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-- Posted Wednesday, 25 October 2006 | Digg This Article
The following are some snippets from the most recent issue of the International Forecaster. For the full 29 page MidWeek Reading, please see subscription information below. WEDNESDAY, OCTOBER 25, 2006THE INTERNATIONAL FORECASTERMIDWEEK READING P. O. Box 510518, Punta Gorda, FL 33951-0518 An international financial, economic, political and social commentary. Published and Edited by: Bob Chapman E-mail Address International_forecaster@yahoo.com CHECK OUT OUR WEBSITE www.theinternationalforecaster.com
SUBSCRIPTION and RENEWAL INFORMATION: 1-YEAR $129.95 U.S. Funds. Make check payable to Robert Chapman (NOT International Forecaster), and mail to P.O. Box 510518, Punta Gorda, FL 33951-0518. 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 US$129.95 for a one-year subscription. Foreigners please use foreign U.S. dollar denominated checks or Money Orders. Note: We publish twice a month by surface mail or twice a week by E-mail. international_forecaster@yahoo.com ***** RADIO APPEARANCES: To check out all of our radio appearances click on this link below: http://www.theinternationalforecaster.com/radio.php US MARKETS The imperial, neocolonial ambitious of the elitists and George Bush and the neocons are coming to an end. Next year US and allied forces will be removed from Iraq and probably Afghanistan as well. That $100 billion drain each year and the death and destruction will be over. This means a status change for the dollar, which will begin with further depreciation. A dollar breakdown of 35% or more should come over the next two years This change is going to affect the entire world. Some 60% of reserves of foreign countries are in dollars and this globalized interdependency is going to prove very costly for the entire world. The coming collapse of the dollar will bring about major social dislocation worldwide, bringing financial collapse, civil wars, invasions and countless deaths and disruptions. People cannot fathom where this is all headed – they simply won’t believe it – and, the diabolical nature of the illuminists. The plan for domination in the Middle East has been on abysmal failure. It has set back the elitist timetable for world government by 20 to 30 years, and it will expose what they have done and what they plan to do. The financial chaos that they put in motion cannot be stopped. There will be no controlled destabilization. Once control is lost, and it will be lost, the window of opportunity will open. Eventually there will be a new currency backed by gold. It may be a new dollar and it may not be. It could be the old dollar will die and a new dollar created. The attempt will be made to continue the privately owned Federal Reserve System. Then again, it might be ended. Hopefully it will come to an end. The basis for the dollar’s demise is already in place. There is no way back. Accrued long-term debt in excess of $70 trillion and a current account deficit of about $800 billion annually. It can’t get much worse. Do you really believe the world will continue indefinitely to fund the artificial lifestyle of Americans? Will central banks accumulate dollars that are decreasing in value daily indefinitely? Of course they won’t. The question is where will they stop? We do not know, but we do know they will stop. Hedge funds are an unregulated problem, but the real worry is systemic risk. A fundamental threat comes from the change in the structure of banking whereby credit risk is packaged into tradable IOU’s or hedged via credit derivatives, and shunted off bank balance sheets. There is some validity in laying off risk to a point. Hedging can reduce the risk to the individual party taking out the insurance; it increases the risk for the system as a whole because of moral hazard. The existence of insurance means people become more risk adverse. That is marked by a decline in risk premiums and in lending standards. The banker is no longer the banker. He originates and distributes risk. The whole relationship has changed. The banker is now a facilitator of financial product, while hedge funds and others assume all the risk. This is like a game of musical chairs. Who will get left out when the music stops and can they handle the losses? It’s like the Greenspan put. With Greenspan gone to collect his exorbitant payoffs, will Ben Bernanke continue such tranquility in risk? We now have intensification of moral hazard. The system is reliant and nothing really bad can happen. Banks are now smaller than the securitized loan market because all the risk has been passed on. It also means when trouble arises collective protective action is likely to be extremely difficult because