-- Posted Thursday, 20 October 2005 | Digg This Article

OCTOBER 2005 (#3) Vol. 9 No. 10-3

P. O. Box 510518, Punta Gorda, FL 33951-0518

An international financial, economic, political and social commentary.

Published and Edited by: Bob Chapman

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US MARKETS

            Our President and our government believe that they have the power to arrest citizens and hold them indefinitely denying us the rights of habeas corpus. In fact, they don’t have to arrest you. Under their interpretation of law they can detain you indefinitely without charges. Something that only occurs under despotic governments. It is occurring under our government against Americans and foreigners. They are kidnapping people off the streets all over the world and little is being done about it. We recommend that you contact your elected representatives and tell them how you feel about the issue.

            In an effort to force oil drilling rich fields near the Arctic National Wildlife Refuge, Alaska’s director of oil and gas has demanded that Exxon Mobil drill their Point Thomson Unit, which they have been sitting on for 30 years, or lose it. Others involved are BP Exploration, Chevron USA and Conoco Phillips Alaska. This past week the state found Exxon Mobil in default.

            If you remember we said sell the general market last November at Dow 10,300 and we set our shorts. We were joined in February by Joe Granville, who is the best, and now this past week Dennis Gartman decided to join us. The Gartman Letter said sell all equity, dollar and bond positions. He compares today’s market action to 1973-74 during which the market got crushed. That sort of correction will be the first stop. The next stop will be worse than 1929-1933. Now, all your money should be in gold and silver related assets, oil and gas stocks, short positions and a small amount of cash. If you do this five years from now you will be multimillionaires. This is a lock – you cannot lose. There is no way out for the world economy.

            The elitists may believe they can stay in power and change the future by manipulating markets. They are going to find out you cannot shape destiny and that the people in this world do not need them to tell them how to live. They do not need the future shaped for them by a corporatist fascist government, and they do not need manipulated markets. We do not need the mind control and psychological warfare directed at us by those in government, and by those who control government from behind the scenes. As we have told you before, these people have tried this again and again since the twelfth century and they have been perpetually unsuccessful. They may have retained power, but not the ultimate power that they desperately seek. Events always have happened to stop them and we believe that has happened. That is what Katrina and Rita are all about. From their point of view the wrong thing at the wrong time. From our point of view it’s the straw that broke the camels’ backs. The elitists have to come to terms with failure. A financial and economic system that faces collapse, which they have lost control of. The lies and disinformation won’t cut it anymore. Reality is going to be difficult beyond anything they or the public can imagine. All of you who do not want to deal with the truth and reality are going to be forced to do so. Inflation is headed to 15% and higher. You won’t find that in the media, but that is reality. Look at our money and credit expansion figures that we release every week. Do they look like monetary aggregates are decreasing? Of course not. They are still increasing in leaps and bounds. The elitist Fed still doesn’t get it, even though throughout history such methods have always been totally unsuccessful. Desperately they continue to inflate knowing that they are only buying time. Government and the consumer are hopelessly in debt and have no way out. The economy has been weakening for three months, inflation is increasing and the effect of Katrina and Rita to put the economy more off balance are now just really being felt. The BLS statistics on CPI and unemployment are totally laughable. Meanwhile, as of last week, the 30-year fixed mortgage rate is at 5.98%. In December, it could be 6 1/2% to 7%. Then we have an administration that is the biggest deficit spender of all time. Contrary to what experts might think about foreign central banks buying US Treasury and Agency debt, for now at least they will continue to see them spend $3 to $4 billion a day. Most of these banks will eventually stop, but the $4 trillion from the Postal Savings Plan in hand Japan will endlessly buy US debt – that is part of their partnership with the US. After that the Fed will monetize US debt sending inflation into the stratosphere. The spiral is already out of the Fed’s hands. From here on it gets nasty and gold and silver explode. You have just seen the end of the last dollar rally. If the ECB raises interest rates, in spite of a recession, due to inflation, the euro will at worst hold its own and perhaps it will rise back to 1.3666. The only reason in recent months the dollar has rallied is that interest rates have risen and there has been combined manipulation efforts by central banks. Economists, analysts and most newsletter writers are fixated on interest rates and they haven’t noticed a year-to-date and year-to-year increase of some 15% in credit. Can they be that dumb or do they almost all have a vested interest in deceiving the public in regard to what is really going on? Private foreign money sees this and is long gone. They also have not overlooked the fact that the US now has a corporatist fascist government.

