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-- Posted Friday, 18 July 2003 | Digg This Article
THE INTERNATIONAL FORECASTER 19, JULY 2003 (#2) Vol. 7 No. 7-2 P. O. Box 510518, Punta Gorda, FL 33951 E-mail Addresses: International_forecaster@yahoo.com (for correspondence) International_forecaster@earthlink.net (for information regarding your subscription or renewals) SUBSCRIPTION and RENEWAL INFORMATION: 1-YEAR $99.95 U. S. Funds. Make check payable to Robert Chapman (NOT International Forecaster), and mail to P.O. Box 510518, Punta Gorda, FL 33951. Please include name, address, telephone number and e-mail address. We accept Visa and MasterCard charges. Provide us with your card number and expiration date. We will charge your card $99.95 for a one-year subscription. Note: We publish twice a month by surface mail or 3-4 times a month by e-mail. E-Mail: international_forecaster@yahoo.com or international_forecaster@earthlink.net for subscription information. For more than 3-years we have refrained from increasing our subscription rates when many other publications have raised theirs. In some instances other subscriptions are 50% to 400% the cost of ours and many do not put out anywhere near the volume and variety we do. We have no intention of raising our subscription prices, but we would like to request a favor. Our credit card rates have increased so we’d like to ask you if you would pay by check. It costs nothing for us to deposit a check. We appreciate your help very much and thanks for being loyal subscribers. Foreigners may use foreign U.S. dollar denominated checks or Money Orders. ***** We cannot avoid the fact that history is never truly “past.” There can be no understanding of the present day without a true understanding of the events that led up to the circumstances of the present.” James Crowhurst US MARKETS California has the fifth largest economy in the world and it’s officially broke and only $38 billion in debt, or 3% of Gross State Product. Now that the Greenspan bubble has broken, politicians and bureaucrats have to face the inevitable result, which is economic instability. The capital gains tax is history and now they have to deal with reality. Taxes will have to rise at precisely the wrong time as the real estate bubble pops. Real estate accounts for 16% of GSP and 38% of GSP growth. If this correction just matches 1990-1992 it will be devastating. Home values fell 20 to 70%. California is headed for disaster. As California operates on a dwindling balance of $5 billion from the sale of revenue anticipation notes, which will take it into August, many other states have problems that are similar. Needless to say spending at the state level will fall for the first time since 1983. Of course, we have no recession we just have a major fiscal crisis. The states collectively at the end of June will have $6 billion left to spend. Governors in 29 states have to raise revenues. New York has raised both income and sales taxes to close an $11.5 billion deficit. They too raised $4.2 billion via revenue anticipation notes. In the last two years mid-year spending cuts of $14 billion have taken place and another $10 billion should be cut before the end of the year. Medicaid costs are up 8%, which is killing the states. Instead of assistance to the states billions are being spent in Iraq. The tax burden, as we predicted, will become onerous and layoffs will be massive. America is still in a recession and it’s going to get worse not better. The CBO says the federal budget won’t be in balance for at least 10 years and deficits will run about $4.1 trillion. This doesn’t include the recent tax cuts or the $1 trillion needed for the Medicare prescription drug benefit plan. Baby Boomers will begin to retire in 2008 and the costs of Medicare, Medicaid and Social Security will be an increased drag on the economy. If all the tax cuts are made permanent, the 10-year deficits will increase by $1.7 trillion from CBO’s current projections. Altering the alternative minimum tax from 30 million taxpayers to 2% in future years will reduce revenue by about $640 billion over 10 years. This certainly isn’t comforting. If all this transpires by 2010 America will be financially a third world country. The legions of the new Rome are about to embark and intervene in Liberia to halt fierce fighting between rebel groups and the government of Charles Taylor. Our leader has determined that we must help the people of Liberia because he has decreed it. Unemployment reached a nine-year high of 6.4% in June, as the economy shed 30,000 jobs, many of which went offshore. The losses were over a wide spectrum. The average workweek was unchanged, as were factory and overtime hours. Wages increased 0.2%. A top health care analyst for UBS has resigned under pressure. After bank officials discovered an e-mail message in which he disparaged Health South just months after he had given the stock the highest possible rating. Obviously he was forced to give a bogus rating in the first place. It shows you the major brokerage firms still haven’t gotten the message. They are still basing ratings and recommendations on how much investment banking business the brokerage gets. They are still lying to the public. The Bush administration is trying to change the Fair Labor Standards Act in a way that could cause millions of workers to lose their right to overtime pay. Under existing rules only workers earning less than $8,060 a year automatically qualify for overtime. That would be raised to $22,100 a year. Nearly 80% of all workers are in jobs that qualify them for overtime pay, or time-and-a-half for work over 40 hours a week. Under the new law many wouldn’t qualify, some eight million. This represents mega cash moving from American consumers to corporate coffers. These new rules are structured in such a way as to create a very strong incentive for employers to exempt workers from overtime protection, primarily by converting hourly workers to salaried employees. This is a systematic assault on the rights of workers and should be stopped. What management wants is for workers to pay for their mistakes or at least fatten their bottom lines. The Bush administration has suspended all military assistance to 35 countries because they refuse to pledge to give American citizens immunity before the International Criminal Courts. $47.6 million in aid and $613,000 in military education programs will be lost to 35 countries. The court will be used as a method to subject anyone to politically motivated prosecutions. We agree on that. We might add the Bush cabal knows all about politically motivated prosecutions; they pursue thousands of them every day but the Ken Lay’s never go to jail for their crimes, because they are elitists. The Bush administration as its own axe to grind but it is far more sinister than that. The ICC, International Criminat Court, is passing so-called “laws” that give it the defacto authority to dictate everything from religious expression to Internet publishing standards for countries that are not even part of the EU. It has laws on “hate crimes” if you have said something on a website, even though out of their jurisdiction, violates their laws. They want to cover everything from criminal violations of the environment to copyright violations. The ICC has precedent over our own court system. Those who disagree with the courts are a third world throwback and will be dealt with accordingly. And, of course, if you disagree you are a terrorist. Latest word on George Bush’s kangaroo trials in Guantanamo Bay prison is that you either plead guilty and accept a 20-year prison sentence or be executed if found guilty. The British are demanding normal judicial process for their two citizens being tried. More For Subscribers.... Peter Fisher, Undersecretary of the Treasury and NY FED chief McDonough are exiting. These are the two who have been issuing the orders in the rigging of the markets. Mr. Fisher’s successor will be Ken Leet of Goldman Sachs so we can expect a continuation of abject opaque market manipulation. California is getting the message. They are being bankrupted by illegal aliens. The poorly educated, low-wage workers, most of who work for cash, pay little in direct taxes and rely heavily on the basic services that are provided by the state and local governments. In fact, many immigrant workers send more money to their homelands then they do to Sacramento in the form of taxes. California’s financial mess is due to unsustainable socialist spending. We forecast this in 1988 as this situation worsened and 15 years of middle class flight began. The state has lost is tax base. Its game is over. You may not use Pay Pall to sell any firearm manufactured after 1898. High capacity magazines are also prohibited. You cannot advertise to sell gun-building kits. State Farm no longer issues homeowner insurance in California, Texas and Louisiana. Homeowner’s rates were up 13% in 2002 from 7% in 2001. Some states were even higher; Texas up 33% and Florida 57%. State Farm recently got a 45% rate hike in Florida. The crisis has been caused by stock market losses, as we reported previously. Other contributing factors were mold and repair costs. Nationwide Insurance companies paid out $6 billion more in claims and expenses in 2002 then they collected in premiums. Along with higher premiums insurers are canceling coverage after one or two claims. US troops may be in Iraq indefinitely and Mr. Rumsfeld has no timetable to bring them home. It will cost $4 billion a month to keep troops there, double previous estimates. Ritalin makers are looking for a new market for their very dangerous drug and that is as a weight loss product. The makers know the terrible side affects as does the FDA, but it’s business as usual in for elitist drug companies. As the US budget deficit heads to $400-500 billion in 2003, total non-financial credit went up $2.5 billion and financial credit $1.9 billion, which now total $4.4 trillion. The affect has been GDP grew over two years in real terms by $248 billion and in nominal terms $621 billion. The weakness in consumer spending does not bode well considering borrowing is at record levels. This year mortgage growth will reach $3 trillion, with over $1.7 trillion of refinancings. In 2002 net consumer borrowing rose to $768 billion. Contrary to what the media tells us expenditures on consumer durables were flat over the year. 64% of higher consumer spending was on services and mainly of housing and medical care. Heavy consumer borrowing is largely financing expenditures on essentials. All this spending has not led to a recovery. All it has done is temporarily prevent a depression. Over the past 12 months to the end of the first quarter of 2003 fixed investment in non-residential building fell $21.7 billion and investment in business equipment and software increased only $10 billion. Computers and peripheral equipment was up $56 billion. Most of that gain was in pricing. As you can see when the economy falls again consumers will attempt to pay off debt, while others save, both of which will compound the downside. This will be accompanied by declining investment and a rising trade and current account deficit. More good news from another American elitist company. Oracle said that it plans to nearly double its workforce in India to 6,000 making that country the software makers’ largest research center outside of California’s Silicon Valley. There go another 6,000 high-paying, hi-tech jobs. That will help lower federal and California state tax revenues. CEO Ellison says, globalization is changing individual lives, cultures, economies and it’s making everything better. Thus, as he helps destroy our economy. Inflation is on its way if only for a temporary stay and rising raw materials’ prices are likely to squeeze already menial profit margins. As the bond bubble broke obviously bondholders were very concerned. The 10-year yield at one point went from 3.08% to 3.76%. 30-year mortgage rates are up over 35 basis points in a month and new applications fell 18% from the prior week and 27% from the May peak. Refinancing is about to decline dramatically. That means real estate and the economy will decline dramatically. Those printing presses are off the edge. M2 was up $21.9 billion for the week ended 6/30/03 and M3 jumped a truly astounding $63.1 billion. The FED is holding a record $652.5 billion in US debt. Foreign central bank holdings of US debt and agencies are $945.6 billion or a total of $1.6 trillion in the hands of central banks. If this doesn’t terrify you and drive you into gold you had best seek professional help. More For Subscribers.... GOLD, SILVER, PLATINUM, PALADIUM AND DIAMONDS Despite a shortfall to demand for 15 years, gold failed to perform until late 1999 due to market manipulation by Barrick Gold and JP Morgan Chase among others. In fact, Barrick began its manipulation in late 1986. We wrote about it at that time but no one believed us. This conspiracy was pulled off because other producers joined the profitable monopoly and the remainder of major producers chose to remain silent. GSMS and the World Gold Council also went along with the plot. In years to come all the players will be exposed and the truth will be known. The gold suppression conspiracy was the biggest market manipulation of all time and its full ramifications won’t be known for some years to come. Gold is in pretty good shape today, the best since 1977. The carry trade is dead, hedging is on its last legs, central banks may have only six to eight thousand tons left, producers are covering hedges, physical demand is enormous, central banks in the Middle East and Asia are heavy buyers, producer production is falling, exploration at a standstill and in decline for 10 years is still in decline, and the Gold Exchange Traded Fund is only a month or two away. It will enable portfolio managers to use gold as insurance bypassing shorting or puts and their volatility and costs. This could allow billions of dollars to flow into gold. Gold benefits whether we have inflation or deflation. Once the real estate bubble is broken, following the just broken bond market bubble, all the markets will go down except gold and silver. Gold and silver will launch to a five-year bull market that is already underway and other markets will be the captives of the bear for an equal amount of time. Nothing is going to undo the damage of all the excesses you are all aware of except a major purge of the world economy and believe it or not that is economically and financially healthy. Although it won’t be healthy for elitists who caused all these problems with their greed and superior ideas of world domination. This is why we have told you to be out of all markets except for gold and silver coins and shares and some form of Treasury paper. Low interest rates won’t work and neither will flooding the markets with money and credit. Eventually earnings will universally fall, unemployment will climb higher and pricing power will be non-existent. Government debt will go stratospheric. That means a short duration of inflation and then an ultimate plunge. What this all conclusively proves is that you cannot manipulate an economy using the levers as they have been used since the end of WWII. Nations will have to go back to a gold exchange standard or nothing is going to work and believe us, they know that. The experiment of a strong dollar and gold suppression didn’t work because the financial disaster it will cause will be unprecedented. Under normal circumstances a purging would take 10 to 15 years although historically inevitable, they have been accompanied by preplanned wars or spontaneous revolutions. In our case we expect revolution after government as destroyed the patience of the American people. This is why under no circumstances do you give up your weapons to government collectors. Currency instability is usually what gets the deflationary ball rolling and that is what we’ve recently experienced in a beginning 20% decline in the value of the dollar. That accompanied by negative real interest rates is devastating for savers. This kind of financial environment forces some savers to assume financial risks in equities such as junk bonds. Negative interest rates and a descending currency lead to competitive devaluations that simply beggar thy neighbor and everyone end up with the short end of the stick. The FED and other central banks are just fighting a delaying action. They know the game is over. If not, why would Fed. Governor Bernanke says we’ll simply debase the currency by printing dollars. That was arrogant and flip but what else would you expect from one of the masters of the universe. Their counterparts in the While House drop money out of helicopters. There is little difference in the approach. Desperate people do desperate things. The benefits accruing to the dollar after a 60-70% decline, and that is what it’s going to do, are transitory at best. That means the dollar and other currencies will all devalue against tangible assets, but in a depression who will want real estate, commodities and plant and equipment? They’ll want the only real money and that’s gold. That is why $1,500 to $3,000 an ounce is not at all far fetched. That doesn’t consider revolution. Then the numbers get much higher. No one wanted to listen to us in 1960-1966-1976-1983 or 1985 and a few want to listen now. The people are always in denial. The world can’t recover with the US buried in debt. The American continental is finished; all we have to do is shovel the dirt into the coffin. Asia is now supporting the dollar in a big way so their currencies won’t appreciate. That’s like shoveling sand against the tide. This is just part of the holding action. Any central bank that’s not on life support should be selling dollars for gold. It won’t be long before the US government will have significant funding issues. When that happens interest rates will have to move higher. That is what we predicted last November for this December thru March and that is exactly what is going to happen. The public is in denial and the media, Wall Street and government have dementia. The FED has stepped on its own tongue with it open mouth policy. All concerned have gone back to the well too many times. They can no longer go back and stoke consumer and investor expectations. The FED’s record since 1913 has been abysmal and they are desperately trying to defy history. Egotism and arrogance have a way of catching up with greedy megalomaniacs. Reinflation, and that is what they are up to, is a foolish high risk gamble and the result of its guaranteed failure will be the downfall and end of the privately owned Federal Reserve System. Treasuries, other bonds, real estate and foreign currencies once safe havens are now only way stations. The only real safety is gold coins and gold shares. Markets will overcome all the other investments as people flee to the only real money. Comex silver stocks are equal to only 2.7 weeks of world demand. Thus, the next several weeks could produce some pretty wild action. There were 79,441 open contracts equivalent to about 397 million ounces or about 50% of all annually available silver supplies. We are also sure China, with its Shanghai market opening, will have a profound affect on the market. It could be payback time for the market manipulators and finally silver may fly. More For Subscribers.... - To recieve the whole 28 page International Forecaster Newsletter, please read below: ****** SUBSCRIPTION and RENEWAL INFORMATION: 1-YEAR $99.95 U. S. Funds. Make check payable to Robert Chapman (NOT International Forecaster), and mail to P.O. Box 510518, Punta Gorda, FL 33951. Please include name, address, telephone number and e-mail address. We accept Visa and MasterCard charges. Provide us with your card number and expiration date. We will charge your card $99.95 for a one-year subscription. Note: We publish twice a month by surface mail or 3-4 times a month by e-mail. E-Mail: international_forecaster@yahoo.com or international_forecaster@earthlink.net for subscription information. For more than 3-years we have refrained from increasing our subscription rates when many other publications have raised theirs. In some instances other subscriptions are 50% to 400% the cost of ours and many do not put out anywhere near the volume and variety we do. We have no intention of raising our subscription prices, but we would like to request a favor. Our credit card rates have increased so we’d like to ask you if you would pay by check. It costs nothing for us to deposit a check. We appreciate your help very much and thanks for being loyal subscribers. Foreigners may use foreign U.S. dollar denominated checks or Money Orders. *****
-- Posted Friday, 18 July 2003 | Digg This Article
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