the leader of the majority party.
She and fellow House members, not the president, can approve any budget they want.
If the president vetoes it, they can pass it over his veto if they agree to.
It seems inconceivable to me that a nation of 300 million cannot replace 545 people who stand convicted -- by present facts - of incompetence and irresponsibility.
I can't think of a single domestic problem that is not traceable directly to those 545 people.
When you fully grasp the plain truth that 545 people exercise the power of the federal government, then it must follow that what exists is what they want to exist.
If the tax code is unfair, it's because they want it unfair. If the budget is in the red, it's because they want it in the red.
If the Marines are in IRAQ, it's because they want them in IRAQ.
If they do not receive social security but are on an elite retirement plan not available to the people, it's because they want it that way.
There are no insoluble government problems.
Do not let these 545 people shift the blame to bureaucrats, whom they hire and whose jobs they can abolish; to lobbyists, whose gifts and advice they can reject; to regulators, to whom they give the power to regulate and from whom they can take this power.
Above all, do not let them con you into the belief that there exists disembodied mystical forces like 'the economy,' 'inflation' or 'politics' that prevent them from doing what they take an oath to do.
Those 545 people, and they alone, are responsible.
They, and they alone, have the power.
They, and they alone, should be held accountable by the people who are their bosses - provided the voters have the gumption to manage their own employees.
We should vote all of them out of office and clean up their mess!”
Read more about the mess these 545 people has created here:
Predators and Recession
Sunday, April 27, 2008
- USGovt is running huge federal deficits, to grow worse as recession worsens
- US trade deficit is widening, as is the corresponding Current Account Deficit
- US bank system is in technical insolvency, with negative non-borrowed core assets
- Nearly 10% of homeowners have negative equity in homes, to reach 20% by year end
- US car industry is reeling from higher gasoline costs, and piglike SUV emphasis
- US airline industry is reeling from higher jet fuel costs, and strangled networks
- US truckers are being squeezed, as highway actions are on the rise
The United States is tragically entering a gradual state of failure, from insolvency, corruption, and indescribably horrible economic counsel. An astronomical rise in USGovt federal deficits could occur in the next few months. Capitalism has failed in an historical spectacle of catastrophe. The nation has lost its legitimate income sources from industry. The nation has relied upon inflation contraptions and financial engineering devices for two decades. The exotic devices have blown up in our faces. The reflection upon the USDollar is certain to continue. Recent adoptions of broader US Federal Reserve lending facilities has given a cup of water, a piece of bread, and a peptalk to a crippled man burdened by a 150-lb backpack of debt even as Wall Street thieves empty his pockets of loose money and all pension receipts. To accept that the worst is over is an exercise in stupidity, naivety, and further con game victimizations. http://news.goldseek.com/GoldenJackass/1209017100.php
Should Gold Investors Worry on Dip Below $900 on Dollar Strength?
When in doubt….Fundamentals. US Debt Load, Economic Growth, Monetary Growth, Trade Deficit.
Much of the recent mini-rally in the Dollar has been due to action in the Euro. German consumer confidence and technical profit-taking have been attributed to the recent short-term pullback. The European Central Bank and the leaders of various EU countries have also been calling for intervention. The Euro has come a long way in a short time. The general consensus seems to be that it is fine for the Dollar to lose its value as long as it does so in an orderly fashion. Looking at a chart of the Dollar Index, it is relatively easy to make out the step-like pattern in the decline over the past 2 years. Sustained rallies have not existed, Period. The evidence supporting the thesis that this ‘rally' will be short-term in nature is immense, while evidence to the contrary is nearly non-existent. http://www.marketoracle.co.uk/Article4475.html
The next few days will be pivotal for Gold and Silver. Fundamentally, the case could not be better for both of these metals. Recognize that any strength in the Dollar recently is because of weakness in the Euro. Nothing here in America has changed fundamentally to support much of a Dollar rally. Counter trend rallies are normal. Nothing goes straight up, and nothing goes straight down. If you really believe that there is "real buying" of the Dollar taking place today vs the buying by shorts covering and booking profits, then maybe Gold is not right for you. If you believe the Dollar has a lot further to fall, use this opportunity to buy more Gold and Silver at a discount. Efforts to stop the rise in Gold have been made rigorously over the course of this Bull Market that began in 2001. Gold has moved relentlessly higher in the face of "intervention", and I believe will continue to do so over the next several years.
Wednesday, April 23, 2008
Bill Murphy: The 'strong dollar' policy was gold price suppression
Address by Bill Murphy, ChairmanGold Anti-Trust Action Committee Inc.GATA Goes to Washington -- Anybody Seen Our Gold?Hyatt Regency Crystal City Hotel, Arlington, VirginiaFriday, April 18, 2008
GATA has been working for nine years to expose the manipulation of the gold market by a very cunning Gold Cartel, but one who is now on the ropes. Nonetheless, over a short period of time, they can make life very miserable for our gold/silver camp, as they did a few weeks ago with their orchestrated raid on both markets. Yet, what is so stunning, is that after all these years, the gold and investment world still doesn't get it, or "won't go there." The fact is the now heralded President's Working Group on Financial Markets met on a Monday in March and then gold was bombed for more than $100 an ounce.
