Thursday, February 26, 2009

Nothing, As In NOTHING, Has Changed.

"Nations are not ruined by one act of violence, but quite often, gradually, and almost imperceptibly, by the depreciation of their currency, through excessive quantity."
-Nicolas Copernicus, 1525

Jobless Claims Hit New Record; Durable Orders Fall
The number of U.S. workers continuing to claim jobless benefits notched a fresh record in the second week of February, Labor Department data showed on Thursday, while new claims for aid were the highest since 1982.

The number of people remaining on the benefits roll after drawing an initial week of assistance increased by 114,000 to a 5.112 million in the week ended Feb. 14, the most recent week for which data is available. The so-called continued claims topped every estimate in a Reuters poll of 15 economists, which had a consensus forecast of 5.00 million.

Initial claims for state unemployment insurance benefits increased to a seasonally adjusted 667,000 in the week ended Feb. 21 from a revised 631,000 the prior week, the Labor Department said. It was the highest reading since October 1982, when claims reached 695,000.

New-home sales tumble to record low pace in Jan.
WASHINGTON (AP) -- New-home sales tumbled to a record-low annual pace in January and there's no relief in sight as mounting damage from the collapsed housing market pushes the country deeper into recession.

The Commerce Department reported Thursday that sales fell 10.2 percent to a seasonally adjusted annual rate of 309,000, the worst showing on records going back to 1963. It also was weaker than the pace of 330,000 that economists expected, and shattered the previous all-time monthly low set in September 1981.

Significantly, it should be noted in the data contained in both of these headlines that the historic lows referenced came at the end of a very long recessionary period. 1981 and 1982 were not pretty economic times, and these were the last years of a slowdown. The data we got today, these numbers are at the "beginning" of a long economic slowdown. YES! I don't care what that knucklehead Bernanke was trying to spoon feed our fiscally ignorant Washington Legislators. The worst numbers always come at the end of the recession, not at the beginning. The carnage has only just begun. 2008 was the blowup on Wall Street. 2009 is going to be the blowup on Main Street. I'm sorry if you dumped your Gold AND Silver in a panic. Those waiting to get in thank you though for your generosity.

Wall Street Opens Higher as Investors Bet on Banks
Wall Street opened higher as investors showed some relief over more government help for the banking system. President Obama's budget proposal outlines the possibility of spending $250 billion more for additional financial industry rescue efforts on top of the $700 billion that Congress has already authorized, a senior administration official told The Associated Press.

This morning's headline on Yahoo Finance. How could ANYBODY be dumb enough to put ANY investment cash into a bank right now? The banks have not bottomed, PERIOD. As a matter of fact, there may NEVER be a good time to buy bank stocks ever again. Don't laugh...I'm dead serious. Think about it, how does the government putting MORE money into the banks make them any better off? Has the government already poured TRILLIONS of Dollars down this sink hole already, and to NO effect? The government pours in money, the banks go lower. Why would pouring more in result in anything different? It's insanity. If they keep pumping Dollars into these banks all that's going to left is change. As in chump change.

Obama budget has new $750B bank rescue contingency
WASHINGTON (AP) -- President Barack Obama is budgeting for a new $750 billion bank bailout this year, raising the prospect of a dramatic increase in the stake taxpayers already hold in the beleaguered financial sector.

The White House's 2010 budget released Thursday includes a $250 billion contingency fund for 2009, the projected cost to the government of purchasing $750 billion in assets from banks in need of capital infusions.

In essence, taxpayers would foot the entire $750 billion up front. Administration budget writers predict the value of the assets that the government purchases would result in a loss of 33 cents for every $1 spent, hence the $250 billion net expenditure.

"We hope that it will not be necessary," White House budget director Peter Orszag said Thursday.

Still, the inclusion of the money is the clearest sign yet that Obama's economic team is not certain that the $700 billion Troubled Asset Relief Program that Congress approved last fall has done enough to unlock the capital markets and make credit more available.

Incredible! Bernanke and The Obama are so certain their "New Plan" is gonna work and send us down the road to recovery by "the second half", that they are already making plans for the failure of this New Plan with plans for the NEW New Plan. Insanity! And investors want to buy bank stocks? Good freaking luck to the lot of you!

The Obama unveils his $3.5 TRILLION budget for the next fiscal year, and projects the budget deficit at $1.75 TRILLION Dollars. That is 3.8 times bigger than last years budget deficit. How in the name of Thomas Jefferson does he plan to pay for this?

This week, the Treasury is offering a record $94 billion debt over three days, including $22 billion in 7-year notes being auctioned Thursday.

Stop and think about that for a moment. $94 BILLION of debt in ONE WEEK. Last years entire deficit, for 52 weeks, was $459 BILLION. In ONE WEEK, the US has taken on 20% of all of last years deficit as a down payment on this years. IN ONE WEEK! That is astonishing! It's fiscal Insanity! Where is the rage?

Timmy, Larry and Benny are Lost in the Fiscal Wilderness
The abomination of Obamanation will prolong economic pain; stretching out damage into many years of fiscal malaise driving wealth from critically needed investments into business friendly foreign lands. Those with the bucks are moving away. Handwriting is on the wall. Economically destructive Californian trends demonstrate where this once proud nation goes next. We are sinking into a dumbed-down cesspool of despair; into a land of drooling liberals, tossing around cash with abandon. Not being satisfied with the $800 Billion they just slammed this week, they propose much more for health care. We are spiraling down a rat hole with no bottom into a pit of depression.

“…George Soros said last Friday the world financial system has effectively disintegrated, adding … there is yet no prospect of a near-term resolution to the crisis. Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union. His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama, Volcker said industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.”

Gold and Silver took it on the chin today... Silver, as always, reacted more violently than Gold. From 974 to 1000 last week I recommended caution with regards to purchasing the Precious Metals at those levels. On the 19th I suggested that any drops to 930 in Gold, and 13.25 in Silver be bought aggressively. Reactions in Bull Markets are common AND necessary. It is far to soon to say that The Precious Metals have capsized, and gone into a reversal. To date, NOTHING HAS CHANGED.

Wednesday, February 25, 2009

That's A Mighty Big IF

“Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.”
-Albert Einstein

You've got to be pretty stupid to believe anything that has dropped from the mouths of the con men in Washington the past 36 hours. Ben Bernanke and Barrack Obama will say ANYTHING in an effort to restore confidence in the the US economy and governments ability guarantee it.

Bernanke told Congress on Tuesday the recession might end this year, and that regulators aren't planning to nationalize banks. Don't hold your breath.

President Obama chimed in last night with another speech long on rah-rah and short on details:

"But while our economy may be weakened and our confidence shaken, though we are living through difficult and uncertain times, tonight I want every American to know this: We will rebuild, we will recover, and the United States of America will emerge stronger than before," Obama said to a (bipartisan) ovation.

Maybe someday, but it won't be this Fall, and not likely next year either.

Federal Reserve Chairman Ben Bernanke said on Wednesday that he had an exit strategy from the U.S. central bank's recent massive monetary expansion that will keep inflation under control as the economy recovers. Well, judging by the success of all his plans to date, you can bet that he has no idea how to keep inflation under control.

The nation's biggest banks are being granted immediate access to further support from the government's $700 billion financial rescue fund.

Treasury Department officials said Wednesday the new support will be provided through the government's purchase of preferred shares of the bank stock that are convertible into common shares at a 10 percent discount to their price before Feb. 9.

So, instead of "nationalising" these banks, we'll just stuff more money under their doors. This news arrived mid afternoon today as the markets failed to show any renewed confidence in the mouth droppings of our fearless leaders. I honestly fail to see how the "immediate release" of TARP funds to the banks is a positive development. It doesn't give me much confidence that the banking crisis is any closer to resolution.

Clearly, our government officials have now been reduced to cheer leading. What else is there for them to do? They've tried countless plans and thrown TRILLIONS of Dollars at the problem, and the problem just gets worse.

Ron Paul, this generations fiscal "Paul Revere", once again today called Bumbling Ben Bernanke on the carpet in front of the Congress:

After a stearn monetary lecture... Ron Paul asks Ben Bernanke if he is prepared to admit that his policies are wrong and what it would take. He says "if, in the next 5 years we still have a bad economy with inflation and high unemployment [will you then admit you are wrong]" and Bernanke says "I will have to concede the point [if that happens]".

Watch VIDEO:

This nation's "confidence" is hanging by a thread, and these liars know it. Do you think Bernanke is going to sit there in front of Congress and tell us that there is no end in sight to this financial crisis? Recall that at the same time last year, shortly after the Bush Administration AND Congress passed a stimulus package, Bernanke sat in front of both houses of Congress and told us he saw a "recovery in the second half" based on the impact of those government checks they were going to send all of us. LOL, that didn't quite work out as he'd planned did it?