            Socialist governments are bad enough, but they usually tend to be passive. Fascist governments by their domineering nature are aggressive and eventually that has always led to their destruction.  Their greed and their megalomania for control eventually destroys them via overreach. A word to the wise should be sufficient. Batten down the hatches. The storm ahead will be far worse and much longer lasting than Katrina and Rita.

            Either Dallas Fed president Richard Fisher is totally out of touch with the economy, which we don’t believe, or he is simply a liar in telling us core inflation is 1 to 2 percent.

            The Business Council and Conference says less than 15% of CEO’s polled expect business conditions to improve over the next six months, from 40% in the previous survey in February. Only 27% expect improvements to continue in their industries, down from 43.2% in February. Twenty-one percent now expect pricing power to increase, down from 28% in February.

            Once we hit the bottom of this bear economic market we expect realized losses of $15 trillion at a minimum.

            In case you hadn’t considered it we expect gasoline rationing in the future. This is another way of controlling the public - another concept of trading freedom for security.

            If you don’t think the market is rigged you are dumb. Last Friday, the Dow was down 100 points with 20 minutes to go. It ended the day up 5 points, enough said!

            In September, average hourly earnings rose 0.2% and weekly hours were unchanged at 33.7. Wholesale inventories rose 0.5%.

            Sir Alan Greenspan retires from the Fed on January 31, 2006. Each time a Fed Chairmanship has changed, the transition has been difficult. The period is used by the elitists to make major changes. This time the change could be explosive with profound implications at a time when the economy and financial markets will be in a negative state of enormous change. The change of chairmanship couldn’t have come at a more inopportune time. The change is a very serious event. The investment community has given Sir Alan the aura of supernatural-god-like qualities. His departure will be difficult if not wrenching. Wall Street’s security blanket will be gone. Knowing that many on Wall Street will be bailing out of the market.

            Another difficult and salient point is that the successor will be inheriting a current account deficit of at least 6.5% of GDP, which is more than four times the average external shortfall of 1.5% in the previous transitions in 1978, 1979 and 1987. There is no national savings, we have an energy crisis and debt, both governmental and personal, and it is out of control Foreign central banks will be reluctant to some extent to finance debt service and interest rates will as a result trend higher as inflation increases in spite of a slowing economy. George W. Bush is going to insist that the fellow elitists that control him allow him to have whoever shares the goals and objectives of his political agenda. If this happens, US and world markets are going to take a heavy hit. It also means a lower dollar, especially versus gold, and higher interest rates – perhaps much higher interest rates. Those rates in turn will eventually stem inflation, but due to the mega-debt will turn to deflation and depression. If Bush’s appointment agenda follows its previous path, his choice will seriously impair credibility and perception. This needless to say will compound problems. By the time the announcement is made for a successor, markets will be in free fall and gold and silver will be substantially higher.

UAL had a pension shortfall of $9.8 billion. Delta has a shortfall of $10.6 billion and Northwest $5.7 billion. Delphi will have one of at least $4 billion and there are more on the way. That totals $30 billion to be paid by American taxpayers because corporate America converted the funds to corporate uses. We call that fraud and theft. The PBGC is already $23 billion in debt, so the recent failure puts them $53 billion behind the eight ball.

 

            Delphi, the nation’s largest auto supplier, is bankrupt. Production and 35,000 high paying American jobs are being moved to China. 12,000 retirees will receive one-third of their pensions from the PBGC, which is from us, the American taxpayer. You can thank General Motors for a failure that was planned 25 years ago. Delphi wants to cut the wages of 35,000 workers by two-thirds, or to $10.00 an hour to compete with China. Delphi employs 185,000 workers worldwide.

