-- Posted Thursday, 10 January 2008 | Digg This Article
| Source: GoldSeek.com
The following are some snippets from the most recent issue of the International Forecaster. For the full 18 page issue, please see subscription information below.
US MARKETS
We have to laugh at economists; analysts and other writers who think a recession may have begun. It’s evidently time for them to join the herd – it’s safe now. They won’t get ostracized for making such a decision before their peers. They won’t be scolded by management or lose their jobs. We said a recession began more than a year ago. We were right and as usual most everyone else was wrong. Then again, we do not have to answer to an employer. Our employers are our subscribers and they want the truth when it happens, not when it is officially okay to divulge it. We already are seeing prognosticators beating their chests because they predicted the housing subprime crisis. Where were they three years ago when in October of 2004, we told people to prepare to sell by June of 2005 if they wanted to sell because that would be the top and it was. We also predicted that not only would there be a subprime, ALT-A implosion, but also a dramatic fall in real estate prices, which has been in process since June 2005. That is a year and one-half before 99.9% of the experts. It was more than a year ago we called for oil at $100 to $120 a barrel and again we were a voice in the wilderness, as we were in April 2000 when we were among only 1-1/2% of all economists, analysts and newsletter writers who called the top of the dotcom bubble.
House prices will continue to fall for another two to four years dependent on whether the government disrupts the market with subsidies or a bailout. Oil will move relentlessly upward as will most other commodities. Gold over the next two years will reach $3,000 an ounce and silver will top $100 an ounce in spite of the central bankers suppression techniques. They will run out of gold for sale, the market will fall and the only go to investment will be gold and silver. When 98% of Americans, Canadians and Europeans are out of the gold and silver markets you have to be very bullish.
The dollar will continue its slide ending up if Americans are lucky at 40 to 55 on the USDX. It is currently 75.75. That will give American exports an advantage, but we export so little that at 50 we can only increase GDP by ½%. That will improve our current account deficit but not substantially so. The only thing that can really help is trade tariffs on goods and services. While we improve our trade deficit, foreign goods will increase substantially in price and prove to be very inflationary. Wall Street, politicians and corporate elitists refuse to face the music. They refuse to purge the system and eliminate the unbalanced economy. That means eventually strong corrective measure swill have to be used and gold and silver will have gone higher than most had dared to anticipate.
Now we are told, in spite of an ongoing credit crisis, the recession that we supposedly are just now entering - maybe say the experts – that they already know this will be a mild recession. How can they know that when they are not quite sure we have entered a recession? They say the recession we “may” be entering will start a recovery in the third quarter. It all sounds like the pitch from a flim-flam man. Unfortunately Elmer Gentry isn’t available because Mike Huckabee has already reincarnated that woeful scamming preacher of the 1920s and 1930s.
As you know homebuilders, suppliers and some financial companies will go bankrupt. The most vulnerable are the builders and suppliers. The government is bailing out Countrywide and WaMu, but the builders and suppliers are fair game. The industry still doesn’t get it. In order to cut stuffed inventories they either have to stop building or cut drastically. The professionals have to expect that home production has to fall 60% to 75% from its peak. Two million excess homes were built for people who cannot afford to pay for them so that we wouldn’t have a recession/depression seven years ago. Sales will fall to 1991 levels and lower, and those inventories will continue to rise until lenders and builders get the message. We still have 75% of the housing correction to go. In the former 30 hot areas prices will fall an average of 35% and 40% to 55% in some areas like California and Las Vegas. Those who see a shallow soft-landing don’t know what they are talking about. It will take a 27% decline in prices to bring house prices in line with rents. A 24% decline is needed to re-establish the normal relationship with building costs. Next will be the homes purchased by speculators. They either have to rent at a loss, or face foreclosure. That will add to oversupply. Consumers are up against it. No more home loans, no savings 11.6% inflation and a 4% increases in wages. That is a 7.6% loss in buying power annually. The price of their biggest asset is falling and the wealth affect is gone. Even if we work through 2008 and 2009, we face a moribund real estate market for a minimum of 2010 and 2011.
We than have the ongoing fallout of CDOs, MBSs, SIVs, ABSs, etc. We have a credit crisis and about two million in mortgage paper that has gone bad. That’s $2 trillion in losses. We are in a recession; who will the buyers be? Free trade, globalization, offshoring and outsourcing are causing many prime credit rated people to lose their jobs and many face foreclosure. What happens when the derivative bomb explodes? What happens when the Dow revisits 7286? What happens when pension funds cut their payouts to retirees? Several large bond insurers are near collapse. Who will cover the loss on the unpaid insurers – the insured of course? We are going to see credit default losses and insured losses for at least two more years. Who will pay for counter party failure? Will sovereign funds want to invest $100 billion in the US financial sector? That’s what it is going to take, if not more to keep many big companies from going under. A Fed lending rate of 3%, down from 4% is too little too late and the wrong formula. We do not see any Wall Street headlines telling us M3 is up 17.5%. Sooner or later the public will wake up as will the Fed, only it will be too late.
