-- Posted Sunday, 26 August 2007 | Digg This Article

It’s with sorrow we have to report that your fellow subscriber Aaron Russo died, Friday August 24th, early in the morning. His valiant fight against cancer is over, but he has left a powerful lasting legacy. Aaron took the battle to the enemy and hurt them deeply. We are very appreciative of what he did for us.

US MARKETS

Brickell Avenue, the downtown Miami corridor where four developments will be completed in late 2008 are anticipating the condo inventory to rise from 5,348 to 122,299. That is a tall order considering only nine condos closed from 6/19 to 7/19. At that rate it will take 64 years to sell out the projects.

The basis for this massive building was low interest rates and lax or no oversight by the Fed. The lenders were just as lax and the lenders for individual loans allowed the unqualified to buy. Liquidity comes from Wall Street as well from out of thin air. Then there were the investment banks securitizing the mortgages in bonds known as CDOs, collateralized debt obligations. They collaborated with rating agencies to hoodwink professional investors in purchasing these CDOs by attaching a bogus AAA rating. This will turn out to be one of the biggest financial scams of all time. These CDOs were the only way to get rid of the riskiest tranches of subprime debt These CDOs were then dumped on mostly foreign buyers, which had to recycle their massive trade surpluses in dollars.

Our new ownership society, which reached 69% of the population, was accompanied by an astonishing rate of mortgage fraud, liar loans and collusion, as a result, this time, over the next at least 2-1/2 years 25% of 50% of these loans will end in foreclosure. The carnage has, as you know, spread into all phases of not only mortgages, but into all phases of lending. The Fed, banks and investment bankers knew as early as 2003 that the only way to keep the Ponzi scheme going was to hawk the toxic garbage to the suppliers of cheap foreign imports and oil, who were loaded with dollars and were anxious to dump them.

Back to Miami, which proves, if lenders will supply the money, builders will build. We once asked a builder in the early 80s recession why he was building under such negative circumstances. The answer was, “because that is all I know how to do.” In a related development Miami has run out of sand for its beaches, thus, the Army Corp of Engineers are being urged to expedite the authorization of foreign sand and for the American taxpayer to foot the bill. Some things just never change.

We are all aware of the collateral problem that is plaguing global markets and demands from self-avowed Wall Street experts that Fed Chairman Bernanke rescue the market by cutting interest rates and injecting massive credit into the market. The problem is not only the previously low interest rates and lack of oversight by the Fed. The so-called experts we see on CNBC never mention the fact that the Fed is increasing M3 at 13.2% already. Nor do they ever refer to the mind-addling amount of financial engineering done over the past 15 years. Ben isn’t cutting rates or unleashing the helicopters because he knows it won’t alleviate the problem. Sir Alan handed Ben a can of worms and he is grappling as best he can with this dogs’ breakfast. He knows the “street secret” is that not only has lack of regulation created derivative confirmation and settlement problems, but that securities of all types are failing globally because of excess arbitrage and pseudo-arbitration positions. There is a shortage of deliverable securities globally.

Securities in shortage command a premium. Those that have possession of the security, mostly banks and brokerage houses, benefit because they can demand a high cost to borrow the securities.

This is a major reason quants (quantitative analysts) have gotten squished. Their short positions rallied not only on short covering from aggregate portfolio liquidation, but also because their shorts were “bought in” due to new SEC regulations and increasing “street” back office fear about the burgeoning failures to deliver. Broker dealers are now required to closeout their fails within 13 days of a security becoming a threshold security regardless of when the sale or failure to deliver occurred.

Behind the scenes the elitists are trying to unwind the decade plus of excessive financial speculation fostered by Sir Alan Greenspan’s malfeasance. This includes carefully trying to de-leverage the system by reducing positions which can only lead to lower prices, delivery fails and exposure so that the Street settlement system is clean and functioning. That will take months to accomplish. The last thing that the Street needs is a policy, like rate cuts or massive liquidity injections, which increases speculation and exacerbates current risk, settlement problems and pricing issues.

The Senator Dodd (D-CT) meeting with Paulson and Bernanke was all political smoke and mirrors. The home of the hedge fund wants Fannie and Freddie to bail them out.