 

            GM’s future liabilities will increase by $11 billion and in three years or less GM will file bankruptcy and their business will be sold off in segments to vulture investors.

 

As we mentioned last week, Karl Rove was offering lawmakers new details of an administration-backed guest worker program that would temporarily legalize the status of millions of illegal workers. These illegal aliens would be designated guest workers for a period of six years, after which they supposedly would be required to return to their home countries and apply for legal re-admission into the US. This is unadulterated amnesty, particularly for Mexicans. Under the US-Mexico-Canada “Security and Prosperity Partnership” to be implemented in 2010 the Mexicans would be let off the hook. Thus, the six-year guest worker designation is a setup to keep them here to do what they want until open borders in 2010. Incidentally, the Mexico-US Business Committee is a project of the Rockefeller-founded Council of the Americas, which created the blueprint for all this and the Development Fund for Mexico, which American taxpayers would foot most of the bill for. This would pay for the expansion of Mexico’s infrastructure, which includes highways, bridges, manufacturing plants, schools and hospitals. The revenue source for the DFM would be Social Security taxes from labor performed by illegal aliens. That is the Earnings Suspense File, which has $463 billion in it presently. One percent of that fund would be allocated to the DFM. This is the latest elitist scam. We just hope Congress knows what we do.

 

            Russell Mead, a senior fellow at the Council on Foreign Relations says, “As the Baby Boomers prepare for retirement, the prospective costs to be exacted of the Social Security and Medicare program may leave Americans feeling like doing what the old urban myth says the Inuit do - ship the old folks out on the ice flows.” As a warm and loving alternative to this cold-hearted approach, Mead recommends, “send the old people to Mexico, Central America and the Caribbean.” “An income that can barely cover a double-wide in Florida can swing a condo south of the border,” he notes. “The federal government should smooth the path for seniors looking to retire abroad,” by expanding Medicare coverage to include foreign healthcare providers, creating retirement agreements with neighboring countries and otherwise knitting our entitlement system with that of Mexico and other Latin American countries argues Mead. Whatever label is affixed to the program it envisions the accelerating merger of our nation with Mexico and Latin America, fueled by taxpayer-subsidized entitlement programs.

 

Secretary of State Rice rebuked Uzbekistan for not answering the US regarding an international inquiry into the Andijan Massacre. The US was happy to overlook the event until President Islam Karimov kicked them out of Karshi-Khanabad. Miss Rice said they were out of step with the political trends in Central Asia. If you are not in lock step with the neocons you are liquidated. For the US this is payback Karimov rejected US and European calls for an “independent” inquiry. The US, under the guidance of Senator John McCain (R-AZ) has prevented a $23 million payment owed to Uzbekistan from being made. The usual financial extortion. In the meantime, President Karimov has been designated a dictator, and the neocons and the EU are arranging a coup to overthrow Karimov.

 

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COMMODITIES

 

            Iraq’s crude oil production in September fell to 2.06 B/D, down 90,000 B/D from August because of a decline in northern crude output. Insurgents continue to blow up pipelines every day. There has been no immediate explanation for about the 106,000 B/D unaccounted for if exports and domestic consumption are subtracted from total production. There is no question that the US government is lying about production figures. Flow is down dramatically and stored oil has been exported. That stored oil is about exhausted.

 

 

GOLD, SILVER, PLATINUM, PALLADIUM AND DIAMONDS

 

            Gold rallied when the dollar went up recently. Our comment was wait until the dollar folds. It did last week and gold shot up again to a new high. That has the elitists suppressing the gold market really concerned, better yet, confused. It is simple, the physical market is overwhelming and will continue to be so for a long time to come. Incidentally, while this was happening, oil dropped $8.00 a barrel. It shows you gold is not about to be denied. Wall Street is brain dead and has been for many years. They don’t get it and don’t want to get it. They couldn’t think outside the box if they wanted too. The longer they and the investors stay away from gold the better it will be. That means gold will go much higher than it would have otherwise. The world is spiraling out of control and nobody cares except us gold bugs, who really understand what is going on.

 

            The World Gold Council now tells us that India’s gold consumption is expected to rise 33% in 2005 to 850 tons due to higher income, good harvests and we will add, a booming stock market. Much of those profits are going into gold.

