-- Posted Sunday, 1 April 2012 | | Disqus
The following are some snippets from the most recent issue of the International Forecaster. For the full 22 page issue, please see subscription information below.
US MARKETS
We lie, you swear to it. That up until now has been the creed of elitist Wall Street. That may be changing to it is every man for himself. We, after months of MF Global lies, have now been told that during the last days of MF, its CEO Jon Corzine, was in direct contact with JP Morgan Chase and arranged the transfer of funds from MF to JPM. This is contrary to what he told Congress and the world. Could it be that the wall of silence on Wall Street is about to be broken? Could it be the criminal syndicate is about to be broken? We do not know but it could all become criminal. JPM obviously decided they could no longer cover for Corzine without getting themselves in trouble. Corzine was the crook who kept repeating he didn‘t know where billions of dollars went. How could they, as master crooks, believe they were going to get away with such a fraud?
The housing recovery seems to have been a temporary affair. Preliminary data frames March as weak as last October. It looks like lower interest rates boasted sales. Those rates are up from 4.72% to 5.02%. Worse yet, Operation Twist is over. That is where the Fed sold the short end of the bond market and bought notes and bonds of 5, 7, 10 and 30 years. Even though the BIS, The Bank for International Settlements, said the program was a resounding success, it was not. American friends knew the Fed was a buyer, so they proceeded in selling long dated paper destroying what the Fed policy was trying to accomplish. Now we expect QE 3, which we have expected for sometime. Lest we not forget the slight easing of credit and the government’s FHA low down payment programs.
A large negative we did not face several months ago was higher gasoline prices, which the public believes are going to stay at current levels for the next few years. If a new house is purchased it has to be close to work and that often is not an easy task. Making plans more difficult is that only half of the homes being sold will be lived in by the owners - the rest are owned by speculators, who for the past 5 years have been eminently unsuccessful in picking a bottom in the housing market. We wonder if these buyers are aware that the administration, which we reported on a few weeks ago, have proposed to have Fannie Mae and Freddie Mac dump 560,000 under water defaulted properties on the hedge funds and others in blocks of $1 billion or more to be eventually rented and put into REITS. Buyers also have to contend with builders building 513,000 new homes a year when 6.8 million homes are already on sale. Now that banks have cleaned up most of the defaults at the low end of the market they’ll now concentrate on the smaller middle sector and the top of the market. This lender policy will add many more homes to defaulted inventory and could take that number to 9.8 million defaulted homes for sale. Those looking for a let up will have to wait beyond 2014. That means you should continue to rent over that timeframe. That means depending on type and area, homes over that period should fall another 10% to 20%. What is disconcerting is the perpetual buying by lenders (banks), Wall Street, government statistics, the National Association of homebuilders and the National Association of Realtors - all produce bogus figures to trick the public into buying. There is also a shrinking number of people eligible to be buyers. These facts at our disposal tell us that there is no housing recovery in progress and that the economy needs QE 3 ASAP. The Fed is trapped and has to print more money just to keep the game going sideways. That, of course, pushes inflation higher, which pushes gold and silver higher.
You have to ask yourself how can there possibility be a recovery? The stock market may be approaching old highs due to the Fed manipulating money, but there is no recovery on Main Street, nor will there be. We do not know if you noticed, but the Dow has just gotten back to even after its 57% plunge of March 2009. In that correction we recommended sale of 14,200 with a bottom at 6,600. The actual bottom was 6,550.
The Fed also has to continue zero interest rates. As rates rise more money is needed to fund debt and that means the Fed has to print more money to offset the cost of borrowing at higher levels.
As far as building over 600,000 new homes a year we have been asking for more than five years how can builders be building with an enormous for sale inventory hanging over the market. Construction payrolls are at a 16-year low and quite frankly we do not know why there is any construction at all?
Every time we look at US policy we cringe. We try to figure out all aspects of what the US is up too and come out with zeros, other then what is the obvious. Two moves against Iran that are dumber then dumb. Negotiations have been going on for weeks between Iran and India for oil delivery and payment. This week the US says to India if you barter or use gold or other currencies we are going to sanction and embargo you as well. One thing this statement has done is put the world on notice that if you do not do what we tell you to do we will destroy you. That is a sad commentary for a once great country. Threatening India was a mistake – a step too far. If settlement is in a form of non-US dollars that means countries do not have to print their own currencies to buy dollars to pay for the oil. Those are the dollars that have been buying US treasuries with, and funding the US deficit. Such conditions will cause nations to continue to sell dollars for other currencies and gold. About 60% of reserves of nations are in the form of US dollars. That could cause a stampede out of the US dollar, but we believe the sale of dollars will be somewhat orderly, as will be the inflationary build up caused by the return of these dollars. Eventually the return of dollars will reach epic proportions, the dollar is devalued and then collapses and we are presented with other wars or WWIII. The time period of dollar failure is being accelerated. We do not have a time table – no one does, but it is coming. That is why we tell you to prepare now while you can. Your food and defense cannot be left to be bought in the future. All your extra assets should be in the form of gold and silver coins, bullion and shares.
In the EU we find some surprising facts – that $1.4 trillion in loans to 800 banks is not being lent out to any great extent. Year-on-year bank lending has fallen in February to 0.7% from 0.8%, while lending to companies fell 0.4% from0.7% and lending to householders fell to 1.2% from 1.3%. overall banks are not doing enough to strengthen the economy.
Austerity cuts in Greece are not enough for S&P and the creditors, so there will be requests for further cuts. If they continue such tactics default will be on the horizon.
Moody’s has downgraded five major Portuguese banks. Their 10-year bonds are still yielding more than 11%, which is terrible.
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THE INTERNATIONAL FORECASTER
SATURDAY, MARCH 31, 2012
03/31/12 (9) IF
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-- Posted Sunday, 1 April 2012 | Digg This Article
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