SATURDAY, JANUARY 6, 2007
THE INTERNATIONAL FORECASTER
JANUARY 2007 (#1) Vol. 11 No. 1-1
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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International_forecaster@yahoo.com
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US MARKETS
The stock market has all the earmarks of a blow-off due to its rich valuations. As contrarians we find recent surveys to be a warning that trouble lies ahead. The Russell Management Group in their quarterly money managers’ poll shows that 86% of advisors are bullish for 2007. Only 13% expect a flat market or a decline of 10%, and just 1% expects a decline of 10% or more. Business Week polled 80 analysts and 89% were bullish, 8% were bearish expecting a decline of less than 10% and just three expect a decline of 10% or greater. Those kinds of opinions send us running for the hills - a perfect contrarian scenario for a market decline.
While money managers luxuriate together convinced the market is headed to ever-great heights, insiders are selling 8.4 shares for every one share purchased. They obviously know something that money managers do not know. At least for now they are not buying that we are shifting to a knowledge based economy.
Someone should pinch these analysts and ask them if they are aware that after six years wages are finally rising and labor is the greatest expense for corporations. It should also be noted consumers make up 70% of GDP, and that they are cutting back on spending. Thus, a drop in personal income due to inflation in spite of higher wages will cut into corporate profits.
As a result the market is overbought and overly bullish thus, we see a correction in spite of the sea of money and credit unleashed by the Fed and other private sources. When the tide turns and the lending dries up inevitably we will see lower prices.
You certainly do not want to admit it, but your government has turned you into a tax slave. Unfortunately computer databases have turned you into an economic slave. Banks and credit card companies have reams of data on you, which, of course, is readily available to our spying government. Solving that is simple, use cash for transactions, only using a credit card when you have to, and limit the checks you write to perhaps 10 or 15 a month. That definitely cuts down your available profile. If you have credit card balances or revolving credit, pay it off. If you can, pay off your vehicles. Except for a mortgage that should leave you debt free. That removes you from a system that has enmeshed Americans in a debt prison. If you do not use a credit card you can’t be tracked and you can’t accumulate debt. If you do not like carrying cash get a license to carry a concealed weapon that will bring you peace of mind and may save your life. If you receive checks from others, cash them for cash so they do not run though your account. Have a 300 lb. gun safe in your home for your weapons and for $10,000 in cash for emergencies, along with your gold and silver coins and ammunition. It’s not easy to move a safe that weighs 800 lbs. And most criminals who break and enter are not safecrackers.
You have to avoid the system that wants you in debt. That way the lenders and your government doesn’t have much of a profile on you. Nothing is private anymore. Banks and other lenders as a condition of doing business with you, demand you give up your privacy. Soon most everything will be RFID chipped so government can track your every movement. If you want to avoid the system keep your savings in gold and silver coins and take delivery. Then revert to using cash. You will end up giving government very little to work with.
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Confidence in the economy among corporate credit managers has apparently been slipping for quite a while. The monthly Credit Managers Index fell for the 5th consecutive month in December, and now stands at its lowest level since April 2003.
What’s more, on a year-on-year basis, 9 of 10 components that comprise the index fell, which is very important. The drop has been driven mostly be deterioration in the services sector, according to the National Association of Credit Management, who has conducted the monthly survey of the business economy from the standpoint of commercial credit and collections since January 2003.
The data bears out what we have said since last February, recession and a slowing economy. Seven of 10 components that comprise the service sector fell. This is where all the growth has been as well as new employment.
A CMI score of more than 50 reflects a view that the country is expanding, while a reading below 50 suggests a declining economy. On a YOY basis between last year and this year, the total CMI Index fell 3.6, from 58.3 to 54.7, as 9 out of 10 components fell.
On Wednesday the Federal debt spiked by $87.15 billion to a new record $8,680,224,380,086.18. This increased the national debt by 1%. If you notice they held the release for the new year.
We see the dollar at 70 to 72 or 55 to 59 before 2007 ends. That is based on the US dollar index USDX at 83.68. Below the surface of our financial markets and our economy lies a volcano that is ready to blow. The first 11 months of our current recession are over and the groundwork has been set for a tumultuous second and more severe segment of this recession. You must prepare as quickly as possible by eliminating as much debt as possible and investing as much money as is prudent into gold and silver related assets. This recession cannot be stopped even by lower interest rates and more copious amounts of money and credit. It is structural and it will cause Americans to lose a great deal of their wealth. You are facing stagnation and inflation, better known as stagflation. You are facing hyperinflation and a recession and ultimately depression. You have been warned – take action.
We continue to discuss the 14% rise in the euro to recent 20-month highs. Interesting, 41% of those in the 13-country Eurozone say they have trouble using the euro after five years of existence. The euro is an alternative to the dollar, but as we have pointed out for some time, the euro is not the answer. Gold is the answer - not the European Central Bank, and its 13-members, week after week sell 400 to 500 tons of gold a year. These central banks are headed in the wrong direction, and soon their economies will be headed in the wrong direction as well. As you can see the only real money is gold.
