SATURDAY, APRIL 21, 2007

04-07-#2-IF

THE INTERNATIONAL FORECASTER

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

          Now hear this! What we are about to tell you comes from deep within the bowels of the Illuminati. This information runs parallel with what we have been forecasting in our issues of the IF.

          In February, via an internal memo, the Carlyle Group said they see another 12 to 24-months or more of “excess liquidity,” which will drive further profits and growth and that the current liquidity environment cannot go on forever; and, that the longer it lasts the more money our investors will make; but also that the longer it lasts, the worse it will be when it ends”

In the missive it was stated that Carlyle’s fabulous profits were not solely a function of their investment genius, but have resulted in large part from a great market and the availability of enormous amounts of cheap debt. In fact, there has been and is so much liquidity in the world financial system that lenders, even their own lenders, are making very risky credit decisions. This sea of money and credit has allowed deals to be done that could never have been done otherwise.

They do not expect the Fed to reduce interest rates anytime soon.

          What could bring this global liquidity to an end? Just that business would diminish their borrowing or could it be higher interest rates? Could it be a terrorist attack; $100 per barrel oil; trade protectionism; the absorption of excess skilled labor into the global economy; the US elections; Russian energy policies; a multi-billion dollar bankruptcy; a tightening by the Bank of Japan or the Fed; an end to the yen carry trade as a result; or perhaps the collapse of several hedge funds or a derivative collapse? All are possible and at least one is probable.

The strategy should be to take lower risk deals and earn lower returns rather than higher risk deals at only small incrementally higher returns. We should redouble our focus on deals with downside protection, asset coverage, multiple and early exit paths, strategic partners, debt pay down, government protection, consumer needs, controllable capital expenditures, defensible market positions, etc.

Carlyle is being careful because they know what is coming, just as we have been telling you here in the IF. Carlyle is the insider. What we have been busy doing for years is figuring out what these elitists will do before they do it.

This is exactly what we have been forecasting. If we and Carlyle are correct, we can expect more than ample liquidity until February of 2009. During the year to 1-1/2 years that follow liquidity will decline and inflation will diminish. After three months of declining liquidity or declining use of liquidity we will know it is time to sell all assets except gold bullion coins, quality gold shares and for those of you who have to have some liquidity, Swiss francs.

...

Now that foreclosures are going wild lots of crooks are defrauding homeowners. Here are some tips. Don’t pay upfront fees to any person or organization promising help. Don’t sign anything without have an independent lawyer review it. Seek out accredited financial counselors, using lists such as those kept by the Department of Housing and Urban Development. Wild rescue offers that are too good to be true are just a scam.

This week the Supreme Court stepped into the subprime lending crisis with a potentially far-reaching ruling that limits the power of individual states to regulate mortgage lending. The elitists have to control everything in our lives.

The Supreme Court is allowing banks to offer new terms on mortgages in violation of the law.

This will have a big impact on the ability of states to act independently on predatory lending and throws the spotlight on federal authorities.

The Consumer federation of America said, “This is really disappointing news, it could work to the detriment of consumers.”

Applications for mortgages fell for the 5^th straight week as ARMs fell to 18.1% of applications, the lowest since 7/03. A year ago they accounted for 30%. Refis were 2.5% lower wow, but they were up 10% yoy. Refi apps fell 0.3% and accounted for 44% of applications. The volume of loan applications to buy a home fell 4.2%, but purchase loans were down 3% yoy. US home sales are off 5.5% yoy. The average 30-year fixed rate mortgage rose from 6.16% to 6.22%, the highest in nine weeks. The 15’s rose 1 bps to 5.92% and the one-year ARMs rose 1 bps to 5.89%.

US foreclosure filings rose 47% in March yoy. That was 149,000 as California’s filings rose 31,434. Nevada and Colorado had the largest percentage gains. Those making late payments are at a four-year high and the failure of 55 subprime mortgage companies has tightened the supply of money for lending. Nevada’s foreclosures were triple yoy. That is one foreclosure for every 183 households, which is four times the national average. Colorado’s rate was one for every 292. Nationally it was one of every 775. California had 6 of the 10 metropolitan areas with the highest foreclosure rates, Stockton being the highest. The others were Vallejo-Fairfield, Modesto, Sacramento, Riverside-San Bernardino and Bakersfield. Greeley, Colorado and Detroit and Denver were also up near the top.

...

Investors poured more than $60 billion into hedge funds in the first three months of the year, or nearly half of the record flow of $126 billion that flowed into private investment pools for all of 2006. This is an unregulated craze that is going to end in tragedy. The money is flowing out of the stock market into hedge funds and back into the market at 100 to one. A few major mistakes will have serious repercussions. Pensions are flocking into hedge funds in a big way and we see those decisions as tragic mistakes. If we are right there will be little left for retirement.

This week the Dow gained 2.8% to a new all-time high, S&P rose 2.2% and Nasdaq rose 1.6%. Despite gold bullion’s $6.00 advance, the HUI fell 2.3% as our government continued their manipulations.