This year he hedged his bets and said there was a reasonable chance for a second half recovery IF the new government stimulus package and Treasury's new plan for the banks "stabilizes" the crisis. That’s a mighty big ‘if.” Nothing they have done to date has stabilized a damn thing. Following each new announcement, each new "plan", the crisis grows deeper, the crisis gets worse. But he has to keep hoping for the best, it's his job to convince you to join him in that hope....even if it means lying to your face. Ditto for the President.

"But don’t mistake yesterday’s action – stocks up, gold down – for a new reality. It is still the same troubled world, and what we are seeing at the moment is just a little comic relief."
-Rick Ackerman, Rick's Picks

Tuesday, February 24, 2009

"Will the DOW get to $3000 first, or will Gold?"

"The money power preys on the nation in times of peace, and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes."
–Abraham Lincoln

We’ve been monitoring gold’s vital signs closely, since any foray above $1000 is cause for nervousness. The yellow stuff has always been free to roam, and even to misbehave, below that price; but once above it, the bankers regard each rally with a glower of malice. While it is indisputable that debt deflation’s irresistible power has rendered the central banks incapable of exerting any meaningful control over the sovereign economies they represent, the bankers and the IMF still have the ability to crush any hint of rebellion by those gold bulls who would deign to challenge the monetary status quo. With their relatively large stocks of physical gold, and the complicity of institutional agents such as JP Morgan to help suppress “paper gold” in futures markets, the bankers still have enough influence over bullion’s price to temporarily suspend the laws of supply and demand.
-Rick Ackerman, Rick's Picks

What a joke! As I sit here watching the spot Prices on Precious Metals this morning... If you EVER needed a single moment in time to PROVE what a crime in progress the futures market in this country need look no further than the CRIMEX in New York. Today is "Options Expiration Day" for the March Precious Metal contracts. Tomorrow is the last day to trade these options. Countless contracts, held by floundering US Banks [chiefly JP Morgan and Goldman Sachs] are short this rampaging Bull Market, and severely underwater. We cannot allow these banks to lose any more money on more bad bets that they've made. Perish the thought! No, these banks just take some more of that Monopoly Money the Fed conjures up, and uses it to sell some more contracts backed by NOTHING. Yes, they sell Gold via the April contract that DOES NOT even exist. They sell these contracts in size to hammer the markets down to cover their previous shorts at lower prices, and lessen their losses. Meanwhile, joe sixpack out there who is buying Gold and it's related shares gets screwed by the perpetual lie that we all now know as the NY CRIMEX.

The futures markets were developed SOLELY as a means of price discovery for the producers and end users of the metals to decide on a "fair" price for a given commodity. It was NOT designed as a tool for government funded banks to suppress, keep in check, or otherwise obstruct a given commodity market. However, under the blind eye of the SEC's CFTC, just such corruption occurs month after month after month. Today is but ONE GLARING example of the governments complicity in the suppression of Gold prices. The Dollar is down today again, NOTHING positive has come out of the financial markets today...or will be anytime soon. The fundamental reasons for the price of Gold to rise indefinitely are as plain as the noses on the faces these blind government regulators.

Have you been looking to buy Gold "on sale"? Well, don't look a gift horse in the mouth. Here is your opportunity. You can rest assured that Gold is not going down this morning because of anything falling out of Ben Bernanke's mouth up on Capitol Hill. The Fed and Treasury is devaluing the US Dollar every minute of every day. Do you want proof?

Watch this video, it is all the proof you need that the CRIMEX is a crime in progress. Gold should have seen $2000 a year ago. We should already be half way to $3000. The biggest question you should be asking yourself now is, "Will the DOW get to $3000 first, or will Gold?"

The Crash of 2009 Is COMING To YOU!!

Now please don't misinterpret my rage here. I have been suggesting for the past several posts that Gold, and Silver, were getting toppy at these levels and a reaction was warranted. But I'd like to see the reaction based on more than the "false" selling of Gold on the CRIMEX. No actual bullion is being sold today. NONE! Today was a scam in the PAPER Gold market that unfortunately is used to determine the price of Gold, and other Precious Metals, in the US. This reaction DOES give investors an opportunity to buy Gold "on sale", but it is the criminality of it that should enrage everyone.

Gold reacted confidently, and found support near 960. A 38% retracemnt of Golds recent rally from consolidation of the breakout at 890. The next level of support at a 50% retracement would be 948.

Silver held near term support at 13.75, but broke its long uptrend line this morning. This uptrend goes back to mid-January at 10.33. Major support off that low rests now at 13.

These markets "should" move quickly higher as we pass through this "expiration's event". I mentioned these dates last week as targets our enemies may be focusing on, and be determined to defend. Many off the Bulls in this market have probably already rolled their positions into April last week in anticipation of higher prices in these markets yet to come. There were few Bullsaround to help defend the metals today, and the shorts took advantage. Use this as an opportunity to take from them that which they so foolishly choose to dispose of. In time they too will be disposed of.

Putin: Post-US World Blueprint
By: Jim Willie CB
Let’s be clear! The Davos Forum was a funeral wake, and Putin rode in on a white horse to announce there is a new sheriff in town!! Davos afforded a unique opportunity for Russian self-styled leader Vladimir Putin to storm the forum stage and to steal the show. Putin presented a basic Blueprint for what should be called ‘The Post-US World’ as the United States and United Kingdom have lost the mantle of leadership and control.

A cherished contact with deep global experience had some very strong words about Davos and the Putin Blueprint. He made additional comments about the Wen trip across major European capitals. In an important message, he said, “Read in between the lines of Putin’s speech and you find all the hints you want. The Chinese and Russians are burying the US alive. The Japanese, Germans, and Gulf States keep a very low profile for the moment. The decisions have been made: wait for 2010. They will use the unfolding chaos to introduce the new currency basket and trade rules… There is a brand new system being designed that will borrow from the past and apply 21st century tools for barter / counter trade / excess capacity etc. An Exchange Platform will cut out the banks altogether… [Chinese Premier] Wen delivered his speech in Davos and went straight to Berlin where they put the final touch on the new world currency basket, sponsored by Berlin-Moscow-Beijing-Tokyo-Riyadh. Moscow and Berlin already have a massive counter trade / barter trade agreement in place, and Beijing was eager to joint that platform as well.” The new global currencies are planned for launch in January 2010. They will be launched amidst growing chaos. Events up to that time will be tumultuous.

The USDollar should not be the true focus of attention. Paradoxically, as it dies a horrible death, its reserve currency status ensures it might be last to crumble. All other currencies are at risk, except perhaps the Japanese yen. The focus of attention should be directed to gold & silver. The pundits, anchors, and supposed experts believe that the rise in the gold price means that price inflation is an imminent but hidden threat. THEY ARE SO WRONG. The threat is of a collapsed global financial foundation, complete with rising chaos from no current viable alternative, as the Untied States finds itself tossed into a dungeon. The process is slow, but the pace is accelerating. The signpost in the dungeon is marked ‘Third World’ with full shame. The charges will go without trial, as the marketplace is brutal. But bank ruin, institutional corruption, exported bond fraud, permission of counterfeit rings, protection of crime syndicates, and abused global reserve currency custodial responsibility lie at the core. Most scrutiny of charges will be conducted much later, when too late, in an examination of the wreckage.

As a reminder, the USGovt federal budget deficit this year should hit 15% of the national GDP size, more than double anything ever witnessed, and more than double what usually causes a 25% to 30% currency correction. This time will be no different. The gold price has responded. Given the turmoil in foreign lands, with their own attendant currency threats, the USDollar is the not concurrent indicator of gold anymore, a topic addressed two weeks ago. GOLD IS RESPONDING, ALONG WITH SILVER. Even the knucklehead financial media and lamebrain financial sector managers have noticed.

The Russians realized the vacuum of banking and political leadership. Vladimir Putin took the high road actually. His criticism of the US failure and corruption was implied. He let the decimation of Wall Street firms, their colossal losses, and their calamitous fall from grace speak for themselves. He would not permit anyone in attendance to yack about how Putin droned on and on about US failure. Failure is painfully obvious for almost all to see. He skipped over much direct criticism to offer solutions, a sign of leadership. No, Putin was the only bright spot in Davos. Putin offered a Blueprint for the next decade, for the ‘Post-US World’ where the US-UK corrupt tag team does not control the helm or sit at the catbird seat. Vladimir Putin and Dmitry Medvedev served as dominant figures over a gloomy forum. A Putin spokesman actually told reporters “This is Davos under the Russian flag.” More accurately, the Davos Forum gave Russia, and to some extent China, a chance to exert leadership.

