THE INTERNATIONAL FORECASTER

SATURDAY  112407(7)_IF

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

An international financial, economic, political and social commentary.

Published and Edited by: Bob Chapman

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US MARKETS

The consumer started cutting back in February of 2006. That is when our recession began. It began to manifest itself a year ago as weakness showed up in manufacturing. That weakness is now more obvious. The recent consumer confidence figures tell us the real estate collapse, the lack of real estate equity cash out, the results of free trade, globalization, offshoring and outsourcing and the credit crisis are all simultaneously taking their toll. Next comes the stock market collapse. That tells you all you should be out of revolving debt and long gold and silver related assets.

This recession will not be sector by sector. It will be all encompassing simultaneously. Consumer spending and borrowing will not hold up this time, everything is going into the tank. Twenty-five years of ‘shop until you drop’ is over. 

That 70 to 72 percent of GDP that came from consumption will drop to the long-term norm of 64.5% and will eventually drop much lower.

The fuel to keep consumerism on the march was easy, inexpensive credit. That game is over. We see the coming recession/depression as deep and long lasting, perhaps to 2012 or longer. This time it will be a replay of the 1930s and perhaps worse. Initially we see a minimum 20% decline in housing from here and a $400 billion reduction in spending over the next two years, or a reduction of 4% of income. This is the most conservative estimate possible.

The dollar will fall to 40 to 55 on the USDX, the dollar index. It is currently about 75. That will help exports, but it will only increase GDP about ½% according to the B.I.S. Luxury purchases domestically will be hit, as well as autos and other big-ticket items as well as discretionary spending. It should be noted that import prices will rise 25% or more for a reduction of $200 billion in imported goods. Retailers will be hit hard. We are going to see five bad to very bad years and perhaps more. Get out of debt and get gold and silver related assets.

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GOLD, SILVER, PLATINUM, PALLADIUM AND URANIUM

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Gold was up against all currencies early Friday morning except against the yen and the Swiss franc, both carry trade currencies, as the cartel continues to unwind the carry trades to hit gold.  Protective derivatives are a must to survive the coming onslaught as the cartel will stop at nothing to slow gold down, risking a 1929 scenario that may well backfire on them as everyone may turn to gold in the coming onslaught as the losses mount.  The dollar has gone into free-fall once again in anticipation of the rate cut expected from the Fed at its December meeting and is now well into the 74 handle, with 75 looking very likely again as stock markets are hit big-time by the sudden unwinding of the carry trade, thereby causing a flight to treasuries and money markets and supporting the sagging dollar.  Oil may take out 100 soon without any further dollar support, and that would ignite gold, so you can see how the unwinding of the carry trade is being used to prevent this from happening as pressure mounts on the short positions of commercials on the COMEX and the TOCOM.  The yen is now sub 108, having reached a market-crunching 107.759 yen per dollar as of 1:40 am EDT, as the cartel continues its assault on the precious metals to save gold option puts expiring on November 27 and gold futures shorts expiring December 27.  The Yen Death-Star has detonated once again, so look out below for yet another sell-off that could take all stock indices down to fresh lows on Friday.  

Large specs should be ready for this as they load up on their protective derivatives. Long-term, un-leveraged, in-the-money protective derivatives are recommended because a squeeze of these derivatives is likely just prior to the expiry of December stock market index options by use of yet another rally-crash scenario where stock markets first rally to drain value from these derivatives as they expire, and then crash to drain liquidity from large specs without the offsetting benefit of the freshly expired protective derivatives.  The yen and the rewinding and unwinding of the carry trade are used to control the direction of the stock markets.  This would be done by the PPT in order to hit gold and silver by causing margin calls for which metals positions must be liquidated to cover in the absence of freshly-vaporized protective derivatives.  The cartel will stop at nothing to ameliorate losses for commercials on their short contracts for gold and silver futures expiring on December 27, so large specs must be prepared for this probable eventuality.