We are in the confluence of several extraordinary developments that will keep policymakers at the Fed, in banking, on Wall Street, in corporate America under pressure. You saw the warning signs last week as we witnessed the president meeting with his “Working Group on Financial Markets.” Not once anywhere in the media were we told that this is what that meeting was all about and why the conclave was unique. When the PPT meets in the open you know there’s trouble. The public didn’t know what was going on, but Wall Street and corporate America sure did. Our conclusion is they cannot solve the problems and the bubbles can no longer be ignored. If they restrain credit the economy collapses, if they allow unlimited credit the problem will get worse. A middle of the road approach can buy time, but in the long term it won’t work either.
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GOLD, SILVER, PLATINUM, PALLADIUM AND URANIUM
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On Tuesday, January 8, 2008, the gold train left the station while the stock markets crossed the Rubicon. Gold has now shattered all nominal price records while the stock markets have just moved substantially past the 10% correction level. Let the golden age of gold begin while the stock markets cross the point of no return as the bloodbath in equities begins. The cartel, showing you once again that gold suppression is JOB ONE at the Fed, has risked all the equity markets in a bid to suppress gold and to keep the resource stock indexes such as the XAU and HUI from setting all-time highs and confirming gold's rise. Just as the XAU and the HUI arrived at their all-time intra day highs, the yen suddenly strengthened and the stock markets plummeted, just as you would expect from these reprobates and sociopaths, sending the XAU and HUI down below their all-time closing highs of 193.17 and 455.93, respectively, but still with very high closing levels of 188.60 and 454.11, respectively. The HUI managed to sneak past is all-time intra day high of 463.06 (oops) to set a new all-time intra day high of 463.19, while the XAU hit 193.78 intra day, just shy of its all-time intra day high of 195.50. Meanwhile, in the gold pits, gold went absolutely wild as safe-haven buyers and scared investors alike took note of its golden returns and made it a part of every investment portfolio out there as the stock markets gave everyone good reason to flee in terror, with the Dow having corrected now by 11.12 %, with a close below its all-time high of 14,164.53 set 10/9/07, for a final tally of 12,589.07. Because gold has gone on a tear, the stock markets have been sacrificed by the cartel with the Dow getting hammered to the tune of 962.62 points in only 8 trading days. During this 8-day massacre, gold has risen from 812 to 892, an 80 dollar per troy ounce trouncing of the cartel, which is now so desperate that they have caused technical damage to all the stock market indexes. The Dow has lost 7.1% during this 8-day period, which is nearly all its gains from 2007, while gold has gained nearly 10%, showing you the growing dichotomy between the stock markets and gold. In the meanwhile, the Nikkei 225, also known as the Japanese Dow, has suffered a market crash of some 3,733.31 points off its recent high of 18,261.98 set 7/9/07, for a total crash of 20.44%, with no end in sight as their biggest trading customer, the US economy, drops into the big financial toilet bowl and gets a "swirly" the likes of which it is never going to forget, and as the yen strengthens, destroying the mom and pop Japanese who own more yen shorts on the CME than are owned by all the pros combined. Gold has done very well in Tokyo as the hapless Japanese, devastated by all the cartel's machinations, flee to the only real safe-haven, avoiding fiat currencies like the plague. Who in their right mind would buy treasuries when they could buy gold? To our way of thinking, this would be malpractice on the part of investment pros, and they are starting to jump on the gold train as gold continues to outperform virtually all other markets. Spot gold set a new all-time high of 891.50 overnight while gold futures most active contract (February) set a new all-time intra day high of 884.00 and closed at a new all-time closing high of 880.30. We are now in virgin territory for all nominal gold prices and are headed for the all-time, inflation-adjusted highs in the $2,500 to $3,000 per ounce area. Large specs that have followed our advice over the past several months to maintain protective derivatives to guard their gold positions against yen hits and market crashes are making fabulous fortunes both on their protective derivatives and their gold positions, so they should be in prime shape to keep the rally going until we blast through 1000 this January. The economy and our entire financial system are going into the tank and if the cartel makes any further moves to put the kibosh on gold it is "Good night, Irene" for the stock markets. The cartel's efforts are now fruitless and futile as they attempt to hit gold by manipulating oil prices down and orchestrating phony dollar rally with their central bank buddies. The system is broke and it is not fixable, no matter what the Fed does. As we have said, either they let gold explode, or all the equity markets will implode. Without a weak yen and a strong carry trade, the stock markets are toast and the Republicans can do some yoga by bending over and kissing their derrieres goodbye! And that will give gold the rocket propellant it needs to blast off into outer space!
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THE INTERNATIONAL FORECASTER
WEDNESDAY JANUARY 9, 2008 - 010908(3)_IF
P. O. Box 510518, Punta Gorda, FL 33951-0518
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-- Posted Thursday, 10 January 2008 | Digg This Article | Source: GoldSeek.com
