As the Oil Bulls and Bears play tug of war, the US Dollar clings to the edge of a cliff, and the bond markets threaten to implode...Gold and Silver sit quietly on the launch pad ready to explode on the next leg of their journey to infinity and beyond.
Today the Philadelphia Bank Index slipped below key support, and the general equity markets began what is certain to be a grinding trip south for the summer. The last month of the second quarter 2008 may be remembered in the future as the beginning of the end for the US Economy. There are few lies left that can be told, and a mountain of them to be exposed. Denying a recession and inflation exist will soon be futile as first the US, and then the world, are buried by both.
Gold and Silver remain locked in Consolidation Rectangles following their respective retracement off their March highs. This consolidation has a Bullish bias at this time based on the Reverse Head & Shoulders pattern that has developed in both Gold and Silver.
According to Stockcharts.com: A Rectangle is a continuation pattern that forms as a trading range during a pause in the trend. The pattern is easily identifiable by two comparable highs and two comparable lows. The highs and lows can be connected to form two parallel lines that make up the top and bottom of a rectangle. Rectangles are sometimes referred to as trading ranges, consolidation zones or congestion areas.
Rectangles represent a trading range that pits the bulls against the bears. As the price nears support, buyers step in and push the price higher. As the price nears resistance, bears take over and force the price lower. Nimble traders sometimes play these bounces by buying near support and selling near resistance. One group (bulls or bears) will exhaust itself and a winner will emerge when there is a breakout. Again, it is important to remember that rectangles have a neutral bias. Even though clues can sometimes be gleaned from volume patterns, the actual price action depicts a market in conflict. Only until the price breaks above resistance or below support will it be clear which group has won the battle.
For the past 10 weeks an epic battle between the Bulls and Bears in Gold and Silver has been waged within the confines of their respective rectangles. Aggressive traders have reaped the benefits of this consolidation. Investors have been left on the sidelines to observe in dismay as every thread of fundamental truth portends to substantially higher Gold and Silver prices. Investors, do not despair. Reinforcements are organizing now as equity and bond investors make plans to protect what little wealth they have left. Gold and Silver will soon be everybody's best friend as the bond and equity markets go down in flames the second half of this year. Clutch your Gold and Silver positions tightly now as many hands will soon be trying to pry them from your grip.
US MARKETS, May 29
What does a $3 per barrel drop in the price of oil mean to anyone? Anything over $80 a barrel is a problem. Are we going to fair better with oil $3 lower for one day when we are already north of $120? What does an increase in new home sales mean when it is coming off a terrifyingly bad prior month that was just revised much lower? We'll tell you what it means - BS!!! And lets not forget a plummeting dollar, out-of-control inflation and M3, insolvent major financial institutions, bailouts across the board for a smorgasbord of fraudsters which includes, borrowers, creditors, raters, insurers and securitizers alike that will be passed on to taxpayers as hyperinflation and mega-taxes, crappy rates far below inflation rates for money markets, savings, treasuries and bonds, banks that are afraid to lend money to each other much less to non-banks, increasing real-world interest rates based on increased risk of default across all categories of debt, food riots, a systemic breakdown based on moral hazard, virtually nonexistent regulation and a complete lack of transparency, potential new military conflicts, a mountain of multi-trillions in credit default swaps, most without any form of collateral backing them, waiting to implode and a litany of other negative fundamentals that would take another full IF issue just to briefly summarize. We cannot think of a single reason to go back into the general stock markets, but our fane-stream media manages to come up with some doosies based on their Goldilocks fantasies and other phantasms.
-Bob Chapman, The International Forecaster
US banks likely to fail as bad loans soar
US banks set aside a record $37.1bn to cover losses on real estate loans and other credits during the first quarter in a sign of the growing economic pain being caused by the global credit crisis, regulators said on Thursday.
Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, said it was likely loan-loss provisions and bank failures would rise in coming quarters as the fallout from market turmoil hits the real economy.
“While we may be past the worst of the turmoil in financial markets, we’re still in the early stages of the traditional credit crisis you typically see during an economic downturn,” she said, adding: “What we really need to focus on is the uncertainty surrounding the economy . . . and again it is all about housing.”
