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US MARKETS

We still await Japan’s decision to raise interest rates. The longer they wait the worse inflation they are going to have. The minute they do raise rates you can be assured that the entire financial system is coming down. Besides money and credit being issued by central banks at a preposterous rate, the yen and Swiss carry trades are the only thing holding up the financial structure. Once we go down our guess is the US will renege on their debt and the 20 biggest banks will be nationalized. They will absorb the losses and expunge the debt. This is why you have to be in gold in the final analysis.

These are the reasons you have to be patient. We are in a gold and silver bull market. Gold and silver will move higher as inflation accelerates in spite of market manipulation. In a year to a year in a half maximum, the system will start to come unglued and that is when giant upward moves will take place. Interest rates are going higher and gold and silver higher with them, it’s when the Fed cuts short-term rates that all hell will break loose. Somewhere along the way they will try it and that will be the explosion that brings the house down. Prior to that we will see bond re-rating. The bond market is ten times bigger than the stock market and when those CDOs are finally marked to the market, bond problems will engulf the entire debt market. That includes all the derivatives as well. Leverage will be seen to be suicidal. Hundreds of billions if not trillions of dollars in value will disappear. As ratings fall selling will beget selling. The Bear Stearns episode is only the beginning of the beginning. What you are seeing in the currency markets as the dollar floats down is only a harbinger of things to come. Adding to the mayhem is the attitude of the elitists who have thoroughly alienated the Russians, Chinese and Venezuelans. That means lots of dollars and dollar denominated assets will be sold into the system. These are all the reasons gold and silver are in bull markets. You have no idea what an opportunity you are being presented with.

The rating agencies are starting to examine the CDO holdings of Asian banks. They are buried in dollars and many are in CDOs. They have bought dollars to manipulate their currencies to make them cheap so their exports will be cheap. In exchange they have falling dollar denominated assets and a falling dollar at the same time. The worst of all worlds. This is one of the weaknesses of rigging your currency. You are going to see forced liquidation. Holders of mortgage securities do not have any claim on underlying assets, only on the intermediate companies, which will declare bankruptcy, thus leaving the shills for lenders to pursue. This really is poetic justice that the manipulators get caught holding the bag. Unfortunately, we probably will not know immediately how much these banks lost because they will hide the losses and we will not see the damage for a year or two later. The picture won’t unfold quickly as it did in 2000 and 2001, after the dotcom collapse. It will be grinding loses most of which will be absorbed by central banks and there will be no accountability. You can also apply losses in all US dollar denominated assets. The dollar will depreciate 35% or more, and US stocks will fall 50% to 80%. The American public is letting foreigners absorb the debt and depreciation.

In finality, the conflict of interest between rating agencies and Wall Street is brazen. The hedge funds will take horrendous losses due to leverage, so we shall see what we see. Thus, they have been shorting the rating agency stocks because they know that S&P, Moody’s and Fitch may not survive after they finish fending off all the lawsuits that will be coming their way.

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As we mentioned earlier oil prices are in the $70 range because OPEC is holding back production. They have a wasting asset and they are receiving a wasting asset in payment. Thus, they must receive more dollars for their oil. That means more US inflation. The old assumption that higher oil prices would retard the economy is not valid. The strong growth of the past four years has not been impeded by high oil prices, so expect them to go higher as the dollar falls further. The demand for oil is there and growing, so oil will go to $100 a barrel in the year’s ahead. Since Russia’s Yukos was dismantled, the spectacular rates of output growth have collapsed. They are really not putting the resources in. Non-OPEC output countries will see flat production for the next five years and they will start declining in 2020. Global production has been 40 million barrels since 2003, and will likely stay at that level indefinitely as usage increases.

The dollar index is approaching 80 and a breakdown. It hasn’t been near this level since 1995 except for in December 2004. What is interesting is that the big commercial traders have gone long in a big way since 81.60 again. They, of course, are acting on inside information from our government. It will be interesting to see what the government has up its sleeve.

