The markets are rocking: precious metals, commodities, raw materials, energy, interest rates, foreign currencies, the dollar and more are providing opportunities, up and down to the prepared investor. The tsunami of money and credit creation required to underpin the asset-backed economies of the G7 has provided opportunities as far as the eye can see. And the massive sterilization of this same money printing by the emerging world is stoking runaway inflation to surface in every area of the globe and signaling the unfolding “Crack up Boom”.
Helicopter Ben is
confronting you with a conundrum: Leave
your money safe in the bank and let him and the G7
Banks, Public Servants and treasuries nibble at it with their printing presses
at night, or get invested? When he
lowers interest rates he transfers the money you should be getting in your
savings accounts and fixed income investments to the
to rescue them from their horrendous losses.
They borrow it from depositors at increasingly low rates as the Fed
rescues the economy (what a crock) through interest rate reductions and lend it
to you through their credit card operations at 20% to 30% interest rates. The Federal Reserve has been completely
compromised by the Congress,
treasury and Hank Paulson. Independent
NOT. Obscene? Yes! Immoral? Yes!
The “roach motels”
derivative markets are underpinned only by the opaque accounting fictions the
regulators and central banks are intent on preserving. Merrill Lynch and UBS began to come clean on
“balance sheet” bombshells that remain hidden within the financial systems of
the G7. The majority of the losses still
remain undisclosed. Losses which are
masked by “Tier three” accounting fictions in hopes that the markets will
recover their confidence in the “over-the -ounter” products and allow them to
be moved onto “someone else’s” balance sheets.
A gigantic game of
hot potatoes has begun. The dollar
itself is becoming a hot potato. The
destruction of its place as the RESERVE currency of the world has been
accelerated to a breakneck pace by the
Reserve. The poster child for the:
“Problems are Contained” are the major stock indexes around the world. A headline illusion to create a sense of
“well being” for the uninformed masses.
But the internals of those same markets are breaking down badly. The money that’s being printed is moving many
markets and those moves are just in their infancy. The dollar has suffered a major breakdown,
many are looking for a countertrend rally, but any rallies are quickly capped
by dollar holders trying to jump out.
Are you benefiting from these opportunities?
We are going to do a
few quick “fingers of instability” on a variety of issues which will continue
to impact your portfolios. They are only
opportunities for the prepared portfolios and pitfalls for those portfolios
which are not. Which side of this divide
is your portfolio positioned on?
The CDO markets
continued to deteriorate in crash-like manner as every rung of the ratings
ladder from AAA on down continued to be marked down by the Credit Ratings Agencies:
Moody’s, S&P and Fitch. Whereas the
big banks and investment houses can hide behind tier three and pray for a
market recovery, the investing community cannot. Pension funds, institutions and money market
funds, have fiduciary investment covenants which direct them to sell securities
which are below certain ratings levels.
Once an investment falls into the lower rungs on the investment scales
they are bound by their own investing rules to divest the assets.
10’s of billions of
dollars of securities have been downgraded since the beginning of October and
this will require that they be sold in a timely manner. Once those securities hit the markets we will
know their true value, and it won’t be pretty.
The super SIV will quickly become an exercise in wishful thinking as
their “high quality” paper becomes junk in the maelstrom of liquidation which
increases every time a security is downgraded.
The super SIV’s whole reason for being was to prevent fire sales and
price discovery. Some of the Triple AAA
CDO’s fell to 57 cents – aka Junk territory.
More and more is slated to become so.
Every sub index of elements (AAA, AA, A etc.) of the structured products
has crashed since October 1. The carnage
of losses is staggering!
Radian, Ambac and MBIA shares’ are in freefall, not only from the projected
losses from their insurance of CDO’s and structured products, but state and
municipal finances in the US are in freefall as well. Many Muni bond holders face BIG problems in
the coming year. What will you do if a
state or municipality goes bust and the insurance company guaranteeing their
bonds does also? The real estate boom
inflated their tax incomes and now is deflating them. I live in
billion dollars, and it is no different in any other city or state in
to the list as the real estate BUBBLE is in a precarious position around the
Foreign inflows into
US corporate bonds have ground to a halt, and that is over 50 billion dollars a
month of foreign investment that has stopped.
Mortgage bond indexes have suffered 30% falls since the end of the
quarter in September. It is clear that
the US Federal Reserve plans on doing a Greenspan and push short-term rates to
very low levels to allow the banks to borrow from their depositors at very low
rates and lend it out long to fix their balance sheets. As usual, the little guy is sacrificed on the
altar of saving Wall Street and the
banks from their poor investment decisions.