More....

 

GOLD, SILVER, PLATINUM, PALADIUM AND URANIAM

 

The ECB had one gold seller of 1.68 tons of gold worth 26 million euros. That is versus 2.81 tons in the prior week. As you know from old news the Swiss earlier sold 35 tons.

 

Tuesday Tocom big gold shorts increased their net shorts by 3,078 contracts to 104,771, as Goldman increased their shorts by 166 to 15,705 contracts. The same group increased their silver shorts by 472 contracts to 3,147.July saw more massive gold sales by Spain and Switzerland for 67 tons and in spite of this gold rose $17.00 in July.

 

The yen has recently been weakened again in the cartel's latest manipulation to support sagging markets.  As of 5:30 am EDT, Thursday, the yen is at 116.248 yen per dollar and 157.450 yen per euro, or about 2 and a half yen per dollar and 4 yen per euro weaker since Friday's close, about 2 yen per dollar and 3 yen per euro weaker since Tuesday's close and about 1 and a quarter yen per dollar and 2 yen per euro weaker since Wednesday's close. Note that Wednesday's Dow gain of 145+ points was due mainly to a weakening of the yen and this trend is likely to continue in the short term. A yen reversal will not only be bullish for stocks, but also will be very bullish for PM's and commodities.  If these yen exchange rates hold or get weaker, you can expect a big day for everything but bonds, which will get hit as money flows back to stocks, PM's and commodities. Bond rates will reverse and go higher, reducing bond prices and putting pressure back on the real estate markets, as longer term bond rates have not retreated to anywhere near the same extent as shorter term bond rates. Given the recent retreat in bond rates that has occurred as everyone flees equities in terror for what they foolishly think are safer treasury bonds, one would wonder just how much good a Fed funds rate decrease would do at this juncture. The dollar is also starting to drop as money flows back to stocks and as the carry trade starts to rewind. The body count from the most recent yen Death-Star detonation will be kept hidden from view for weeks or perhaps even for months just as in the LTCM debacle, so get ready for some heavy volatility ahead as the shoes start to drop in the not too distant future.  We suspect that the opening of the Fed's discount window was indirectly also a bailout for many hedge funds as well as banks. What used to be a disgrace has now become a free-for-all flow of credit to just about anyone who wants it and with a maturity 30 times greater than normal to boot, so you know that desperation has come to a head for the cartel as they try to cover the debacle which they themselves are responsible for creating. The Fed and the PPT are now the only things that stand between equity markets and a catastrophic disaster, as there is not a single fundamental factor that would draw anyone into equities at this point. The credit and equity markets, as well as the commercial paper, CDO, ABS and junk bond markets, are all in vapor lock otherwise. Most importantly, if the Fed funds rate is not decreased at the Fed's next meeting in September, you can expect already flaccid equity markets, which now fully expect this to happen because the Fed has filled them with this unlikely hope, to take the final plunge into the abyss. The Fed will probably just lower the discount rate again, but this will not satisfy the markets. Gold futures open interest has continued at very low levels with a total of 330,204 contracts as of Tuesday's close. So it should be clear to all that the cartel, in a state of stark, raving fear, is attempting to avoid being overextended in shorts when the fall rally kicks in. By the way, gold de-hedging is accelerating, and has set a new record high for the second quarter with a total of 5.2 million ounces of de-hedged gold, lead by Newmont and Lihir, who together contributed 3.5 million ounces to the 5.2 million ounce total. Soon gold and silver will both soar toward the heavens while everything else plumbs the depths of hell.

 

May is the operative word. As we all know Goldman Sachs is a main cog in the Illuminist structure. Goldman said, “The dollar “may” decline to a record low against the euro in the next six months because US economic growth will slow, forcing the Fed to cut interest rates.” We have been of the opinion that the elitists would save the dollar, but from what Goldman says that is not the case. They are telling us it’s save the economy and not the dollar. If they are correct gold and silver will rise substantially. A recent event makes us seriously consider their opinion and that is on the Tocom they have the lowest short position in 1-1/2 years, which would indicate they see higher gold prices. We are unable to see their Comex position because Comex makes that a secret, but we do see the COT report on the commercials and at this writing the commercials continue to cover their shorts. If they continue to reduce their core short position, it is a sure sign we are going to see a major rally. Remember, they are working with the elitists.

