Thursday, May 29, 2008

Nothing Left But The Stench

Sadly, this evening I must report that the Bull Shit Detector has seized up and exploded. Perhaps it was old, and it was time. Or perhaps, it was wave after wave of Bull Shit today that simply overwhelmed it and forced self destruction. My hopes rest with Renuzit for there is nothing left but the stench.

I have made every effort, over the past 10 weeks, to counsel all whose eyes gaze upon this script, that owning Gold and Silver during this upheaval in the World Financial System is both prudent and wise. Owning the Precious Metals is not for the feint of heart. You need nerves of steel and a really nice pillow. The Precious Metals are the "ride of a lifetime". If you didn't like roller coasters as a kid, this may be a ride to avoid. The highs on this ride can be pretty high, the lows deep and frightening. Huge profits and harrowing losses. And for those with the convictions to white knuckle the ride to its destination, the personal satisfaction of knowing that you have conquered both greed and fear. Because it will be those brave enough to endure the "ride" that will find themselves on top as all the naysayers look up from far below.

Today was not as low as many may fear or believe. The declines over the past three days will, when looking back, represent one of the greatest fake outs in the history of Bull Markets. This is a classic Bear Trap being set on the boobs that man the soon to be terminal black boxes that have disrupted this Secular Gold Bull Market one too many times now. These program traders are about to receive a strong dose of the truth and it is going to leave their little black boxes in smoking ruins.

Today, once again, US Government statisticians dished up another heaping helping of Bull Shit for the delusional wizards of Wall Street to swallow whole. And it tasted so good, they asked for another giving new meaning to "shit eatin' grin".

Today's GDP number was pure Bull Shit refined and derived with the aid of the Bull Shit inflation numbers consumers have been laughing at for months. The US Government will stop at nothing in their deceptions used in a vain effort to convince Americans that nothing is wrong with the economy, and that "things just aren't as bad as they seem". Is that a chours of "Bull Shit" that I hear rising from the streets of America? Listen closely, I think it is...

US logs better but still weak growth; far from being out of the woods
In fact, a closer look behind the 0.9 percent increase in the gross domestic product during the January-to-March period revealed much caution on the part of consumers who have been clobbered by the housing, credit and financial debacles.

"What emerges is a picture of an economy that's gasping for air," said Bernard Baumohl, managing director of the Economic Outlook Group.

When exports and business' inventories are removed and imports are added in, economic activity actually contracted at a 0.1 percent pace in the first quarter, the worst showing in more than 16 years. That figure underscores consumers' disinclination to spend vigorously.

News Release: Gross Domestic Product (GDP) and Corporate Profits

There is one simple fact about "growth" in the US Economy: 70% of it comes from the American consumer. There is also one simple fact about GDP: it is a backwards looking statistic. "Growth", real or contrived, in Q1 2008 is all water under the bridge. Q1 GDP says little to nothing about growth in the current quarter or future quarters. The bottom line is that the Fed and the US Government are desperate in their efforts to keep the "recession tag" from being hung on the US Economy. Everybody and their uncle knows the US Economy is in a recession, the problem is nobody wants to admit it.

Americans are addicted to credit. From the halls of Congress, to the lowest Joe on the street, "buying on credit" IS OUR WAY OF LIFE. Without credit there is no "economic boom" the past 25 years. Credit is now disappearing for many Americans, and their way of life with it. And the US Economy is going down the drain with the American consumer. SEVENTY PERCENT of US GDP comes from the American consumer, the rest from what industry remains and government spending. Credit for Americans, American businesses, and soon the American Government is evaporating like the lakes in the drought parched South Eastern US. Without credit, there is no growth in America any more. The addicts are going Cold Turkey, and the withdrawals are not going to be pretty.

Oil falls after Energy Department says surprise drop in supplies due to temporary factors
NEW YORK (AP) -- Oil prices fell sharply Thursday after the Energy Department reported unexpected declines in crude oil supplies last week but said the drop was due to temporary delays in unloading oil tankers along the Gulf Coast.

In its weekly inventory report, the department's Energy Information Administration said crude oil inventories fell 8.8 million barrels last week, while gasoline supplies fell 3.2 million barrels. Analysts surveyed by energy research firm Platts had expected slight increases in supplies of both.

But the EIA also offered a rare explanatory note on the Gulf Coast tanker problems. Gulf ports have closed many times in recent months due to fog, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

The ONLY fog is between the ears of US Government statisticians. Here before you now is one gargantuan pile of pure 100% Bull Shit. "...a rare explanatory note...", just when you thought you'd heard everything.

In Washington, meanwhile, the Commodity Futures Trading Commission revealed that it is six months into a wide-ranging investigation of U.S. oil markets, with a focus on possible price manipulation. The CFTC also announced a handful of initiatives designed to increase transparency of the energy futures markets.

The commission said it started the probe in December and was publicizing the investigation "because of today's unprecedented market conditions."

Disclosure of the investigation may have contributed to oil's declines, analysts said.

You can rest comfortably knowing that there is unlikely a similar probe by the blind CFTC into "price manipulations" in the Gold and Silver markets. What a joke! Anything to try and steer people away from the truth. Any first year economics student, or produce clerk for that matter, knows that the price of Oil is skyrocketing because the US Dollar is backed by nothing more than 100% BULL SHIT. The mere suggestion that Oil prices are declining because demand is falling in the US is BULL SHIT as well. It's a bigger World today than it was just 10 years ago. The competition for the World's resources is becoming fierce. The monster we fight today in higher Oil prices was created unconstitutionally by the US Congress in 1913. That monster is the US Federal Reserve. And if there needs to be an investigation of anything in this country, it is this criminal entity that is robbing Americans of their wealth every minute of the day. And that monster may soon be on life support...

Fed to keep making bank loans available to ease credit stresses
WASHINGTON (AP) -- The Federal Reserve announced Thursday that it will make a fresh batch of short-term cash loans available to squeezed banks as part of an ongoing effort to ease stressed credit markets.

The Fed said it will conduct three auctions in June, with each one making $75 billion available in short-term cash loans. Banks can bid for a slice of the available funds. It would mark the latest round in a program that the Fed launched in December to help banks overcome credit problems so they will keep lending to customers.

The new round of auctions will be conducted on June 2, June 16 and June 30.

The smooth flow of credit is the economy's lifeblood. It enables people to finance big-ticket purchases, such as homes and cars, and helps businesses expand operations and hire workers.

Wanting to avert a broader panic that could endanger the entire U.S. financial system, the Fed has taken a number of extraordinary actions to provide relief. In its broadest extension of lending authority since the 1930s, the central bank agreed to temporarily let investment firms obtain emergency loans directly from the Fed, a privilege that only commercial banks had been granted.

The central bank is expected to focus more on these and other efforts to help banks and investment firms overcome any credit problems as it winds down an aggressive rate-cutting campaign that started last September.

But isn't the credit crisis over? Only for the naive and those that sure wish it was. The credit crisis is FAR from over and may soon be about to explode and destroy the US Economy for the next two generations. Few realize or understand what the Fed has undertaken and given away with these loan/auctions they are promoting every other week since December. The Fed has pushed this country to the brink of complete economic collapse, and nobody wants to tell the story, or expose the truth. Fortunately Gary North does, and he has done so with the following insightful and alarming essay. Why has big financial media ignored this story?

Bernanke's Nightmare Chart
by Gary North

The Federal Reserve System on December 17 began a unique experiment: debt swaps with large commercial banks. The FED is now swapping at face value highly marketable U.S. Treasury securities in exchange for discounted mortgages. Nothing like this has ever been attempted before. It represents an innovation in central bank policy. It is called the Term Auction Facility (TAF). The initial offer was for $20 billion in swaps.

The rate charged is about 2%. This is why the FED has cut the FedFunds rate to 2% – not to stimulate the economy directly but to make available TAF loans at low rates.

Here is how the game is played. The borrowing banks can place the borrowed Treasury debt on their books at close to face value. This looks as though the banks are meeting their capital requirements.

What is really going on? Deception on a massive scale – a fully legal deception that the U.S. government's bank auditors understand and go along with.

With this as background, let us consider the words of the Federal Reserve System as of May 2.