The overriding theme of the Putin plan is a new multi-polar world, where power is shared and no longer concentrated in a dangerous fashion. Putin was as specific as required for a blueprint, which typically does not need to go into great detail. It requires a new structure. When an entire system is shattered, one needs a foundation with large structural descriptions as planks. Putin gave it. He is not a hero, but rather a man who realizes the disorder in progress and the dire need for new direction. The USDollar-based system is dead. Within the vacuum, the global financial and economic system is slowly collapsing. Actually, my view is that the USEconomy is accelerating in its breakdown, unlikely to last through the summer without some very clear evidence of failure. The untold story is that the global system failure has pitted two groups of powerful billionaires against each other. Putin represents a force that pursues greater equitability in commerce, trade, and banking with multi-polar power centers. His opposite force pursues greater concentrated power, more fascist towers, and a beneficial reduction in world population. This thorny topic is given occasional coverage in the Hat Trick Letter, yet is highly controversial and risky to discuss. Broad strokes rather than detail are my choice.

Putin openly questioned the reliability of the USDollar as a global reserve currency. He all but said it is dead in the water for that role. He called the one reserve currency a danger to the world economy, in fact! He acknowledged that globalization has multiplied the destructive force, so that the US-UK crises have touched all nations and everyone. To be sure, other nations are epicenters for crisis like Spain. Several nations are feeling the impact of the shocks from the crisis epicenters, like Germany, Russia, and China. Some specific criticism was given. Putin talked about the disproportion between the scale of financial operations and fundamental value of assets. That means huge US-UK financial flows in trading centers against a backdrop of miniscule current valuation of the bank centers. The US & UK bank sectors are insolvent. Putin talked about the differences between the increased burden of international loans and source collateral. That means the Western nations, led by the US & UK, but also Southern Europe, have outsized debt burdens against a backdrop of near nil collateral, a stark trait of insolvency, if not bankruptcy. Putin attacked indirectly the Untied States for printing money with abandon, consuming what Asian factories produce, while Asians respond by saving money in the form of government debt securities. Putin warned the global leaders not merely to treat the symptoms, which is precisely what they are doing, but to work toward serious reform.

Putin warned of blind faith in the omnipotent power of states, and the distorted concentration of assets in the hands of the states. That might be a slap at the central bankers, who are serving as quasi-bank systems unto themselves in a desperate action. Their biggest new ledger item is Dollar Currency Swap. Putin warned that unbridled growth of budget deficits and public debts is destructive. In essence, Putin urged a return to free enterprise principles. The Western leaders are moving toward socialism and fascism. What irony that former KGB leader from the Soviet Union was lecturing the West on the benefits of embrace for capitalism and free enterprise!!!

Putin openly called the current unipolar world obsolete, referring indirectly to the US-UK dominance. This is as close as one could come to hearing that the current system is one step from the scrap heap. Unfortunately, chaos reigns as leadership is absent, insolvency rains down as economic troubles all over, and no leaders seem capable of pulling back the reins. Putin urged a new system of global regulators, an obvious slap at the unspeakably corrupt Securities & Exchange Commission (for stocks) and the unspeakably corrupt Commodity Futures Trading Commission (for commodities). Each is a lapdog steeped in conflict of interest, paid to look the other way to criminal activity, with no urge to prosecute their friends. The SEC and CFTC have been team players for the four major US-based crime syndicates in order for them to conduct their business. They are parasites to the system, while the syndicates spread cancers. Putin all but said to eliminate the Intl Monetary Fund and World Bank. Putin wants to see shared technology across borders. This is a slap against the US, which refuses to export advanced computer technology and telecommunications technology.

Putin made a comment about possible energy shortages and obstructed growth prospects, but urged constructive inter-dependence. This could be regarded as a threat, and should be taken as a claim for leadership. Putin reminded the group of his recommendation in 2006 for cooperation among energy suppliers, consumers, and transit countries. These suggestions fell on deaf ears over two years ago, but now after the Ukraine incidents, their time has clearly come. Putin wants a new international legal framework for energy security, with clear-cut legal statutes. Some of what Putin mentions comes as a reaction to US financial sources that are exerting extreme force on energy prices with political motive. Putin openly called for a balanced price determination system free from the vagaries of financial derivative instruments.

One should interpret this not as an endorsement of the status quo, as reported by the US press media, but rather as an announcement of the new structure to conform to the Putin Blueprint for a Post-US World. The entrenched and defensive US-based and UK-based press media have no interest in mentioning a new framework. Loss of the current framework represents an invitation to the Third World.

Stocks Rise as Bernanke Tells Congress Recession May End This Year- AP
Federal Reserve Chairman Ben Bernanke has steadied Wall Street by telling Congress the recession might end this year. In his semiannual report to the Senate Banking Committee, Bernanke predicted the economy is likely to keep contracting in the first six months of 2009. But he also said "there is a reasonable prospect" the recession will end this year. He warns that a recovery will require getting credit and financial markets to operate normally.


Monday, February 23, 2009

Phase Three

Gold primed to be ‘mania asset’
Gold is exhibiting all the classic signs of being in a structural bull market. On fears of inflation in early 2008, it rallied. Then, on fears of deflation in late 2008, it rallied again.

So does gold perform better during inflation or deflation?

In our view, that question is the wrong starting point. On the contrary, the rationale for owning gold, as it once again approaches the $1,000 an ounce level, is the prospect of mounting monetary disorder.

The US Federal Reserve, having flooded the market with liquidity by more than doubling its balance sheet in less than six months, may be unable or unwilling to withdraw it in time for fear of precipitating a secondary relapse in economic activity. Other central bankers will also face intense pressures to “support” their domestic economy by weakening the currency, leading to competitive currency devaluations.

The race to the bottom in fiat currencies has begun and hard assets, particularly gold and silver, should be the primary beneficiaries.

Gold is a prime candidate to become a “mania asset” once its demand becomes chiefly financially driven as opposed to jewellery and/or industrial demand driven where its upside could be capped by “sticker shock”.


[World Gold Council Report]
Sustained investor interest in gold over the course of 2008 against a backdrop of the worst year on record for global stock markets and many other asset classes, helped push dollar demand for the safe haven asset to $102bn, a 29% increase on year earlier levels. According to World Gold Council’s (“WGC”) Gold Demand Trends, identifiable gold demand in tonnage terms rose 4% on previous year levels to 3,659 tonnes.

As shares on stock markets around the world lost an estimated $14 trillion in value, identifiable investment demand for gold, which incorporates exchange traded funds (ETFs) and bars and coins, was 64% higher in 2008 than in 2007, equivalent to an additional inflow of $US15bn. Over the year as a whole, the gold price averaged $872, up 25% from $695 in 2007.

The most striking trend across the year was the reawakening of investor interest in the holding of physical gold. Demand for bars and coins rose 87% over the year with shortages reported across many parts of the globe.

In March 2007, Richard Russel a confessed "Gold Bug" discussed Gold and Bull Markets:

There are four kinds of gold or non-gold people (1) They know nothing about gold and never even think to ask. (2) They know a little about gold, but can't afford to buy any. (3) They trade small amounts of gold, but as soon as gold moves up or down 5 dollars or more, they sell it or are stopped out. (4) the so-called "gold bugs," the small minority who understand gold and money and adhere to a policy of accumulating gold.

The great majority of investors don't understand bull markets or the concept of the primary trend. When the primary trend of an item turns up -- whether it be stocks, commodities, agriculturals, precious metals -- we call that a bull market. There are small, medium and large bull markets. Once the primary trend of a category turns bullish, there's no way of knowing beforehand, how big the coming bull market is fated to be -- nor exactly what path the bull market will take.

We do know that in major bull markets there are psychological or sentiment phases. The first phase of a bull market is the accumulation phase. This is the early phase where informed investors accumulate an item because they know the item is underpriced or that the item is underused or simply not understood.

The second phase of a bull market, usually the longest phase, sees the professionals, the funds, the big money, the smartest of the public, taking positions in the item. The second phase tends to be characterized by many reactions, corrections, adverse news events that cause the public to dump the item.

The third phase of a bull market is the speculative phase, Here we see rising volume, the wholesale entrance of the public, accompanied by news and endless hype by the Wall Street "experts." People who wouldn't touch the item during the first and second phases, are now enthusiastic buyers. The third phase sees systematic distribution by the early first phase buyers. Third phase buying can easily turn to hysteria and madness. Towards the end of the third phase, we see hints of the beginning of the next primary bear market.

