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US MARKETS

Our latest Fed Chairman Helicopter Ben Bernanke, a devoted Keynesian, has made his first move to bail out our crumbling financial system and particularly the banks and Wall Street. He has cut the discount rates to banks ½% to 5-3/4%. He now expects long lines to form at the discount window. The Fed has fed almost $200 billion into the system in the past two weeks and the CDO, ABS and commercial paper markets are still frozen. We believe another ½% discount rate cut will follow with another $200 billion in repos, CDO and ABS buyouts to follow as Ben leads us to the precipice of hyperinflation. This predicament, not of Mr. Bernanke’s making, will push Bush, Cheney and the neocons closer to attempting a war with Iran to cover up the failure of the financial system. They will tell the public the wars against terrorism were necessary because the Iranian Republican guards are terrorists. That will cover up monetary, fiscal and economic failure. We know the Illuminists do not want war with Iran and they want withdrawal from Iraq. Afghanistan is another matter due to the drug profits.

We now have $600 billion plus committed to the monetary band-aid that is supposed to keep the world financial system afloat. Our guess is $1.2 trillion will stop gap the problems for now if the banks re-lend on an 8 to 1 basis. That gives them $4.8 trillion and that will cover a multitude of sins. We do not expect all of it will go off at 8 to 1, we’d guess $3 trillion would do the trick. 

All of the world’s major central banks were in on the rescue injecting various amounts of money into the international financial system. They are all buried in CDOs, ABSs, and commercial paper. Now we can all have higher inflation together.

 Greenspan’s Folly will be with us for the next several years as the system continues to deteriorate. This bailout won’t stop the market from going down to 12,000 on the Dow. That will cause losses and under funding of pension commitments and bankruptcies and closings of hedge funds. Yes, in this scheme some are more equal than others. Yes, just like in Animal Farm. The NY Fed bought $38 billion in CDOs from Goldman Sachs, Bear Stearns, Merrill Lynch, JP Morgan Chase and Citigroup and they will pay 4% interest, not 5-3/4% like everyone else. These are the anointed ones.

Interestingly the Bank of England has not participated in the bailout and are set to raise interest rates soon due to a very over valued real estate market.

Then there are the derivatives. JP Morgan and Citicorp together have $105 trillion plus between them.

Then there is the massive liquidation of assets in the US by foreigners who see the dollar and the American economy in trouble. Then there are hedge funds that are being forced to sell and pension plans that want out. That is why you now sell the market into every rally and buy gold and silver related assets on any pullbacks. There are massive sellers in the market – some forced and some voluntary. This is a tide the “Working Group on Financial Markets” and the Fed cannot stem. We saw oil fall $8.00 a barrel and gold $20 on forced hedge fund liquidation.

If we are not at the end of the yen carry trade we are close. That takes over $1 trillion out of the international currency market flow. That will have to be replaced by central banks. That means the Bank of Japan won’t be buying lots of dollars and that means their account at the Fed won’t be buying as many Treasuries and Agencies as they have in the past. That constant demand for dollars will be gone, both from the Bank of Japan or from hedge fund speculators. As we said over and over if the Fed raises interest rates to save the dollar, the entire economy will collapse and the banks and Wall Street will suffer grievous harm as will the average American. If they lower rates, the dollar will fall like a stone, and all of the forgoing problems will totally manifest themselves. The Fed has been in a box since 2000, and they cannot get out and they have no hope of saving the system. That is why we tell you to get out of credit card, revolving, vehicle and all debt except your mortgage. Any money you have for investment has to go into gold and silver related assets. When you see the Fed and the ECB, the European Central Bank, absorbing and monetizing the banks and brokerage houses’, garbage debt such as CDOs, ABSs and commercial paper you know they and we are in deep trouble and that is what has happened over the past two weeks.

As you have seen the dollar cannot launch a strong rally back to 84. It moved up to 82 and on Thursday and Friday it fell again. If the Fed ever cuts rates everything will fall, especially the dollar, as gold and silver flies. We do not see that happening, but Wall Street does and they will be wrong again. It is far more important to save the dollar than the economy because if the dollar goes the economy will follow anyway. Thus, you may see a 1% total cut in the discount rate, but no cuts in the prime rate. The Fed will continue its bailout as will other central banks and they will also pour gasoline on the increase in money and credit fire. Unfortunately, no matter which way they go they and we are screwed. Sooner or later there will be a dollar panic. Our guess is in 2 to 3 years. In the meantime inflation will be 15% next year and higher the year after. People will clamor for $500 and $1,000 bills and eventually a loaf of bread will cost $15.00 or more. Get mentally prepared because that is where we are headed. Once the dollar collapses it will get even worse as gold hits $5,000 an ounce plus and silver $100 an ounce plus. This is how you will keep your assets and buying power together. This will be the seed money for the next generation. Those who do not prepare will be sorry.

The word on Wall Street is that Fed Chairman Bernanke should have secretly bailed out Bear Stearns and we wouldn’t have had what we are now experiencing. We do not agree. It would have happened anyway, sooner or later. We do not think Ben Bernanke is incompetent, we just believe he doesn’t really understand markets. Do not forget, this is all Greenspan’s Folly.

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GOLD, SILVER, PATINUM, PALADIUM AND URANIUM

Second quarter world gold demand reached 922 tons, up by 19% yoy with a dollar value of $19.8 billion, a gain of 27% in dollar terms yoy. The dollar value of gold in jewelry reached a record $14.5 billion.