 

            Consumption, excluding recycled gold, rose 57% to 508 tons in the first half of the year, up from 322 tons in the first half of 2004.

 

            India’s economy should grow 7% in this fiscal year to 3/31/06, just above last year’s 6.9%. Gold buying pressure in India is extremely strong. Gold was up 89% in India and 77% globally.

 

            The total volume of gold derivatives and gold futures, options and certificates far exceed the gold reserves of central banks. Lease rates lead us to believe the gold suppression cartel is under intense pressure and are close to being out of gold. The day of deliverance is at hand. The gold shorts are going to get their heads handed to them.

 

            The way gold is acting and the fact that the gold suppression cartel members believe $500.00 is eminent tells us gold could easily blow right through $512.00 to $550.00. That would certainly bring the pros into the market. If we are right, $850.00 an ounce is achievable by March.

 

            We must add the fundamentals and the silver charts are probably the best ever. Expect an explosion. Even the Fed is talking higher inflation and that is powerful fuel for a booming silver price.

 

            Gold is no longer tied to the dollar. It has now broken out in almost every currency. Gold is now the currency of choice. This has badly damaged the efforts of the gold suppression cartel and it spells the end of their manipulation. That is why gold is running up whether the dollar is rising or falling. Every attempt over the past few weeks to knock gold down has been unequally unsuccessful. Wall Street and the brokerage houses on the short side of gold and gold shares are about to lose lots of money. They’ll also lose lots of money in the market and bonds as well. Many large brokerage houses will go bankrupt in the next five years - just deserts for a band of criminals. The great fraud is about to come ingloriously to an end. 

 

            The oil/gold ratio remains near an historic low with an ounce buying just 7.7 barrels of oil.

 

            When we began getting into the gold market in the early sixties there were three strong gold-silver newsletters starting out; Harry Schultz, Jim Dines and the now deceased Vern Myers. This is what the grand master Harry Schultz had to say about the gold market the other day. “The gold market is now in a different kind of phase, not just a leg up. It’s serious now. This is where the insiders gradually load up.” This is exactly as we told you it would be.

 

            The IMF used to have three tons of gold. They have been leasing gold, which they will never see again. The only question is, do they have any more to lease?

 

            The gold breakout in currencies is causing a paradigm shift in investor thinking regarding currencies. They are shifting to gold and in time, as gold appreciates, that shift will overwhelm the markets.

 

            The Washington Agreement to limit gold sales to 500 tons is a farce. This past fiscal year ended 9/3/05, they sold at least 552 tons and the figure may actually be 574.6 tons. So much for transparency and veracity.

 

            Comex warehouse gold holding are six million ounces of gold yet, commercials have sold 20 million ounces. If buyers were to take delivery the commercials would have to short cover and that would drive gold prices much higher. All of you so-called market timers, who are expecting a correction in gold, had best be long. It is only a matter of time before commercials have to cover.

 

            Morgan Stanley says Asian central banks should hold more gold, especially Japan, China, Korea and Taiwan.

 

            Many professionals and a handful of others now believe us that the gold market is rigged by the central banks. They wait for a rally and after the suppression cartel pounds gold back down they are sitting waiting to buy at lower prices. Gold has taken on a life of its own and there is no way to stop its climb. On Monday, the euro gold fix was 393.81, which is another technical and fundamental breakout. Investors are buying gold as the debt free alternative currency. The key to the gold market is cash buying and Europeans, Americans and Canadians are not in the market as yet.

 

The Silver Users Association says it opposes the creation of an exchange-traded fund (ETF), due to concerns such as investment product could make silver too expensive or illiquid in the world market. Of course, the real reason is because they and their elitist friends would lose control in the suppression of silver prices. The silver is not available. Almost all the inventory is gone.

 

It looks like at the end of the third quarter Barrick’s hedge book was a negative $2.32 billion. That is up from a minus $190 billion at the end of the second quarter. By the end of the year the hedge book could be offside $3 billion.

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-- Posted Thursday, 20 October 2005 | Digg This Article

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