In addition, the Federal Open Market Committee authorized an expansion of the collateral that can be pledged in the Federal Reserve's Schedule 2 Term Securities Lending Facility (TSLF) auctions. Primary dealers may now pledge AAA/Aaa-rated asset-backed securities, in addition to already eligible residential- and commercial-mortgage-backed securities and agency collateralized mortgage obligations, beginning with the Schedule 2 TSLF auction to be announced on May 7, 2008, and to settle on May 9, 2008. The wider pool of collateral should promote improved financing conditions in a broader range of financial markets.

Deciphering the FedSpeak, we learn that the FED is swapping U.S. Treasury securities for packages of loans on just about anything. I suppose this could include cars, if the FOMC decides the asset meets its wider standards.

Consider these words: "The wider pool of collateral should promote improved financing conditions in a broader range of financial markets." Let me translate.

The wider pool of eligible capital for swaps will allow banks to convince government auditors – wink, wink – that the assets on the banks' books need not be marked to market with a discount. Therefore, the banks will not have to call in loans in order to bring their loan-to-capital ratios back into line with regulations.


It can go on for as long as the Federal Reserve System has U.S. Treasury debt to swap. As Hamlet said, "There's the rub."

In November, 2007, two weeks before the first TAF auction was held, the Federal Reserve System held about $800 billion in Treasury debt. As of May 1, it held $539 billion. "May day! May day!"

The Federal Reserve's "creative financing" to bail out banks that have invested in creatively financed mortgages has a limit. The limit is its portfolio of Treasury debt.

It took from 1914 until November 2007 for the Federal Reserve to accumulate $800 billion worth of Treasury debt. It has take from December 17 to the end of April for the FED to divest itself of $260 billion of this portfolio, a decrease of one-third. In its place, it has placed AAA- rated mortgages.

At the current swap rate, the Federal Reserve System will be out of Treasury debt in December of 2008. But by adding car loans to the list of eligible paper, the FED has guaranteed that this rate will accelerate.

Please take the time to read the entire essay at the the link above as I have paraphrased from it to get the point across. And that point is that the Fed has risked it's own destruction [not to mention the destruction of the US Economy] by implementing this "cash for trash" swap program. That, and the fact that they are now culpable in fostering bank fraud. The severity of the actions the Fed are now engaged in are beyond shocking. The whole concept is predicated on this plethora of virtually worthless credit backed securities regaining their value in the near term and being returned to the banks as sound investments. Ain't gonna happen. Rising interest rates in the long bonds will destroy that pipe dream.

Doing the quick math exposes how close the Fed is to running out of Treasury debt to swap for this trash so as to perpetuate the bank fraud that Wall Street has brazenly accepted as "the end of the credit crisis". From December 2007 through April 2008 the Fed had swapped out $260 BILLION of it's $800 BILLION Treasury debt kitty. Two more auctions in May at $75 Billion each raised the total swapped out at the end of May 2008 to $410 Billion. Now add three more $75 BILLION auctions in June and the Fed will have exhausted $635 BILLION of its $800 BILLION in Treasury debt reserves. Almost 80% of the Fed's Treasury debt that it took 93 years to accumulate will have evaporated in SIX MONTHS! Pfft, gone!

As the Federal Reserve blows thru its assets to perpetuate a collosal bank fraud, the US Congress sits silent on the sidelines oblivious to the economic madness destroying this country's future for possibly the next two generations. The credit crisis is certain to sink this country. The leadership vaccum in Washington will see to it that it remains sunk.

Tuesday, May 27, 2008


The Bullshit Detector was working overtime today:

U.S. Economy: Confidence Falls as Home Values Decline
May 27 (Bloomberg) -- Confidence among American consumers fell in May to the lowest level since 1992 as the two-year housing slump showed no sign of bottoming.

The S&P/Case-Shiller home-price index dropped 14.4 percent in March from a year earlier, the most since the figures were first published in 2001. Separate figures from the Commerce Department showed sales of new homes were the second-lowest since 1991 in April.

Sales of new homes increased 3.3 percent in April after readings for the prior month were revised lower, the Commerce Department's report showed. The April sales pace was an annual 526,000 homes, compared with a 509,000 rate in March that was the lowest in 17 years.


Sales of new homes increased 3.3% in April? Uh, not exactly. As a matter of fact...NOT AT ALL. March new home sales came in at 526,000, but were revised down to ONLY 509,000 with the release of the "new" April numbers. The April numbers reported today by the US Census Bureau were annualized at 526,000. THE SAME NUMBER THAT WAS ORIGINALLY POSTED FOR MARCH! So by revising the March numbers down by 3.3% to 509,000, the US Census Bureau miraculously created a 3.3% "increase" in new home sales. If that isn't BULLSHIT, I don't know what is. And the worst part of the deception is that the knucklheads on Wall Street bought it hook, line, and sinker. LOL, even with the deception new home sales were the SECOND LOWEST since April 1991.

So we combine "no increase in new home sales, the home-price index down 14.4%, and consumer confidence at a 17 year low and we get a rising Dollar? More BULLSHIT! The Dollar was up, once again, mainly on weakness in the Euro caused by a surprise decrease in German consumer confidence. The Dollar most certainly was not up because of an "increase" in new home sales. And it was not up because of a small drop in Oil prices.

Oil Falls More Than $3 as Record Prices Curb U.S. Fuel Demand

May 27 (Bloomberg) -- Crude oil fell more than $3 a barrel in New York, the biggest decline since April, on signs that U.S. fuel consumption is dropping because of a slowing economy and record energy prices.

``There's trepidation at these price levels,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``High energy prices are having a substantial impact on the economy and potentially on demand.''

``After failing to break through $135 decisively last week, it appears we've put a resistance line there,'' Flynn said.

"Signs" that US fuel consumption is dropping? Signs? So what if it is dropping. I'm pretty certain the Chinese will be more than happy to pick up the slack and use what we don't. When are the anal-ysts going to wake up to the FACT that the world economy and energy consumption no longer revolves around the US.

Resistance in Oil prices at $135? I guess the same could be said about $115, $120, $125, and $130. All numbers that have fallen by the wayside as Oil relentlessly climbs higher. Yes, Oil is ripe for a correction, but just because it is doesn't mean that it will. And so what if it does. Are you going to tell me that Oil at $108 is going to help the US avert a recession? If so I have but one answer for you. BULLSHIT!

And now for our #1 BULLSHIT detection of the day. The whack job done on Gold and Silver over at the NY COMEX. Western government can cry all they want to about "speculators" running up the price of Oil, but the real crimes being committed in the futures markets are in the Precious Metals pits in New York. Not only was today's take down in Gold and Silver completely unwarranted, it was blatantly contrived. And I wouldn't be surprised to find out that the drop in Oil prices was contrived by futures traders in New York today as well. All at the behest of the US Government and their stooges at Goldman Sachs. The 10-minute Gold chart posted above will show you that the hit on Gold began exactly the moment the NY COMEX opened for trading this morning. The Precious Metals were relatively firm all through yesterday's holiday and overnight in Asia and Europe.

As sad as the take down was, particularly in Silver, it wouldn't surprise me if we closed the week up in the Precious Metals. If nothing else, it is another great buying opportunity! The US Dollar is going nowhere fast. The only question left to answer now is which will get to the basement first: The Dollar or the Dow?

Monday, May 26, 2008

The US Dollar And Black Gold

The illustrious government of the USA has been spinning a global web of financial deceit for the better part of the past 35 years. Since Richard Nixon closed the Gold window in 1971, and the US last defaulted on it's debt to the world, the US Dollar has been the biggest lie known to mankind.

By hook and by crook the US Dollar became the "reserve currency" of the world as the US and the Saudis in 1973 declared the US Dollar the single barter for Oil. In exchange for a lifetime of military support, the Saudi Kingdom agreed to accept ONLY US Dollars for their Oil. To keep things simple, other Oil exporting nation's soon began accepting ONLY US Dollars for their Oil. This action then created a "demand for US Dollars". The US Government had effectively switched the Dollars backing from Gold to Oil.

As the years passed, this new, and growing, demand for US Dollars allowed the Federal Reserve to begin and perpetuate a monetary inflation unrivaled in the history of mankind. This monetary inflation is soon to reach it's zenith. Soon to be followed by the complete destruction of the US Dollar as a currency, the destruction of the US Economy. and the destruction of a standard of living we have taken for granted for the past two generations.

