-- Posted Sunday, 26 November 2006 | Digg This Article
The following are some snippets from the most recent issue of the International Forecaster. For the full 24 page issue, please see subscription information below.
SATURDAY NOVEMBER 25, 2006
THE INTERNATIONAL FORECASTER
NOVEMBER 2006 (#3) Vol. 10 No. 11-3
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
The two strongest economies in the world are slowing down. For the past five years two-thirds of world GDP has been the result of the US and Chinese economies, this means if their slowdown continues, which we believe it will, then the global economy is about to slow down. In just the past four months Chinese industrial production has fallen 5% to 4.7%, and US production fell 2% to 4.1%. The US declaration in September was faster than the fall during the 2000-01 slowdown.
The weakness in the US economy is most apparent in the housing and consumer sectors. The experts, including ex-Fed Chairman sir Alan Greenspan, were telling us in September the worst was over, the 15% plunge in October housing starts dispelled that miscalculation. Residential construction is now at a six year low and it underscores just how much further down the housing industry and prices have to fall. In the first nine months of the year construction expenditures are down 27% from the peak in 2001. What is interesting is that employment has only fallen 12%. This means that companies are trying to retain workers hoping for a turn in fortune. That turn is not coming and substantially more jobless will soon hit the market. Before we hit bottom, housing construction will have to fall 50% to 60% from its peak. By the end of 2007, all previous plans for residential construction will have been completed. That is when we will get a better picture of construction unemployment. We’ll also get a better take on employment in the real estate and financing industries and it is not going to be pretty. What disturbs us deeply is that we forecasted these events for the past three years and couldn’t reach enough people to warn them that real estate was headed for trouble.
Retail sales have fallen for the past two months resulting in a drop of almost 2% in retail consumption growth. The October comparison is the weakest in over two years and 50% of the growth in January, when we said the economy had topped out, and the recession had begun. America’s top retailer Wal-Mart had its weakest month since 12/00 and November looks to be flat after October’s gain of 0.5%. The notion that American consumers would keep on spending irrespective has already been proven wrong. It is now obvious to the public, but not the professionals, that recession has begun. Consensus thinking is wrong. They either cannot see the forest due to the trees, they are in denial, or they are lying. We choose the later. Overall growth for the past nine months is 2.5%. Two percent would signal a recession and we saw 1.6% in the third quarter. That is down from the 3.7% ten-year growth trend. If experts cannot figure that out they had best return to university.
What is significant about the pullback in third quarter GDP is that energy costs had fallen substantially. Gasoline fell by some 30%. That is a $100 billion infusion to be spent in other areas of consumption. That must mean debt is being paid down and or some savings are occurring.
In China the government is attempting to cool off a red-hot economy. Urban investment spending has fallen from 28% to 16.8%. This is far and away the biggest sector in the economy. It is more than 40% of GDP. Private consumption is 38%, which is far below the 70% in the US. Exports are 34%. This slowdown will have major implications for GDP growth and this is already showing up in industrial output. This is not a collapse, but a pronounced slow down. We believe their administrative measures for slowdown had not been as effective as anticipated. This means government will now come down hard on expansion. As this transpires Chinese exports are slowing down as the American consumer backs off. It is barely perceptible but it is slowing. That means the top in the commodities market is probably nine months to a year away. We see slowing demand for Chinese exports. We also see that China either revalues the yuan by 10% or more or they will be facing punitive US trade tariffs. Seventy percent of exports from China are by transnational conglomerates so they will get hit hard as their bottom lines crash. In time we expect a reversal if trade sanctions and imposts are passed. That means production returning to the US, a cutback or end of offshoring and outsourcing. The lessons have been learned. We cannot compete with slave labor for the benefit of the elitists. We learned that 225 years ago.
This means global growth will not be 4.9% of GDP in 2007. We may well see 3-1/2%, but at this juncture it is hard to say how fast the US, Chinese and world economy will swoon. We also shouldn’t forget the ten major nations of the world are increasing money and credit by some 15% plus. How long can that keep the party going without hyperinflation? The world central banks believe they can float the world economy on liquidity. That’s all the financial centers of the world talk about. We see a disconnect in a year or so when the central banks give up the experiment that they know has failed so many times. When the money and credit spigots are turned off there will only be one refuge and that is gold. The world is about to witness the worst economy since the 1930s, and only the informed and agile will survive.
This is our position presently. If we are incorrect or we have to project falling interest rates of say ½%, then the economy will move sideways, but the dollar will be clobbered and gold and silver will fly.
...
GOLD, SILVER, PLATINUM, PALLADIUM AND DIAMONDS
On Wednesday gold was up over $4.00 early on and silver was $0.25 higher. Then about 10:30 EST, the boom was lowered.
South African diamond production rose 15.2% to 1.40 million carats in August YOY. Output was 32.5% higher than in July. Total production for the first 8 months of the year amounted to 10.1 M/C, a 1.5% fall YOY.
The small diamond mining industry in South Africa is dying. The legislation created to promote small mining is suffocating it. This is because applications for prospecting licenses on properties over 1.5 hectors require the same compliance for a small miner as for Anglo American. The small miners cannot get bank loans unless they can submit a 5-year business plan. Such things cannot be produced unless there is enough land to prospect. Due to the rules in 2002 there were 1,000 operating diggers and today there are 164, an 80% decline. Historically this group has produced 10% of South African production.
Empowerment isn’t the issue; it is social and labor compliance that small-scale miners cannot afford. Production is down 50% and employment has fallen to 6,000 from 25,000 jobs.