Days before this takedown Treasury Secretary Paulson said, "The United States will do what it takes to calm markets," he meant it. So we got deja vu all over again. In May 2006, according to a U.S. senator, the U.S. government ordered the price of gold down after it reached $730 per ounce. That rear-guard action, as with the one of a few weeks ago, only stalled gold's inevitable advance to much higher prices. However, this constant market interference has kept the price of gold to at least half of what it would have been without the price suppression scheme. There are numerous benchmarks to make that claim, including inflation adjusted measures, gold's historic price relationship with oil, platinum, etc.
What is so astonishing to me, after all these years, is that almost no one outside of the GATA camp will come to terms with this market manipulation or even discuss it publicly in a civilized manner. The press will not even acknowledge GATA exists, despite hosting two world class gold conferences in Durban, South Africa and the Yukon's Dawson City. There was not even one financial press inquiry about GATA's $264,00 full page color ad in the Wall Street Journal.
It seems the GATA blackball began nine years when I was interviewed on CNBC by Ron Insana, for the first and last time. As soon as they heard what I had to say in GATA's behalf, that was it -- not only for CNBC, but the WSJ, the Washington Post, NY Times, Barron's, Fortune and Forbes magazine, and the rest of the US financial market press.
Early on, my colleague Chris Powell stated that it appeared we are dealing with an issue that is more sensitive than revealing the secrets about making a nuclear bomb. Perhaps so. For sure, the US financial market media is loathe to give any press time to an ad hoc group taking on the richest and most powerful people in the world. They have made a mockery of the notion we have a free US financial market press. We do not. We have a bought press.
This stifling of the gold truth has also made this conference, at the doorstep of the Fed and Treasury, a useful and timely one. Is using the term "stifling" an exaggeration? I think not.
Five months ago GATA (via Dr. Edwin Vieira, a Washington law firm, and the Freedom of Information Act) requested the US Treasury and Fed explain the true status of US gold reserves. Supposedly the US has 8300+ tonnes of unencumbered bullion in our vaults. If that is the case, it should have taken the Fed and Treasury about 5 minutes to respond to GATA's request, not 5 months, as is now the case. The fact is the Fed is withholding 137 pages from GATA, after making other redactions, is all you need to know how right we are. 137 pages+ we are not allowed to see to explain US gold reserves are all there and not encumbered in any way?
The Treasury remains silent.
There is so much I could get into after 9 years, and so little time, so I thought what might be most valuable today is to deal with what all this means; not only for those of you here who have come from all over the world, but for so many others in my country. And most importantly, to point out how YOU can benefit from knowing what the GATA camp knows.
That certainly was the case for those who came to our GATA African Gold Summit on May 10, 2001 when the price of gold had slumped to the $256 per ounce area. Reg Howe, James Turk and Frank Veneroso explained, utilizing three different methodologies, how the central banks (orchestrated by the US) were going through their available reserves to suppress the price -- as demand for physical gold was FAR greater than mine and scrap supply, as is still the case today. We knew this surreptitious flooding of central bank gold into the market was unsustainable -- that the price of gold would have to rise sharply to ration future demand.
This is just what happened. Our African conference marked the bottom of the 20 year gold bear market.
Fast forward 5 1/2 years later to our Yukon conference -- with the price of gold at $436 per ounce. Our highlight film of that conference is available at our GR 21 website. If you have not seen it, I strongly suggest you do so. At that conference numerous speakers explained what The Gold Cartel was doing and why they were going down to a defeat. Several speakers, including myself, predicted the price of gold was going to $3,000 to $5,000 per ounce -- which is no big deal when you think of it in inflation adjusted terms.
One of the delegates was Andrey Bykov, a top economic advisor to President Putin, who told me it was the finest conference he ever attended. Two days later, a quiet gold market erupted, breaking the $6 Price-Capping Rule in the process. The price went up $300 per ounce in the ensuing nine months before the US ordered the takedown, just like they did a few weeks ago.
The price of gold nearly doubled from our first conference to our second and more than doubled since Dawson City. The amount of time for the doublings was cut in half. Will this pattern continue, meaning we get $1900 gold in the next year and ½? I think so. I surely wouldn't bet against it.
The reasons are simple and will be discussed at this conference. The most important one is that The Gold Cartel is running out of available central bank gold to meet surging demand for physical gold. It is the opinion of the GATA camp that the central banks only have half the gold they say they have in their vaults -- not the commonly bandied about 30,000 tonne number, but less than 15,000 tonnes. A vast portion of what is left isn't going anywhere, so The Gold Cartel's scheme is hitting the wall. This is the main reason the rate of ascent in the price of gold is accelerating. The central banks are running out of ammo. What they have available for sale, compared to growing demand, is a fraction of what it was when they started their price suppression scheme. Surely it is a reason The Gold Cartel is begging the IMF to dump some of its gold.