In The Beginning

Today's Bull Market in Gold began in 1999 with Gold at around $250. Left for dead, this "barbarous relic" began to gain attention as the Y2K fears swirled around the globe. Gold rose briefly over $300 as the turn of the century neared. After the 21st century arrived without incident or financial calamity, Gold drifted back down towards $250, and investors continued the Bull Market ride they were enjoying in the equity markets. Little did they know how close they were to the end of that ride.

The great Bull Market in equities began in the Spring of 1982, roughly two years after Gold peaked at $880 in a mania driven blow-off top. Gold had risen through the 70s from $35 an ounce to $880 after President Richard Nixon closed the "gold window" and effectively defaulted on the US Government's debt to the World. Closing this gold window ended the redemption of US Dollars by foreign nations for Gold at the US Treasury. The world was essentially full of "worthless Dollars" and rampant inflation ensued as the Fed continued printing more of them.

The Bull Market in Gold topped when new Fed Chairman, Paul Volcker, in 1979 stepped into the inflationary storm with massive rate hikes to knock the wind out of inflation. Interest rates peaked in the Fall of 1981 with the 10-year Treasury yielding 15.84%. This top in the bond markets, and the Reagan Revolution gave investors incentive to step back into the stock markets, and forsake Gold. Informed investors and contrarians began to "accumulate" stocks on the cheap. With the re-election Of President Reagan in the Fall of 1984, stocks became THE place to invest. Gold was kicked to the curb, and the "smart money" [the professional money mangers] swarmed into the equity markets.

The ensuing rally in equities soon morphed into the "Bull Market" that led investors to believe that stocks, like real estate, only go up. "This time was different." A mania in stocks ensued. By the Spring of 2000, the Bull Market in Stocks was 18 years old. There were few investors in stocks at this point that had ever experienced a Bear Market. When stocks peaked in the Spring of 2000, investors were too busy reveling in the New Century to notice the dangerous position they were in. "Irrational Exuberance" wasn't just an observation, it was a warning.

From Wikipedia:

"Irrational exuberance" is a phrase used by former Federal Reserve Board Chairman Alan Greenspan in a speech given at the American Enterprise Institute during the stock market boom of the 1990s. The phrase was interpreted by financial pundits as a typically cryptic warning that the market might be overvalued.

Greenspan's comment was made on December 5, 1996 (emphasis added in excerpt):

“ [...] Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? [...] ”

Gold Wakes From The Dead

As the equity markets topped and rolled over in the Spring of 2000, fears of recession began to spread through the economy and Wall Street. As the equity market losses began to accelerate, White Knight Fed Chairman Alan Greenspan rushed to the rescue with interest rate cuts in the hopes of averting a "crash" in the markets prior to the Presidential elections coming up in the Fall. These interest rate cuts were largely ignored by the equity markets but made a huge impression on the currency markets. In September of 2000 the US Dollar peaked at its all-time high. 0.8228 versus the Euro. Gold Bugs across the globe took notice.

By the Spring of 2001, Gold prices had again bottomed at around $250. The Equity markets appeared in free fall, continued cuts in interest rates by the Fed were having little effect on stemming the bleeding on Wall Street, and the economy was rapidly slowing down. And then came the blow that kick started the heart of Gold. September 11, 2001.

911 was a national tragedy of epic proportions. Few recognized it as the knockout punch, the death blow, for the US Dollar that it was. Osama Bin Laden was, and is an evil man, but he wasn't stupid. He knew exactly what he was doing when he took down the Twin Towers of The World Trade Center. The Twin Towers were a symbol to the World of Western wealth. A wealth that revolved around the US Dollar, and the hegemony that came with it. He understood that the "real" strength of the US was it's control of the World's reserve currency, the US Dollar. Destroy the Dollar, and you could destroy the USA. There was not a military force on the planet that could challenge the US Military, but destroy the pillar of strength upon which it was built, and you could bring America to her knees. The War On Terror is less about fighting dirty men in robes standing in the shadows, and more about saving the US Dollar from certain death. Osama Bin Laden is not the enemy, The US Federal Reserve is. Bin Laden did little more than destroy the curtain the criminals at The US Federal Reserve have hidden behind since it's unconstitutional inception in 1913. The real enemy is sitting right there in Washington, DC. But that is a story for another day...

As the Financial Markets reopened following the 911 attack, Gold stirred to life. Prior to 911, with equity markets falling along with interest rates, contrarians and informed investors had begun taking an interest in Gold having noted an apparent top in the US Dollar. They had begun to accumulate Gold on the cheap in anticipation of further downside in both the equity markets and interest rates. A confirmed top in the Dollar could signal inflationary pressures down the road, and Gold seemed a logical hedge. The Twin Towers attacks in September 2001 had the effect of kicking the equity markets while they were down, and losses there accelerated quickly. The White Knight Fed Chairman Alan Greenspan, determined to stem the bleeding in the economy, and on Wall Street, began slashing interest rates, eventually lowering them to 1% by the Fall of 2002 from their highs above 6% in the Spring of 2000. Gold Bugs took notice and began to accelerate their purchase of Gold on the cheap. Gold slowly crept higher and was around $325 by the Fall of 2002.

The Gold Bugs were relentless in the accumulation of their Precious Metal. As informed investors within the mainstream "investment community" joined them, Gold climbed towards $400. Between the Fall of 2002 and the Fall of 2004, Gold stealthily rose to peak at $450. The Gold bugs were ecstatic. They had watched from the sidelines as their Precious Metal rose in price by 80%, and nobody seemed to notice.

By the Fall of 2004, the equity markets had rallied from the 2002 lows, the economy had shaken off the throws of a "mild" recession, and the White Knight Fed Chairman Alan Greenspan began to observe an addiction to the punch he had spiked with 1% interest rates two years earlier. He decided to raise them. The Dollar quickly began to rise, and Gold was put in check at $450. The equity markets stumbled a bit at first, but then decided to move forward, they were "printing money on Wall Street". America was in the throes of a "housing boom", new highs in equities were just around the corner!

2005 arrived with Gold prices firm between $415 and $460. Gold prices remained steady in that range thru the first three quarters of the year despite a 15% rise in the US Dollar. Gold Bugs and their growing cadre of informed investors continued to accumulate their Precious Metal. It did not go unnoticed by these savvy investors that as the US Dollar rose and currencies around the globe fell, the price of Gold rose dramatically in a number of foreign currencies, breaking out to new highs in many of the major ones. In 2005, the price of Gold rose 35% in Euro, and 36% in Yen. Gold was sending an important message to investors around the globe. Few were listening.

By the Fall of 2005, fears of a resumption of the bear market in equities, a slide in the US dollar, and a credit squeeze that could deflate the world economy began to sprout. In the US, a slowdown in housing was just beginning to materialize, and the pace of consumer spending was being called into question. The week of September 11, 2005, almost four years to the day of the Twin Towers attack, Gold closed above its 2004 high at $460.40. The talk of "credit derivatives" was beginning to appear in the financial media:

Dealers Vow to Enforce Tougher Rules in CDS Market
Thursday, September 15, 2005
NEW YORK -- Fourteen credit derivative dealers met with the New York Federal Reserve Bank on Thursday and vowed to police the booming market themselves to keep regulators from doing it, a meeting participant said.

At issue were lags in the processing of trades and delays in informing involved parties when contracts change hands, which regulators believe has the potential to throw the market into confusion if it comes under stress.

Delays in processing trades could lead to disputes over payments in the event of a default, as well as confusion over the amount of exposure banks have to counterparties.

The Fed is concerned that delays in communicating to involved parties when contracts change hands could spill into systemic problems in the global financial system."

Industry participants outlined a number of concrete steps," to address the back office issues, the Fed said after the meeting. "The Federal Reserve and other members of the supervisory community will continue to monitor developments in this market very closely."

Then in the week of November 27, 2005, Gold crossed the Rubicon, and closed above $500 for the first time in 24 years. In the span of just 90 days, the price of gold had increased 25%, from around $440 to $550. In contrast, it had taken three years from its bear market low in 1999 for gold to sustain a 25% rise. The shrinkage of time from three years to 90 days to muster a 25% move signified that the gold market was evolving. The end of Phase One of this secular Bull Market in Gold had arrived at this time.