Much debate has recently swirled within the "mighty G7" nations that it is the "speculators" in the futures markets that are causing the accelerating rise in the price of Oil. In the West, particularly in the US, it's is always somebody else's fault. Nobody ever wants to, or will, stand up and take responsibility for their actions. It is always easier to blame somebody else. This is why we have so many lawyers in our society today. "Then I'll sue!", should be this nations motto. With so many lawyers in our government today, it is little wonder that we continually play the "blame game" when it comes to rising Energy and Food prices. How naive these fools are. How foolish we, as a nation are, to elect these ambulance chasers to be our leaders. Hey, "ya get what ya pay for." Only a collection of US Government lawmakers could come up with such a ridiculous idea as this to pander to the voting public:

US House votes to sue Opec
The US House of Representatives has approved legislation that would allow the nation to bring a lawsuit against Opec for conspiring to keep oil prices up, a move reflecting the rising tensions between energy producing and consuming nations.

“Opec’s concerted manipulation of world oil marketplaces calls for more than begging for help,” said Robert Scott, the Democrat representative from Virginia, during the House debate. “It calls for full anti-trust enforcement.”

Folks, it just can't get any more pathetic than that. Well, it probably can, and probably will, but to even suggest that they can "sue OPEC" and change things, makes one question strongly the leadership of our nation. If this is the best these clowns in Washington can come up with to solve runaway Oil prices, we must then resign ourselves to the fact that things are probably going to get a whole lot worse before they get and better. A WHOLE LOT WORSE!

I am of the opinion that Oil's rampant rise today is a direct result of it's affiliation with the US Dollar over the past 35 plus years. One of the Fed's biggest regrets during the 1970's inflation crisis was that they did not suppress the price of Gold. Today the Fed and it's sister central banks in the G7 work overtime to halt and/or slow the rise in Gold prices. They can do this by dumping their reserves on the market place. By all estimates, Gold should be more than double where it is today just to have kept up with inflation. Strangely it is not...because of the central bank suppression. Oil on the other hand, is not "held in reserves" by central banks, and cannot be "dumped" on the market in an effort to suppress the price. This is why we so often hear about US officials begging the Saudis to pump more Oil.

Thus, with the Dollar effectively backed by Oil the past 35 years, it should come as a surprise to no one this seemingly out of control rise in the price of Oil over the past 12 months. The 70's are being replayed again at the dawn of the 21st century, only this time Oil is playing the role of Gold. As the value of the US Dollar plummets with each new pile of them dumped into the market place by the US Treasury and the Federal Reserve, Oil has no choice but to rise in price.

The "speculators" are only taking advantage of the situation the US Government created and perpetuated over the past 35 years, and simply "profiting " from the exposure of the lie that is the US Dollar. The speculators are not the cause of the rising price of Oil. It is foolish to even suggest it. These speculators are nothing more than vultures circling the soon dead carcass of the US Dollar.

How and/or when will Gold benefit from these "exorbitant" Oil prices? Gold is historically cheap relative to Oil right now. Gold at a very minimum should be double today's price relative to today's Oil prices. A likely scenario may unfold as we move into summer and Oil prices "correct". Money will move from Oil into Gold [and Silver] as the Oil trade unwinds. However, because rising inflation is baked into the next several quarters, falling Oil prices may not necessarily lead to falling Gold prices. Very soon, and quicker than many believe, Gold is about to pick up the torch in the Inflation Hedge Sweepstakes. It's a lot easier to buy Gold as an inflation hedge than it is to buy barrels of Oil. A lot easier to store as well. The next leg up in this secular Gold Bull market should prove to be spectacular as "investors" flock to the Precious Metals as an Inflation Tsunami washes over the US.

It’s not an Oil Crisis it’s a Dollar Crisis
By: Peter Schiff, Euro Pacific Capital, Inc.
In their search for explanations as to why oil has surged past $130 per barrel, Washington, Wall Street, and the financial media are as clueless as cavemen after a freak summer snow storm. Despite the head scratching, the blame game is nevertheless in full force. Speculators and big oil companies are being trotted out as scapegoats, and increased margin requirements and taxes on windfall profits and futures trading have been mentioned as appropriate sanctions. It should be clear that this is pure farce, and that no one understands what is actually happening.

The reality is that after years of reckless consumption and dollar debasement, Americans are now being priced out of markets over which they formerly held unchallenged title. As more affluent foreigners consume more of the resources and products they previously supplied to us, Americans are being forced to cut back. The rising dollar-based price of gasoline is simply an illustration of this global trend.

How to Fix Everything
by Adrian Ash
Speculating in the commodity markets is a bad thing, a very bad thing indeed. Congress ought to do all it can to protect the public interest – starting with its own re-election.

The Committee therefore recommends closing the US commodity futures market, and imposing sanctions on any foreign state that doesn't do the same, to prevent speculative funds simply moving elsewhere

This policy – undertaken for the good of the international community – will thereby force speculators back into more socially beneficial activities, such as trading those subprime-mortgage backed bonds now stuck on the balance sheets of New York investment banks.

Fixing that crisis is what both the economic stimulus package and the Federal Reserve's cash-for-crap liquidity injections are intended to achieve. Sub-zero real rates of interest should in no way be allowed to encourage or fund trading outside socially "good" speculations like residential real estate.

Germany in call for ban on oil speculation
German leaders are to propose a worldwide ban on oil trading by speculators, blaming the latest spike in crude prices on manipulation by hedge funds.

It is the most drastic proposal to date amid escalating calls from Europe, the US and Asia for controls on market forces, underscoring the profound shift in the political climate since the credit crunch began. India has already suspended futures trading of five commodities.

In the long run, any scheme to ban futures trading would be extremely hard to enforce as the markets would tend to move offshore. Hedge funds are probably not the culprit in any case.

Oil markets are likely to shrug off the moves as political posturing, instead focusing on Norway’s suspension of crude output at three platforms, cutting supply by 138,000 barrels a day.

The news comes as Lloyd’s Marine Intelligence reported Opec oil shipments fell by 1m barrels per day in the four weeks to May 4, confirming suspicions that the market has been chronically short of supply.

Silver Technicals 2
Adam Hamilton, Zeal Intelligence LLC
If you’re a pure silver trader, you should take comfort that silver is basing high for its next major upleg. Now since silver follows gold, and gold’s seasonals are very unfavorable in summer, we may have to wait until autumn for the next major gold and silver uplegs. Both of the past two uplegs started in Augusts of their respective years. But if there was ever a summer for gold to buck seasonal trends, 2008 is it. The coming inflation scare is going to be the worst seen since the 1970s, great for gold investment demand.

The International Forecaster - Bob Chapman
Note that the rollover of gold futures contracts will be completed next week. The initial tally on April 30 had June contracts of open interest at 248,355 and August at 47,406. As of Thursday, those numbers stood at 163,127 and 143,608, respectively, meaning that June contracts of open interest have decreased by 85,228 contracts while August contracts of open interest have increased by 96,202 contracts. That means that the rally still has legs, and that after the current rally peaks next week based on short-covering, there will be a short period of consolidation after which gold and silver are up, up and away! This rally has legs. The correction is over and those who are waiting for the usual summer slump are going to get a very big surprise. Wait until you see what happens in July when the seasonal adjustments that have artificially lowered official CPI and PPI are removed and all the suppressed inflation flows back into official numbers. Gold and silver are headed for the moon, so don't miss out on the coming rally. Take your position now and sit back and watch the precious metals go to town.

Tuesday, May 20, 2008

Light Fuse, Get Away

Listen... There is a chant rising around the Dollar Desk in the currency pits. "Die, Die, Die..." And it sounds like they mean it. Gold and Silver Bulls put the bears on notice today. They are about to foreclose on their ill advised positions and bring new meaning to "naked shorts".

Over on the NYSE, the sound system was sabotaged and a loop of Na-Na-Na Na, Hey-Hey-Hey, Goodbye...played all afternoon.

