Between 1992 and 2002 the GSEs, Fannie Mae, Freddie Mac and the Federal Home Loan Bank grew 600% of assets and 1.5 times faster than the combined growth of the top five US commercial banks. GSEs promote home ownership as Congress charged them to, but their mission has been distorted. Congress does not want them to give houses away and that is what they are doing. As of the year-end 2003, the FHLB system boasted 8,101 members, 5,946 commercial banks and credit unions and 82 insurance companies. At that time the FHL books held $822.8 billion in assets, about 62%, of which were advances to other member institutions. Fannie and Freddie support home ownership via purchasing mortgages from originating institutions, usually banks and specialized lenders. Both are publicly owned and traded and are supervised by the Department of Housing and Urban Development, which means there is little regulation; they are political footballs. They keep the best mortgages and securitize the rest. They bundle mortgages into pools and sell claims on the pools, guaranteeing the resulting mortgage-backed securities against default. Over 60% of mortgage loans are securitized and Fannie and Freddie guarantee over 72% of existing mortgages. Fannie is holding about $892 billion mortgages and guarantees another $1.6 trillion. Freddie has $65 billion in mortgages and guarantees $850 billion. These three, Fannie, Freddie and FHLB are not guaranteed by the government and they make that plainer everyday. They are exempt from state and local taxation and securities-registration requirements and they have a subsidized line of credit from the US Treasury. Outstanding debt for the three GSEs is $2.5 trillion.  If the government were to have to bail out the three the financial system and the dollar would collapse. The three have distorted markets like any socialist system would and there is no further need for these institutions to do what they are doing. They put the entire financial system at risk, not only because of what we have discussed but also because of their enormous derivative positions. The three also receive subsidies in the form of deposit insurance that creates moral hazard problems related to risk taking and unfair completion. They are used politically and increase risk to impudent levels. We as American citizens bear the risk. Their subsidy on interest rates lowers funding costs to reduce funding costs for loans that should not be made in the first place. Over 50% of their loans are sub-standard and 25% are borderline. These loans made by these GSEs raise their employee salaries and the dividends for GSE shareholders. For every $44 in savings to homeowners, Fannie and Freddie’s shareholders make $72 billion. That is a sweet deal isn’t it and it is all via taxpayer subsidies – your tax dollars. In the case of the FHLB, at least advances are heavily collateralized to the market value of the mortgage. The cover is typically 125 to 170% of the advance. Thus far, the FHLB has not lost money. Fannie and Freddie are way over extended and we believe both will go under. The investors and bondholders will lose their investments and the government will end up with all the mortgages. Those who cannot pay will be allowed to keep their homes and the government will move families in with them.

            The Office of Federal Housing Enterprise Oversight has subpoenaed Fannie Mae books regarding its accounting practices.

            There are 518,739 Gulf War Veterans on medical disability since 1991 with only 7,035 reported wounded in Iraq in that same 14-year period. Eight of twenty men who served in one unit in the 2003 US military offensive in Iraq now have malignancies. That means 40% of the soldiers in that unit have developed malignancies in just 16 months. The only way they could have gotten cancer is from depleted uranium.

            In NYC, 2,540 students fled their public schools last year out of fear for their lives. These were safety transfers that were beaten, bullied and threatened by classmates. Manhattan and South Bronx led the city with 343 transfers. Most children are simply terrified to go to school.

            In the Google IPO via Dutch auctions, the underwriters received 2.8% commission not the 7% most of Wall Street demanded. We see this as a new wave, which will force IPO fees lower.

            Last week we reported that FBI field officers have spent months canvassing their communities for potential troublemakers. They have a list of potential troublemakers and are projecting the possibility of violent disruptive acts. Of course, it is all about intimidation. Stifling protest and chilling free speech are only part of what the lawmen are now doing. It looks like a revisit to J. Edgar Hoover’s Cointepro-program. If you are approached, immediately call your attorney and if you do not have one get one. Be courteous but do not answer questions, do not let them into your home or apartment and do not cooperate in any way. You have to understand that under the Patriot Acts they may well have already tapped your phone and broken into your domicile and legally copied your records already. They also probably have gone through your mail, bank and brokerage accounts and also probably probed your neighbors. If confronted by FBI agents go outside your home, ask for identification, take it in hand and copy everything on their ID. Either that or read the information into a tape recorder. Better yet, video tape the event if you can. Then take their cards and tell them your attorney will be in touch with them for an appointment. These procedures seriously threaten our freedom. We are now only one step away from tyranny.

            If housing prices do not fall 30 to 50%, few will qualify for a loan. Last year, the percentage of all homebuyers in California purchasing their first home fell to a 22-year low of 31% of all existing homes purchased here last year. That share was 40% in 2003.

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GOLD, SILVER, PLATINUM, PALLADIUM AND DIAMONDS

            The gold suppression cartel is looking down the barrel of superior firepower and it is called physical off-take. Americans and Europeans may be dumb when it comes to gold but the rest of the world understands. In addition, there is plenty of speculative buying power available, thus the fireworks have just begun.

             We believe the Argentines have gotten the elitists’ attention. Virtually broke they buy 42 tons of gold. They have to now be number one on the new world order hit list. We must say they have a lot of guts. They have to know what the consequences will be. They are now playing the same game Alan Greenspan is on creating monetary aggregates.

Doesn’t it seem strange that there has been not one word in the purchased general media about John Embry’s, Sprott Asset Management Report on the rigging of the gold market?  The only exception was the Toronto Globe & Mail. How totally irresponsible, and yes criminal. Those lame idiots at the World Gold Council, Gold Fields Mineral Service and the executives of major mining companies have not said a word. What a classless bunch of jerks.

            We also read Tim Wood’s tasteless, acidy interview with John Embry of Sprott Asset Management. We continue to recommend boycotting Mineweb, that piece of journalistic garbage masquerading as mining news. The Sprott Gold report when we look back will be recognized as a milestone in the history of gold’s greatest bull market. It is one of the finest reports ever produced in the brokerage industry and after 45 years in the trenches, we speak from experience. The research is without peer. This report will be a major turning point in the gold bull market. Institutions, hedge funds and central banks have been put on notice; this is just the beginning of a raging gold bull market like none other seen in history. Wait until the public realizes what has been done to them. They will show little mercy.

            Dubai’s retail jewelry trade saw sales increase 5% in June, July and August versus last year. Consumption has been up each of the past four years and if this rate continues gold prices will move $70 higher to $480.

            Japanese July gold imports were 140% above last year. Their appetite for gold rose 8.655 tons. It could be the Japanese are about to return to gold in a big way.

            Russian officials handling the sale of a stake in oil giant Lukoil have set an opening price of $1.9 billion for 7.6% of the company. It pumps 19% of Russia’s oil. It is also a significant global player with 2% of worldwide production and 1.5% of reserves. The two front running bidders are Conoco Phillips and Dabir Investments run by David Guggenheim.

Sprott Asset Management announced the publication of Not Free-Not Fair: The Long-Term Manipulation of the Gold Price. The study represents the most thorough and detailed examination of allegations that the gold market has been subjected to severe price manipulation over the past several years. The summary can be read in its entirety on Sprott Asset Management’s website: www.sprott.com

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-- Posted Tuesday, 31 August 2004 | Digg This Article