Phase Two in the Gold Market wasted little time getting started. By the Spring of 2006, Gold prices had rocketed above $700, peaking at $730 the week of May 7, 2006. By this time the Fed was getting serious about raising interest rates to support the floundering US Dollar. Between March 28 and June 29, 2006, the Fed raised interest rates 75 basis points to 6.25% and threatened to raise them further. Gold was, technically, significantly overbought at this point in time, and the first major correction in Gold's Bull Market occurred. This correction in price was most unwelcome by the now fast growing Gold community, and confirmed that Gold had indeed entered Phase Two of it's secular Bull market.

Massive corrections and high volatility in the Gold Market followed for the next 18 months as the Fed held interest rates steady at 6.25%. Gold traded in a wide range between $550 and $650 for the balance of 2006. But then, late in February 2007, a major turning point in the financial markets arrived. The US Housing market topped out. News of a top in the Housing market sent fear rippling up and down Wall Street. Gold broke from it's seemingly endless trading range and began trading in a higher and tighter trading range between $650 and $700. Gold Bugs again stepped forward in anticipation of a reawakening of the now slumber Gold Market Bull. A new accumulation of Gold was begun by the ever growing Gold Community.

In July of 2007, news broke that two hedge funds at Bear Stearns were on the verge of collapse. Both had investments in the subprime housing markets. Rumors that the two hedge funds mothership, Bear Stearns may be in financial trouble if these two hedge funds are allowed to fold. The market senses the fear, and so does the Federal Reserve. Our new Fed Chairman, Ben Bernanke, is quick to slash interest rates with a major mid-term election coming up in the Fall. On August 17, 2007, the Fed slashes interest rates by 50 basis points to 5.75%. The US Dollar immediately turns lower. Two weeks later, Gold roars through $700 like a hot knife through butter and sets its sights on the 1980 high. Phase Two of the secular Bull Market in Gold is progressing just as it should. The few industry professionals not already in Gold, quickly jump on board the train leaving the station.

As the balance of 2007, unfolded the Fed was forced to cut interest rates three more times as the credit derivatives that had given them cause for "concern" just two years prior were now beginning to explode up and down Wall Street. The US Dollar was in free fall and a panic was developing. Gold was riding that panic higher and higher. Gold broke $800 quickly in late October, pausing briefly to enjoy the Holidays before reaching new all-time highs as 2008 arrived.

Continuing to cut interest rates 50 and 75 basis points at a time, the Fed became desperate to halt a blossoming credit crisis threatening to put the world's credit markets in lock down. Gold responded by tacking on another $150 and reached $1034 on March 17, 2008. With a major milestone now toppled Gold looked poised to "go to the moon".

The US Government had other ideas. On March 18, the Fed announced the collapse and subsequent takeover of Bear Stearns by JP Morgan with financial backing by the Fed itself. A coincident interest rate cut by the Fed of "only" 75 basis points appeared to "spook" the rampaging Bull Market in Gold. Prices fell immediately, and continued falling...for weeks. Phase Two of the secular Bull market in Gold looked like a bust. But that's what phase two is supposed to look like. The Bull is going to do everything it can to throw you from it's back, never to return.

Speculators were crushed in the violent correction that followed the March 2008 top in Gold. Each new rally in Gold in response to a deterioration of the global financial markets was squashed. Belief in the Gold Bull was being called into question by even the most die hard of Gold Bugs. Phase two of a Bull Market is both volatile and frustrating. Only the strong survive.

Finally, in October 2008, after a $350 haircut, Gold prices bottomed. A second chance for those believers in Gold's Bull Market was at hand. Phase Two was offering a "golden" opportunity to purchase Gold at prices not seen since Phase Two of the Gold Bull Market took off in earnest in the Fall of 2007. If you missed the train ride to $1000 before, here was your chance to buy tickets at a sharp discount. Interest rates had been slashed to 1.25% by the Fed, it was obvious there was nowhere to go but up for Gold.

In December of 2008, the Fed slashed interest rates one last time putting them effectively at ZERO. In doing so the Fed committed to holding rates there far into the future, and were seeking alternative ways to unlock the credit log jam paralyzing the World's financial system. They even suggested buying the Treasury's debt to fund the growing national debt and raise the cash to prop up the nations now insolvent banks.

Since that major low in Gold prices in October at $680, Gold has steadily climbed a growing wall of worry on Wall Street and at central banks around the World. The financial system is in peril and people are beginning to question the value of the World's fiat currencies. On Friday, March 20, Gold surpassed $1000 for ONLY the second time in history. Phase Two in the ongoing secular Bull market in Gold is living up to it's potential...and nearing it's end.

Phase Three is waiting in the wings. Numerous "news" reports covering the "experts" predictions on where the price of Gold may be going are one sign. Rising volume in Gold "products" is another. Every day it seems we are treated to a "new high" in gold holdings in the Gold ETF [GLD]. Volumes are rising in the Gold share indexes. Yet few people actually own, or have exposure to Gold in their investment portfolios. Phase Three will be here soon enough. Knocking down Gold's 2007 high of 1034 should open that door, and close the door on Phase Two. Phase Three is where the real money in Gold will be made as Gold finally makes it's way to the Moon.

1999 - 2005 Phase One

2005 - 2009 Phase Two

2009 - ? Phase Three

Thursday, February 19, 2009

What Dollar Rally?

Dow ends at lowest close in more than 6 years
NEW YORK (AP) -- An important psychological barrier gave way on Wall Street Thursday as the Dow Jones industrials fell to their lowest level in more than six years.

The Dow broke through a bottom reached in November, pulled down by a steep drop in key financial shares. It was the lowest close for the Dow since Oct. 9, 2002, when the last bear market bottomed out.

The blue chips' latest slide dashed hopes that the doldrums of November would mark the ending point of a long slump in the market, which is now nearly halfway below the peak levels reached in October 2007.

But they passed the highly touted Obama Plan. What gives? It looks like the dike could use another finger...

Wholesale inflation takes biggest jump in 6 months
WASHINGTON (AP) -- Inflation at the wholesale level surged unexpectedly in January, reflecting sharply higher prices for gasoline and other energy products.

The Labor Department said Thursday that wholesale prices increased by 0.8 percent last month, the biggest gain since last July and well above the 0.2 percent increase that economists had expected.

The acceleration was led by a 3.7 percent surge in energy prices with gasoline prices jumping by 15 percent, the biggest gain in 14 months.

Even outside the volatile food and energy sectors, wholesale prices showed a bigger-than-expected increase, rising by 0.4 percent. Economists had expected a slight 0.1 percent rise in so-called core inflation.

Federal Reserve Chairman Ben Bernanke told an audience at the National Press Club on Wednesday that he saw little risk that the Fed's efforts to fight the recession and a severe financial crisis would trigger inflation presusres.

He said that once the economy begins to rebound and financial markets stabilize, the Fed will be able to quickly reverse the actions it has taken before inflation becomes a problem.

Federal Reserve Chairman Ben Bernanke is a liar and a thief. All of his actions to date scream inflation is purposely being baked into the cake. Bumbling Ben knows this and is counting on it, but his "job" is to "keep inflation expectations in check", so he lies to anybody who'll listen. Unfortunately for you Capt. Ben, the public tuned you out weeks ago...they're on to you.

U.S. continuing jobless claims at record
NEW YORK (Reuters) - The number of U.S. workers continuing to claim jobless benefits jumped to a record high in the first week of February, the Labor Department data showed on Thursday, while new claims for unemployment insurance were unchanged at a very high level.

JOBLESS CLAIMS: * The number of people remaining on the benefits rolls after drawing an initial week of aid surged 170,000 to 4.987 million in the week ended Feb 7, the most recent week for which the data is available. That was the highest reading on records dating back to 1967. * Analysts had estimated so-called continued claims would be 4.86 million from a previously reported 4.81 million the prior week. * Initial claims for state unemployment insurance benefits were a seasonally adjusted 627,000 in the week ended February 14 unchanged from an upwardly revised 627,000 the previous week. * New claims hovered close to a 26-year high. * Analysts polled by Reuters had forecast 620,000 new claims versus a previously reported figure of 623,000 the week before. * The four-week moving average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, rose to 619,000, the highest since 1982, from 608,500 the prior week.

Well, our new President is right about one thing: "Things are gonna get worse, before they get better." To bad that he and his cast of financial rubes have nary a clue how to steer this rudderless ship. The President claims his highly suspect Stimulus Plan will save OR create 3.5 million new jobs. He might want to have the part about "saving jobs" updated or deleted all together. At the rate the economy is now losing jobs, 3.6 million will have disappeared by The 4th of July.