banks have already walked away from their products. They will not share pain and losses in private sector workouts. During times of financial crisis the problem of crisis management will be even more difficult due to the globalization of banking. Financial stability can no longer be managed at the national level. The old backup is no longer there. There will be no burden sharing. It will be every man for himself. The elitists in their greed for profits have embarked on a mission of which there is no return if problems arise. This is why we all need our financial houses in order because we now do not know what tomorrow will bring. ... We believe soon the consumer is going to start to pay off debt and those with little or no debt will start paying down debt. The housing market’s cooling off has caught some peoples’ attention. Wages and salaries will continue to rise next year, which will put stress on corporate profits and cause more inflation. America is at a critical point and we believe is the most infamous financial episode since the Great Depression. The public doesn’t have a clue because they know little or nothing about the last depression and professionals have little understanding of the forces at work, how they intersect and what the outcome may be, nor quite frankly do they care. They love living in this fool’s paradise. The housing bubble is not just about home prices, home building, home equity financed consumption; it is also about extraordinary financial conditions that enabled a household sector that was unable to adequately service its debt to obtain massive amounts of new credit that has masked their financial vulnerability. In addition, it is the intention of the elitist Fed to force more debt on the consumer to keep the game alive and the economy from collapsing. Consumers and professionals still don’t understand why the bubble occurred and why it is going to be far more destructive than almost anyone thinks. Presently households cannot service current debt without massive infusions of new credit, which for now they are receiving. During the last recession debt did get paid back, it accelerated. People borrowed their way out of trouble. Today, the situation is quite different. It has become more expensive to remove cash from equity. As the debt burden increases, the cost of extracting equity rises and nominally the cost of equity extraction rises and the equity available for extraction drops. Thus, mortgage and consumer debt woes will surface at an accelerating pace. The money will be available, but the debt service could financially destroy the borrower. It doesn’t take a situation for everyone to go broke. We see 35% of Americans in financial trouble and that is enough to take the system down. It is a downward spiral. The more the access to funding deteriorates, the more the ability to spend deteriorates and that weakens the economy and feeds back to more problems in the housing market. It becomes a vicious cycle. The virtuous cycle is over. The extraordinary is over - it’s back to reality. Home buyers have overstated their incomes by at least 35% to buy a more expensive home whose price was going to increase in value forever. The loans were pure collateral bets. Now that prices are falling and there is little illiquidity, those speculators are trapped. It is a fact already the loan originators are buying loans back. That will continue for the next three years and many lenders will bite the dust. Eventually lenders will be forced to tighten standards on refinancing of ARMS and the issuance of equity loans and cash outs. This will intensify problems at just the wrong time. This is what recessions are made of. A prolonged credit crunch. The derivatives that have become part of the housing market have increased the probability of problems because they have brought a false sense of security. The issuers and buyers of risk are operating on the edge and many will fall into the precipitance. We are about to leave the sustainable trend. It is now unsustainable. There will be as always some event and everyone will be able to see the folly of the real estate market. There are going to be fundamental changes in our lives and balance sheets. We are already in that process of breakdown. People do not recognize how important, and abnormal and unsustainable current financial conditions are. Without an event gradual deterioration will accomplish the task. Next year it will become apparent that lender losses will build to a point where that they cannot be dealt with discreetly. It is on the way, just be patient. Wealth can be a fleeting thing. ... GOLD, SILVER, PLATINUM, PALLADIUM AND DIAMONDS The market manipulation continued on Monday with gold off some $25 in 2 days. Pre-opening