There is on essay today that demands everybody's attention. It is part history lesson, and part current events. It should come as no surprise after reading this that JPMorgan is in cahoots with the Federal Reserve. What is a surprise is that there is not an uproar over the events that transpired on St. Patrick's Day. How the US Congress can let this blatant theft of taxpayer money go uncontested escapes me and earns all incumbents a one way ticket out of Washington in November. This is a MUST READ.

Robert Owens, a co-author of the Federal Reserve Act, later testified before Congress that the banking industry had conspired to create a series of financial panics in order to rouse the people to demand “reforms” that served the interests of the financiers. A century later, JPMorgan Chase & Co. (now one of the two largest banks in the United States) may have pulled this ruse off again, again changing the course of history. “Remember Friday March 14, 2008,” wrote Martin Wolf in The Financial Times; “it was the day the dream of global free-market capitalism died.”

Monday, May 19, 2008

The Joke Is Getting Old

To begin with, The Fed Is NOT Going To Raise Interest Rates! Please, give that idea a rest. I don't care how horrific Tuesday's PPI numbers may be, the Fed will not raise rates in 2008, PERIOD!

Index: Weak economy may dodge a recession
NEW YORK (AP) -- Gas prices are high, food's more expensive and the job market's cold, but the U.S. may still avoid a recession.

That was the message Monday from a private business group whose index of leading economic indicators defied expectations and inched higher in April.

The New York-based Conference Board said its forecast of future economic activity rose 0.1 percent in April, matching a 0.1 percent increase in March. Economists had expected a 0.1 decrease in April.

The index is designed to forecast economic activity in the next three to six months based on 10 economic components, including stock prices, building permits and initial claims for unemployment benefits.

"These data certainly reflect a weak economy but not one in recession," said Ken Goldstein, labor economist at The Conference Board. The small increases in March and April, which followed five months of decline, could be a signal the economy may not weaken further, he said.

Six of ten leading indicators the Conference Board measures rose in April, including stock prices, interest rate spreads and housing permits. Those increases more than offset the sharp declines in average weekly hours worked and consumer spending.

Yeah right... "...its forecast of future economic activity rose 0.1 percent in April..." 0.1%? Do these geniuses even have an inkling of how PUNY 0.1% is? 0.1% is ONE TENTH OF ONE PERCENT. IT IS A FRACTION OF 1%. IT IS 1/10! If 0.1% was any smaller it would be zero! Given a margin of error, 0.1% could just as easily be MINUS 0.1%. And these economic geniuses have the nerve to suggest that the economy "may not weaken further"? Yeah, and the price of gasoline dropped in April. Give me a freaking break!

Have these knuckleheads at The Conference Board [nice name by the way] checked the price of Oil lately? Oil closed at an ALL TIME high today ABOVE $127 a barrel. A snowball has a better chance of doubling in size in hell than the economy has of not weakening in the months ahead. What ever credibility The Conference Board [what a stupid name] had previously, it all evaporated with this ridiculous assertion this morning. 0.1%! LOOOOOOOOOOOOOOOOOL!

Just what is this Index of leading Indicators anyways. [Besides wishful thinking.] For the answers to that we go the to answer masters at Wikipedia:

The Index of Leading Indicators is an American economic index intended to estimate future economic activity. It is calculated by The Conference Board, a non-governmental organization, which determines the value of the index from the values of ten key variables. These variables have historically turned downward before a recession and upward before an expansion. The single index value composed from these ten variables has generally proved capable of predicting recessions over the past 50 years. Those who have an activist view believe in discretionary monetary and fiscal policy. They believe that the index of leading indicators can provide an early warning system so that policymakers can shift toward macroeconomic stimulus when the index fails.

One problem with the index of leading indicators is that the time lag between the signal of a recession and the actual recession has varied widely. Also, on a few occasions, the index of leading indicators has fallen, and no recession occurred. That is, the index has given a few false alarms. Hence, policymakers must react carefully to the changes in the index.

The 10 components of the Index include:

1. Average weekly hours worked by manufacturing workers
2. Average number of initial applications for unemployment insurance
3. Number of manufacturers' new orders for consumer goods and materials
4. Speed of delivery of new merchandise to vendors from suppliers
5. Amount of new orders for capital goods unrelated to defense
6. Amount of new building permits for residential buildings
7. The
S&P 500 stock index
8. Inflation-adjusted monetary supply (M2)
9. Spread between long and short interest rates (the
yield curve)
10. Consumer sentiment

While this index correctly forecasted each of the 7 recessions during the 1959-2001 period it also has forecast 5 recessions that did not occur.

This naturally brings to mind a famous saying by economist Paul Samuelson: "Economists have correctly predicted nine of the last five recessions."

Predictably unpredictable. 0.1%! Cancel the alarm. The economy is saved! Consumer sentiment is at an ALL TIME LOW. How could I ever think the economy might weaken further in the months ahead? The Index of Leading Indicators says it isn't so. I bow before thee... Your offering of hope is immeasurable. So what if Oil is $127 a barrel...

What's this?

No end in sight to market woes say Trichet, Buffett
LONDON/FRANKFURT (Reuters) - The end to the credit crunch is still not in sight, European Central Bank President, Jean-Claude Trichet and Warren Buffett, the world's most famous stock market investor, warned on Monday.

"These are demanding times, challenging times... It is an ongoing, very significant market correction," Trichet told BBC radio in Britain.

Buffett, whose years of shrewd investing have earnt him a fortune estimated at $62 billion by Forbes magazine and the nickname "the sage of Omaha," struck a similar tone at a news conference in Frankfurt.

"I'll talk about the United States. I don't think the effects of the credit crunch are far from over at all. I think there will be rippling secondary, tertiary effects."

Trichet and Buffett's comments come after U.S. Federal Reserve Chairman Ben Bernanke said last week the healing process from the credit crisis would take some time.

But, but, but...the Index of Leading Indicators has "indicated" that the economy may not weaken further. I saw the headline. It must be true. The Dow was up today. Maybe Mr. Buffet and Mr. Trichet have their facts mixed up. I swear I read at least a dozen times in the past 10 days that the credit crisis is all but over. These guys must be mistaken. I'm going to buy the Dollar just to prove them wrong!

Fed's Direct Loans to Banks Climb to Record Level
May 15 (Bloomberg) -- The Federal Reserve's direct loans of cash to commercial banks climbed to the highest level on record in the past week as money-losing lenders increasingly turn to the central bank for funds.

Funds provided through the so-called discount window for banks rose by $2.8 billion to a daily average of $14.4 billion in the week to May 14, the central bank said today in Washington. Separately, the Fed's loans to Wall Street bond dealers rose by $75 million to $16.6 billion.

Policy makers have increased the attractiveness of direct loans as they seek to alleviate the impact of the credit crunch. Fed Chairman Ben S. Bernanke said two days ago that while markets have improved, they remain ``far from normal,'' adding that the central bank is prepared to increase its twice monthly auctions of funds to banks.

``The Fed is providing an extraordinary amount of liquidity through various mechanisms,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. While ``credit markets are showing signs of improvement'' there is ``a long way to go,'' he said.

"A long way to go". I guess I better not ask Dad again, "Are we there yet?" Geeze, they just told us last week that the credit crisis was over. I'm so confused. We're in a recession, we're not in a recession. The credit crisis is over. The credit crisis is not over.

PEOPLE! THE WORLD FINANCIAL SYSTEM IS F*#!ED UP! IGNORE THIS NOISE. IGNORE THE BLATHERING NONSENSE. IGNORE THE LIES. IGNORE THE WISHFUL THINKING. The bad part of this mess hasn't even shown up at the party yet, and the ugly part hasn't even gotten dressed yet. Call your broker ASAP and buy some Gold and Silver. You'll sleep better at night knowing what few do. THE TRUTH!

This just in:

US to Peg Dollar to Rat's Ass
Fed chairman Ben Bernanke says "We were looking for a new stable pre-set intertemporally constant fixed asset to peg the greenback against, and the rat's ass was it".

The US dollar has been under siege lately due a combination of factors including the sub-prime interest scandal, declining house prices, soaring gold and oil prices and a commitment to fighting wars really far far away for reasons nobody can remember.

Bernanke surprised many by reverting from a fiat currency to one based on fungible assets. It seems that when the subject was brought up with the president Mr. Bush was reluctant to maintain a Fiat Currency while GM an Ford are not doing so well, "It just doesn't seem like the American thing to do."