 

Friday was the conclusion of one of the most pathetic weeks for US stock markets in recent history.  The Dow gained 300 points, so you might think that this was a good week, right?  Wrong.  Look at the cost of those 300 points.  The Fed pumped in hundreds of billions of dollars in credit and liquidity over the past week, which when magnified through the fractional reserve banking system used by the Ponzi-Scheming central banks, amounts to well over a trillion dollars (yes, that is trillion with a "t").  To give you an idea of how much a trillion dollars is, consider the following:  The average Dow component sells at about 55 dollars per share.  One trillion dollars would purchase more than 18 billion shares of Dow-type stocks.  Eighteen billion shares is seven times the total number of shares traded on the entire NYSE on Friday.

Now let's conservatively assume that one trillion was added in the form of credit and liquidity.  That is three and a third billion dollars per Dow point, making this latest monetary manipulation by the Fed the most ineffective in stock market history as we march on toward hyperinflation.  Mind you that the weakening of the yen alone this week by about 2 and a quarter yen per dollar and a liquidity-gushing 5 yen per euro would have sent a healthy Dow on a 300 to 500 point upward rampage without a single dollar of credit or liquidity being added by the Fed.  The kind of money that was thrown around this week would have sent a healthy Dow tearing past 14000, with 15000 looking very feasible in the near future.  Instead, all the cartel got was a stinking 300 Dow points, with most of that coming from direct intervention by the PPT.  The rest came from suicidal carry traders who are apparently addicted to the carry trade like crack addicts are addicted to cocaine.  Perhaps they are crack addicts.  One certainly would have to wonder based on their insane foray back into equities out of low-yielding treasuries.  What have we said over and over again, ad nauseam:  Never chase a yield!

 

This move out of treasuries sent the dollar to the woodshed as the USDX, also under pressure from the pound and the euro whose central bank managers are likely to raise their funds rates in the near future as the Fed considers lowering theirs, tanked a whopping .478 points to close at 80.667, well below the 81 support level.  Gold naturally benefited, along with silver, oil and other commodities as some of the more intelligent traders decided to invest some of their newly found liquidity into solid assets like PM's and commodities, as well as PM stocks, the only true safe havens under the current horrifying market scenario.  Gold went on a $9/oz. tear from 660 to 669 before closing at 667+, up 11 for the week, while silver ripped upward by $.28/oz., closing at 11.93, up .20 for the week as it continues to mirror gold.  Demand from Indian bargain-seekers has already started to kick in.  Demand for gold during the Indian wedding season is going to eat the cartel alive.  Incidentally, the XAU and HUI, which closed at 139.43 and 324.99, respectively, had gains on Friday that were almost twice that of the Dow, the S&P 500 and Nasdaq.  For the week, the XAU and HUI gained 7.78% and 6.14%, compared with the Dow's measly 2.29%, as traders are finally starting to wise up about where they should be putting their money.  This must have caused the members of the cartel to blow their collective corks!

 

The cartel will now puff the stock markets up as best they can, installing shock absorbers to dampen the effects of continuing bad news which we can assure you is on the horizon on account of the Yen Death-Star detonation and ongoing CDO contagion.  The cartel is now using stock market manipulations to support the dollar and to hit gold.  They are using the flight to safety in treasuries and cash to boost the dollar and suppress gold by hitting the stock markets with yen manipulations.  So get ready for some volatility as the fall rally commences.  They are taking terrible chances now in their desperation to stop gold from sounding the alarm.  If they hit the already anemic stock markets, they may lose control and send them into financial oblivion.  And if they then try to bring the stock markets back, the equally anemic dollar might get hit so hard as money flows from treasuries back to stocks that it may plummet well past 80 before the cartel can manage some damage control.  Eventually traders will get sick of all this BS and will invest exclusively in PM's and their respective stocks, which collectively will then shoot to the moon.

 

*****

 

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-- Posted Sunday, 26 August 2007 | Digg This Article

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