Saturday, November 29, 2008
A MUST WATCH 16 MINUTE VIDEO THAT WILL GIVE YOU A COMPLETELY NEW PERSPECTIVE ON YOUR PLACE HERE ON EARTH. STATISM IS DEAD PART THREE (THE MATRIX) http://www.youtube.com/watch?v=P772Eb63qIY FOR THE PRECEDING TWO PARTS: STATISM IS DEAD PART ONE (DEFINITIONS AND THEORY)IS AT: http://www.youtube.com/watch?v=PGIgOIFdnMQ&feature=channel (24 1/2 minutes) PART TWO (THE PROSECUTION OF GEORGE W. BUSH FOR MURDER) IS AT: http://www.youtube.com/watch?v=8EJ9VyjCsXU&feature=channel BE SURE TO INVESTIGATE THE OTHER VIDEOS PUT OUT BY STEPHAN MOLYNEAUX (see the links on the right of the YouTube page of each of the above videos) His first video was called NAKED NEWS (see link on right of Part One) but he changed it to TRUE NEWS starting with his 2nd video because the name was taken and people objected. You can type in either title in the search box at the top of the YouTube pages for his videos
Friday, November 28, 2008
Thursday, November 27, 2008
A Climate of Corruption, Bailouts, Currency Rigging and Unfair Competition Posted: November 22 2008 Citigroup's big problems, beggars in Zegna suits, trade wars on the horizon, Philadelphia Fed report beset by weakness, record injections of liquidity, jobs slashed on wall street, a bevy of financial indicators to ponder just how much we have fallen, market losses trim size of overall economy Citigroup’s problems are double AIG’s, which has the taxpayers and investors on the hook for $170.4 billion. We see AIG’s problems at over $500 billion so that means Citigroup could be offside $1 trillion. Citi is loaded with the same garbage AIG has. That means both AIG and Citigroup are insolvent, and you will get to pay to bail out both of them. What very few know or understand is that the financial condition of the US is far worse than realized. You have to get out of all dollar denominated assets with the exception of gold, silver, oil and gas stocks and Swiss Franc Treasuries. Be very heavy in gold and silver coins. http://theinternationalforecaster.com/International_Forecaster_Weekly/A_Climate_of_Corruption_Bailouts_Currency_Rigging_and_Unfair_Competition
Manipulations, Corruption And Looting Takes Economy To The Brink Posted: November 19 2008 Watching obvious criminal manipulations, COMEX becomes CRIMEX, Dubai Exchange, economic pundits avoid reality, eight years that changed America, regulation will protect the elite... EXCERPT: "What you are now witnessing is the slow motion destruction of the CRIMEX, formerly known as the COMEX, a commodities futures market which is supposed to provide a means for producers to hedge their products, but which has morphed into a rigged casino where commodities that don't exist are traded as if they did for prices that exist only in the fairytales woven by the Illuminati, who control the exchange. This destruction is what happens when the credibility and integrity of the market owners and managers of the CRIMEX, together with the credibility and integrity of the market regulators, the CFTC, move from near zero to negative infinity." http://theinternationalforecaster.com/International_Forecaster_Weekly/Manipulations_Corruption_And_Looting_Takes_Economy_To_The_Brink
The Turkey's Revenge Paris, France Wednesday, November 26, 2008 "You can understand how fraudulent most economic analysis is," Nassim explained, "just by looking the life of the turkey. The animal is fed for 1000 days...and then it is killed. So, if you plotted out the turkey's life on a chart, it would look great for 1,000 days...each day, the food arrived reliably, and each day, the turkey gained weight. The turkeys would look around and say they were enjoying growth and a bull market. Momentum investors would see it as an opportunity. The quants would run linear regressions on the data and prove that the risk was minimal. " Ben Bernanke would describe the turkey's life - with no setbacks - as the product of a "great moderation." Turkey stockbrokers would assure their clients that nothing had ever gone wrong in the turkey's life. Turkey econometricians and theorists would come up with explanations for why the turkeys' growth would continue forever and they'd pat each other on the back for having finally mastered the "turkey cycle." Turkey politicians would run for re-election on the grounds that they had helped create a better world. And turkey economists would project further weight gains...until the turkey was the size of a hippopotamus Then, come Thanksgiving, and all of a sudden, something goes wrong. Alas, all the turkeys' theories, models, and conceits were for the birds. "Rare events can't be modeled," Nassim continued. "Because they are too rare. You can't get a statistically reliable sample. Alan Greenspan recently explained that he 'had never seen anything like this before.' Well, of course he had never seen it before. It never happened before. "Because these events are so rare, they