THE INTERNATIONAL FORECASTER

Saturday 10_07_1_IF

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An international financial, economic, political and social commentary.

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US MARKETS

We are sure all of you are anxious to know that the numbers of millionaire households globally grew by 14% in 2006 from 2005, and now control a third of the estimated $100 trillion in wealth. The 9.6 million households, comprising 0.7% of the world’s households, now control $33.2 trillion. Half are located in the US and Canada, 25% in Europe and 1/5th in the Asia-Pacific region.

In non-wealthy households, defined as those with less than $100,000 in financial assets, declined from 2001 to 2006. But, assets held by households with more than $100,000 climbed from $51.4 trillion to $84.5 trillion during the same period. The richest 0.1%, those with more than $5 million in assets under management own 17.5% of global wealth.

Planned layoffs fell nearly 10% in September as the slump in housing continued to hurt payrolls. More than 1/3 of the cuts of 71,739 came from mortgage lenders, construction firms and real estate firms. Thus far this year, about 1/6th is directly related to a collapsing housing market.

IMF data says it is mostly central bank flow of funds that is keeping the world economy afloat despite all the recent attention granted to sovereign wealth funds the central banks of the world’s emerging economies accounted for $320 of the world’s 340 billion in reserve growth in the second quarter and $283 of $303 billion in the first quarter. In the end central banks are financing the entire US deficit.

Twenty-seven percent of hiring managers said they planned to increase their staffs in the last three months of the year, down from 32% who said they expanded their payrolls in the third quarter and 41% in the second quarter. The job market has weakened measurably since the spring and will weaken further through the end of the year. Six percent said they expected to cut staff down from 9%, 63% will leave there staffs as is.

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The Street is betting the FOMC meeting this month will bring lower interest rates. That is based on lower economic numbers, a continuing credit squeeze at banks and Greenspan’s comment that the real estate crisis and house prices will fall a lot further than people think. Cheap money is now history. The days of big leveraged buyouts are over because the CLO market is dead. Banks won’t lend to each other for more than a week. The current situation is more systemic than the crisis in 1998. It effects far more institutions and will have a far greater impact on the global economy. Those who believe we will get a recovery as in 1999 are mistaken. We are facing a property collapse and hyperinflation. This is also worse than October 1987. This time the dollar has hit record lows and gold and silver are rallying in spite of official suppression. This is January 2001 all over again or October 1929. The US is the biggest debtor in history with external liabilities reaching 35% of GDP. Foreigners are not buying our Treasury paper and that means the Fed will have to buy the bonds, monetize them, and we will have even more inflation. Dropping interest rates won’t work – only a purge will and the elitists do not want to face that. Thus, they will inflate until they cannot anymore.

In a story reminiscent of the tall tales about Paul Bunyan and his blue ox, "Babe," the cartel arranged for the greatest phantom creation of nonexistent jobs of all time, and no one believed them.  Stocks rose anyway thanks to the PPT's weakening of the yen, with the Dow gaining about 92 to close at 14,066.01.  Stock market traders can kiss their derrieres goodbye as this means rate cuts are not very likely in the near term, so the cuts they have priced in may never happen until much later.  Don't worry yet though, because before the stock markets crash again in a cartel-orchestrated carry trade unwinding aimed at forcing liquidations of PM positions held by large specs to cover margin calls, these markets will be run up by a weakened yen to flush out yen calls and stock index puts purchased by large specs to protect their PM positions, and you can take that to the bank.  We can already see them setting this up to happen just before the expiration of October options.  This is how every gold rally this year has been stifled by the cartel.  It is their MO.  Always remember that gold suppression is JOB ONE at the Fed, and the cartel went all out to whip up another jobs phantasm that would have made Pinocchio's nose grow into a telephone pole.  In Wednesday's IF we wrote, and we quote: "You will likely get some help from Friday's upcoming jobs report which should put an end to the dollar's dead-cat bounce, but remember that our government creates jobs out of thin air, so be ready for a disappointment if it comes."  Well come it did, and as we recommended, the currency and gold markets were ready for the beyond-belief jobs report, with gold and silver both gaining and the dollar dropping in an almost immediate reversal of initial dollar gains and PM losses that occurred just after the report came out.

For the totally gullible and monumentally naive among us, the government would have us believe that non-farm payrolls gained 110,000 jobs last month, and they even had the gall to revise the minus 4000 jobs for August to plus 89,000.  The Fed finally came to the dollar's rescue, but they had to lie through their teeth to do it, and the pros don't believe them.  Everyone is sick to death of the colossal falsehoods that are thrust at us daily by our government which lies pathologically, and will now move toward trading activity based on reality and ignore government statistics.  Commodities traders could not be happier as they now have the perfect excuse to cause commodities to soar based on our now apparently "vibrant," "no-recession-here" economy, so inflation will continue unabated as a deluge of money and credit drowns the economy in an attempt to break the credit-crunch and as inflation already in the pipeline comes home to roost.  Perhaps even more incredibly, and despite the supposed job gains, the unemployment rate rose to 4.7% officially, which is yet another totally bogus statistic.  Our subscribers know that the real rate of unemployment is now around 15%.