No matter what others might say about GATA's claims, NO ONE has a better track record over the years predicting what the price of gold would do and why, starting at the bottom of the market. We have never wavered. You would think others might be more curious to know how GATA could get this move so right and most of the gold analysts on Planet Wall Street got it so wrong all this time. Heck, you only have to go back to Barrick and AngloGold's hedging below $300 to know how wrong most of them have been. Funny thing is, they still don't get it. At present, most of the mainstream pundits/analysts are neutral to bearish at these price levels.
The bottom line for me is that anyone who doesn't understand, or deal with, the gold price suppression scheme, doesn't understand the key to the gold market. Therefore, it is impossible for them to do any kind of effective gold market analysis. AND, they don't realize how this perverted scheme has led to the growing financial market crises in the US.
Cutting to that chase, the gold price suppression scheme was the cornerstone of Secretary Treasury Robert Rubin's "strong dollar" policy.
What else was this policy all about, outside of rhetoric? No one over the years has been able to explain this policy to me. Having a policy means doing something and we know what that doing was, and is.
Reg and James can do this more justice, but there is a historic relationship between the price of gold and interest rates -- called Gibson's Paradox, acknowledged by no less a Gold Cartel figure than former US Treasury Secretary, Lawrence Summers. By suppressing the gold price, the US wanted to keep US interest rates lower than they normally would be, keep the dollar stronger, and enhance our stock market -- real estate too.
Simply put, had the price of gold been allowed to trade freely, like oil, the price would already be double what it is today. US interest rates would have been much higher in years past. Thus, the Fed would not have been able to take our Fed Funds rate down to where it was, and is. Therefore, to some degree, a free gold price would have curtailed a fair amount of the US mortgage/housing fiasco and prevented much of the Moral Hazard issues of the day.
This notion is very easy to comprehend. What is the talk from those who live on what I call Planet Wall Street when the price of gold is soaring? It is about INFLATION, CRISIS, or DOLLAR COLLAPSE. None of it is positive for US interest rates, our economy, or financial market for those in the Planet Wall Street crowd. The suppression of the gold price suppresses that line of media chatter.
That is the essence of what you need to know about "the why" of the price suppression scheme. In my opinion it was the lynchpin operation leading to the systemic financial market crises of the day.
We all know how one bad habit can lead to yet another. The recently highly touted Working Group on Financial Markets, the Counterparty Risk Management Group, Exchange Stabilization Fund, and The Gold Cartel went from active management of the gold price to an ever present role in manipulating the stock market, and upping the heralded Moral Hazard problem even further.
This propping up of the stock market kicked into high gear after 9/11. I suspect those doing the constant stock market rigging initially used the national security issue as justification for their interference in the free market process. The problem is this now constant interference is gradually leading to the destruction of our free markets.
As the US real estate bubble grew, Americans were led to believe real estate prices would go up forever: that they could refinance their mortgages to raise cash and go on a spending binge, thereby enjoying a much enhanced lifestyle -- leading to, in many cases, a temporary feel good illusion. Many of us in the Planet GATA camp have a pretty good idea where that illusion is taking us: an escalating disaster.
What most Americans don't realize is that the US stock market is a bit of an illusion too. It just doesn't trade like a free market. Every time the market is about to fall apart, it miraculously turns around. Planet GATA stock market watchers know all too well about the Plunge Protection Team's patented last hour Hail Mary play -- in which the DOW rallies hundreds of points for no apparent reason.
The point here is that these market managers have upped the Moral Hazard ante with their antics. They have taken away the "fear scenario" pertaining to our markets -- why worry, investors think, since "the market always comes back." Thus, the Orwellians in New York and Washington have lulled to sleep the average investor about the downside risk of the markets and potential capital loss. Just as gold is a key financial market barometer, so is the DOW. How many times have we heard the past months how well the DOW was acting despite horrendous economic news? The market managers in New York and Washington know the negative impact a reeling DOW would have on the sentiment and psyche of the average American. Thus, the PPT manages the DOW to manage "expectations."
So they prop the DOW up to foster the notion that everything is fine. For years I have compared this to a Stepfordville, or Matrix, way of thinking/operating. The problem is we are not talking about the movies here. It is our well being and status of our future existence.
It is a main reason we are having this conference in Washington -- to expose the manipulation of the gold market, managing of other financial markets, and also to focus on the distortion of US economic stats, which has led us further and further away from our true underlying economic reality.
This is not the first time GATA has come to Washington to expose the truth. It is ironic that GATA is seen as anti-establishment because we have gone the establishment route to make our findings known in Washington.
-- In addition to our Wall Street Journal ad, we have taken out full-page ads in Washington's Roll Call.
-- Met with U.S. Rep. James Saxton, vice chairman of the House Joint Economic Committee.
-- House Speaker Denny Hastert.
-- The vice-chairman of the sub-Committee on Domestic and International Monetary Policy, U.S. Rep. Spencer Bachus of Alabama.
-- Gone to Austin, Texas, the state capital to meet with two of President's Bush's boyhood friends from Midland, Texas. One, Tom Craddick, is the speaker of the Texas House. He sent a two-page executive summary of GATA's findings to President's Bush's private fax, the day after I met him. I received a postmarked letter that same day from the President's economic advisor at the time, Larry Lindsay.