Treasuries Tumble as Fed Signals U.S. Debt Purchases on Hold
Feb. 18 (Bloomberg) -- Treasuries fell as the Federal Reserve signaled it’s not going to purchase U.S. securities to lower consumer borrowing costs any time soon.

Thirty-year bonds, which had been little changed for much of the day, plunged after the minutes of the Fed’s Jan. 27-28 policy meeting showed officials will wait before buying Treasuries. The government tomorrow will announce the size of next week’s auctions of two-, five-, and seven-year notes. The likely total is $97 billion, according to Wrightson ICAP LLC.

The government will sell $41 billion in two-year notes, $31 billion in five-year notes and $25 billion in seven-year notes next week, Wrightson ICAP forecast. The Jersey City, New Jersey- based firm specializes in government finance. The record for a two-year auction is the $40 billion sold Jan. 27. The five-year record is $30 billion, set Jan. 29, and the seven-year record is $9.8 billion in 1993, the year the note was discontinued.

The Treasury sold a record $67 billion in notes and bonds last week.

“The market is going to have to digest a huge dose of Treasuries for a while,” said Jack Bauer, a managing director who helps oversee more than $4 billion in debt in Fairport, New York, for Manning & Napier Advisors Inc. “These numbers are so big it’s hard to get your arms around them.”

Demand for Treasuries from China “remains quite strong,” Fed Chairman Ben S. Bernanke said in response to a question after a speech in Washington.

There he goes again, Capt. Ben stretching the truth further than advised. Yeah, China might still be buying "some" Treasury's Ben, and it might seem like they're buying a lot of them relative to "last years" debt burden that came in just under $500 BILLION. But Ben, the Treasury is going to have to float at least $2 Trillion in bonds this year. Do really believe, do you expect us to believe, that the Chinese are going to buy more bonds this year than last year, or the year before? Ben, you mathematical genius, the Chinese bought maybe 25% of the Treasury debt last year, I don't think that is gonna happen this year OR next.

China is right to have doubts about who will buy all America's debt
Chinese doubts about the value of US Treasury bonds highlight a crucial question: who will buy the estimated $2.7 trillion to $4.2 trillion of debt expected to be issued over the next two years?

With annual foreign purchases accounting for less than a tenth of the low end of that range, and domestic investors unable to bridge the gap, the Chinese are right to worry.

Foreign buyers have absorbed a little over $200bn of Treasuries annually, a useful contribution to financing the $459bn 2008 deficit, but only a modest help towards the $1.35 trillion minimum average deficit forecast for 2009 and 2010.

Unless that changes substantially, there will be $1 trillion annually to be raised by the Treasury from domestic sources, more than double the previous record from domestic and foreign sources together, plus whatever is needed to bail out the banks.

Yu Yong ding, former adviser to the People's Bank of China, recently demanded guarantees for the value of China's $682bn of Treasury securities.... Yu is right to worry.

Oil prices surge on report of falling inventories
COLUMBUS, Ohio (AP) -- Oil prices jumped Thursday as new government data showed U.S. oil inventories fell unexpectedly and that consumption of gasoline and other petroleum products -- which have been plummeting because of the recession -- may be starting to edge higher.

Light, sweet crude for April delivery rose 7 percent, or $2.77, to settle at $40.18 per barrel on the New York Mercantile Exchange. The vast majority of trades have shifted to the April contract with the March contract expiring Friday.

Benchmark crude for March delivery surged 14 percent, or $4.86, to settle at $39.48.

The Energy Information Administration said crude stocks decreased 200,000 barrels to 350.6 million barrels for the week ended Friday. Analysts had expected stock to grow by 3.5 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos. Inventories have risen more than 30 million barrels in the prior six weeks.

AS last Fall's OPEC production cuts work their way through the supply chain, "unexpected" drops in Oil inventories will become the norm over the next several weeks. Oil prices are bottoming NOW. A bottoming in Oil prices coupled with a topping in the US Dollar Index, and the stage could be set for a very rapid advance in the price of Oil through this Spring and into mid summer. $70 Oil by Memorial Day remains my target. Do not be shocked to hear the words Oil and shortage in the same sentence by Labor Day.

Six headlines above. All Gold positive, and Dollar Negative. The Dollar did come off it's new rally high today, but Gold dropped along with it. As a matter of fact, the Dollar and Gold have been joined at the hip since about mid January. This is VERY unusual behavior as the two almost always move in the inverse of each other. But these are unusual circumstances the global financial system is facing. Expecting the unexpected has become the norm if you want to trade these present day markets with any success.

Capital flight has driven the US dollar higher. On a day when President Obama signed the Economic Stimulus Package into law, the banking turmoil in Europe and the resignation of Japan’s Finance Minister has turned investors away from other major currencies. Even though the greenback is yielding next to nothing, investors are willing to park their money with the US government as long as they keep it safe. The lack of negative game changing news from the US has been very positive for the US dollar. The greenback and gold prices have been moving in tandem since January 14th. This unusual correlation is actually sending a strong message to currency traders.

It is not very often that we see the US dollar and gold prices move in the same direction. Since gold is priced in dollars, the value of the yellow metal tends to fall when the dollar rises and rise when the dollar falls. However this has not been the case since January 14th as the rally in the US dollar corresponds with the rise in gold prices, which closed today at a 7 month high of $970 an ounce. The last time we saw this traditionally negative correlation turn into a positive one was in 1982. At that time, recession hit many countries including the US. Although the rise in gold prices can be partially attributed to future inflation problems, the cohesive movement in the value of gold and the US dollar suggests that central banks around the world are losing credibility. There are growing concerns that a time bomb could explode in Europe leading to more troubles for the region as a whole. If that is the case, there may not be any safer form of investment than gold. The rally in the US dollar and gold is telling the market that investors are worried about global economic stability outside of the US and therefore they are preparing for the worst.

“Larry, the dollar seems to be defying gravity. What gives?”
by Larry Edelson
On the surface, it looks like the dollar is strong. But stand back for a minute and consider the following: The British pound and the euro are plummeting. So is the Russian ruble and all Eastern European currencies.

Add in all the dollar-denominated debts that are being liquidated and paid off, and the dollar should actually be soaring. But it’s not. The Dollar Index is a mere 16% above its record low set last year.

On a relative performance basis, that’s terrible upside action in the buck. And it’s a sign of what’s to come. There’s not one shred of doubt in my mind that the dollar is headed much, much lower.

Either forced lower by the marketplace, which is fully aware of the trillions in fiat money that must be printed, or by authorities who have the legal means to change and depreciate the value of the dollar to alleviate the deflationary impact of the mountain of debt out there.

Note: Some say Europe is in much worse shape than the U.S., and in some respects, that’s true. But Europe is NOT expected to save the world, the U.S. is.

Couple that with the fact that most of the world lays the blame for this crisis on the U.S. and you have a geo-political situation that squarely puts U.S. authorities on the hot seat, under pressure to devalue.

Moreover, since a global economic recovery depends on a recovery in the U.S. — it actually behooves U.S. authorities to devalue the buck. By doing so, they can …

1. Stimulate U.S. exports

2. Re-ignite inflation and rising prices, both domestically and internationally

This is exactly what President Roosevelt did in 1933 when he confiscated gold, raised its price, and devalued the dollar. Almost immediately, the economy began to recover, employment picked up, and both prices and wages started rising.

At this time Gold and the Dollar are on a parallel course. For how long is anybody's guess. I suspect it will not be for too much longer. Looming catastrophe in the insurance sector and the nation's pension plans are certain to put a dagger through the heart of the Dollar and ignite Gold to new highs. There will most likely be a reversion to the normal inverse relationship between the Dollar and Gold by the end of the third quarter, possibly as soon as mid March.

In the here and now however, the Gold Bugs face options and contracts that will expire on February 24-25. It would be safe to assume that the Gold Cartel will make every effort to keep Gold in check Friday and into next week's expiration's. Should they fail to do so, the shorts in these Precious Metals markets may be about to face one hellaciuos ass whuppin'.

Gold support 961 / 950 / 939 - buy any move to 930 aggressively

Silver support 13.95 / 13.82 / 13.68 - buy any move to 13.25 aggressively

Tuesday, February 17, 2009

Gold And Silver Assert Their Authority

“The most important thing about money is for it to maintain its stability. You have to choose between trusting the natural stability of gold and the honesty and integrity of politicians. With all due respect, I advise you to vote for gold.”
- George Bernard Shaw

Eastern European currencies crumble as fears of debt crisis grow
Hungary’s forint fell to an all-time low on Monday, and Poland’s zloty slumped to the lowest in five years on plunging industrial output. Half of all loans to the private sector in Poland are in foreign currencies so borrowers face a severe debt shock after the 40pc fall of the zloty against the euro since August.