Reverting back to the gold standard was not an option as the price of gold has increased as investors have flocked to it with the decline in the dollar. Pegging the dollar to it now would be disastrous. Defending the huge amounts of gold required in one location whether it's Fort Knox or elsewhere would simply be an open invitation for George Clooney and Brad Pitt to develop a devilishly clever plan to clean out the place and make US marines look foolish in the process. "I don't think we have a game plan to defend ourselves from those slick movie stars" admits Bernanke.

"The beauty of the rat's ass is that it is safely distributed in the streets and sewers of most cities. It is mobile, capable of evasive maneuvers, can defend itself when under attack on its own and right now its value is about as low as it can get.""The dollar can only go up from here." Bernanke announced smugly.

Sunday, May 18, 2008

The TRUTH Is Out There

Lies. So damn many lies. They're like a trail of bread crumbs that will, ironically, eventually lead to the truth. "What is that truth?" you may ask. Gold baby! The Truthsayer. Gold is the single best asset to not only expose the lies, but protect you from them as well.

Perceptions are changing as each day passes. Even the ignorant are becoming cognizant. The scent of discomfort is beginning to stir the flock. The sheeple sense the Shepperd may have lead them astray. Few will realize they are on the road to the financial slaughterhouse until it's too late.

Captain Ben and the rest of the crew on the Good Ship La-de-da, realizing they're struggling to keep Titanic II afloat, have now resorted to lies their bought and paid for media surrogates find difficult not to laugh at. Inflation is fast becoming THE buzzword in the media and around the office water cooler. Denying it, lying about it, and blaming the price of Oil for it will not make it moderate or disappear. Inflation is on the rise globally. There are no ifs, ands, or buts about it. It is a fact and its is escalating quicker than any one believes or can imagine.

325 basis points cut from the Fed Funds rate, liquidity injections, cash auctions, $600 rebate checks. And that's just in the US. Monetary inflation is being pumped out of central banks around the globe. Who can devalue their money fastest to protect their exports? Global inflation is becoming an epidemic. And it doesn't look like there is a cure anywhere that is close to efficacy.

The effects of the Fed's initial interest rate cuts in Sept./Oct. '07 are just now beginning to be felt...six months down the road. It will be September 2008 as the FULL effects of Shepperd Ben's detour to the financial slaughterhouse begin to be realized. Gold will be flying high on the dismal 2nd qtr earnings that are ahead of us by then, and be primed to kick in the afterburners as the nation begins to come apart at the seams in an avalanche of credit defaults.

The future is bright...if today you are a Precious Metals investor. We may be able to keep our heads above water, barely. The Summer/Fall of 2008 could make 1968 look like a walk in the park. Prepare for the worst, and hope for the best.

The Daily Reckoning
But here's some good news:
Last month, the price of gasoline went down 2%, says the Labor Department.
Wait a minute. Do you remember gasoline prices going down in April? We don't. As we recall, oil prices were soaring…and so was the price of gasoline.

We're beginning to sniff something funny in the air…a rat.
It was largely thanks to this reported drop in prices at the pump that the Consumer Price Index registered a scant 0.2% increase for the month of April.

...we check the records from NY gasoline futures trading and find the price actually rose 12% in April. How come the feds put it down as minus 2%? Turns out, they made a 'seasonal adjustment.' But turning plus 12 into minus two sounds like more than an adjustment; it sounds like either magic or major surgery…like turning a prince into a frog or a fat man into a slim woman.

Bob Chapman, The International Forecaster
We have entered the eye of the storm as the BLS takes this opportunity to give us another lie about inflation, which is so preposterous that they have become the laughing stock of the financial community. If you can believe that core CPI was .1% and regular CPI was .2% last month, then you probably still believe in the Easter Bunny, Santa Claus and the Tooth Fairy, and by the way, we have a bridge for sale over the East River that connects Brooklyn and Manhattan - real cheap. This latest Paul Bunyan tale comes to you from the most recent performance of the fane-stream media's acting troupe at Theatre Bizarre courtesy of the pathological liars and script writers in the BLS who are in charge of compiling our economic data, a show which is of course sponsored by the Illuminati. This so-called "information" comes to us following news that March PPI and April Import Prices (ex-oil!!!) both increased by 1.1%, which is an annualized rate of 13.2%, while our own statistics about actual inflation show 12.375% for the CPI, and our calculations for M3 top 18%, which means that actual inflation is still rising to play catchup with M3. Food is up 37% yoy (which means an average monthly increase of 2.66%) while oil has rocketed from $101.58 per barrel on March 31 to $113.46 per barrel on April 30, an increase of 11.7% in one month (over 140% annualized!!!) after peaking at $119.93 per barrel on April 28. So that means one of two possibilities. Either the government is flagrantly lying about inflation, or corporate earnings are about to explode and go down in flames to a level so negative that the resulting anomalies in analysts' predictions will give the appearance that they have all collectively turned into crack addicts. If you are absorbing a 13.2% increase in the cost of your production, and then only passing on 2.4% out of that 13.2% to your customers in the form of increased prices, may we suggest that you have a gargantuan problem with your profitability. The tellers of tall tales can't have their cake and eat it too, although the Illuminist reprobates continually try because they know how dumb the sheople can be. As you can see from our actual inflation statistics, as you might expect, very few cost increases are now being eaten by the producers and most cost increases are being passed on to consumers. To do otherwise would be financial suicide, plain and simple. And may we add that either way, Goldilocks gets eaten by the Three Bears.

The Myth of Lower Oil Prices
Pinocchio’s spin meisters are working overtime as the most recent CPI, GDP and retail sales data were such a joke that even the main stream financial media were embarrassed to hang their hats on them. In the private sector this would be labeled PREMEDITATED fraud and you and I would be charged with disseminating false and misleading information to investors.
- Ty Andros

Why Inflation Is Going To Hurt This Time
Let us look, briefly at the oil market. When the US invaded Iraq, we were told that $10 oil was right around the corner. Then, as the war went from triumph to tribulation…the oil price rose. Still, the war’s backers believed they had done good. Higher oil prices couldn’t last, they said. The National Review said oil was a “bubble” in ’04, when it was at $50 a barrel. Then, Steve Forbes said it was a “bubble” at $70 a barrel in ’05. Now…a Goldman expert says it will go to $200 a barrel.

Success leads to excess. Sooner or later oil really will be in a bubble…and sooner or later the bubble will pop. But when? At what price? China is doubling its use of the slick liquid every seven years. In the US, there are 480 cars per 1,000 people. In China, there are only 10. And China could be the world’s largest automaker in just a matter of months. Our advice to Americans: fill up your tanks.

When the illusion that the crisis is under control fades away…
Indeed, contrary to what they say (and maybe to what they really believe), there is no bottom to the pit that can stop the fall; or rather, there might be a bottom but its getting deeper day after day (11). Ironically, those who in the past years used to say that there was no limit to profit and benefit increases, are now trapped in a process where the bottom gets always deeper, where losses keep increasing endlessly as reference asset prices fall always lower, and where the only things that go always higher are energy and food prices. But isn't irony one of the only identifiable features of History?!-June-July-2008-New-tipping-point-in-the-global-systemic-crisis-When-the-illusion-that-the-crisis_a1691.html

Correction in Gold Near End
By: Jim Willie CB
Sadly, the insolvent US$-based economic and financial system has a long way to go before any recovery can be claimed. The four primary pillars of the federal budget deficit, the trade and current account deficit, the bank insolvency, and the rising tide of negative equity homeowners, these scream of ongoing need for remedy. All forms of remedy involve monetary inflation. The current approach has been careful and directed. The next steps will be much more broad and systemic in the face of desperation to avert collapse. Beware of civil disobedience toward mortgages. Beware of civil disturbances. Beware of open scuffles at gasoline stations. Beware of possibly food riots in poor neighborhoods. Being the newest Thrid World nation, the Untied States will see food riots similar elsewhere in the world. The system inside the US is moving toward chaos. An inflationary recession does that. Job loss and rising prices make for a nasty cauldron for emotions. The only known plan will be to produce enough inflation to keep the system running. The implemented cure will plant seeds for further crisis one year from now, and guarantee a severe change via disruption. The only safe place to be will be commodity investments that oppose the Great Paper Chase in dissolution, in particular precious metals and energy. My favorite remains silver, for many reasons.