are also completely unpredictable...and usually much worse than you can expect. Like Thanksgiving Day for the turkey." The turkeys are getting the axe...but they're having some revenge: Americans are getting the axe too. Unemployment is rising sharply...and tomorrow, when Americans sit down to their turkey dinners, they will be dining in houses worth about 18% less than they were worth a year ago. Not only are their houses worth less...their values are falling faster and faster. There's no sign of a bottom to the housing market. In some areas - Los Angeles, Miami, San Diego, and San Francisco - the loss in housing wealth already exceeds 26% from a year earlier. But don't worry, dear reader. Houses are not dot.coms. And they're not turkeys. They won't go to zero. And they won't disappear. Besides, they were never financial assets in the first place. They're just places to live. If you're happy with your house...you don't care what its price is. On the other hand, if you're not happy with your house, this is the time to start looking around. Our guess is that house prices will go down another 20-30%. Then, you will be able to get houses at very reasonable prices.. Unless you want to live in Detroit - where you'll be able to get a house at a remarkable price. Meanwhile, the economy itself is sinking too. GDP faded in the 3rd quarter - down 0.5%. Most likely, the U.S. economy will begin walking backwards faster too. Which means...more businesses will fail...more people will be out of work...and those people with any money in their pockets will be very careful about how they spend it... ...which will, of course, make things worse. All this is a natural, normal response to a credit bubble. It gets bigger and bigger - and then it blows up. Loans are made...and then they are collected. Mistakes are made...and then they are corrected. People do stupid things...and then they pay for them. People go mad on the way up...then, they go mad again on the way down. What could be simpler? But if you think the feds are going to stand still and let something natural happen, you have not been reading the papers. They're "pulling out all the stops" to try to prevent the correction. More below... *** So far, the feds' efforts have been futile. But we have little doubt that they will get the hang of it eventually. If there is one thing the feds can do it is inflate the money supply. Ben Bernanke stakes his reputation on it. And here is Thomas L. Friedman explaining what is needed: "...a massive stimulus program to improve infrastructure and create jobs, a broad-based homeowner initiative to limit foreclosures and stabilize housing prices, and therefore mortgage assets, more capital for bank balance sheets, and most importantly, a huge injection of optimism and confidence..." Friedman is the voice of the masses. But the intellectuals agree. Bloomberg reports: "'You want to do everything you can when you're facing the threat of a deflationary breakdown of the economy,' says Michael Feroli, a former Fed official who is now an economist at JPMorgan Chase & Co. in New York. He sees the central bank cutting the overnight lending rate to zero in January and holding it there throughout the year." "Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson are being forced to pull out the stops because the extraordinary actions they've taken so far have failed to gain much traction. Credit markets are collapsing, stock prices are plunging and the world economy is sinking into a recession." "The biggest mistake Obama could make," says Yale economist Jeffrey Garten, "is thinking this problem is smaller than it is. On the other hand, there is far less danger in over-estimating what will be necessary to solve it." Yeah...go ahead and err on this side now.... Why not? You erred on the other side. That is about the depth and breadth of thinking on the issue - at least from the people who never understood what the problem was...and now offer to solve it. And it was to one of these same hacks whom Obama has turned for his Secretary of the Treasury - Timothy Geithner. Here is another Hank Paulson. Unlike Hank, he did not work on Wall Street. Instead, he was supposed to be keeping an eye on Wall Street - as head of the New York Fed. "He was in the room," when all the bailouts and busts happened, said one Wall Street pro. AIG, Bear, Lehman, Citigroup - he was in on them all. And he was at least peeping through a keyhole when Wall Street was enjoying its wild party. He saw the deals go down...the leveraged debt...the private equity buyouts...the subprime razzle-dazzle...the quants...the bonuses. We don't recall a single word of warning. But then, he's a young guy...maybe he's learned something. But we have a pretty strong hunch he'll be at the Treasury Department not to further his education...but to play his role in the developing tragedy. He's meant to try to stop the correction. