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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

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US MARKETS

            A hallmark of the American legal system has been the confidentiality of attorney-client communications. A move is underway to end this. Forty-two states have already adapted limits, which have turned attorneys into government spies. Once the SEC, IRS and the Department of Justice complete their assault on the issue they will rush to make an example of a lawyer who fails to help the government convict his client. Their new role is to serve as government informants. The government is already exercising its coercion having found one law firm not following the law and fined them $41 million in a case where the government froze the assets of the firms’ 400 partners despite the fact that the defendant had not gone to trial nor had been convicted of any offense. The law firm was robbed for abetting a crime that had not been tried or proven. You are now living in a country run by the Bush Crime Family and you are guilty until proven innocent.

            We believe that somewhere around September 9, 2003, the US dollar will peak. That would take the dollar index to around 100. We also believe that is why gold has broken through resistance and is headed to test $388.00 an ounce. Anyone with an ounce of sense can see among the myriad problems the US economy is faced with. None is anymore hurtful than the growing amounts of money it will take in the coming months and years ahead to finance both the federal budget deficit and the nation’s current account shortfall. The government, back in the Rubin-Clinton era, switched borrowing heavily into the short-term and as the paper comes due, particularly at the short date end of the market, it will be rallied at increasingly higher rates. For eight years the Treasury has moved to limit 30-year and 10-year financing and now they’ll pay the price.

            Arizona’s governor Janet Napolitano, as she posed with Mexican President Vincente Fox, in Mexico City, said the US needs to rethink its immigration policy, and that Arizona should be the place to begin a pilot guest-worker program. Her one-day visit was also used to promote trade. She said trade between Arizona and Mexico, which in 2001 totaled $8.1 billion for both countries, created about 50,000 jobs in Arizona, according to Thunderbird, the Graduate School of International Management in Glendale. We definitely dispute those figures if for no other reason than that Thunderbird is an Illuminist one-world institution. She was simply pushing an amnesty program for the New World Order along with Senator McCain and Representatives Jeff Flake and Jim Kolbe, all Arizona Republicans. They are acting for corporate America to give legitimacy to slave labor. While in Mexico the Governor did all the talking as Mr. Fox welcomed the plans to ship as many Mexican citizens as possible to the US because wealthy Mexicans don’t want reform and a middle-class in their country, because it might cost them some of their enormous wealth. Of course, the PAN Governor’s drooled all over themselves agreeing with the governor. Let America have our poor and uneducated. America is a wonderful dumping ground. Napolitano said she rejected vigilante activity and she is pushing for criminal charges against Arizona residents who are American citizens, for detaining illegal aliens because the State of Arizona and the US government refuse to arrest and deport these felons. We do hope you voters in Arizona let the governor know how you feel about the issue and do your best to remove her from office.

            The IMF sees the US dollar headed lower due to a budget deficit of 6.1% of GDP in 2003, with a structural deficit of 5.2% of GDP. They also expect a repeat performance in 2004.  Wait until the IMF sees the third quarter economic data. They won’t believe it. This is a jobless, profitless recovery. Higher interest rates and higher energy prices are killing corporate bottom lines. Even the Plunge Protection Team can’t change those numbers. This is also why short interest in Fannie Mae shares has doubled from May to August; 2.3% of its shares have been sold short. The dollar is topping out again. The rally is about over, as it goes down interest rates will rise as will the price of gold. This will crack the real estate bubble and depression will begin in ernst. China has gone far enough. They either revalue their currency or trade war will begin. They won’t, trade war will begin and they will start selling dollar and buying gold.

            The NYSE, in its impertinent arrogance, has signed a new employment contract for four years at $2.4 million a year, including bonuses with Dick Grasso. He must have some pretty heavy stuff on the elitists. What usually follows is an early untimely death. Incidentally, he cashed out his retirement with a total payout of $140 million and in 2001 he made $12 million and in 2002 $15 million. This is obscene for a man who heads a quasi-public institution.

            It took the State Attorney General in Oklahoma to reign in WorldCom’s officers and charge them with criminal fraud in the $11 billion scandal. In the meantime, what were the US Attorney’s Office and the SEC doing, sleeping? Like in NYC, the AG had to move against the crooks on Wall Street because the federal government refused to do so. Are they that incompetent or have the elitists told them not to prosecute? They can destroy Martha Stewart and she has been convicted of nothing. That is because she’s not one of them. Enron’s Ken Lay and Jeff Skilling remain untouched by the law, because they are elitists.

            Home builders, realtors and mortgage lenders are unanimous in their conclusion that rising mortgage rates will not lead to lower house prices. The sociopaths’ beliefs are surely rooted in self-interest and fail to account for a fundamental law of economics, which states that supply and demand determines price. This is something you cannot put statistics or a slide rule too. There are other social and economic factors that effect home prices besides interest rates. Within six months the 30-year mortgage rate will be back close to 8%.

            Car manufacturers in July spent $2,668 on rebates, interest free loans, lease deals and other discounts, up $519 or nearly 25% from July a year ago. A car is now on the lot 78 days before it is sold versus 54 days at the beginning of 2003 and 60-days in July 2002. Sales fell 4.5% in July, despite historic incentives. Net the auto manufacturers spent a record $3,631 a vehicle on incentives in July compared with $1,873 for European auto companies, $1,447 for Koreans and $1,075 for Japanese cars. GM’s were $3,969, up 7% and they picked up 1.2% of market share to 29.1%. Ford incentives rose 3.8%, but they lost 3.8% of market share. Chrysler lost 1.7% to 11.8%. This doesn’t look like a recovery to us.

            The NASD says that brokers screwed 95 million investors out of tens of millions of dollars when clients didn’t receive discounts when selling mutual funds. It goes on and on and on and no one goes to jail.

            An index of applications for mortgages fell last week to the lowest in 14 months, or 65% of the levels at the end of the second quarter, as lending rates stayed close to their highs for the year. It declined 13.3% to 638.6. The refi index fell 21.3%, the eighth weekly decline. The 30-year fixed rate mortgage rose to 6.32%, up from 6.28% a week earlier. The 15-year was 5.66%, up from 5.6%. All three loans required the payment of an average 0.7 points to achieve the rates.

            As we suspected LaBranche & Co. was ordered by the NYSE to turn over all employee private emails. They now will be censured or fined. LaBranche did nothing wrong. They believed their constitutional rights were being violated and they were being violated.

            The collapse of the mortgage and housing market triggered by a 1 1/8% increase in interest rates has sent mortgage refinancing down over 70% from its peak. Refinancing had produced $800 billion a year to be used in consuming to keep the economy afloat.  A fall in the housing market will have heavy implications for the economy. In 1988 there were 44,000 mortgage brokers, employing 320,000 people. $50 billion alone each year is spent on closing costs and that is 1 million people making $50,000 a year that won’t be making that anymore. Over the past five years housing prices are up 40% and mortgage debt is up 60%. We see major unemployment coming to the industry to add to 2004’s unemployment woes.

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