Instead of saving the main street economy with their actions, they are
hurting it as inflation is running away….
The Taxman Cometh, Middle Class Attacks
The mother of all
tax hikes is front and center in the
content with what they steal from their citizens on a nightly basis with their
printing presses. Pointing at hedge fund
managers in New York and calling them” THE RICH” they turn around and sock it
to every small business man in the US, taxes are set to skyrocket on people
earning $150,000 or more, while the largest Corporations in the US are going to
get a tax cut. Why the Big
corporations? Why of course it’s because
they are big campaign donors. Most
people don’t understand that Big business doesn’t pay taxes, their customers
do. It’s passed right through to the
customers and reduced wages for the employees.
People earning over
$150,000 a year face the expiration of the Bush tax cuts so their tax bill will
increase from 34% to 39% and then Congress wants to add an additional 4 to 5%
surtax to cover the AMT (Alternative Minimum Tax) repeal. 44% tax rates on small business men and THE
RICH, who earn over 150,000 dollars a year.
Before they are finished, the definition of the rich will be as it is in
where anyone earning more than $48,000 euros is RICH. MISERY spread widely is the definition of
FAIR by the public servants. Of course
that is true as all the productive people and entrepreneurs left the country
This is supposedly
to FIX the Alternative Minimum tax, a tax monstrosity created in the late
1960’s to catch several hundred people who paid no taxes by cleverly (but
legally) using the tax code, has now descended onto tens of millions of
people. THIS IS THE CONTINUAL
REDEFINITION OF THE RICH, as your public servants eat more and more of your
income for the “something for nothing” constituents. These people have been moved into the
definition of the rich as the value of their paychecks has risen nominally. In purchasing power terms, the dollars they
make have imploded and have been inflated by the G7 printing presses. Nobody creates more jobs than small business
unfortunately they don’t have armies of lobbyists to grease the halls of
congress with MONEY for their REELECTION campaigns. So they are easy pickings for congressional
tax and spending vultures and don’t have the money to BUY protection from
Every State and
municipal government is frantically searching for income to plug gaping holes
in their funding, further driving stakes into the hearts of consumers and small
business. These fraudsters expanded
their budgets by gargantuan proportions during the feeding frenzy of the now
dead real estate boom/bubble. Those
income streams have now virtually stopped in their tracks and they are like
whales on a beach after the water has receded.
Of course, none of them even considers CUTTING SPENDING.
Once these tax hikes
take effect expect every one of the businesses in
transfer the income to the government: Federal, State, and Municipal. Is this a recipe for growth and wealth
Stocks are near
their highs, but more than 50% of the gains in the NASDAQ are from 3 STOCKS:
Apple, Google and Research in Motion, in the S&P 500 more than 50% of the
stocks are below their 200-day moving averages…..
More and more
investors are fleeing to the perceived safety of Technology and multinational
big caps, the Russell 2000 is a laggard.
The absurd CNBS er CNBC position that stocks can’t go down or it is a
disaster is absurd. It is only a
and Washington as they won’t be able to fleece you as much through inflation
and taxes. It is painful to watch the
spin of 3rd quarter earnings which are down about 1 % year over
year. But stocks are up 20-30%! What’s wrong with this picture?
Looking at 3rd
quarter earnings, Goldman Sachs held 72 billion dollars of tier 3 assets (mark
to myth) but somehow had no losses from them.
John Mauldin reports of one series of CDO’s from Goldman that is
worthless (Hank Paulson must have guided them through this minefield). Transportation companies such as Federal Express,
UPS, railroads and industrial giants such Caterpillar and Cummins are talking
about substantial slowing of business and inventories. At the same time the stock analysts are
predicting 10% growth in 4th quarter profits. Most Corporate and GDP profit growth is an
illusion as inflation is far higher than acknowledged by the government and investment
banks and brokers.
Profits are beating
expectations, which were revised down right up to the last day of the 3rd
quarter, creating an illusion for investors of health and expanding
business. CNBS er CNBC NEVER gives you
the real number, pro forma went the way of the dodo bird in 2000-2202, it’s now
resurrected in the new term: now it’s always EX-ITEMS, aka “the bad stuff”,
which does impact earnings – but they present the fiction of them which is not
reflective of the true earnings. CNBC
America is a wholly-owned subsidiary of their advertisers, aka
Inflation and GDP
Does anyone believe
inflation is not a problem? In today’s
3rd quarter the CORE personal consumption inflation rate was 1.9%. Signaling to the cognoscenti that the fed can
ease with no danger of inflation. GDP
clocked in at 3.9% above most estimates, capital investment was up 7.9% and
consumer consumption was up over 3 % (can you say higher food and energy costs?