-- The GATA Army has sent thousands of letters to various Congressman over the years. One prompted Kentucky Sen. Jim Bunning, the Hall of Fame baseball pitcher, to query Fed Chairman Greenspan to clarify legal counsel Virgil Mattingly's use of the term "gold swaps," which GATA found in prior Fed minutes.
Mattingly replied: "I have no knowledge of any 'gold swaps' by either the Federal Reserve or the ESF. I believe that my remarks, which were intended as a general description of the authority possessed by the secretary of the Treasury to utilize the ESF, were transcribed inaccurately or otherwise became garbled."
Fed minutes garbled? RIGHT!
So, here we are again -- back in Washington -- going the establishment route again and in the American way.
And this conference could not have come at a more opportune time. GATA has long pointed to Goldman Sachs and JP Morgan as The Gold Cartel's hit men -- with Goldman acting for the Treasury and Morgan for the Fed. To appreciate how incestuous these relationships are, we only need go the instantaneous JP Morgan/Fed bailout of Bear Stearns. It is universally accepted that this swift, precedent setting deal was arranged to prevent a systemic US financial market collapse.
But, by doing so, the aptly named Working Group on Financial Markets upped the Moral Hazard/Greenspan put ante once again. Out of nowhere the Bear Stearns shareholders were mostly wiped out -- in part due to the consequences of the market rigging, Market Hazard issue, perhaps a FIRST of many other unintended consequences of the US market manipulation. As our free market process is further interfered with, one day it might lead to 25 Bear Stearns, kicking in one after another -- perhaps due to a derivatives neutron bomb going off. Chaos could reign. The average American won't know what hit him, as life savings go down the drain.
More on that later in the conference.
We are also here to better understand how to profit from the mess the market managers created. In my opinion the best way to do that is to build a conviction the GATA camp knows what we are talking about. This is just what occurred after our other two conferences.
Fortunes have been made and there are more fortunes to come. The price of gold has gone up 3 to 4 times since our first conference. Silver went up around 5 times. If a number in our camp are correct, those prices will go up 3 to 5 times again from present levels. There is a great deal of money on the table here -- money that most on Planet Wall Street don't want you to know anything about. Because of them, the investing public is totally clueless about the gold/silver investment opportunities that have been, and are, clear as can be.
I hope you enjoy this conference as much as I have enjoyed the other two, and that this one will be just as meaningful for you. My GATA experience has been the most fulfilling of my life, as my GATA journey has been a Triple Ph.D. learning experience about the gold market, as well as to how our US financial system is really operating. This new found knowledge is very empowering and I am extremely grateful for this fascinating education.* * *
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Original Post: http://gata.org/node/6251
Tuesday, April 22, 2008
Wall Street pulled back Tuesday as investors appeared largely unimpressed by a rush of quarterly results from bellwethers like AT&T Corp., DuPont and McDonald's Corp. Oil prices also touched fresh highs, raising some concerns about inflation.
Risks are rising that Fannie Mae and Freddie Mac may need a government bailout that could cost far more than previous rescues.
Monday, April 21, 2008
On Friday, Citibank posts a $5.1 BILLION loss, but it's not as bad as expected and the stock market goes up 200+points.
This morning, Bank of America posts a $1.23 BILLION profit but its 18 cents a share worse than expected and the stock market is down to flat.
So, it's better to buy stocks in companies that lose money but do better than the experts predict, than to buy companies that make money and do worse than the experts predict. Hmmm, what would Warren Buffet do?
Another bizarre day for the Precious Metals: The Dollar gives back 2/3 of it's gains from Friday, Oil hits ANOTHER record high above 117 and Gold is flat and Silver gets taken to the woodshed?
I think a key factor in the short term is the Euro. Traders are absolutely reluctant to take it through the 1.60 level. To date, as soon as the Euro clears 1.5950 the bids disappear, the Dollar catches a bid and the Precious Metals get sold. It's all very mechanical, and somewhat amusing. The G7 is powerless to stop the fall of the Dollar. Their jawboning may slow it's decent for a few days, but it will do nothing to save it from it's demise. The Bull in any market is going to do the best it can to throw as many off it's back as it can. 953 Gold and 18.50 Silver remain our breakout targets. A move thru 1.60 in the Euro could set off a cascade of events in these markets that will be a wonder to behold.
The May Silver contract is in the process of being rolled into July this week and could keep a cap on Silver until late in the week. Gold is presently at the mercy of the timid Euro traders. Today's move higher in Oil should have had the Gold Bulls squeezing the COMEX shorts without mercy. Irrational behavior to be sure, but who ever said the Precious Metal markets, or any market, are supposed to act rationally?
Bob Chapman, The International Forecaster
What everyone keeps forgetting is that bond prices are at 50-year highs due to plummeting rates of interest that are destroying the dollar. If the Fed keeps lowering rates, speculation and inflation will get worse, and gold will soar. But if they start to stabilize rates, or to raise them to support the dollar, bond principal will get cremated and a goodly portion of those many trillions of dollars in bonds will flee in terror and find their way to precious metals as a safe-haven and inflation hedge.
USDOLLAR REBOUNDING… NOT !!!