Thursday, May 15, 2008

Perceptions Change Like The Weather

Until today, there has been a pervasive "perception" that the credit crisis is waning, and that the US Dollar had bottomed and is in the midst of a "rally". Folks, this is a bubble of bullshit that is about to burst. Wishful thinking, daydreaming, it what you will. POP! Pffft! ...and it's back to reality.

In fundamentals alone, this "perception" lacks a single dose of reality. Just today, in a speech, Fed Chairman Bernanke said the credit crisis continued to confound the economy. "Events continue to unfold," he said, adding that "the financial stress we continue to experience" stemmed from a separation of lending and distribution of credit to investors. Hmm, sounds like a credit crisis in full swing to me. The Dollar "rally" ended today with news from the ECB that growth in the Euro Zone is robust and inflation is steady. Understand that the perceived Dollar "rally" is based solely on current [and continued] weakness in the Euro, and not a single straw of fundamental reality.

This evening we see news that Japanese GDP is up:

TOKYO (Thomson Financial) - The Japanese economy grew at a faster-than-expected pace in the first quarter as brisk exports to emerging markets like China offset slower demand in the United States, government data showed on Friday.
The Cabinet Office said gross domestic product grew 0.8 percent in real terms in the

January-March quarter and at an annualized rate of 3.3 percent.

With Japanese inflation running hot in a country that imports ALL of it's Oil, could we soon hear talk of a rise in Japanese interest rates and a rising Yen? Can you Dollar Bulls say, "DOINK!"

Europe and Japan are on the verge of putting the US economy in their rear view mirrors. The biggest of all fears in these two economic partners is that a slowdown in the US economy would drag their economy's down, and that their strong currencies would weigh heavily on their respective export sales. The World Economy is moving forward in spite of the US economic slowdown.

The interesting thing about perceptions is that they're just like the weather, they change. As it becomes ever clearer that the ECB is not going to be cutting interest rates soon, if at all, and that the Bank Of Japan may soon have the "strength" to raise interest rates, the US Dollar will begin to be perceived for what it really is...burnt toast.

This morning, the Precious Metals caught the sent of soon to be changing perceptions. A mid day dip in Oil prices the only thing holding Gold back today from a long awaited breakout from it's oppressive two month consolidation. The most amusing aspect of today's dip in Oil prices were the market headlines touting it's effect on stock prices: Stocks advance after retreat in oil prices. The media is so misleading [as if that needed to be said]. Oil prices had completely retraced their entire dip by the 4PM close of markets in New York and stood at 124.51, +0.29 at 5:15PMest.

...the Philadelphia Federal Reserve said regional manufacturing activity is contracting in May at a much slower pace than in April...

Guys, it's slowing. The pace that it is slowing is irrelevant.

...the Fed said nationwide industrial output sank for the second straight month in April by 0.7 percent, due to big cutbacks in the automotive and other manufacturing industries. The drop was more than double analysts' average prediction.

Perhaps if industrial production was just "slowing" instead of "sinking"...

The Labor Department said the number of laid off-workers applying for jobless benefits rose last week by 6,000 to 371,000 -- near the average analyst forecast, and suggesting that the labor market remains weak but in check.

The labor market is substantially weaker than the Labor Department would ever allow you to believe...

The media cannot get the inflation story straight:

On Wednesday:

Stocks advance after lower inflation reading
Wall Street advances after better-than-expected consumer price report eases inflation concerns
NEW YORK (AP) -- Wall Street advanced Wednesday after a better-than-expected report on consumer prices tempered some of the market's concerns about inflation.

On Thursday:

Gold, Silver Futures Rebound on Demand for Inflation Hedge
May 15 (Bloomberg) -- Gold rose for the first time this week on speculation higher energy costs and a weaker dollar will boost demand for the precious metal as a hedge against inflation. Silver also gained.

And today's most shocking headline:

Government Inflation data at Odds with Reality
In an age where governments of every political stripe distort economic data to promote their own self-interests, it’s hardly surprising that they present inflation statistics that are wildly at odds with the reality faced by consumers and businesses, and regarded with utter disbelief. In the latest US government report on inflation for instance, there was a glaring “seasonal adjustment,” for energy prices that cast great doubt as to the accuracy of the findings.

US Labor Dept apparatchiks said consumer prices rose a smaller than expected 0.2% in April, tamed by energy prices, which were unchanged last month. Utilizing an obscure “seasonal adjustment,” Labor figured that gasoline prices actually fell 2% in April, which doesn’t reflect the reality of what consumers were paying at the pump. Furthermore, the IMF’s global food price index rose 43% over the last 12-months, but the US consumer price index for food is only 5.1% higher.

Wall Street cheered the tame inflation rate, reckoning it gives the Federal Reserve more time to peg the fed funds rate at 2%, to jig-up the stock market with massive money injections. But the folks who aren’t fooled by the government’s propaganda on inflation are the American people, whose dollars buy less with each passing month. The inflation tax is the great thief of the middle class.

For the 12-months through April, prices for US imports were 15.4% higher. Yet Wall Street economists massaged the data, and explained that wholesalers and retailers are absorbing the higher costs out of reluctance to increasing prices and driving away customers. Should we trust the inflation statistics conjured-up by government apparatchiks, or rather, place greater faith in the depreciating dollars and cents that flow through the commodity markets each business-day?

Five weeks ago I "boldly" predicted Gold and Silver would see new highs by Memorial Day. Obviously, that looks highly unlikely. Am I sorry I made that prediction? In a word, NO. All things being equal, I think we could all agree that both Gold and Silver would have made substantial new highs by Memorial Day. I have made every effort in the past five weeks to keep before you the fundamental reasons to be invested in Gold and Silver. These fundamental reasons for owning Precious Metals are only stronger today than they were just five weeks ago. If this is your first correction/consolidation in the Precious Metals markets, consider yourself now a veteran. If the past two months have been "nothing new", I'm certain you know what lies ahead. On that note I will now boldly predict that in the next up leg of this secular Bull Market in Precious Metals, percentage gains in Silver will nearly double those of Gold.

As the threat of inflation grows each day... As the mention of inflation begins to dominate the headlines... A rising tsunami of investment in Gold and Silver is sure to follow.

Bad News For The Buck

Following yesterdays fabricated inflation numbers in the US, today we receive inflation AND GDP numbers from the Euro Zone. Looks like there won't be any interest rate cuts from the ECB anytime soon. The ECB has it going on!

Death to the Dollar...

Euro Zone inflation eases somewhat in April, yet well above the 2.0% Y/Y (, May 15 2008, 09:12 GMT

EU Advanced Gross Domestic Product s.a. up 0.7% in 1Q; 2.2% up y-o-y (, May 15 2008, 09:01 GMT

The dollar wilted against the euro this morning as the single currency soared on news that Germany, Europe's largest economy, had posted its highest quarterly GDP in 12 years.

To see all of this mornings early bird economic data, please follow this link to the Economic Calendar: Click on the orange exclamation points to get the news stories for each data point.

Tuesday, May 13, 2008

The Fed Is Dead

If I could go to the highest mountain in the land, and scream at the top of my lungs...this is what I'd bellow:


OK, now that I've got that off my chest... Look, the Fed can "pause", "talk tough", or dance of the head of pin. It is impossible for the Fed to raise interest rates. Why would they have cut them AGAIN last month if they were going to raise them next month. Why is it impossible for the Fed to raise interest rates? If the Fed raises interest rates it will cause our now fragile economy to implode and go down swiftly in flames. Rising interest rates would destroy the already beaten down housing markets. Rising interest rates would make it too expensive for business to borrow money that is near impossible to get now at today's fires sale rates. Rising interest rates would force uncountable defaults on credit card debt from coast to coast.

For the Fed to even have a glimmer of hope in stopping inflation they would have to raise interest rates to levels ABOVE the rate of inflation. And since we ALL know that inflation is substantially higher than the 4% the Fed leads us to believe, interest rate increases would have to be gargantuan. pegs real inflation at 12%. Do you really think the Fed is going to raise interest rates back to 5% let alone 13%? Not a freaking chance! As a matter of fact, the Fed has lost complete control of interest rates.