Freddie Mac posted 30-year fixed rate mortgages down 5 bps to 6.17%, the 15’s fell 2 bps to 5.89% and one-year ARMS fell 2bps to 5.45%. The MBA purchase applications index fell 4.2% this week and down 2.5% yoy as dollar volume fell 2%. Refi apps fell 0.3%, but dollar volume rose 36.3% yoy. The average new purchase mortgage declined to $235,000 and the average ARM increased to $393,800.

Bank credit declined $4.4 billion to $8.410 trillion. Securities credit fell $4.4 billion. Loans and leases were relatively unchanged. C&I loans declined $5.6 billion while real estate loans jumped $14.8 billion. Consumer loans were up $1.7 billion, while securities loans declined $4.3 billion. Other loans fell $6.6 billion.

M2 jumped $17.7 billion and narrow money expanded $177 billion ytd or 8.7% annualized, and $460 billion, or 6.8% over the past year.

Total commercial paper declined $15.1 billion to $2.035 trillion, with an ytd gain $61.1 billion, or 10.1%. CP has increased $345 billion, or 20.4% yoy.

Asset backed securities (ABS) issuance rose by $12 billion. YTD total ABS issuance of $209 billion is now running slightly ahead of comparable 2006. At $11 billion ytd home equity ABS is about 27% behind last year’s pace. YTD CDO issuance of $101 billion is running 23% ahead of comparable 2006.

Fed foreign holdings of Treasury, Agency debt rose $6.4 billion to a record $1.916 trillion, with an ytd gain of $164 billion, or 30.4% annualized. Custody holdings, for other foreign central banks, expanded $311 billion yoy, or 19.4%.

The dollar index fell 0.6% to 81.45.

Gold for the week rose 0.9% to $691.55, while silver slipped 1% to $14.00. Copper was up 2.4%. June crude fell $2.22 to $64.11. May gasoline declined 1.9% and natural gas fell 5.4%. The CRB fell 1.8% and the GSCI fell 2.2%.

There are $2.2 trillion in subprime and ALT-A loans out there, not $1.3 trillion as described by the experts and our government; 50% will go down in flames. Fannie Mae and Freddie Mac are both on the verge of bankruptcy, so they will bail out the failures, not on your life.

The experts talk of $25 billion in losses in CDO’s. We see losses 20 times that figure.

...

GOLD

Kazakhstan produced 8.8% less gold and 6.4% less silver in the first quarter.

On Wednesday spot gold closed at $688.50, up $0.50 and silver fell $0.03 to $13.96. The June gold contract rose $0.80 to $693.30, silver fell $0.04 to $13.98 and copper rose again $0.06 to $3.62. After the London a.m. fix of $690.40 it was pressured all day long, but not successful pressure. The Indian government is going to let the rupee appreciate and that makes gold and silver more attractive to Indians. Tocom shorts cut their shorts a large 9,003 contracts to 91,312. This is a very low short position. Goldman covered 1,343 shorts taking their position to 21,676. This tells us gold is ready to fly. In silver the same group covered 35 contracts to net 4,647. The XAU lost 1.25 to 145.72 and the HUI fell 3.10 to 361.99.

         On Wednesday the Dow rose 31, S&P 9 and Nasdaq fell 40 Dow points. This market could be topping again. The yen was up .31 to 118.62, the euro up .0018 to $1.3586, the pound was unchanged, the Canadian dollar was up .21 to 88.68 and the dollar index fell .11 to 81.50. Oil finished $-0.11 to $63.13, gas rose $0.03 to $2.08 and natural gas fell $0.8 to $7.50. The 2-year was 4.64% and the 10’s were 4.65%.

On Thursday four hours prior to opening most everything was weak. The Dow was off 61, S&P -64, Nasdaq -67 Dow points. The Nikkei fell 295, FTSE was off 70 Dow points, the CAC -45 and the DAX -80. The yen was +.68, the euro -.0031 and the pound -.0089. Oil was +$0.01, gas +$0.2 and natural gas +$0.02. The 2-year was 4.62% and the 10’s were 4.63%. Gold was -$2.70, silver -$0.10 and copper -$0.11.

As soon as the commodities and Forex markets opened in New York the onslaught against oil, currencies, commodities, silver and gold began and the cartel attempted to keep the stock market from falling. It was painful but it could have been worse.

On Thursday, gold lease rates fell from .20% on Tuesday to .13% over the past two days, indicating that the gold suppression cartel, the US Treasury and the central bankers are selling more physical gold. That is probably because their IMF gold sale ruse didn’t work. We now understand why the yen rose from 119.85 to 117.62 to close at 118.38. That is to frighten the specs into cutting down long gold positions and dumping some of their short yen positions. When they borrow yen they are essentially short. They have to cut leverage as the yen rises and that means holding a long gold position, not adding to it and perhaps selling it. If this is taking place and the cartel is a physical seller and they have the commercials selling as well, there is short-term downward pressure. As we said earlier the cartel hit the energy complex and commodities as well. This was a well-coordinated attack by our government on supposedly free markets. Their day will come and we will volunteer to be the hangmen. Not missing a beat they hit the XAU for 3.40 to close at 142.32 and the HUI fell an incredible 9.26 to 352.73. Welcome to corporatist fascist America.

...

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