-- Posted Monday, 24 July 2006 | Digg This Article
The following are some snippets from the most recent issue of the International Forecaster. For the full 27 page issue, please see subscription information below.
THE INTERNATIONAL FORECASTER
JULY 2006 (#3) Vol. 10 No. 7-3
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
There is a great deal of confusion regarding reports that US Special Forces have seized control of Israel’s nuclear complex located near Demona. The word is that China’s President told Mr. Bush that if the Straight of Hormoz was blocked by Iran, China would consider it an act of war. Bush promised President Hu and Russia’s Mr. Putin that the US would secure Israel’s nuclear weapons and limit Israel’s incursion into Lebanon. Israel would secure its Northern border with Lebanon and that Israel would not attack Iran or Syria. Secretary of State Condi Rice is reporting the deal to PM Olmert of Israel.
The PPI, Producer Price Index, rose 0.5% in June. We won’t even report the core because it is just a big lie - an index without food or energy. The experts were wrong again, they predicted a rise of 0.2%; they are wrong 2/3’s of the time. Flipping a coin is more scientific. May’s PPI was up 0.2%.
Orange County, California foreclosures nearly doubled in June, rising from 35 in May to 65 in June. Overall, foreclosure activity including default warnings to delinquent homeowners rose 60% last month. The county had 639 new foreclosure filings last month, up from 399 in May. That includes 574 default notices issued to homeowners behind their monthly loan payments. LA County’s activity was up 15.7%, Riverside 25% and San Bernardino 11.7%.
Venture capital secured $11.2 billion for future investments during the second quarter. This is the biggest fundraising in five years. It totals $18 billion so far this year, a 41% increase from $12.8 billion at this juncture in 2005.
In the first solid sign that the housing market has turned south, home sales in Philadelphia, South Jersey and Delaware fell in the first six months of the year. Sales fell 4% and the number of days it took to sell a home on average soared 48% to 32 days. Prices in the Delaware Valley rose by 10.3%. The hardest hit was South Jersey, down 8%. The number of days on market for Pennsylvania homes rose 59% to 31 days, compared to 58% to 21 days for Delaware and 16% to 38 days in South Jersey. South Jersey house appreciation was 12.3% and Pennsylvania’s was 8.4%.
More than 50% of college students have at least one credit card that is billed to them and 25% of those students use credit cards to pay tuition. 55% were carrying a balance versus 38% who had not borrowed tuition on a card.
Another dirty little secret is many banks carry more real estate loans today than they did during the 1980’s real estate boom.
The SEC is ready to start filing charges against companies backdating stock options. Criminal investigations are also proceeding.
Output at factories, mines and utilities rose 0.8% in June as capacity use rose 82.4%, the highest rate since June 2000.
Due to the glut in unsold homes in Boston, realtors are trying to get clients to drop their prices. The hope is low prices will attract more prospective buyers, leading to faster sales. The new selling lingo is drama pricing, or energy pricing. They are drastic measures for difficult times. The median price in Massachusetts has declined 4% over the last year to $331,000 in May. It is a buyers market and it will stay that way for a long time.
May net foreign security purchases rose to $69.6 billion versus April’s $51.1 billion.
The NAHB July housing index was 39, down from 41 in June. That is a severe plunge in confidence. These are the same builders who believed that they could easily live with 7% 30-year fixed rate mortgages. The index peaked at 72 in June 2005 when we predicted the housing market had topped out. The current sales index fell to 43 from 47, the expected sales index dropped to 46 from 51 and the traffic of potential buyers fell to 27 from 29...