In another twist, the government claims they "accidentally" left off government jobs in the previous month's report which is why the number turned out negative.  So, does that mean that the Fed will now take the rate cut back, or does it mean that they left these government jobs out intentionally to justify a big rate cut to save their Wall Street buddies?  We'll let the reader decide.

If the truth were known, and the phantom jobs created by the birth/death model were removed, we would have had negative job growth for virtually every month over the past year or more.  If you added in the hundreds of thousands of illegal aliens who have lost their construction jobs, who are not counted in labor statistics, the job situation would be even more negative.  You might also note that although many illegal immigrants send some of their money home, a good portion gets spent here in the US and this is bound to have a very negative impact on communities that have foolishly become heavily dependent on the cheap labor provided by, and the consumer spending of, illegal aliens.  The southwest especially will get creamed by this illegal alien unemployment situation, which is what they get for exploiting these people for decades.

We ask how there can be any job gains whatsoever what with constant outsourcing and off-shoring of jobs, businesses that are frozen in place due to a deadlocked commercial paper market, banks, investment banks, hedge funds, bond brokers and stock brokers ripped by an ongoing CDO/ABS/MBS/CP/ABCP/SIV debacle of unprecedented proportions which threatens to take down the world economy and financial sector, record losses and layoffs in the automotive industry, an ever-shrinking and now virtually non-existent manufacturing sector, a terrified transportation sector which is being torn to shreds by a relentlessly rising price for oil and fuel, cutbacks in all types of employment due to rising business costs caused by runaway inflation and a tanking real estate market that is devastating our economy with colossal employment losses in construction, real estate sales, mortgage origination, banking, title insurance, home inspections, home appliances, hardware and building supplies and who knows what else as that ripple quakes through our economy.

And of course you never hear about underemployment where people lose $25/hr. jobs and pick up $10/hr. jobs in slave labor camps, which the government calls the service sector.  Heaven forbid that we should dare to count the hundreds of thousands out of work who have lost their unemployment benefits and have given up trying to find a decent paying job in our increasingly decimated economy which has been flooded by slave labor in the form of illegal immigrants who our government has intentionally let in to line the pockets of big business which chews them up and spits them out while our citizens live in poverty, unable to compete with people who live 20 and 30 to a house and whose home countries have comparably low costs-of-living, allowing for a much lower living wage level.

Welcome to our new corporatist fascist country, the new United Goldilocks Matrix where the sheople sleep in their pods while the government creates a fantasy world where everything always seems to turn out just right, while in reality the sheople are being eaten alive by the Big, Bad Inflation Wolf and they don't even know it, because they have been given body-numbing anesthetics in the form of whopping government lies about economic statistics like the Jack-in-the-Beanstalk story we got today from the Bureau of Lying Statistics.  You may have noticed our many references to fairy tales, because that is the picture of our economy that the Illuminists and their bought and paid for dingbats, which some refer to as our mainstream media, present to us - a fairy tale.  As people are about to find out, the Cinderella story presented by the idiots and morons in the media and by our tall-tale-telling government will soon turn into a Grimm fairy tale.

Well, the large specs did us proud again this week.  In fact the message they delivered to the cartel on Friday made our week.  The arrogant cartel of course thought that PM's would buckle and that the dollar would soar on the much-better-than-expected jobs report.  They were hoping upon hope that this would allow them to get out from under the commercial-short-annihilating, mountainous wall of shorts which they created in a futile attempt to stop gold, the size of which was accentuated by yet another all-time high in gold futures open interest set on Wednesday with a total of 443,912 contracts.  Boy, were they in for a surprise!  After digesting the preposterous, egregious lies about jobs data, gold bared its teeth in disgust and lashed out at the cartel, striking its arch foe with a reverberating backhand that knocked its teeth out and left it seeing stars.  When the jobs data hit, gold was trading in the 736-737 range, silver in the 13.39-13.40 range, and the spot USDX in the 78.35-78.40 range.  The data initially took gold down to the 727-728 range, silver down to the 13.23-13.24 range, and the spot USDX up to a lofty 78.819, all things considered. Then something very strange and wonderful happened. Everyone paused and said, hey, wait a minute, what on earth are we doing?  We all know these statistics are being made up by the BLS as they go along like they were writing some fiction novel.  Are we out of our minds?  Are we going to cave in to the cartel based on a bunch of ridiculous hogwash made up by a bunch of thieving reprobates?  No freaking way!  After this stunning revelation dawned on traders, gold went ripping like it was shot out of catapult, rocketing to 744 before settling in at 741.30, UP 4.20.  Silver did the same, launching itself up to 13.48 before settling in at 13.38, UP .02.  The spot USDX plummeted, skydiving to close at 78.308, DOWN .173, and DOWN a whopping .511 from its intra day high.  Incidentally, open interest on the USDX has been at the very lofty 39000+ level for 11 consecutive trading days and they have not even managed to attain 79 again before faltering in yet another failed dead-cat-bounce rally.  So much for the best-laid plans of cartels and men.  The XAU and HUI vaulted forward also, pressing up against their all-time highs, closing at 171.27 and 393.99, respectively.

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-- Posted Sunday, 7 October 2007 | Digg This Article