-- Posted Sunday, 23 October 2011 | | Disqus
The following are some snippets from the most recent issue of the International Forecaster. For the full 29 page issue, please see subscription information below.
US MARKETS
After three years banks are still working on a mortgage plan as 22.5% of existing mortgages remain underwater. Banks are sitting on $700 billion of home equity loans and seconds at original values, not market value. This refusal needless to say totally distorts their balance sheets.
This is not illegal, but it certainly distorts their balance sheets. Such a situation means they really are insolvent and those holding such loans will either go bankrupt or be reorganized by the government, which is nationalization that means citizens get to pay the bank’s losses. By these assets not being forced to mark-to-market, credit continues to expand worsening the situation. Thus, banks live on government and Federal Reserve life support and that condition can only lead to another episode of crisis, which most certainly is in progress. Even Europe has been bailed out to the tune of trillions of dollars created out of thin air by the Fed. At last official count it was $16.1 trillion, plus whatever else they are secretly hiding on or off the books. This Ponzi scheme has been in operation for three years, and has to be continued because if it is not the entire world financial system collapses. The Greek crisis is the visual specter of the world financial crisis, far, far more lies under the surface in almost every country. The value of and pricing of bonds, particularly sovereign bonds, has been totally distorted by central bank interference and manipulation. There is no reality in bond markets anymore and when they come crashing down it will be a sight to behold. Let this be a word to the wise. It has been almost 300 year since the financial collapse of 1720 in England and France and this episode today has all the trappings of a replay. We always try to look at both sides of each of these historical events to see if they were caused deliberately and if today’s events are a replay. In almost all instances we believe events were the result of deliberate intervention to bring the system down and today’s problems are no different. On the face of it why would we allow the same players who brought the system down to resurrect it? It does not make any sense. Why should the people be responsible for the bankers and politician’s machinations? They should not be, and therein lies the rub. These players are once again going for total control of the financial and economic system, so that they can control all of the people, so that they can implement their centuries old dream of world government and the subjugation of mankind. Rumors run rife throughout Europe of a plan to repair and solve their financial crisis. All are bogus, designed to keep stock and bond markets from collapsing. The propaganda and misdirection engendered in these rumors are professionally designed to control the show so to speak. What you are watching and are subject to is psychological warfare to make you believe that everything will be all right when in fact the crisis is deepening. There is no way out for Europe nor for the entire financial system and that is the way it has been planned. Investors have to be conditioned to expect the situation to be extended in search of a solution – a solution unbeknownst to the public that is deliberately unattainable.
In the US there is another secret plan in the works to give the Treasury the ability to borrow an additional $900 billion that would, of course, come from the Fed. Then there is the enabling Super Congress, which bypasses Congress that is attempting to cut $1.5 trillion from future spending over the next ten years, at the same time the President’s efforts to spend $447 billion for jobs is shot down in the Senate.
The two-year recession supposedly almost ended 2-1/2 years ago. That is the official position - ask the permanently unemployed who’s job has been shipped to China, whether the so-called recession is over? Since June of 2009 median household income has fallen by 6.7%. That is some recovery, as unemployment rose to 22.6%. Those who lost jobs and found new ones made 17.5% less in income. Those out of work remained jobless from 16.6 to 24.1 weeks. This year that number was 40.5 weeks, the lowest in 60 years. In addition the real median self-employed income has fallen 12.9%. That condition is prevalent worldwide. Whether governments and their handlers like it or not since February 2009 the US has been in an inflationary depression, which is worsening every day, with no end in sight.
We see the business networks dragging up anyone they can find to convince us that a recovery is in motion; any dissenting voice is never heard from again. The system is not working and no one wants to admit to it. The players do not know any other system, so they do not want to abandon the one that they have. You cannot maintain the system by creating more unpayable debt. The system that is currently functioning can’t continue to do so indefinitely.
As a result of these conditions and volatility many investors have left the markets and their assets have disappeared in a cloud of smoke. The big investment firms front running the market, naked shorting and government manipulation have driven many to cover. Just this week we had two professional commodities traders close their accounts after having been successful for more than 20 years. They were simply tired of the manipulation and losses at the hands of their government. Over the past five years hundreds that we know of have quit. Before long there simply won’t be enough players left in the paper commodities.
As a reflection of this we now see Occupy Everywhere. These are people that are sick and tired of being lied to. This indicates that business and government are no longer going to be able to do what they have been doing. That was being reflected in the markets until we were told that Europe was going to be saved. Well, we’ll see.
We now find that foreign central banks have been large sellers of US Treasury and Agency securities. They are no longer buying 25% of Treasury issuance, which means the subsidy is ending. This certainly complicates operation twist, or is this why this operation was adopted in the first place to absorb this selling. As we pointed out earlier foreign currencies have fallen over the past four months versus the dollar and the sale of US dollars for local currencies would make these currencies move higher. The move out of dollar denominated debt began about a year ago, but has since picked up steam. Such debt received an unexpected boost from problems in Europe as many sold European debt for US debt to escape possible future EU problems. This was a flight to perceived quality. Even with Europe in serious trouble funds have again stopped flowing into US debt. In fact the present sales of US debt is akin to dumping. Now the question arises, will this continue and will it neutralize operation twist? Thus far the yield has jumped 45 bps in the 10-year T-notes, as notes bonds were sold with the Fed as a declared ready buyer. In addition margin requirements on Treasuries have been lowered in an attempt to attract more buyers.