If you believe that government spending is out of control you are right, it is. Yes, tax receipts have risen but that is temporary. When the economy slows revenues will fall and the spending will still be there. By the government’s own projections the outcome of this profligacy will soon become calamitous. Unless we pay this debt down it will become a millstone around our necks. That 12% increase in money and credit every day and the piling on of debt dilutes the value of the dollars we hold and in all the assets we own. The result is a continuing depreciation in the value of the dollar, higher interest rates and higher inflation. As we repay this debt we have to consider that interest rates are at a 45 year low and in all probability will move up over the years to come making debt service more expensive and more onerous – perhaps even unpayable. Higher rates mean ever more debt to cope with existing debt. That causes a loss of confidence in the dollar driving its value ever lower. That drives gold, silver and commodities higher.
These problems have been caused by our President and our Congress. It’s spend, spend, spend, elect, elect, elect. This is why in our coming election almost all of our representatives and Senators who are up for reelection should be thrown out of office. The main culprits are the denizens of the House. These are the termites who are leading us into bankruptcy. Worse yet, there is no indication that they have any intention of slowing down. They have led our country to the threshold of bankruptcy and if it wasn’t for foreign lenders we would already be insolvent. Governments have and do go bankrupt. Worse yet, we have a fiat currency with no gold backing. We ended gold backing in 1971. If the dollar fails and it is no longer the world’s reserve currency then almost all currencies will fail with the exception of the Swiss franc and Russian ruble, both of which have heavy gold backing. The euro might survive dependent on whether European countries really have any gold left. The bottom line is the US economy and its finances are in trouble and we do not see any solution that our elected representatives want to take. The only alternative is gold and silver related assets...
GOLD, SILVER, PLATINUM, PALADIUM AND DIAMONDS
The prices of gold, silver, crude oil and corn will soar to record highs during the second half of the year, boosted by global political tensions, oil-production worries and soaring demand for bio-fuels, according to commodities analysts speaking at a panel discussion in Chicago.
Daniel Rabb, managing director of AIG Financial Products in New York says, “A combination of growing industrial demand, supply constraints in some markets, and dollar weakness are all contributing to an upward price trend for many commodities.”
College economics is generally pure Keynesianism, its no wonder the educated do not understand gold as the only real currency known as hard money. Due to that lack of knowledge, and further absence of intellectual perception, it’s difficult for many under 45 years old to remember the great gold and silver bull markets of the 1970s. We are now repeating that inflationary cycle and the dynamics are incredibly more powerful. Over the next several years there will be massive inflation because the elitists will try to buy time. They are in an impossible situation and they are well aware of it. They will play out this game until they cannot anymore – until the bitter end. This is why gold and silver and commodities as well will perform in a fashion that is unimaginable today. Only the perceptive few will retain the value of their assets and some will become very wealthy.
This is no commodities bubble and as we said before commodities will at least double from current levels. Gold and silver will go stratospheric.
Don’t listen to what passes for the truth today from our media, Wall Street, government, the banks and corporate America. It is all intellectual garbage. During the 1970’s interest rates climbed relentlessly higher, culminating in rates of 20.5%, as the US 30-year Treasury bond yielded 13.5%. This was accompanied by rising commodity and gold and silver prices. Those who tell you that these investments won’t appreciate are either stupid or liars. The result is all there. All you have to do is go back and study what happened in the 70s. We know – we lived it minute by minute. Those experts should be reminded that during the same period stocks and bonds got slaughtered. Interest rates are raised to protect the dollar, not to stop inflation. The elitists could care less about inflation. They have to keep the dollar from crashing. They will allow the dollar to decline, but slowly over a few years, if they can. They cannot allow the world to lose faith in the dollar. If they do everything will collapse around them. Don’t forget in this process if interest rates don’t continue to rise or pause, gold, silver and commodities will go even higher. Central banks wouldn’t know an inflation fighter if they stumbled into one. The Fed is increasing money and credit by 12% annualized and European central banks are doing the same at a 10% plus level. The world is awash in liquidity and we see no end in sight. Foreign government exchange reserves are at a record $4.4 trillion, up almost 10% y-o-y. That doesn’t sound like fiscal austerity to us...
-- Posted Monday, 24 July 2006 | Digg This Article
