THE INTERNATIONAL FORECASTER

                                                 Wednesday - Mid Week 10_03_07_MW_IF

                                        P. O. Box 510518, Punta Gorda, FL 33951-0518

                        An international financial, economic, political and social commentary.

                                                 Published and Edited by: Bob Chapman

E-Mail Address:

International_forecaster@yahoo.com

CHECK OUT OUR WEBSITE

www.theinternationalforecaster.com

RADIO APPEARANCES:

To check out all of our radio appearances click on this link below:

http://www.theinternationalforecaster.com/radio.php

US MARKETS

What is interesting about today’s economy and financial markets is that most people believe they are normal. They think interest rates are always supposed to be low and that there should be endless money and credit available, that the Fed will back the economy no matter what and that we are always assured of a soft landing.

We have news for professionals and others, that is not the way it is and they are soon to find out that into each life comes a little rain. By any historical standard our markets are excessive the culmination of 15 years of monetary profligacy. Yes, it stretches back to 8/15/71, but we chose 1992 because it’s the year the purge of excesses should have been taken on. The elitists’ powers and their front man Sir Alan Greenspan would have none of that and they papered over money and credit by expanding them even further. We did not see any miracles over that period of time, only what is called financial innovation. The rigs like derivatives, structured products and finance unregulated are out of control. We have had one long period of monetary disorder that few have been aware of. We have had two major bubbles in just the past ten years. The first in the stock market and the second in real estate. Liquidity is still being created profusely by 18 of 20 major central banks and simultaneously we have a credit crunch among banks due to the fraud in the CDO market that is collateralized debt obligation market. This has all been accompanied by inflation of over 10% for the last four years of over 10% in the US and over 5% in the other countries. At the same time wage increases have been miniscule. In America, the Fed, Wall Street and the banking elitists do as they want to do. The result has been rising commodity, precious metals, consumer and asset prices. The longer this situation is allowed to persist the worse the outcome will be. In the meantime the economy becomes distorted in one long economic and financial maladjustment, which causes dramatic imbalance. Speculative liquidity, created by the fed and now other entities, creates a highly credit-dependent and unstable system. Bubbles can only be sustained by more and more money and credit, which is exactly what is going on right now.

We have just seen the results of wanton credit usage. The Fed sets the stage with outrageously low interest rates, the mortgage originators make loans that should have never been made, which are called subprime and ALT-A, the banks join in on the party, the Fed encourages it all via non-oversight and the investment banking community, assisted by rating agencies packages the financial toxic waste into fraudulently rated bonds and sells them to professional entities worldwide. As you have already seen this has created massive losses in the trillions of dollars and a credit crisis where banks won’t lend to one another due to a lack of confidence and trust and the lack of transparency by thousands of institutions. No one knows whose books are impaired with bonds that are being carried at par, that in fact are probably worth $0.25 on the dollar. The disconnect is papered over by the use of derivatives, sophisticated structures and leverage. This credit insurance is perceived to cover the shortcomings of the endeavor, when in fact we do not know whether it will work, because derivatives have really never been tested under duress. Derivatives have distorted our markets and we have yet to see if they will render our system totally dysfunctional. The system is already in serious trouble and where it will all lead no one knows, not even its creators. We are certain of one thing and that is to sustain the credit bubble economy will require ever-larger quantities of credit creation, more risk and massive additional inflation. We have already seen the credit market seize up, which has caused thus far terrible consequences in the commercial paper, CDO, ABS & MBS markets. The result has been a limited availability and in the commercial paper market virtually no credit availability for CDO or ABS backed credit and in new mortgages, a severe tightening in the new mortgage market. Business cannot easily finance production and inventory, and in housing resets cannot be financed nor new loans made exacerbating the fall in house prices. This is accelerating the real estate bust. We have yet to see the negative affects on business.

We also hear legislators and others talking about using Fannie Mae, Freddie Mac and the FHA to bail out CDO bond holders and borrowers who should have never had loans in the first place. The GSE’s are nothing less than pyramid schemes and are inherently unstable if not on the edge of bankruptcy. Trillions of dollars of unstable non-GSE debt instruments now permeate the system as well, while at the same time the GSE’s are incapable of orchestrating their market liquidity operations or getting their derivative holdings correct. The situation for Fannie and Freddie can only worsen and to use them to bail out jumbo, subprime and ALT-A loans is ridiculous.

It would be a mistake to enlarge Fannie and Freddie’s missions at this juncture. It would be nice to have Fannie and Freddie insure loans up to $625,000, but it is not practical and not financially prudent. As it is credit insurance in the form of derivatives is highly suspect. Many investors are trapped in illiquidity as a result. In fact, the proliferation of sophisticated leverage strategies created demand for financial products, none of which have been proven and present systemic risk.

What we have is trillions of dollars in suspect debt instruments and derivatives floating around the world. They have created unprecedented imbalances and poor allocation of capital, which are undermining the entire financial system. The only way the system can continue to function is by expanding money and credit endlessly. This puts stock and bond markets at great risk. They will, when they decline, push America deeper into recession. From here on out it is going to get very bad and your only real protection is via gold and silver related assets.

...