Bets in the options market against the S&P 500 Index have exceeded wagers it will rise by a 2 to 1 margin for a month, the longest since Bloomberg began gathering data in 1995. That is seen as a warning sign that the market is about to experience a 5% to 10% decline. The most successful managers expect a 19% decline by the end of the year. A 5% correction at Dow 14,000 is a Dow 13,300; 10% is 12,500 and a 19% correction would be Dow 11,340. We agree with 11,340 for openers.

The options market is a bell ringer, a wake-up call as the market outlook for corporate earnings is the worst since 2002, as we predicted it would be and we don’t see earnings improving much. Retail sales in June fell by the most in two years as credit card debt surged again. Home Depot has already cut its profit outlook, citing, as we predicted, a deepening housing slump. Shares of Hoffman Estates, Illinois-based Sears Holding Corp., the biggest US department store, fell the most in four years, after predicting a decline in profit of as much as 46%.

The open interest for puts was 10.4 million on 6/19, which was 2.24 times the number of calls, the most since 8/98. The figure is now 2.03. The ratio was 1.24 on 10/9/02 when the market rally began.

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GOLD, SILVER, PATINUM, PALADIUM AND URANIUM

As we predicted, over the past couple of weeks the consolidation period in gold and silver ended and prices are beginning to move upward. There has been favorable developments, such as oil prices in the 70s and a dollar that is about to attack 80 on the USDX. Those producing oil and denominating it in dollars want higher oil prices to offset their dollar losses and they accomplish that by producing less oil. Curtailed production is a defensive mechanism. Other major currencies may rise against the dollar, but all currencies are falling versus gold. Gold for six years has risen and the media and investors in the US, Canada and Europe have had little current interest. That is very bullish, because they command massive amounts of capital that will eventually be diverted from falling stock and bond markets into gold and silver.

The central banks have sold massive amounts of gold, but have been unsuccessful in containing the gold price. They do this because gold is real money, and Federal Reserve notes are not worth the paper they are written on. Anyone who says there is no manipulation is just plain dumb, or a member of the C.F.R. It is only a matter of time before the elitists are out of gold. The long-term appreciation of these metals is now set in stone.

The only reason the financial system hasn’t collapsed is not only are 18 of 20 major central banks increasing M3 by more than 14%, but the real culprit is the yen and Swiss franc carry trades. We expect the franc carry trade to end soon as the Swiss raise interest rates again and perhaps again. Japanese housewives and cabdrivers are selling yen to buy higher yielding currencies, a move that can only end in disappointment. Inflation is now over 4% in Japan and it is only a matter of time before Japan raises interest rates, the yen appreciates again and the speculators get decimated along with the US bond and stock markets. Everything comes to those who wait and are patient.

Many commentators refer to what is called a "Wall of Worry" in connection with the rise of a bull market, stating that all bull markets must climb a Wall of Worry on their way up.  So what is this so-called Wall of Worry, really?  I'll tell you what it is.  It is a wall of deception.  The Wall of Worry is a package of lies constructed by the reprobate pirates of Wall Street.  They have used this insider-trading scheme, which is referred to as a Wall of Worry but which is really a euphemism for fraudulent propaganda, to rip off the US public since the first day of trading commenced at the New York Stock Exchange.

Who controls the media?  The elitist, globalist, Illuminist, corporatist, fascist members of the cartel.  Who controls the government and all regulatory authorities?  The same.  Who controls Wall Street?  The same.  So the simultaneous control of the media, the government and Wall Street are the perfect ingredients for a never ending bilking and swindling of the gullible public using this so-called Wall of Worry.  The culprits are the same group of megalomaniacal whackos who control the media, the government and Wall Street.

Any Wall of Worry is constructed like the wall of a medieval fortress.  The walls and the surrounding moat keep the serfs out, while the lords and their servants have stairways and ladders inside the castle with which they can climb the walls with ease.  Whenever fundamentals indicate that a bull market is ripe to start in any financial sector, the elitists have the media disseminate fraudulent information intended to scare people away from investing in that sector so that the elitists can glom as large a portion of that sector as they wish at bargain basement prices.  Then little by little they lower the drawbridge, luring the public back to that sector and driving prices up wildly.  As the public goes into a feeding frenzy, the elitists slowly back out of the market, selling their positions at handsome, sometimes even exorbitant, profits.  The elitists then climb back down the wall and retire to their castle while they watch their serfs/victims pile onto the wall until it collapses as the market reaches its blow-off top, munching on mutton chops while they watch the serfs fall to their deaths on the rocks below.  For them this is great entertainment.  The fraud and insider-trading is of course never investigated because the elitists own the investigators.