The USDollar has been trying to rebound for a month. With growing federal deficits, widening trade deficits, an underwater banking capital core, and rising homeowner negative equity, the US financial fundamentals resemble a banana republic on four primary pillars, unworthy of any currency rebound. Look for a breakdown to 70 and below in the next several weeks. The downtrend is stronger than any newly formed basis for a bottom bounce. The impact on gold will be to send it over the 1000 level again, this time as floor support for the summer advances. The next USFed rate cut could be the impetus. A game of chicken is being played by the Euro Central Bank, which refused to cut rates since last summer.
-Jim Willie CB
There are no markets anymore, just interventions
What other agency of a democratic government could get away with the principle that was articulated on national television in 1994 by the vice chairman of the Federal Reserve, Alan Blinder? Blinder declared: "The last duty of a central banker is to tell the public the truth."
40 Years of Inflation, 80 Years of Dow/Gold
IF WALL STREET STOCKS can surge 160 points on falling earnings, an 11% drop in housing starts, and a 16-year record for consumer-price inflation, then so can everything else that doesn't carry a picture of George Washington.
Sunday, April 20, 2008
"Gold is on sale." "The Dollar is up, sell now and cut your losses before it bellies up again," Asian traders were over heard cajoling with one another as they steal America's wealth.
The day is not that far off when Asia will own America. Conquering her without firing a single shot. American Dollars represent one thing and ONE THING ONLY...DEBT. It says so right on the money: This note is legal tender for all debts, public and private. For the past 37 years Americans have duped the rest of the world into believing that her Dollars represented wealth. When in fact they represent an unfathomable mountain of I.O.U.s. American debt equals 340% of her annual GDP. THREE HUNDRED AND FORTY PERCENT! What's gonna happen when the Asians call in their share that debt?
MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES
America is drowning in debt. US Government debt is in excess of $9 TRILLION...about $30,000 for each man, woman, and child in the country. The US debt is growing at light speed—$1.4 billion a day or $1 million a minute. Sadly our "leaders" and "would be leaders" [it's a stretch to even use the word "leader" and "politician" in the same sentence.] simply accept this overwhelming burden as a "fact of life". It is criminal what America's Government has done to her people. The burden we as a nation will be forced to bear for untold generations to come cannot yet be put into words. And yet few stand up and call these "leaders" out on the carpet, demanding to know why our nation's wealth has been irretrievably squandered.
But then that would be a bit like the pot calling the kettle black. American consumers possess a rather gargantuan mountain of debt themselves. $2.48 TRILLION of consumer credit debt. Credit card debt alone has hit a record $915 BILLION. There is $900 BILLION of sub prime debt blowing up right now. The $915 BILLION of credit card debt is not only jaw dropping, but it is held at interest rates 3-5 times higher than the sub prime debt. Imagine when this little debt bomb blows up... Who said the American bank's self made credit crisis has passed? LOL, this crisis has barely gotten out of the gate.
Not to worry, the US Government in it's never ending infinite wisdom, has arranged a special deal with the counterfeiters at the US Treasury that will surely fix EVERYTHING. In just a couple of weeks mailboxes across the nation will be opened to the wonders of wonders...FREE MONEY! Who ever said money doesn't grow on trees was absolutely right. It grows in mailboxes!
A $600 BILLION cash stimulus is being doled out to Americans that are $2.48 TRILLION in debt. The handout won't even cover 2/3 of the nation's credit card debt. And heaven forbid you use this free money to pay off debt. The money comes with explicit instructions as to your civic responsibility, and in the name of patriotism, to spend that money like a drunken sailor on shore leave. Spend it frivolously, and save your economy and way of life...even if the real effect of $600 BILLION on the American economy would be akin to pissing into the wind. Seriously, our great leaders have gone to great length to convince our nation of sheep that all of the country's financial ills can be cured with the grand sum of $600 BILLION.
$600 BILLION is less than 25% of $2.48 TRILLION. $600 BILLION is less than 7% of $9 TRILLION. $600 BILLION is chump change and it isn't going to fix a damn thing. My $600 cut of the $600 BILLION pie won't even cover my annual expense on beer. [Beer prices have gotten way out of hand.] Not only is the money chump change, it's not really even free. It's an advance on next year's tax rebate. Which leads one to wonder, "If you lose your job and don't make any money this year to earn a tax rebate next year, do you have to pay the advance back next year?"
Damn, great country innit?
Hey would somebody PLEASE explain to Barrak Bin Laden that imposing "windfall profit taxes" on the Oil Industry will not solve a damn thing. Explain to this Oprah Winfrey puppet, and leader wannabe, that the high price of gasoline is NOT because of EXXON gouging people at the gas pumps. The high price of Oil, and in turn gasoline, is the direct result of the US Federal Reserve and the US Treasury debasing the US Dollar. Tell Mr. I Don't Know Jack About The World Financial System that monetary inflation is driving the price of Oil and all commodities higher. Clue this clueless clown into the fact that inflation is a tax on ALL Americans, rich and poor. Barrak buddy, you wanna see some real high gasoline prices, and maybe some gas lines at the pumps? Slap a windfall profit tax on the Oil companies. You'll wish your momma never wished you grew up to be President. And please share this truth about Oil and Inflation with the others coveting the White House. None of you is worthy of the office...there is not a thread of leadership among the lot of you.