gold fell $6.60 and silver $0.195. At the end of the day gold was off $13.60 to $579.20 and silver fell $0.31 to $11.57. The December contract showed gold at $582.90, off $13.50, silver off $0.30 at $11.67, copper at $3.45, -$0.01 and the access aftermarket up $2.00. The implications for a high stock and bond market and low commodities, gold and silver prices is to show the public all is well. They want voters to believe that if Republicans and incumbents are not reelected, that the stock market will fall. This is truly Orwellian. It also points up again how controlled the major media is. We are to be treated to a President Bush, CNBC interview that will purely be softball for propaganda and misinformation purposes. Monday’s gold open interest rose 858 contracts to 334,220, while the silver open interest fell 394 contracts to 108,761. Friday’s gold saw open interest rise 82 contracts. On Friday, Tocom shorts increased their position by 3,315 contracts to a total of 98,329. Total open interest hit a new low of 252,210. Goldman increased their net short to 397 contracts to 30,138. Monday the XAU gained 1.59 to 130.21 and the HUI rose 2.74 to 304.53. This was a very strong day for shares AEM, GG and SSRI were off $0.20 or so and toward day’s end they came in very strong. The Dow jumped 45 points in the last ten minutes of trading, finishing at 12,117, up 115, as the S&P rose 72 Dow points and the Nasdaq 78 Dow points. Oil was under pressure again as the experts said that OPEC members won’t cut production and that they liked $60 oil. The finish was $58.81, down $0.52 after having traded much lower. Gasoline rose $0.04 to $1.47 and natural gas fell $0.36 to $6.88. The euro fell $.0061 to $1.2548, the pound $1.8733 minus .0099, the Canadian dollar slid -.20 to .8868 and the dollar index rose .42 to 86.48. The 2-year Treasury note ended up at 4.91% and the 10’s finished at 4.83%. At this rate we should see 6.50% 30-year fixed rate mortgages. Comex silver stocks fell 635,438 ounces last week to 105,149,635 ounces. From 9/21 to 10/21/06, the date of the Diwali festival, import of gold into India rose 123% to 156 tons from 70 tons YOY. Remember, the buying season is all the way through January. We hear much discussion regarding gold reserves and the GFMS figures. Those figures, as we have said since 1988, are totally bogus. We repeat, the IMF has no gold – it has pledges that cannot be fulfilled except by a few nations. All the US has left is some coin melt and that is it. Switzerland, Germany, France, Italy, Russia, Japan and China have gold, but in some instances such as Germany, France and Italy, a good part of it was leased out and will never be returned, it has already been sold and they will receive or have received dollars for their gold. Gold had a wild journey on Tuesday. Down $7.00 and then recovery led by of all parties JP Morgan Chase. Gold was up $4.10 to $583.30 and silver was up $0.18 to $11.75. The December contract month saw gold up $4.70 to $587.60, silver at $11.85, up $0.18 and copper off $0.03 to $3.42. The access aftermarket was up $2.00. Gold open interest rose 238 contracts to 334,458. The effort to smash gold for a third straight day was unsuccessful. Monday’s Tocom large shorts increased their short positions by 2,031 contracts to 100,360. Goldman covered 425 contracts. Silver shorts increased their net short position by 10 contracts to 1,968. The HUI rose 2.46 to 306.99, and the XAU rose .62 to 130.65. The ECB balance sheet revealed that three banks sold gold last week, while a fourth added gold coins. Net total of 112 million euros was sold or 7.33 tons up from 0.98 tons. This is very small considering India alone bought 156 tons over two months. The systems reserves of gold and gold receivables decreased to 175.206 billion euros. Foreign currency decreased 700 million euros. Cash in circulation fell by 1.9 billion euros to 591 billion. Russia reduced gold production 2.6% YOY in January-September to 122.762 tons. Mine output fell 3.2% YOY to 110.546 tons, with incidental or byproduct gold production rising 8.2% to 8.898 tons and secondary production dropping by 7.1% to 3.317 tons. ... SUBSCRIPTION and RENEWAL INFORMATION: 1-YEAR $129.95 U.S. Funds. Make check payable to Robert Chapman (NOT International Forecaster), and mail to P.O. Box 510518, Punta Gorda, FL 33951-0518. 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 US$129.95 for a one-year subscription. Foreigners please use foreign U.S. dollar denominated checks or Money Orders. Note: We publish twice a month by surface mail or twice a week by E-mail. international_forecaster@yahoo.com *****
-- Posted Wednesday, 25 October 2006 | Digg This Article
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