Its not real growth). Richard Russell (www.dowtheoryletters.com) reports:
As I said, the
nation’s faith in the Fed is amazing. It’s even more amazing in view of the
fact that our President (I’m referring to
Bush) is receiving the lowest approval rating of any president in history. The
only thing lower is the current approval rating of today’s pathetic Congress.
And yet, we continue to take the government BS statistics on inflation
seriously. The latest Economist magazine puts the year-over-year dollar
index of “all items” up 16.7%. They put the price of food up 31.6%
year-over-years. So our government tells us that “core inflation” is
running below 1%. And people take these figures seriously.
The GDP report
clocked in at 3.9%, but if you subtract real inflation as reported by Richard
Russell is it really higher? MasterCard
just reported blowout earnings; I guess if you can’t earn the money you can
just borrow it? Of course it is only at
20 to 25% interest. Can you say legally
sanctioned indentured servitude? And of
course with the new bankruptcy laws there is no escape for these borrowers from
these loan sharks. These loan sharks,
also known as the “Investment and Money center” BANKING industry, owns the
the Federal Reserve: “lock, stock and barrel”.
In conclusion, my good friend
Clyde Harrison sums up the situation quite well: “The fed cut short rates ½ of
a percent 6 weeks ago, the ten year bond is down 6/100’s of 1 percent so no
help for the mortgage market, the dollar is down 3 %, gold is up 7%, crude is
up 12%, so Goldman Sachs, Bear Stearns, Citigroup and Merrill were helped, the
public was hurt”. “The dollar dropping
by 3% means prices will soon be higher at Wall Mart, and gasoline will be
higher the next time you fill up” additionally, he said “Its good to have
friends in high places”.
gold will move, crude will move, the dollar will move, and many other markets
will move. These are opportunities, have you captured them? Have you devised a plan to capture them or
will your portfolio be the victim of them?
Do the homework necessary to thrive!
strategies can be hazardous to your portfolio.
You need diversification which can prosper regardless of market
Bonds are bombs as
the printing press relentlessly assaults them.
Guaranteed certificates of confiscation as they were in 1980. Who is propping up this illusion? Why would anyone by a
issue when they pay 3-5% and inflation is running over 6%, at least. Is this the price you have to pay for the
SAFETY of a government bond? Safety is
an oxymoron as the supposedly ultra-reliable borrower is also the serial money
One of my customers
who operates shopping malls in
says the tenants are struggling (late on rents and worse, no pay); things are
not well in the land of the consumer-based economy of the
increase government spending and waste, and destroy job-creating small
businesses and call it “fairness” for the little guy. This is the formula that the Congress is
running on and has been implementing since last November’s “throw the bums out”
vote. Look no further than
results; it is absolutely failing in every respect to wealth creation and
business. Unemployment is the highest in
the country and jobs are scarce. That is
the ghost of Christmas future for the US of A.
enemies except in the
and the new EU 15. This is also the destination
where Corporatism is front and center as the corporations and banking
industries finance the reelections of the public serpents, er servants. And in exchange for their support, the public
servants bury the middle classes and emerging entrepreneurial competitors in
the small business communities. Look no further than the proposed Tax Reform
to see this in action.
The G7 central banks
and political community are firmly in the grasp of big corporations, banks,
politicians and their “something for nothing” constituents. To the detriment of the broad electorates who
are dumbed down and led like sheep to the fleecing arenas. Housing is not going to be fixed by lowering
rates, and the homeowners will not be saved either. This is only a rescue of
Treasury Secretary, after the amiable dunces before him. Well, as H. L. Mencken said: I have gotten it
good and hard as what I wished for is turning into a “monster” of government
manipulation and corporatism run riot over the economy. Every time I see him on the TV screen I shake
my head as I “think” I see the horns of the devil rising out of his
forehead. LOL. The president’s working group on markets,
also known as the Plunge Protection Team, has recently had another Goldman
alumni and hedge fund manager named as leader.
They are picking the pockets of savers across
are now very, very political playgrounds!
Why did the Fed
lower rates so it won’t DISSAPOINT the markets?
The Markets are supposed to do whatever they do, not be supported by the
Fed. I thought their mandate was full
employment and controlling inflation.
The absurdity of the Fed preemptively addressing problems BEFORE they
are real shows what ACADEMIC economists can do; it’s all theory and has no
basis in reality! Paulson has sold
Bernanke a story and he has bought it HOOK, LINE and SINKER. Turn
them into opportunities for yourself regardless of the way the markets go!
Futures & Alternative Investment Specialist