Please pardon my rant this evening, I just had to get some of this stuff out of my head.
This past Friday. Call it what you will, currency intervention, Gold Cartel take down, or just plain bullshit...it really was/is just noise. Inflation is only just now beginning to be noticed and squawked about by the financial media. Remember that the effects of Fed interest rate cuts are usually not felt until 6-9 months after the cut. The Fed began cutting interest rates in September 2007, a 1/2 point cut. Recent inflation data is thru March 2008...6 months down the road from that first rate cut. Bear in mind that when we are told about the "effects" of Fed rate cuts, the effect most often referred to is "growth in the economy". To date we have seen little in the way of growth, but a lot in the way of inflation. March 2008 is six months from the FIRST Fed rate cut....and Inflation is just now starting to get peoples attention and we only have the "effect" of a 1/2 point cut. The Fed's most recent rate cut was one month ago, 3/4 of a point. Since September 2007 the Fed has cumulatively cut rates by three points thru the cut in March 2008. Imagine now, what the potential for inflation will be by September 2008. Stop choking, and just think of how bad inflation may be six months from now. Oh, the pain... Inflation will dominate the headlines as the country goes to the polls in November. Sadly, none of the choices we'll be offered will have an answer for why inflation is so high. ALL will tell you it's because the price of Oil is too high and Exxon must be made to pay for our pain. We will know differently. And we will all be sitting fat in our Gold and Silver positions having weathered the noise of March and April, and all attempts to take our Precious Metals to come. It can't be emphasised enough. Investing in Gold is a marathon, not a sprint. Riches will find their way to those that are right, and sit tight. Focus on Inflation. As the Inflation numbers rise through the Spring and Summer, so too will the level of investment in Gold and Silver. The Rush to Gold is fast approaching.
News you can use:
Goldman Sachs and Wells Fargo warn 'delusional' investors on stocks
David Kostin, the chief US investment guru for Goldman Sachs, expects the S&P 500 index of Wall Street equities to plummet a further 15pc over the "near term" as companies scramble to lower their outlook for this year.
Scott Anderson, chief economist at Wells Fargo, is equally pessimistic, describing the bullish views of some market players as "bordering on delusional".
Banks in line for £40bn bail-out - paid for by the taxpayer
Rescue: The Bank England has been asked to take mortgages off banks' books
Vince Cable, the LibDem Treasury spokesman, said: "We cannot have a situation where the banks are able to privatise their profits and nationalise their losses.
"The Government must now insist on a orderly programme for identifying the losses in the banking system to ensure the banks themselves cover those losses.
"This looks like rewards for failure and irresponsibility."
Citigroup May Need to Sell Assets to Bolster Capital
April 19 (Bloomberg) -- Citigroup Inc. shareholders, cheered by a $5.1 billion first-quarter loss that wasn't as big as some analysts forecast, face growing concern that the bank may have to sell assets, reduce the dividend and attract outside investment to bolster capital.
Talking heads cheer Citicorp’s earnings because Citicorp lost less than predicted by the Street, declaring now that the OTC derivative problem is over. Talk about world class BS!
Wednesday, April 16, 2008
Wall Street surges higher after upbeat earnings reports
NEW YORK (AP) -- Wall Street rallied Wednesday after better-than-expected quarterly results from JPMorgan Chase and two other Dow Jones industrials raised investors' hopes that companies and the economy are indeed recovering from the protracted global credit crisis. The Dow rose more than 250 points as investors shrugged off any concerns about oil passing $115 a barrel for the first time.
A market anxious about corporate earnings and their effect on the economy was relieved after JPMorgan Chase & Co., Coca-Cola Co. and Intel Corp. all topped first-quarter projections.
The battered financial sector advanced after JPMorgan beat analysts' expectations despite a 50 percent drop in quarterly profit. The nation's third-biggest bank, which is in the process of acquiring ailing Bear Stearns Cos., reported $2.6 billion of write-downs tied to its loan portfolio.
Stop right there! "...beat analysts' expectations despite a 50 percent drop in quarterly profit." Ignore the fact that anal-ysts have been lowering earnings estimates from one end of Wall Street to the other for the past six weeks. Focus on the FACT that JPMorgan's earnings DROPPED 50% from a year earlier. Last time I checked you bought companies with growing earnings, and dumped those with falling earnings. Please, somebody correct me if I'm wrong, but I think that is the general theory behind "investing" in stocks of companies. JPMorgan's earnings DROPPED 50% and their shares were bid up 5% today because they beat reduced earnings expectations? No, their shares were bid up by shorts in JPMorgan covering their trades.
Nobody was really buying JPMorgan shares today. The media cannot comprehend a short sale of a company's stock, let alone the unwinding of it. Instead you get headlines like: Stocks stage big rally after earnings from Intel, JPMorgan, Coca-Cola ease profit anxiety. Stocks rallied today for one reason alone, short covering.