The gold spot market on Wednesday closed up $0.50 at $628.60 and silver fell $0.03. The December contract in gold closed at $629.00, up $0.30, silver was off $0.05 at $13.04, copper fell $0.12 to $3.14 and the access aftermarket was up $1.20. They just had to make sure they ruined our long weekend.
We know inflation is out of control and gold is about to move higher when the IMF and sales of their gold is trotted out. Every time the IMF has sold, after the sale gold has taken off up to the upside. The IMF’s 103 million ounces of gold have increased in value this year by $136.20 an ounce or more than $14 billion. That certainly gives them more collateral. That is if they still have the gold, which we doubt. They have leased it and it won’t return except in the form of dollars. The gold’s been sold.
On Tuesday combined CBOT and Comex gold contract volume rose 4,167 lots. Tuesday’s trading volume was 49,000. In major selling on Wednesday combined volume was 122,000 contracts far more than double as the gold suppression cartel tried to take the precious metal down to lower prices. Incidentally, the CBOT is open all by itself on Friday. If the euro and pound, 70% of the dollar index, break out further on Thursday and Friday we can expect another fight in the pits. On Tuesday the Tocom shorts added 871 contracts to net 140,587. Goldman did 315 of those contracts for a total of 32,317. Silver shorts grew 157 contracts to 3,080.
On Wednesday the Dow rose 5 points to 12,327, S&P rose 30 Dow equivalent points and Nasdaq rose 66 Dow points. Oil fell on higher oil and gasoline inventories to $59.24, down $0.93, gasoline fell $0.05 to $1.60 and natural gas lost $0.27 to $7.72. The euro broke out up .0096 to $1.2937, the pound broke out up .0157 to $191.41 and the Canadian dollar finally rose .37 to 87.65. The 2-year Treasury was yielding 4.75% and the 10’s 4.57%.
ECB members sold 6.35 tons of gold last week under the Washington Agreement.
Gold was $5.00 higher early on and silver was $0.25 higher. Then about 10:30 A.M. EST the boom was lowered. From then on gold and silver struggled. Gold went off $1.00 and silver $0.05. Finally at the close they edged up slightly for the day. We are sure one thing that helped gold was the bounced back up in gold lease rates. The one-year rates rose from .012 to .09%. Whatever the central banks wanted leased was leased and we saw the remnants of the lease sales today. They were explicitly used to keep gold from closing above $630 an ounce. If not finished with their suppression they are close to it. In addition we won’t get the COT report until next week.
The dollar as of Wednesday had broken down versus the dollar index, the euro and the pound, and that should expedite gold’s move to the upside. If it sticks, we’ll know next week.
The streetTracks Gold ETF (GLD) reached a new record-gold holding on Wednesday at 418.84 tons. In order to hold gold down over the last several days lots of gold was sold or lots of shorting was going on – or both. We will know next week.
From January thru October Russian gold production fell 1.3% to 142,357 tons.
Friday morning at 4:00 a.m. gold was up $5.00. By 4:45 a.m. it was up $9.70 and by 4:50 a.m. it was up $8.80. That was a very auspicious beginning. It shows you what can happen when the market isn’t impeded by central banks. The good news is the gold suppression cartel is running out of gold and the dollar is on its way to test 80 on the dollar index and 1.3666 on the euro. In the December month gold closed at $638.60, up $9.60 and was very strong into the close. Silver closed strong as well at $13.40, up $0.43. Copper rose $0.10 to reach $3.14. The access aftermarket was unchanged. The HUI closed at 340.26 +8.23 and the XAU was up 2.60 at 141.08. The dollar index was 83.60 -.93. The euro rose .0156 to $1.3094, the pound was up .0171 to $1.9314, the Canadian dollar climbed .51 to 88.12. The 2-year Treasury was 4.73% and the 10’s were 4.55%. The Dow closed at 12,280 off 47, the S&P fell 46 Dow points and Nasdaq fell 36 Dow points.
There is an unusually large number of Fed and other central bank speeches scheduled next week. We wouldn’t be surprised if the elitists let the dollar fall to push the Chinese and Japanese into allowing their currencies to rise. Then there is the up and coming December trip to China by Paulson, Bernanke and others. We could see a test of 80 on the dollar index soon. That 83.60 close isn’t far away. The speeches are being used to keep the dollar from plunging. They want to scare the Asians - not have a break below 80. This is a game of poker and a game China knows how to play. In addition, next week is filled with the release of economic data. This is accompanied by a worsening situation in the Middle East, not only in Iraq and Afghanistan but also in Lebanon. The Zionists refuse to stop being aggressive. They may soon have the French and others shooting their planes down. We could well be facing an explosion in gold, silver and commodity markets and in currencies.
We finally just received the Friday spot closes. Gold rose $9.80 to close at $637.90 and silver was up $0.39 to $13.40. These are clear breakouts. We’ll pause at $660 to $670, and pause again at $714 to $730. Then it is $850.00 as the dollar challenges 80 on the dollar index. This Paulson gamble is not going to work. The Chinese will tell him to get stuffed. We see a mad scramble to cover shorts on Comex on Monday. It was closed on Friday. We could see a $20 plus higher opening. We are sure London will join the party early on with Tocom. Making things worse Paulson and his gang of illuminists have just managed to aggravate the Chinese and they may well be dollar sellers and gold buyers as well as other currencies. The dumb investors in Europe, Canada and the US are about to find out they should own gold and silver and what a precarious position the world financial and economic system is trapped in. There finally will be a massive shift in investment interest as real estate and the stock market finally move lower, much lower. Last time it took ten months for gold to move higher and nine months for silver to move to its highs. This time we are looking for a minimum of $850 to $1,000 gold and $23 to $25 silver. The stocks will go crazy.
...
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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 Sunday, 26 November 2006 | Digg This Article