By the look of things yields may very well be headed higher and that means mortgage rates will as well, which is the exact opposite of what the Fed wants. If this wasn’t a big enough headache for the Fed, primary dealers have been selling as well. All the implications of the above remain to be seen, but thus far the outcome does not look good.
In the interest rate saga, one of the easiest things for Europe and the UK to do is to cut interest rates, in as much as the German economy is slowing. The official growth rate for 2012 has been lowered from 1.8% GDP growth to 1%. That is a serious drop. As well, the exit of Mr. Trichet has moved such a move closer to reality. All the big events are becoming non-events and that does not bode well for positive solution. Over the next 2 to 3 weeks we will know what Europe is going to do and it may disappoint all by doing nothing.
As we have noted before, after three years of layoffs and austerity, companies have found it difficult to keep improving productivity. They have hit the wall so to speak. In the first quarter it fell 0.6%. Long-term productivity gains have been 2-1/2% on average. The first quarter was quite a shock. Labor costs were the damaging component. The second quarter came in at plus 3.3%. Labor costs on average are advancing at a 2% rate, which is natural, but it is not good news for corporate profits.
2011 earnings are fading and gains will be more difficult in 2012. Neither the US, UK or Europe have in any way addressed the problem of economy. They were to busy saving the financial sector by creating liquidity and laying debt created by banking on the public.
Wall Street is delusional and is becoming even more so since the advent of “Occupy Wall Street.” We are told that at get-togethers of Wall Street, employees and officers that they are concerned for their safety. Just one death and they would scatter for the hills. Some are armed and some have bodyguards.
Where else could Warren Buffett get such a deal? He put $5 billion into a Bank of America non-taxable convertible preferred that is guaranteed by the US government. This is an unbelievable sweet deal created specifically for this Illuminist. These individuals should be concerned. For the last few years’ tent cities have sprung up all over America and the bigger and more numerous they grow the more chance that violence could occur. Soon over two million unemployed will lose their extended unemployment benefits. We wonder if that could be a catalyst for violence. We are seeing the same kind of deliberately created incompetency today that we saw in the 1930s. Twelve years of failure that only another well-planned war could end.
Such conditions encourage investors who understand what is really going on to move their wealth into gold and silver related assets. Gold ownership has risen from 0.2% in 2000, when we recommended gold in this cycle, to 0.7% last year. That is as a percentage of global financial assets. The investment of $227 billion in 2000 was worth $1.18 trillion last year. In order to reach some 40 years ago it would require $9 trillion in further investment, or more gold than has ever been mined. There is absolutely no question that the investing public is very underinvested in gold. In addition all the gold and silver stocks in the world evaluated together are capitalized at less value than Apple Computer or GE or Coca Cola. In the meantime vast amounts of gold is moving from the West to the East. Once that becomes a dominant factor there will be a hue and cry for a world reserve currency backed by gold. The potential upside in gold and silver are enormous, as you can plainly see. As each day passes more and more investment finds its way into gold and silver and that shift will continue. Inflation is 11.6% and we may reach 14% by the end of the year. That performance will direct more investors into gold and silver, as well. A flight to quality as gold is again recognized at the only real money. In relation to hyperinflation, gold would take on a whole new meaning. Gold and silver are the ultimate safe havens, the only place to be in a world of manipulated markets. One of the most interesting developments of the past few years has been the re-accumulation of gold by sovereign nations. The investing public has been buying gold and silver for 11-1/2 years. The trend is set and until we switch back to a gold standard, away from fiat money and into sound money, gold will continue to appreciate.
If socialism and corporatist fascism are not abandoned the world financial sector will implode. Whether it is trying to protect the average citizen or to subsidize transnational conglomerates, that demand monopolies, both are doomed to failure. Look at the financial mess that exists in the US, UK and Europe presently, with most of the financial entities insolvent, and kept on life support by central banks printing more money and credit. Keynesianism is in its death thrones and Austrian economics will replace it. There are some who believe that financial and social chaos are at hand, and they may be correct. They will occur eventually, but the tactics been used presently by the elitists is to perpetuate the system as long as possible. Their options are fading but are not totally played out. This macabre play has some time to go and in that process gold and silver will move perpetually higher. Yes, investors saving their wealth will be continued to be subjected to manipulation by the US government. It will be disruptive and try ones nerves and souls, but you must stay in the game for the long-term and not get shaken out. Once out you’ll probably never return. This is not about making money and getting rich. It is about saving what you have worked for a lifetime. The fundamentals are all in place and they will remain so, it is up to you to recognize them and take advantage of your knowledge. Ignore those who talk about confiscation of not having papers assets. They will all be proven to be wrong, as they have in the past. Set your compass and do not be deterred. If you are you will be left out, and that is the last thing you want to happen. The path will be long and difficult, but you must stick to your guns. If you do not you could end up with nothing.
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THE INTERNATIONAL FORECASTER
SATURDAY, OCTOBER 22, 2011
10/22/11 (7) IF
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-- Posted Sunday, 23 October 2011 | Digg This Article
| Source: GoldSeek.com