GOLD, SILVER, PLATINUM, PALADIUM AND URANIUM

Early Monday saw mostly pluses. The Dow was up 4, S&P +28, Nasdaq up 9 and the FTSE up 40 Dow points. The CAC was -30 and the DAX was +7. The yen was -.93, the euro -.34 and the pound -.56. The 2-year was 3.98% and the 10-year 4.58%. Oil was -$0.18, gas-$0.01 and natural gas +$0.02. Gold was +$4.00, silver +$0.03 and copper +$0.03.

In spite of the Swiss selling 113 tons of gold from June 15th to September 26th, gold prices moved higher.

They tried to knock gold down but couldn’t do it. Spot gold rose $3.80 at $746.90 and silver fell $0.03 to $13.69. Copper closed +$0.05 at $3.69. Another attempt to affect the value of the dollar was coordinated by the fed and the ECB President Jean Claude Trichet, who said the US government still has a strong dollar policy. As we know this is phony and just an attempt to shore up the dollar. The yen was -.90 to $1.15.70, the euro was -.33 to $1.4232, the pound fell .33 to $2.0437, the Canadian dollar rose .36 to 100.88 and the dollar rose .22 to 77.84. Oil fell $1.42 to $80.24, gas fell $0.06 to $1.98 and natural gas rose $0.18 to $7.05. The 2-year Treasury yield rose to 4.01% and the 10’s rose to 4.55%. The Dow in spite of more terrible news went up 193 to 14,088, S&P rose 182 and Nasdaq rose 237 Dow points. As we explained in Saturday’s issue the commercials and option writers are in serious trouble and in a week – if gold doesn’t go down – they will very seriously be tempted to cover their shorts. As we said, the gold cartel has lost control of the gold market and that can’t retrieve that control. Gold open interest fell 6,838 contracts to 436,927 and silver OI rose 916 to 117,643. We do not think $700 gold will ever again be broken in any meaningful way. Friday in the Tocom session Goldman increased their short position by 240 contracts to 11,697. The XAU rose 3.93 to 172.68 and the HUI broke out to 401, up 8.03 on the day.

There can be only one reason Switzerland sold one-half of their allotment for the next 27 months in just three months and that was to manipulate the gold price.

The IMF has kicked the dead cat again. Dominique Strauss-Kahn, who will succeed Rodrigo Rato as IMF chief a month from now said central bankers do not appear to appose sales of IMF gold, which they don’t have.

A Citigroup report by John Hill and Graham Wark, says the avalanche of central bank gold sales earlier this year was “clearly timed to cap the gold price. Central banks have been forced to choose between global recession or sacrificing control of gold, and have chosen the perceived lesser of two evils.” This will take the policy resolution to the credit crunch in the form of a massive, extended reflationary rescue, which will cause a new cycle of global credit creation and competitive currency devaluations.

Early Tuesday morning was a well-coordinated attack by our government on the foreign currencies, PM’s and the commodity complex. The Dow was up 19,S&P +14, Nasdaq +22 and FTSE +40 Dow points. The CAC was +42 and the DAX +41. The yen was +11, the euro -.62 and the pound -.15. The 2-year was 4.02% and the 10’s 4.56%. Oil was -$0.71, gas -$0.02, and natural gas +$0.04. Gold was -$14.60, silver -$0.43 and copper -$0.01.

            Tuesday saw the worst alternative of what we described on Saturday. The forces of darkness took the access market down and then clobbered London, which let to a $23.00 downside in gold during the session. That technically leads to gap filling. Gold closed off $17.70 at $729.70 and silver off $0.38 at $13.31. This was government subversion at its finest. You must understand that you are at the mercy at least for the time being of a corporatist fascist government. The re-energized “Working Group on Financial Markets” or better the latest invention called the “Counterparty Risk Management Group” has led another attack on our previously free markets. The general market news was dreadful but in the fascist world that means nothing. The discount window is open, banks borrow billions, and lend $8-$10 on each tranche of funds, thus there are plenty of funds to force the market higher as the end result becomes massive inflation, which the Illuminists tell us does not exist. The theft of our assets goes on unabated. The silver market is buried by market makers all covered by our government Very few in the markets do not know what is going down. The bottom line is the central banks again heavily sold bullion in order to allow the shorts to cover. The correction is over. The gold rally will now resume. Buy everything you can. You do not often get opportunities like this. Gold price suppression is paramount in the mind of the Illuminists. No other policy is important. Not even that of the US and world economy, nor anything else. Gold is the antithesis of all the conspiracy wants to accomplish on their way of world government and the suppression of all human beings on our planet.

The market in India was closed on Tuesday, which made the cartel’s work much easier. They are not dumb. Gold open interest rose 6,262 contracts to 443,189 and silver OI fell 51 to 117,592. On Friday there was 1.77 million ounces, or 17,712 contracts delivered which is large. The cartel shorted into this as the spec funds bought. This gold attack today allowed those shorts to cover.

The blatancy of what the government and central banks is going to become front-page news shortly. People, investors and pros are getting fed up with what is going on.

As we mentioned earlier, gold call option positions on Comex for December are massive at 136,481 contracts. That is equal to 13.5 million ounces of gold. The strike prices are from 740-800. There are 24,407 contracts open at $800, the largest for any strike price; 12,587 are at $750 and 15,835 at $700. There are even 6,831 at $1,000.00.

...

-- Posted Thursday, 4 October 2007 | Digg This Article