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GOLD, SILVER, PLATINUM, PALADIUM AND DIAMONDS
Gold came charging out of the gate Wednesday, up $7.60 and then el slamo, whammo. What happened! This time it wasn’t a fall in lease rates, it was a different attack. We discovered every time they used low lease rates that gold was attacked. They read our publication; they knew we knew what they were up too. So, it was back to the Working Group on Financial Markets – Exchange Stabilization Fund and the Repo Pool working in tandem. Drive the dollar up and the euro and pound down. Drive down oil and commodities. Attack gold and silver stocks first and then gold and silver by using derivatives and naked shorts on gold and silver. There you have it. That is what they did. It will last a few days and that is it, and off we go again. Isn’t it great having a corporatist fascist government?
The Illuminists had the Dow up 106, but they couldn’t hold it there. It was off 40 before the close and closed barely ahead, up 11 to 12,475. The S&P fell 14 Dow points and the Nasdaq rose 48 Dow points. Copper fell $0.22 to $2.65 under the elitist onslaught followed by corn off $0.20 to $3.70, wheat off $0.23 to $42.76, oil fell a whopping $2.73 to $58.32, gasoline off $0.07 to $1.55 and natural gas off $0.14 to $6.16. The CRB got hit for 8.54 taking it to 298.44. In the process they ran the dollar up killing the currencies. The euro fell $.0109 to $1.3161, the pound fell $.0225 to $1.9497, the Canadian dollar .61 to 85.33 and the dollar index, USDX, rose .71 to 83.68. Even yields fell with the 2-year Treasuries yielding 4.76%, down 4 BPS and the 10’s at 4.66%, down 6 BPS. What was done today was unbounded arrogance. Our government, the Fed, Corporate America and Wall Street could care less what we think and what the law is. With the help of the SEC and CFTC they do darn well as they please and continue to screw the American public. This will be a day of reckoning and if they need a hangman or executor I’ll gladly volunteer. The slight bright spot on the day was gold only fell $8.90 to $627.10. The barrage was terrific so it could have been lots worse. Better news was that – the February contract closed at $629.80, $-8.20. Spot silver fell $0.33 to $12.52, but the February contract only fell $0.26 to $12.67. As of last Friday, Goldman Sachs had a Tocom net short position of 29,186 gold contracts. The XAU fell 5.28 to 136.05 and the HUI sank 13.78 to 324.46.
On Thursday gold started off up $1.50, but was attacked again. Gold ended down $3.10 at $624.00 and silver rose $0.14 to $12.66. The February contracts showed gold off $3.60 at $626.20, silver up $0.13 to $12.80 and copper was $2.60, off $0.04. Silver reacted very well. Gold open interest rose 8,166 contracts to 353,494 as hedge funds bought and silver open interest rose 2,291 to 103,703 contracts.
We believe this is an all-out war on gold, silver, energy, commodities and the euro, pound and Canadian dollar. The Europeans are demanding a stronger dollar and they are getting it. The dollar index, USDX, rose .41 to 84.09. The euro fell again .0085 to $1.3082, the pound fell .0091 to $1.9487 and the Canadian dollar fell .34 to 84.96. Oil fell $2.73 to $55.59, gas fell $0.06 to $1.49 and natural gas fell $0.01 to $6.16. The 2-year Treasury yield was 4.70% and the 10’s were 4.61%. The Dow struggled all day ending up 6 to 12,481, S&P rose 16 Dow points and Nasdaq 18 Dow points. The XAU fell 2.48 to 133.57 and the HUI gave up 7.37 to end up at 317.09.
Louise Yamada was voted Wall Street’s best technical analyst from 2001-2004 in surveys by Institutional Investor. She has been right for 15 years. She now tells us that she sees gold over $730 this year and at $3,000 within 10 years. She says the metal’s inverse relationship to the dollar as a consistent reason to buy. She now is managing director at Yamada Technical Research and former head of technical research at Citigroup.
Gold may rise to $855 an ounce this year as the dollar extends its decline, reducing the appeal of dollar-denominated assets, according to India’s Sharekhan Commodities.
JP Morgan Chase says gold will average $678 this year and Merrill Lynch has forecast a $650 price in 2008. They are both looking for lower oil prices to reduce inflation.
The ECB member gold sale reported earlier that we suspected was Italy, was only an adjustment related to the refining of gold coins, which had previously been reported under other assets in the central bank in question’s account.
On Friday gold fit the same pattern as Thursday. Gold was up $1.50 three hours prior to the opening then unchanged at the opening. Then came the coordinated attack. We believe the whole situation was executed to strengthen the dollar. The attack on gold, silver, commodities and other currencies was made to complete the operation.
Gold closed the week down $18.90 at $605.10, after trading close to $600. Silver fell $0.54 to $12.12. The February contract in gold closed at $606 off $19.30, silver $-0.61 at $12.23 and copper off $0.07 at $2.54. Gold open interest fell 2,124 contracts to 351,370. Silver OI fell 832 contracts to 102,871.
Word is Treasury Secretary Henry Paulson of Goldman Sachs has consulted Robert Rubin on a range of issues, including dollar policy. The recent dollar rally is a result of that meeting. This is not the 1990s. The financial and monetary situation is much, much worse.
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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