The stock markets have now gone to the point where the drawbridge is wide open and the elitists are starting to climb down the stairways as the serfs pile in.  They have already concocted their exit strategy.  It is called Project Turquoise, a black pool of liquidity where big players can transact business with one another outside the public markets.  The excuse is that these large players can avoid being robbed by brokers looking to profit from inside information based on foreknowledge of large purchases and sales and that they can also get substantially discounted commissions.  But in reality, Project Turquoise is a slaughter house for what Wall Street calls "hogs," big, fat, stupid institutional traders like insurance companies, pension plans and non-insider banks and hedge funds.  Look at what happened, and what is going to happen, to all those "hogs" who purchased subprime ABS's, CDO's, credit swaps and like derivatives based on phony ratings!  Not a pretty picture!  Project Turquoise will be used so that the elitists can climb back down the stairs and retire to their castles without the serfs having a clue as to what is going on.  They will leave the walls as if they were wearing a cloak of invisibility.  The final crack-up, boom cannot be far behind.  Get out of the stock markets now before it is too late!  

Joseph Kennedy, who I once caddied for two summers, explained his "serendipitous" exit from the stock market by telling the "cutsie" story that he knew it was time to get out when his shoeshine boy started giving him stock tips.  Do you really believe that story?  If you do I have a bridge for sale in Brooklyn.  He was an elitist insider and he was told when to get out.  Incidentally, he also bought a lot of gold with the proceeds, and again "serendipitously" shipped the gold to Europe just before the government ordered the confiscation of gold from the public, obviously after he was told in advance that this is what the government was planning.  Most of the other elitists escaped destruction during the 1929 Crash in exactly the same way.  FDR, another elitist, then raised the price of gold in 1933, for purposes of setting the gold standard, from $20/oz. to $35/oz., giving his elitist friends a nice 75% profit after only 3 or 4 years.  Do you see how easy it is to make money when you're inside the walls of the castle?   

The precious metals and commodities markets are still in the Wall of Worry stage.  The drawbridge is still up.  Every day the elitists hit gold and silver and print media articles pronouncing the end of the PM rally.  Mind you that they create this Wall of Worry even as they themselves scarf up gold, silver and every variety of commodities like a bear eating honey from a beehive.  Do you really think it is just a bunch of ETF's, Indian women and Arab jewelers buying all that gold?  Are you that naive?  Whenever gold is sold at fire-sale prices, you can bet the elitists are right there, scarfing and glomming away like little children in a candy store.  Try asking Gordon Brown, the King of Fire-Sale Gold, who it was that bought all that gold at the bottom of the market from the Bank of England.  As it "shockingly" turns out, quite a bit of it was purchased by Baron Rothschild himself, the ultimate in elitists, of course.  He has already almost tripled his money in seven or eight short years, and will make quite a bit more before it is all over.  Not a bad return there, eh Baron?

           So do not be fooled by these elitists and their fraudulent, manipulated Wall of Worry.  The more gold and silver the public buys the better off we will all be when the Walls of Financial Jericho come tumbling down.  Be like the Kings of Wall Street and start getting your digs in now.  We will let you know when it is time to make changes to your holdings and when it is time to get out.  As the elitist FDR said, the only thing you have to fear is fear itself.  So go out there and start ringing the gold alarm so your fellow citizens are warned of the impending plunge into financial oblivion in time to do something about it.  Buy as much gold, silver and their related stocks as you can possibly afford.  Be the Paul Revere of monetary metals, metals that are supposed to be the only legal money allowed in our country according to our original Constitution as written by our Founding Fathers.  Destruction is coming!  Destruction is coming!  Save yourselves! Buy gold and silver!

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-- Posted Thursday, 19 July 2007 | Digg This Article