The Damn Is About To Burst

President Bush, in a Rose Garden news conference Tuesday that dwelled largely on the economy, said he understands Americans' anxiety over high gasoline prices. "If there was a magic wand to say `OK drop price,' I'd do that," he said.

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:

Top Stories

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.
http://biz.yahoo.com/ap/080429/fed_interest_rates.html

"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?