Do not expect any rallies for the rest of 2007 other than a rally-crash scenario as described above.  This is because gold and silver are now ignited any time the stock markets start to move up.  The pros wisely are no longer plowing available investment capital exclusively into stocks because the chance that a systemic failure will occur in the not-to-distant future has become a near certainty as the real estate markets continue to implode under the pressure of accelerating rate resets on subprime adjustable rate mortgages and as the toxic contagion spreads to the upper tranches of subprime-laced bonds and other asset/mortgage-backed derivatives like CDOs on account of accelerating job losses caused by the ongoing recession.  Gold and silver and their related assets are now being recognized as the best protection against subprime contagion and a potential derivatives implosion, not to mention a likely worsening of the ongoing credit crunch and of hyper-stagflation.  This also explains why gold and silver are no longer following stock markets up and down as robustly as in the past and are now frequently moving counter to the stock markets when they crash.

The most likely action for Friday is a strong yen during precious metals trading with a yen reversal after metals trading has ceased in order to aid in yet another end-of-day miracle by the PPT to keep the stock markets from crashing too far.  The PPT is now playing with fire, as they may not be able to bring stock markets back.  Also the whole strategy may backfire and cause gold and silver to explode as safe-havens.  The violent reduction of interest rates on treasuries, agencies and money markets by reason of the rush into these assets, which would be caused by any crash will make gold and silver look even more enticing than they already are.  The abysmal rate of return on these dollar-denominated assets will also eventually produce a flight to more stable and much more profitable assets like German bunds and Swiss government bonds denominated in the strong and reliable Swiss franc, thus dragging the dollar down further and igniting the precious metals.  No one gives a crap any longer about these dead-cat bounces in the dollar which are the obvious product of these now frequent and continual crashes which the cartel is now implementing in a vain attempt to suppress the precious metals.  Such dollar rallies are almost always reversed the following day.  

The repos of treasuries and agencies which will be monetized in order to fund these various manipulations will serve to accelerate the rate of inflation once again as we head toward Weimar Republic status, a rather dubious distinction shared by various imploded economies over the course of history.  In fact, at the rate we are going now with all these manipulations, hyperinflation is going to arrive much sooner than even we have predicted.  Every time there is a big Fed bailout, the date for the inevitable commencement of the much-dreaded onslaught of hyperinflation is moved up substantially.  We are now considering a hyperinflation time clock similar to the one used by scientists to indicate how close we are to a final nuclear conflagration.  We will in all likelihood get a financial conflagration long before the nuclear one arrives, so load up on gold, silver and their stocks as we head toward a 1929 Stock Market Crash scenario.  Isn't it amazing what the cartel, the Fed and the PPT will risk in order to stop a "barbaric relic"?!

At 4:30 am EDT Friday, rampant manipulation continues as the yen has surprisingly weakened somewhat from 107.759 yen per dollar about 3 hours ago to 108.431 yen per dollar, undoubtedly to assist in an out-of-the-blue dollar rally which occurred precisely at the same time as gold had spiked to 816.  The USDX went from as low as 74.5 in electronic trading, down a whopping .5, and then for no apparent reason, other than manipulation, spiked back to about 75.1, now up about .1, for a total swing of .6.  Expect some extremely wild manipulations on another thinly traded, abbreviated day in the stock markets as Black Friday gets underway.  Large specs must remain vigilant during these vulnerable holiday markets to prevent technical damage to precious metals and must continue to protect their gold call options and their long contracts in gold futures.  So keep an eye on your laptops while you enjoy the holiday season and be prepared to jump all over the cartel reprobates who we can assure you have no regard for God or Country, for Thanksgiving or Christmas.

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1-YEAR $159.95 U.S. Funds

US AND CANADIAN SUBSCRIBERS: Make check payable to Robert Chapman (NOT International Forecaster), and mail to P.O. Box 510518, Punta Gorda, FL 33951-0518. Please include name, address, telephone number and e-mail address.

Or:

We accept Visa and MasterCard charges.  Provide us with your card number and expiration date.  We will charge your card US$159.95 for a one-year subscription.

You can email us in two separate emails (1- the Credit Card Number with full name, address and your telephone number and (2- the Expiration date on the card.

NON US OR CANADIANS SUBSCRIBERS:

Due to the time that it takes for your mail to arrive to us from a foreign country, we would like for you to email us as above the CC information in two separate emails.

Note:  We publish twice a month by surface mail or twice a week by E-mail. international_forecaster@yahoo.com or if_distctr@yahoo.com

                                                                        *****

-- Posted Sunday, 25 November 2007 | Digg This Article