“We’re nearing the level were things could get out of hand,” said Hans Redeker, currency chief strategist at BNP Paribas.

The mushrooming crisis has already started to spill over into Germany's debt markets, lifting credit default swaps on German five-year bonds to a record 70 basis points. The gap between French and German CDS spreads has narrowed abruptly for the first time since the credit crisis began.

“Investors are beginning to ask whether Germany is going to have to pay for the rescue of Eastern and Central Europe,” he said.

A report by Moody’s released on Tuesday said the region’s banks were coming under severe stress as the property bust combines with a rising debt burden. “Local currency depreciation is a major risk to East Europe banks,” it said.

This just in: 5AM est

Gold testing resistance at 960 +20

Silver testing resistance at 13.98 +0.21

Forex failure continues in Poland
It’s getting bleaker by the minute in Eastern Europe. In case you didn’t catch the latest from the Telegraph’s Ambrose Evans-Pritchard, he warned at the weekend how a growing crisis in Eastern Europe could cause nothing less than a total collapse in the West, or as he put it: “If one spark jumps across the euro zone line, we will have global systemic crisis within days.”

Failure to save East Europe will lead to worldwide meltdown
Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay – or roll over – $400bn this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut.

Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36pc of its foreign reserves since August defending the rouble.

"This is the largest run on a currency in history," said Mr Jen.

Monday, February 16, 2009

Putting Out Fires With Gasoline

”Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if they have any, in manufacturing, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits. Profits which are the price of no useful industry of theirs.” (1813).
-Thomas Jefferson

A Doozy of a Depression
By Bill Bonner
02/16/09 Los Perros de San Jose, Nicaragua
Remember our dictum: the force of a correction is equal and opposite to the deception that preceded it. As we looked out over the absurd hallucinations, delusions and lies of the Bubble Years – oh, those happy days! – we warned that the coming correction “would be a doozy.”

And a doozy it is.

‘Doozy’ is a technical term we feral economists use. “Depression” is what most people call it.

The downturn is going to be tough for almost everyone, almost everywhere. The French have to learn to live with fewer tourists at home and fewer bottles of champagne exported abroad. The English have to learn to with less revenue from financial services. The Chinese – and Asians generally – have to figure out what to do with all those TV sets that junk Americans aren’t buying anymore. Arabs wonder what to do with their oil.

Americans, meanwhile, have to figure out how to get by in a world where strangers aren’t so kind. You’ll remember what made the world go round this last quarter century. Those nice strangers made things and shipped them to Americans. The Americans paid for them with I.O.Us. The foreigners were so accommodating, they never asked for payment. Instead, the I.O.U.s just piled up in their vaults.

All that has come to an end. Trade is collapsing. And now it’s every man for himself. Sauve qui peut. Americans aren’t buying. Chinese aren’t selling. So far, the strangers are still being nice about America’s I.O.U.s. They’re politely holding onto their Treasury bonds and not insisting on payment. But they’ve made it clear that they’re not exactly looking for a lot more of them…not when the value of America’s collateral is falling so sharply. And they’ve made it clear that if the United States lets these I.O.U.s go down anymore, they won’t be very happy about it.

But what we’re wondering is whether we should add a corollary to our dictum: Yes, the force of a correction is equal and opposite to the deception that preceded it. And the measures taken to stop the correction will be just as absurd as the crackpot ideas that got the economy into trouble in the first place.

We don’t know what particular good this insight does for us. But it just shows that the show isn’t over. One hallucination may have run its course, but there are plenty more. And they have consequences too.

The Obama Stimulus: Truth and Consequences
by Martin D. Weiss, Ph.D.
Will the new Obama stimulus and banking bailouts succeed or fail?

What will be the immediate and ultimate consequences?

let’s not waste time digging for causes — the economic blunders of Washington, the financial greed of Wall Street, or the big debts and risky bets by almost everyone.

Let’s also not waste time pointing fingers — the Clinton administration for creating the tech bubble, the Bush administration for creating the housing bubble, or the Obama administration for giving us what promises to be a whole new government debt bubble.

Most important, let’s not waste our breath debating whether the plethora of government actions and programs since 2007 are philosophically right or wrong.

The fact is, they have failed.

In addition to the $152 billion Bush stimulus package in the spring of last year and the $700 billion Troubled Asset Relief Program (TARP) in the fall, the U.S. government has loaned, invested or committed $200 billion to nationalize the world’s two largest mortgage companies, Fannie Mae and Freddie Mac … over $42 billion for the Big Three auto manufacturers … $29 billion for Bear Stearns, $150 billion for AIG, and $350 billion for Citigroup … $300 billion for the Federal Housing Administration Rescue Bill to refinance bad mortgages … $87 billion to pay back JPMorgan Chase for bad Lehman Brothers trades … $200 billion in loans to banks under the Federal Reserve’s Term Auction Facility (TAF) … $50 billion to support short-term corporate IOUs held by money market mutual funds … $500 billion to rescue various credit markets … $620 billion for industrial nations, including the Bank of Canada, Bank of England, Bank of Japan, National Bank of Denmark, European Central Bank, Bank of Norway, Reserve Bank of Australia, Bank of Sweden, and Swiss National Bank … $120 billion in aid for emerging markets, including the central banks of Brazil, Mexico, South Korea, and Singapore … trillions to guarantee the Federal Deposit Insurance Corporation’s new, expanded bank deposit insurance coverage from $100,000 to $250,000 … up to $500 billion in Fed purchases of asset-backed securities … plus trillions more for other sweeping guarantees.

Grand total: Over $9 trillion … and counting!

These efforts were designed to stimulate the economy, avoid a housing bust, restore public confidence, contain the credit crunch, reduce the danger of a global debt collapse, and shore up sinking banks.

But based on the overall net results to date, every single one is an outright, unambiguous, proven failure:

The economy was not stimulated.

The housing bust was not avoided.

Public confidence was not restored.

The credit crunch was not contained.

The danger of a global debt collapse was not reduced.

The finances of the nation’s banks were not shored up.

The Objective Evidence Shows That the Massive Bush
Administration Actions to Save the Economy Have Failed.
Now, the Same Evidence Shows That the Massive
Obama Efforts Are Likely to Meet the Same Fate:

Never forget: Everything you see today — the collapsing economy, the failing banks and the continuing danger of a global debt collapse — is happening despite the most numerous, most radical and most expensive government rescue efforts in history.

Yet, rather than recognize their futility, the Obama administration is pushing forward with even larger actions — always with the same general goals (to prevent collapse) and forever using the same blunt instrument (more government money).

The Obama stimulus package is $787 billion, five times larger than the Bush package just one year earlier. They promise larger attempts to save the sinking housing market … more money to avoid an even broader credit crunch … more money to prevent a more catastrophic debt collapse … and more money to shore up banks that have now sunk into an even deeper hole.

The sequence of global insolvency begins
Contrary to what political leaders and their central bankers seem to believe worldwide, the problem of liquidity that they are striving to solve by means of historic interest rate drops and unlimited money creation, is not a cause but a consequence of the current crisis. It is in fact a problem of solvency which is digging « black holes » where liquidities disappear, whether we call these holes bank balance sheets (1), household debt (2), corporate bankruptcies or public deficits. In consideration of the fact that a conservative estimation of these “ghost-assets” reaches already USD 30,000-billion (3), our team considers that the world is now facing a situation of general insolvency affecting in the first place the most indebted countries and organizations (public or private) and/or those depending most on financial services.

...the situation prevailing today throughout the entire global financial system, a large part of the world economy and all the economic players (including States) who based their growth on debt in the past years. The crisis translates and magnifies a problem of global insolvency. The world is becoming aware of the fact that it is a lot poorer than it used to believe in the last decade. And 2009 is the year when all the economic players must try to assess their real level of solvency, knowing that many assets are still losing value. Moreover a growing number of investors no longer trust the traditional instruments and indicators of measurement. Quoting agencies have lost all credibility. The US Dollar is just a fiction of international monetary unit and many countries are striving to get away from it as quickly as possible (6). Thus, quite rightly, the entire financial sphere is suspected of being a giant black hole. Concerning companies, no one can tell if their order books are reliable (7) because in every sector customers cancel their orders (8) or just stop buying, even when prices are discounted, as indicated by dropping retail sales in the past few weeks (9). Concerning States (and municipalities), slumping fiscal revenues are likely to result in even higher deficits and then bankruptcies. As a matter of fact, Russian billionaires (10), Gulf oil-monarchies, Chinese commercial Eldorados (11), all the « golden-egg geese » of companies and financial institutions of the planet (namely European, Japanese and North-American ones (12)) turn out to be insolvent or hardly solvent. The question of the solvency of the US federal State and federated states (13) (as well as of Russia or the United-Kingdom) is beginning to be asked by some big international media; as well as the question of the solvency of large capital-based pension funds, major players in this past twenty years’ globalised economy.

According to LEAP/E2020, the trend is clear: the sequence that has begun this year is a sequence of global insolvency.!-Phase-IV-of-the-systemic-crisis-The-sequence-of-global-insolvency-begins_a2688.html

'Paper gold market will crash at Comex'
Do you want to see gold in the big picture? Read an interesting interview with Marc Gugerli by Oliver Disler. Marc Gugerli isFund Manager & Advisor of Gold 2000 Ltd and the Julius Baer Gold Equity Fund.

Oliver Disler: Is Gold an alternative to treasury bonds, since the yields are so low?

Marc Gugerli: That is a great question. Treasury bills are the next big bubble (to burst). Investors and most asset managers have in average 20% cash and 30% invested in short-term treasuries. For a certain period this might be the right asset allocation.

Since the yields on cash and short-term treasuries are almost 0% in major currencies, Gold is getting more attractive as an investment. Now you have to ask yourself, if you rather want to be fully invested in classical assets only where the supply is exploding by the new money printed or at least add some Gold which can’t be copied, printed and is nobody’s liability?

Oliver Disler: This is interesting, but again, why is the price of Gold not trading much higher?

Marc Gugerli: The majority of investors purchase Paper-(Gold)-Futures at the COMEX. The sellers or counterparties of those Gold-Futures are just a few very dominant players. Some of them have an in-official close link to the US government. So far most of the investors didn’t exercise the gold futures and have accepted cash instead of physical settlement.

This is about to change. I believe that the comex will default and the entire paper gold market will „crash“ and gold could rise very quickly to 2000 until 3000 US Dollars. When this happens it will be too late to exercise or to try purchasing physical gold. It’s the same with a house insurance, which you need before the beds are burning!

Oliver Disler: What is your view about the price of Silver?

Marc Gugerli: The situation in the paper silver market is even worse. At the actual levels, Silver is extremely cheap and investors are divided if Silver is rather an industrial or still a precious metal or both. But having a look at the price development it is rather treated like other industrial metals as well. Silver is the Gold of the poor Man.

I believe that the price of Gold becomes extremely expensive and will be considered rather as “store of wealth” than money. What concerns Silver I can imagine that for example China or Mexico could accept Silver to be money and mean of payment (Silver Standard). I expect that Silver could outperform the price of Gold.

Oliver Disler: What is your opinion about the US Dollar?

Marc Gugerli: The question is always compared to what? I believe that basically most industrial countries are trying to weaken their currencies with the goal to boost exports. To remain competitive other countries needs to do the same and start the money printing press and the devaluation carousel is launched.

Central banks are devaluating their currencies against limited available and tangible hard assets like land, commodities and precious metals like Gold or Silver. The ECB is far behind the curve and the printing machine runs slower than the one of the Federal Reserve. But all this can change very fast.

The Goldsmiths—Part XXXIII [an excellent read and series of essays]
By R. D. Bradshaw
With the introduction of the Socialist welfare state in the Christian West (by the Rothschild Cabal, so that we all could be more addicted to paper money and so that the process for world government could be speeded up), many people in the West (and especially in the US and Britain) have begun to be quite lazy. To feed the consuming society, nations like the US have turned to outsourcing and the importation of goods from producing countries—primarily in the Third World, like China, India, Malaysia, etc.

In this process, many Third World nations have gained huge stacks of US dollars, bonds and notes. While these countries have willingly accepted this increasingly fiat money, the handwriting is now on the wall that those days are about to end. When we reach that point, the reaction seems clear enough.

Those so-called Third World nations are first of all going to say—no more worthless fiat dollars. Now while we wiped Iraq off the map for this attitude, and while we have plans to knock off Iran for this thinking, we are not in much of a position to attack the world and particularly nations like China and Russia. The rejection of fiat, worthless, US dollars will be a normal and logical move by many nations in the coming days in 2009.

So what will the thinking Chinese, Indians and Malaysians do with their hoards of dollars and dollar instruments when they wake up and say no more dollars? Well, they are going to have to start spending that money for whatever it may still buy. I am convinced that they will commence a program of buying gold.

One of the developments in 2008, spurred on by and and some of their contributing writers, has been a move to encourage people to start buying gold futures for delivery from COMEX. Wouldn’t it be great if the wealthy Chinese were to do this in 2009? They have the dollars and could do it easily enough as long as gold is suppressed and the dollar has value.

“It normally is rare to find such doom-and-gloom commentary appearing in general financial circles. It is even more uncommon for commentators to reveal that some of the dominant players in the gold market have a close link to the U.S. government or that the price of gold could soon double or triple. Lately, mainstream financial analysts have been much more willing to talk about gold, to recommend owning gold for having better appreciation prospects than other assets, and to specifically recommend purchasing physical gold rather than shares in gold exchange traded funds or gold ‘certificates.’

“The tide has been turning toward gold for the past eight years, partly because it has been one of the top performing of all asset classes. Still, the proportion of Americans who own gold is minuscule - estimates I have seen range from only 3-9 percent of all U.S. investors. There is much more room for future appreciation despite how far prices have already climbed this decade.

“The money supply of all of the world's major currencies is now increasing by 10-30 percent annually. With the gold supply increasing by less than 2 percent annually, it is a virtual certainty that all currencies will fall in value against gold. In the past several weeks, several investment advisors have become more positive about gold because of the relative strength in the price of silver! In the past, silver has led the way for higher precious metals prices, which is just what has been happening so far this year. Late last year, the gold/silver ratio was over 80. Now it is under 70 and falling. I like the prospects for both silver and gold (though I continue to expect silver's price to outperform gold).

How Banks Are Worsening the Foreclosure Crisis [recommended reading]
The bad mortgages that got the current financial crisis started have produced a terrifying wave of home foreclosures. Unless the foreclosure surge eases, even the most extravagant federal stimulus spending won't spur an economic recovery.

Diluted to Oblivion, Dead Banks
By: Jim Willie CB
The response by the USGovt, the USFed, Wall Street banks, and the USCongress will result in very little remedy since their first objective is to keep in place the cover-up to their gigantic fraud, much of which still eludes the financial press. By the time conditions worsen, rescues will not be the primary objective any longer. Rather, prevention of collapse will become the urgent priority. Desperate official actions will result in turning the corner on inflation, from the so-called deflation toward hyper-inflation. The gold & silver price will find release. Already, their prices are disconnected from the USDollar. Gold & silver serve as panic meters, systemic breakdown meters, monetary meters, and official desperation meters. The USEconomy has entered an acceleration phase in its breakdown. Gold & silver are poised to make new highs and not look back. They have responded to growing monetary disasters. Incredibly powerful events are in the works, to be unleashed within the next several months.

The attempts to revive the banks will lead to desperate measures. The Obama Stimulus plan is not a good start. It is much more of the same failed junk tossed into a hasty package, founded on desperation, called urgent expedience. Little is designed to rebuild the US industrial base, which would provide a strong legitimate income source. Most economists fail to recognize this missing piece. The tax cuts are not permanent, thus will change little in spending propensity. The tax credit for home buyers will lift mainly the homebuilders, who need to go out of business. The pork amounts to 11% to 13% of the total spending bill. Little is done to alleviate the high corporate tax burden, where the US is not competitive. Sorry, but this is just another spending bill loaded with garbage and a few half-baked ideas that seem constructive.

The USGovt, complete with Dept Treasury henchmen from Goldman Sachs, and compromised USCongress committee wonks, still has not addressed the underlying problem: Billions of dollars of toxic securities and loans languish on banks balance sheets. The big banks are flailing, reluctant to make sharp writedowns, urging accounting boards to exclude mark to market methods, hiding assets off the balance sheets, anything to buy another day. In the meantime, the USEconomy suffers from credit seizures and basic deprivation. Much of the funds authorized for rescues, bailouts, and nationalizations have been squandered, not by waste, but in fighting credit derivative fires. These activities are not publicized for many reasons. Attention is not wanted on the flimsy foundation to the US banks. Attention is not wanted to reveal the location of financial nuclear bombs of great potential destructive force. One informed contact to the Hat Trick Letter expects at least $30 trillion and perhaps over $50 trillion to blow up eventually in credit derivatives, with uncertain consequences.