In tonnage terms, India, which is the world’s largest gold market, achieved all-time records in gold jewelry and retail investment was 716 tons in 2006 or 27% of the world’s total. In the first half of 2007 it bought 528 tons, a massive increase of 221 tons or 72%, fueling a 297-ton increase in jewelry demand for jewelry and retail investment worldwide, from 1,183 tons to 1,480 tons. This all bears out our prediction of massive physical gold off take. This is something the Illuminists never figured on and it is destroying their plans for perpetual control of the gold price.

China increased by 41 tons to 184 tons or 11% of total purchases. Vietnam’s demand rose by 17 tons, a 54% increase. Middle East demand rose by 24 tons, Russia set a second quarterly record of 20 tons, a 27% gain yoy.

US demand fell 20 tons, off 15% in the first half of the year. Americans still do not get it.

Overall gold supply to market reached 1,664 tons in the first half of the year versus 1,734 tons yoy. Investment demand fell 5% to 130.4 tons from 137 tons. ETF investment was a negative 2.6 tons, versus a gain of 48.9 tons yoy. Industrial demand rose 2% to 116.5 tons in the second quarter. Total gold supply for the second quarter was 840 tons, down 7% yoy from 902 tons.

Monday had many plus signs early on. The Bank of Japan didn’t raise interest rates so the dollar was under pressure. The Dow was +53, S&P +35, Nasdaq +17 and the FTSE +76 Dow points. The CAC was +65 and the DAX +34. The yen was -88, the euro +19 and the pound +16. The 2-year was 4.20% and the 10’s 4.69%. Oil was -$0.84, gas -$0.07 and natural gas -$0.50. Gold was +$1.60, silver +$0.15 and copper +$0.05.

On Monday gold fell $0.80 to $655.50 and silver lost $0.02 to $11.71. Monday is usually a weak day for precious metals, but overall they look very strong. Wall Street is looking for a prime rate cut that isn’t going to happen. Bonds rose again on the speculation with the 2-year Treasury closing at 4.11% and the 10’s closing at 4.64%. That is down from 5.30% just a month ago. The Fed is driving short rates down to accommodate the economy and ease liquidity pressures. The situation is still grim.

Gold open interest fell 10,036 contracts to 329,717, another recent low. Silver OI fell 3,761 contracts to 120,186. The currencies were flat with the yen -.65 at $1.1496, the euro +.0012 at $1.3484, the pound +.0071 to $1.9881, the Canadian dollar up .59 to 94.78 and the USDX dollar index up .01 to 81.37 – more manipulation. How can the dollar rise when the country’s financial system is on the edge of oblivion? It is incomprehensible that more people are not howling about the blatant manipulations of all of our markets. In the case of the 2-year Treasury bill, it has fallen the most since 1987 as investor flee to what is perceived as safety. Yields dropped more than they did in 1998 during the LTCM crisis. There is a major move of sophisticated investors out of money market funds and into US Treasuries and other treasuries like those of Switzerland. Confidence is gone and it is going to get worse. The Fed added $3.5 billion in reserves via overnight repurchase agreements.

The big Tocom shorts reduced their short on Friday by 6,552 to 113,376 as Goldman covered 1,683 shorts to net 19,561. The same group reduced their shorts in silver by 370 contracts to 2,647. The XAU rose 2.77 to 132.13 and the HUI rose 6.46 to 312.65.

The Dow rose 42 to 13,121, S&P fell 4 and Nasdaq rose 24 Dow points. Oil fell -$0.93 to $71.05, gas fell $0.10 to $1.93 and natural gas fell $0.98 to $6.03.

Strong economies and stable prices in the Middle East region increased demand by 20% to 97.5 tons in the second quarter.

Tuesday early on was slightly lower. The Dow was -33, S&P -35, Nasdaq -30 and FTSE -34 Dow points. The CAC was -14 and the DAX -30. The yen was +59, the euro +.0003 and the pound -.0087. The 2-year was 4.02% and the 10 was 4.58%. Oil was -$0.31, gas -$002 and natural gas -$0.12. Gold was -$1.00, silver was -$0.20 and copper was +$0.06.

The Swiss Central Bank proposed to sell 250 tons of gold by September 2009. In August holdings fell CHF 917 million to CHF 31.81 billion in July. This implies they sold 35 tons. They do whatever the Illuminati tells them to do.

On Tuesday, gold rose $0.50 to $656.00 and silver fell $0.27 to $11.44. We saw the Henry Paulson interview on CNBC and he stated what is being done to assist the markets. That is the re-energized Working Group on Financial Markets. Needless to say, the host, Steve Liesman, ignored the admission that markets were being manipulated. Gold, silver, commodities and the bond and stock markets may be all over the place, but gold bullion held by gold exchange-traded funds, ETF’s, hit another record high as did sales in India, the Middle East and China, in fact, all over the world except the US, Canada and Europe. The big Tocom shorts cut their net shorts by 11,683 contracts to be net short 101,693 as Goldman covered 3,885 to net 15,536. The same group increased silver shorts by 28 to 2,675. Why would Comex raise margins on silver contracts? Of course, only to drive it lower. They will rise to $3,000 from $2,500 for non-clearing members and from $4,050 to $4,375 for customers.

On Tuesday, the Dow fell 20, S&P 15 and Nasdaq 76 Dow points. The yen rose .42 to $1.1439, the euro was -.0007 to $1.3463, the pound -.0056 to $1.9817 and the Canadian dollar -.81 to 94.06. The 2-year was 4.02% and the 10’s 4.59%. Oil was -$1.65 to $69.47, gas -$0.07 to $1.87 and natural gas -$0.16 to $5.88. Gold was up $1.70, silver was +$0.18 and copper +$0.06.

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-- Posted Wednesday, 22 August 2007 | Digg This Article

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