The bond markets are going to determine where interest rates go now. And the Fed is not going to like it one bit, and they will continue to buy Treasuries in an attempt to continue to keep a floor under the long bonds. This will prove to be, in the end, the Fed's ultimate boo-boo. You see, the interest rate the Fed loves to monkey around with is the rate that banks charge each other for money. The Fed Funds rate has little real impact on the consumer. The rates consumers pay are tied to the 10 year and 30 year long bonds. Ever wonder why mortgage interest rates have barely budged to the downside since the Fed began cutting interest rates last Fall? The Fed claims to be confounded by it as well. They know exactly why mortgage interest rates have not fallen. The Fed has been buying long bonds to monetize the nations debt and keep interest rates low. Where do you think they get all the treasuries they trade for the investment banks toxic waste at the bi-weekly auctions? Rising interest rates are the biggest threat to the band-aids the Fed has, to date, applied to the sucking chest wound we have all come to know as "the sub-prime crisis". Rising interest rates threaten an unraveling of the credit derivatives that continue to hang over the world financial system. Rising interest rates will detonate this thermonuclear financial time bomb if they are allowed to rise. Rising interest rates are absolutely the last thing the Fed wants to see happen. Unfortunately they may be powerless to stop it.

The 10-year T-bill closed today with a yield of 3.90%. With "official" inflation running at 4%, investors are not making ANY money holding them. But with "unofficial" inflation running at 12%, investors are LOSING 8% by holding them. With inflation of the verge of exploding much higher, how much longer do you think investors will continue to hold their LOSING investment? Long bonds "should be" yielding in excess of inflation, so that investors get a "real return" on their investment. As inflation escalates, investors are going to run for the exits in the bond markets. This in turn will cause interest rates to rise, and chase inflation. Falling bond prices result in rising yields, or as we know them, rising interest rates. Investors will take the money from their bond sales and park it in the one place that has historically been the best hedge against rising inflation: The Precious Metals. Gold and Silver are going nowhere until investors flee bonds, and race to the Precious Metals and commodities.

So you see, no matter how much hot air the Fed Heads blow about rising inflation, they are powerless to use the one tool they have at their disposal to keep it in check. Heck, the truth of the matter is they have all but abandoned the idea of lowering interest rates because not only has this ploy completely failed to resolve the "credit crisis", it has in fact lit the fuse to an inflationary explosion. The Fed has really F'd things up folks. The Fed could sit still on interest rates for months, it wouldn't matter in the least when it comes to controlling inflation. And it will matter even less towards shoring up the US Dollar. The Fed has sacrificed the Dollar, and the rest of the world better wake up soon to the fact that the Fed and the US Government have NO wish to see the Dollar go up. You can't pay off this nations mountain of debt with a rising Dollar.

And this nations debt is really the NUMBER ONE reason the Fed cannot tolerate rising interest rates. It costs the US Government $3 BILLION A DAY to service this country's $9 TRILLION debt. And that is at today's minuscule interest rates. Imagine the costs to the government with each one percent increase in interest rates. You think homeowners with adjustable rate mortgage resets are in trouble. OOOOOOOoooo momma, do you see the corner the Fed has painted themselves and the American Taxpayer into? Do you begin to understand why it is imperative that you have Gold and Silver investments. It's the DEBT stoopid! This country's DEBT will ultimately be its undoing.

Don't be deceived by the talking heads in the financial media, or the talking heads at the Fed. The Fed has absolutely NO interest in controlling inflation. Say what? Here's some Fed induced inflationary news that has slipped through the cracks:

Fed seeks approval to pay interest on reserves
WASHINGTON (Reuters) - The U.S. Federal Reserve has decided to seek authority from Congress to begin paying interest on commercial bank reserves this year, a tool that could help it thaw frozen credit markets, a person familiar with the issue said on Wednesday.
Paying interest on the reserves banks are required to hold at the Fed to balance customers' deposits would make it easier for the central bank to move more funds into financial markets seized in the grip of a credit crunch without driving down benchmark interest rates.

"It's particularly relevant now because the Fed would like to put a bunch of cash in the market, and it can do that beyond what the market will take at the given (benchmark interest) rate only by increasing the demand (for reserves)," said Douglas Elmendorf, a former Fed staffer now at the Brookings Institution. Paying interest should spark that demand.

Paying interest on reserves would boost demand for reserves and could help the Fed pump liquidity into markets without lowering benchmark rates.

Bernanke Wants Fed to Pay Interest on Bank Reserves
May 7 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, seeking ways to stabilize money markets, will ask Congress for authority to pay interest on commercial-bank reserves this year, a person familiar with the discussions said.

``It would have the effect of putting a floor under the federal funds rate,'' said Walker Todd, a research fellow at the American Institute for Economic Research in Great Barrington, Massachusetts.

So it would appear then that the Fed has NO intention of stifling inflation with a "pause", only accelerating it by directly increasing the money supply with an end run around the more obvious inflationary interest rate cuts. These guys make the Great and all Powerful Oz look like a Crackerjack salesman. Talk about deceit!

Bernanke Says Fed to Boost Loans to Banks as Needed
May 13 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said financial markets remain unsettled and the central bank will increase its auctions of cash to banks as needed.
While markets have improved, they remain ``far from normal,'' Bernanke said today in a speech to an Atlanta Fed conference at Sea Island, Georgia. ``We stand ready to increase the size of the auctions if further warranted by financial developments.''

European govt bonds track Treasuries sharply lower after solid U.S. data
LONDON (Thomson Financial) - European government bonds were tracking their U.S. counterparts sharply lower after solid data from the world's largest economy reinforced views that the Federal Reserve will not cut interest rates at its meeting in June.
Although retail sales showed the headline figure fell by 0.2 percent in April, market players chose to ignore this and focused on retail sales excluding autos, which rose by 0.5 percent, beating expectations for a smaller 0.3 percent rise.

'A better than expected ex-auto print and relatively firm underlying details were a big negative for Treasuries,' said Meny Grauman, economist at CIBC World Markets.

'Markets are impressed by the ability of American shoppers to continue to spend, and this result will only help strengthen the view that the Fed will pause at its next rate setting meeting,' said Grauman.

Bond prices were also pressured by concerns about imported inflationary pressures, following news that import prices rose by 1.8 percent in April. Although this is below March's 2.9 percent rise, analysts had forecast a smaller rise of 1.7 percent, and March's reading was revised up.

'Inflation concerns are also supporting the expectations of a more hawkish Federal Reserve with import prices rising... more than expected,' said Rhonda Staskow, an analyst at Thomson IFR Markets.

So the perception now is that with "rising inflation" in the headlines the Fed will now lean towards raising interest rates. Case in point today's bump in the Dollar. I think we made it clear above, that is not going to happen. Rising interest rates in the long bonds are the result of the bonds being sold. Don't be misled. This is NOT Dollar positive. Falling bond prices will cost investors Trillions of Dollars as the capital investment tied to these bonds begins to evaporate. The worst fear of the Fed and US Government is that foreign investors will begin to dump their US Treasuries as the Great 20th Century Bond Bubble begins to burst. And damn well they should be scared to death of this reaction in the bond markets. It will spell certain doom for the American economy, and all the investors foolish enough to hold onto these USA, Inc I.O.U.s. The exits from the bond market could get crowded in a hurry. Don't even consider for a minute that the Fed could buy all the Treasuries that will be sold. Not even the Fed could print that much money. And if they could, could you imagine the inflationary result?

And as quickly as the exits to the bond markets jam up, the lines outside the Precious Metals markets will become blocks long. Yes, Gold can rise in a rising interest rate environment, and it will be soon enough.

Monday, May 12, 2008

Living The Lie

Liar Liar Pants On Fire

Edward Lazear, White House economist

Thu, May 8 2008, 09:38 GMT
Thomson Financial News -

"The data are pretty clear that we are not in recession."

Henry Paulson, U.S. Treasury Secretary

Wed, May 7 2008, 10:54 GMT
Thomson Financial News -

"The worst is likely to be behind us."

How do these jackasses sleep at night. Telling lies in public will only come back to haunt you. In the Spring of 2009 look for these two to be on the run from lynch mobs. We are clearly in a recession, and the worst is yet to come. Of course when you believe your own's easy to tell more of the same. The talking heads in this government have been lying to us repeatedly about the financial crisis America and the World has found themselves entangled in. How many times were we told the "sub-prime crisis" would be contained and that it would not effect the broader economy? When will the lies end?

Barrack Bin Laden, the now self ordained Democratic candidate for President of this doomed nation has repeatedly preached his "vision for change" in America. Though he gives few specifics, and offers only "buzz words", Mr Obama best be careful what he wishes for. I doubt the change this country has in store for it is going to be to anybody's liking. And if he's sitting in the big chair, he's going to be the one taking the blame for it.

Why anybody would want to be President of this sinking nation escapes me. Perhaps that explains the dearth of qualified candidates. [Ron Paul being the exception] Do any of these shills offer a thread of leadership with their candidacy? And if there is ONE thing this country lacks right now, it is leadership. I doubt any of these three rah-rahs could lead a cheer, let alone a nation destined for the scrapheap of history.

Quickly shiftying gears... I was getting cramps today from laughing as the headlines on Yahoo repeatedly suggested that stocks were higher because of "strength" in the Dollar and lower Oil prices. Yes, the Dollar was higher overnight in Asia, as it often is on Mondays...particularly if the close on the previous Friday was weak. By 10AM est the Dollar had given up it's .25 gain and had reversed itself into a .16 loss, a .41 reversal from it's morning high. Yet repeatedly as the day progressed, higher stock prices were attributed to a higher Dollar. The Dollar was in the RED for all but the first 40 minutes of trading on Wall Street today damn it! Oil prices were said to be down on a strong Dollar, yet the Dollar wasn't stronger at all. Do you think maybe they are taking this "strong Dollar" BS a bit to far in the press?

Oil is clearly overbought at these levels, and a reaction lower should be expected. Gold was weak today ONLY because Oil prices were soft. Will Gold prices slide if Oil prices slide? The Plunge Protection Team hopes so. Unfortunately that exact scenario my not occur. Gold appears poised to move higher in spite of any reaction in Oil prices. Besides, it's unlikely Oil prices fall very far. I am of the belief that the recent Goldman Sachs call for Oil to rise to 150-200 in the next two years was a contrary warning that a top in Oil prices is near, and Goldman Sachs has some futures contract they'd like to unload. The profits they make in Oil will quickly be moved into the Precious Metals as this months inflation's numbers arrive this week and shock the investment world. This weeks shocking inflation revelation may also set off a collapse in the Treasury markets as US Government Bonds are likely to be the next bubble to actually burst. And in doing so, throw ice water on the talking heads suggesting that it was the commodities bubble that was bursting. Far from it. The next leg up in commodities is now on our doorstep.

The Ticking Credit Card Time Bomb
Peter Schiff, Euro Pacific Capital, Inc.

It should be painfully obvious that expanded consumer credit is not evidence of improvement, but simply, deterioration. Unfortunately, when it comes to understanding the economy, there is little common sense on display. By going even deeper into debt just to make ends meet, American consumers are digging themselves, and our entire economy, into an even greater economic hole and laying the foundation for the next major credit debacle.

Soon, as credit card delinquencies rise and losses on pools of securitized credit card debt mount, those supplying the credit will finally get wise to the fact they will never get their money back. As a result the market for such debt will dry up even more quickly than did the market for subprime mortgages. Cards will therefore be much harder to come by and will have much lower limits then they do today. Limited to only the cash in their wallets, Americans will finally be forced to dramatically curtail their spending, and the recession will finally gather serious momentum.

The crisis is only 1/3rd of the way to its solution
Bob Chapman, The International Forecaster

The credit crisis is over as Bernanke, Buffett, Paulson and Gross would have us believe. George Soros and Jamie Dimon say it is not over yet. We guess the bottom line is who’s solvent and who isn’t. The crisis is only 1/3rd of the way to its solution. If it’s over, why did the Fed, lower interest rates again and at the same time increase the amount of funds available to financial institutions? It is obvious Bernanke, Buffett, Paulson and Gross are lying. The situation is worse now than it was nine months ago. It was that banks would borrow short from central banks, but now it is up to 28 days for the Fed and we expect that to move to 90 days soon, and the ECB is lending short-term for a year and that is renewable for three years. You can bet these are permanent capital infusions. The banks will end up keeping the money or Treasuries and the central banks will keep the toxic waste that you will get to pay for. The banks and other financial institutions that are at the discount window and at the auctions secretly getting funds are insolvent. Not all of them, but at least half of them. Once it becomes known who is solvent and who’s not, the Illuminists will decide who is going under and who is not. The Illuminist banks will selectively be the only ones who attract capital. That is how they’ll cover up what they are doing. In July and August we will start to hear rumors of who is going under and who isn’t. All small and medium-sized banks, which are insolvent, will start to go under. That is why the FDIC called back 35 retirees to handle the 150 to 300 banks that are going down. The big question mark is will the public panic? We do not know, but there is a good chance they will whether its in Chicago or Frankfurt. Our advise is do not hold over $100,000 in any bank account, have $5,000 to $10,000 in small bills in cash in your safe at home. If you have and need liquidity for business or otherwise buy Swiss Franc government bonds. Own and take delivery of gold and silver coins, get out of your credit card and revolving debt, have freeze dry and dehydrated foods and a method of defending your family at your disposal. This could get very nasty if not now, later. The price of gold and silver will go exponential as will the coins and shares.

Opportunity on a Silver Platter
By Jim Willie CB

The bull market in commodities is not over. At best it will take a breather. My contention is that major US banks are speculating in the energy market in order to repair their broken balance sheets. Certainly Goldman Sachs is. The entire story line of the worst over for the USDollar and for the USEconomy is patently false. Just one more chapter of plain propaganda by the Wall Street community, the US Federal Reserve, and the USGovt. They are collectively worried to death, sweating bullets, even as precious capital blood has spilled in massive quantities. The entire US financial system has tragically turned insolvent. Inflation remains the only option left as an option, yet they cannot destroy the last standing asset group in USTreasury Bonds.

The most egregious backfire of banking flatulence has been the rise in long-term interest rates. This is precisely what the USFed does not want, since it provides substantial headwinds for the housing & mortgage market, via higher mortgage rates. The bond market, via USFed rebalancing, has properly priced the higher asset risk erosion from price inflation, as it should. Some have called this effect the next Bond Conundrum. Sure it is! In fact, the USTreasury complex is a maze of not just conundrums. It serves as a stark living breathing example of Goebbels (Nazi Information Minister) and Orwell (author of 1984) joined in a nightmarish marriage of deceit and fraud. The problem is that long-term bond yields should be over 10% since price inflation is even higher than that. Talk about an overvalued asset!!! The last buble to burst is not crude oil and gold with the supporting cast of commodities. It is the USTBond complex. Its prices are way way way out of whack. Sure, the USFed is trying to stimulate with lower rates. But why would any sane thinking person buy a USTreasury Bond when the real return is minus 7% to minus 8%?


In corporate news, FedEx Corp. rose 63 cents to $91 after lowering its fiscal fourth-quarter earnings forecast, citing rising fuel costs.

MBIA Inc. posted a $2.41 billion first-quarter loss, as the struggling bond insurer took heavy charges to write down the value of liabilities amid continued deterioration in the credit markets. The stock rose 72 cents, or 7.6 percent, to $10.15 following comments from the company on the strength of its balance sheet.

First-quarter losses at wireless carrier Sprint Nextel more than doubled to $505 million, as it lost more monthly subscribers.

Mortgage lender IndyMac Bancorp swung to a first-quarter loss as credit markets continue to deteriorate.

Obviously, despite the losses, this was all fabulous news, as the stock indexes all rose today. Please, explain to me how a company at the center of the sub-prime mortgage crisis can post a $13 a share LOSS, and their stock can go up? Please, explain to me why stock indexes rise when the price of Oil is rising 25% in 4 weeks, and then attribute today's gains on a feeble pullback in the price of Oil from $126 to $124.50? And please explain to me these headlines that keep insisting that the Dollar has been rising. The Dollar closed lower today at 72.96, and it was the third day in a row that the Dollar has closed lower!