JPMorgan's earnings results were hardly a picture of recovery. After JPMorgan insiders unloaded their soon to be worthless shares onto the public they announced this less than glowing news:
JPMorgan Plans to Sell $6 Billion of Preferred Stock
April 16 (Bloomberg) -- JPMorgan Chase & Co., hours after saying the credit-market crisis is almost over, made plans to sell $6 billion of perpetual preferred stock, according to a person familiar with the offering.
Chief Executive Officer Jamie Dimon, 52, said on a conference call with reporters that the credit-market crisis is more than halfway finished as financial firms reduce leverage, and may be as much as 80 percent over.
Things are going so well at JPMorgan they have to go begging to the Street for $6Billion? CEO Jamie Dimon claims the credit-market crisis may be 80% over? That's wishful thinking Jamie. The credit-market crisis may have reached the end of it's beginning, but isn't even close to 80% over. I'd be surprised if it was just 20% over.
I could gleefully beat this horse to death for several more paragraphs. Suffice it to say that today's rally in stocks was little more than a Bear Market Rally. Yes, there were some legitimately good earnings reports today. Coca-Cola, Intel, and IBM. Bear in mind that these three companies are "multinationals" and stand to benefit in the biggest way from a falling Dollar. And speaking of a falling Dollar:
Dollar falls to record low against euro
SAN FRANCISCO (MarketWatch) -- The dollar remained under pressure against most major counterparts Wednesday, notching a fresh low against the euro after mixed U.S. economic data.
The euro was changing hands at $1.5950, after rising as high as $1.5977, according to FactSet Research data.
That marked the loftiest level since the single European currency began trading in January 1999. It moved up from $1.5799 in late North American trading Tuesday.
Annual EU inflation hits record 3.6 percent on rapid pace
Yearly inflation in countries using the euro jumped to record highs, pushing the currency to a new heights against the dollar Wednesday as oil prices soared above $114 a barrel.
The 15-nation currency hit $1.5978 after the EU's statistical agency Eurostat said that annual euro inflation for March rose 3.6 percent on higher prices for energy and food.
It was the most rapid ascent in 16 years, stifling chances of a near-term euro interest rate cut by the European Central Bank. The weak dollar sent oil prices to new highs as investors fled the struggling U.S. currency in favor of commodities.
The US Dollar is in a world of hurt, and is once again staring into a free falling abyss. As I mentioned yesterday, the ECB is mandated to control inflation in the Eurozone. The Dollar got crushed today as hopes for an ECB rate cut all but vanished. All the hot air from the G7 this past weekend is now left to contribute to global warming. Gold blasted through resistance at 935. Gold is, has been, and as long as there is a world of fiat currency smothering the planet always will be, a hedge against inflation. The 2008 "Rush to Gold" by global investors looking to insure their wealth begins today. Silver investors will be along shortly, and I presume rabidly.
Higher energy and food prices boost March consumer inflation; bigger increases expected
WASHINGTON (AP) -- Inflation rose again last month, reflecting big jumps in the cost of energy and airline tickets. And the forecast is for even bigger energy-related increases to come, including the possibility of $4 per gallon gasoline by Memorial Day.
The Labor Department said consumer prices rose by 0.3 percent in March, after being unchanged in February, as energy prices jumped by 1.9 percent and airline fares, reflecting higher fuel costs, increased 3 percent, the biggest one-month gain in six years.
Food prices, which have been steadily rising for more than a year, were up by 0.2 percent in March and 4.4 percent over the past 12 months. The price of some food staples showed even bigger increases over the past year, including a 14.7 percent rise in the price of bread and a 13.3 percent increase in milk prices over the past year.
U.S. March housing starts down 11.9 pct
WASHINGTON (Thomson Financial) - Housing starts and permits fell faster than expected in March, to levels not seen in sixteen years.
The Commerce Department said U.S. March housing starts fell 11.9 percent to a 947,000 unit annual rate, down from an upwardly revised 1.075 million units in February. That is the lowest level since March 1991.
Crude Oil Rises to Record Above $114 a Barrel as Dollar Plunges
April 16 (Bloomberg) -- Oil rose to a record above $114 a barrel for a second day in New York as the dollar plunged to an all-time low against the euro.
The appeal of oil and other commodities as a hedge against inflation grew as the dollar sank as low as $1.5968 versus the euro. Oil is also gaining on demand from China, the world's second- biggest crude consumer, where the economy expanded 10.6 percent in the first quarter, government statistics showed today.
China GDP grows strongly; inflation high
BEIJING (AP) — China's robust economy slowed only slightly in the first quarter despite global gloom, while inflation stayed above 8 percent in March, the government said Wednesday, adding to pressure to rein in prices that are battering Chinese consumers.
The world's fourth-largest economy expanded by a still impressive 10.6 percent in January-March from a year earlier, down from the previous quarter's 11.2 percent rate, amid weaker global demand for exports and government steps to cool an investment boom.
Consumer prices rose 8.3 percent in March over the same month last year, down only slightly from February's 8.7 percent, the highest rate in nearly 12 years, according to the National Bureau of Statistics.