Ms Bair spoke as the FDIC released its quarterly banking profile, which showed loan-loss provisions in the first quarter were more than four times higher than last year’s level. That was the main reason bank earnings fell 46 per cent to $19.3bn from the first quarter in 2007 for the commercial banks and savings institutions where the FDIC insures customer deposits.
Following restatements by banks, the FDIC revised the industry’s net income for the fourth quarter of last year from $5.8bn to $646m – the lowest since the end of 1990.
S&P slashes bank, broker ratings on loan loss fears
NEW YORK (MarketWatch) -- Standard & Poor's Ratings Services on Monday lowered its ratings on Lehman Brothers Inc., Merrill Lynch & Co. Inc. and Morgan Stanley on concerns about further write-downs in their holdings of U.S. mortgage and residential construction loans.
"The negative actions reflect prospects of continued weakness in the investment banking business and the potential for more write-offs, though not of the magnitude of those of the past few quarters," wrote S&P credit analyst Tanya Azarchs in a research note.
"They also reflect a reassessment of the vulnerabilities of the wholesale and less diversified model of funding for the specialized investment banks," she said.
S&P said it believes "loss rates in those loan sectors are poised to exceed historical levels by a wide margin."
S&P added that although many banks have been raising capital as a way to offset any upcoming write-offs, the company remains worried about the forms those capital raises have been taking and warned they may not meet official standards.
Lehman's Confidence Game
The bears are prowling around Lehman Brothers.
Though the stock has stabilized after falling 8% at the end of last week, bets that shares of the company will decline currently outpace bets that shares will gain by more than 7 to 1 in the options markets.
On Tuesday, the most-heavily traded of the bearish bets--called puts--were in $30 contracts expiring in June, meaning these traders see Lehman Brothers' (nyse: LEH - news - people ) shares falling 16% in the next month. A reasonably large group sees the shares falling to $17.50 by then, and a limited number of contracts were out on $5 January options, according to data from Interactive Brokers.
Trading in puts Tuesday was practically calm compared with Friday, when volume nearly reached 200,000 contracts, according to Jon Najarian at Optionmonster.com. Still, 75,000 contracts were trading hands Tuesday, nearly double the normal levels. "Lehman is not out of the woods," Najarian said.
Sound familiar? Furious options-trading preceded the run on Bear Stearns (nyse: BSC - news - people ) in March, including trades in the unimaginably bearish $10 July option, when Bear Stearns stock was trading at $70 just one week before its disastrous fall. The company sold to JPMorgan Chase (nyse: JPM - news - people ) for $2 in a deal that was later revised to $10 a share.
Don’t be Afraid, Buy Gold
Those oblivious to gold’s warnings instead place their trust in government-supplied statistics. Based simply on flimsy CPI reports, these observers believe that inflation is nowhere in evidence, and that the flight to gold is therefore unwarranted. Yesterday’s GDP report provides the latest illustration of this dynamic. The government was able to present an annualized first quarter growth rate of .9% based on an assumed annualized rate of inflation of only 2.6%. In other words, inflation in the first quarter of 2008 was the lowest first quarter inflation in the last four years. How such a claim did not elicit howls of laughter is beyond me. The government previously reported that in the years 2007, 2006, and 2005, annualized first quarter inflation rates were 4.2%, 3.4% and 3.9% respectively. Does anyone, besides Fed governors and Wall Street economists, really believe inflation so far in 2008 is 33% below the average rate over the past three years?
http://news.goldseek.com/EuroCapital/1212164525.php
http://news.goldseek.com/EuroCapital/1212164525.php
-Peter Schiff, Euro Pacific Capital, Inc.
US MARKETS, June 1
If you think it is safe to get back into the financial waters for stocks and bonds, we suggest you watch the original movie, "Jaws," using the waters patrolled by the great white shark as your metaphor. Already the stock markets have plummeted, and the bond markets are now under pressure as massive losses create higher rates of interest through accelerating risk reassessment. The great white shark of hyperinflation waits under the deep, dark waters of financial profligacy, fiscal mismanagement, monetary imbecility, unfair trade with its attendant currency manipulations and rampant, rampaging fraud from top to bottom, with the bursting of the real estate bubble being a perfect example of this witches brew of economy-killing debacles. Da-da, da-da...da-da, da-da...da-da, da-da...
-Bob Chapman, The International Forecaster
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