There are too many headlines to post that would lend storm clouds to my raining on Wall Streets euphoric Bear market rally today. Inflation is running hot globally. The facade of contained inflation in the US by the governments BOGUS inflation numbers is realized by ALL outside the beltway in Washington. The emperor is stark naked. Wall Street can dream about the "end" of the credit-market crisis all day and all night. They wish it would go away...it is not. The price of Oil and gasoline is NOT the fault of Exxon as countless forwarded emails would have you believe. The US Dollar is crumbling before our eyes, and the last to realize it will be Americans too glued to their reality TV, incessant gossip magazines, and their belief that their government can fix everything for them while feeling no pain. Pain is on the way baby. PAIN...
Tuesday, April 15, 2008
U.S. March PPI up 1.1% on higher energy, food costs
WASHINGTON (MarketWatch) - Wholesale prices surged 1.1% in March, led by rising energy and food prices, the Labor Department reported Tuesday. Energy prices rose 2.9% in March, while food prices gained 1.2%. The core producer price index, which excludes volatile food and energy, rose 0.2%. Economists surveyed by MarketWatch had expected the PPI to rise 0.4% and the core to rise 0.2%. Year-over-year, the PPI is up 6.9%. The core PPI is up 2.7% over the same time period.
Odds of a half-point cut to fed funds dip after PPI report
SAN FRANCISCO (MarketWatch) -- Fed funds futures slid early Tuesday after a U.S. wholesale inflation report for March showed a sharper-than-expected rise in price growth. The May contract fell to 98.08 mid-morning on the Chicago Board of Trade from a settlement of 98.11 Monday. The contract is now pricing in a 32% chance of a half-point cut to the fed funds target rate when the Federal Open Market Committee meets April 29-30. It fully prices in a quarter-point cut. Late Monday, the contract reflected about 44% odds of a half-point cut. The fed funds target rate is currently 2.25%; a half-point reduction would bring the rate to 1.75%.
And so the Dollar catches a bid because the addle-minded believe that rising inflation will curtail Fed rate cuts and thus strengthen the Dollar. Wishful thinking. The Fed could stop cutting interest rates this minute, and never cut them again, and the Dollar will not be strengthened in any way. Only ONE country has worse interest rates than the US and that's Japan. Rising inflation is the result of a weak Dollar and is Gold positive.
So what if the US Fed stops cutting interest rates. The rest of the world currencies still offer better returns. An interest rate cut by the ECB could help the Dollar marginally, but they are predisposed to fighting inflation so that is unlikely anytime soon if at all. The US Fed could raise interest rates to fight inflation and support the Dollar, but in a slowing economy that would prove disastrous so that is unlikely anytime soon as well. The fact is the Dollar is underwater and sinking...soon to be sinking ever faster...there is little that can offer it much hope in an environment where the government stewards backing it are not interested in taking fiscal responsibility for it. The Dollar is helplessly hopeless.
Crude oil at new high just above $114; gas also at a record
NEW YORK (AP) -- Energy traders rewrote the record books again Tuesday, pushing oil futures past $114 a barrel as gasoline and diesel prices struck new highs of their own at the pump.
Light, sweet crude for May delivery jumped as high as $114.08 a barrel shortly after regular trading ended on the New York Mercantile Exchange. That is nearly $2 above an intraday high set last week.
Oil prices are vaulting higher by the day. Today's move higher in Oil prices firmed current bids under Gold and Silver. Rises in both Gold and Silver today were capped by the false strength in the Dollar. It is only a matter of time before the lids come off these two Precious Metals. 935 Gold and 18.32 Silver. Wednesday's CPI report could be just the catalyst to push Gold and Silver through resistance and towards their recent highs. That PPI report, coupled with another poor petroleum inventory report mid morning Wednesday, may be just what the Precious Metals Bulls need to squeeze the shorts cluttering these markets.
Net Foreign Purchases Of U.S. Securities Increase In February
Monthly net TIC flows, which include non-market flows, short-term securities, and changes in banks' dollar holdings, were $64.1 billion in February, nearly twice the $35.7 billion from January.
Financial market analysts consider the monthly data from the Treasury Department to be a significant but imprecise gauge of how easily the U.S. can finance its trade deficit. The February TIC flow compares with the $62.32 billion trade deficit during the month, reported last week by the Commerce Department.
By the slimest of margins, the US was able to finance it's trade deficit in February. It will be interesting to see how much longer this country can avoid having the World turn it's back on us. There's a sucker born every minute, and there were plenty of them around the globe buying US securities in February. Today's TIC report for February was Dollar neutral.
John McCain Gets It
McCain blamed the slowdown of the nation's economy in part on bankers and lenders who ``forgot some of the basic standards of their own profession,'' leading to the current crisis in housing and credit.
He singled out James Cayne, 74, chairman of hobbled securities firm Bear Stearns Cos., and Angelo Mozilo, 69, chief executive of Countrywide Financial Corp., which lost $704 million last year.
``Something is seriously wrong when the American people are left to bear the consequences of reckless corporate conduct, while Mr. Cayne of Bear Stearns, Mr. Mozilo of Countrywide, and others are packed off with another forty- or fifty million for the road,'' McCain said.
Yes John, something is seriously wrong, and Gold knows it. Spread the word.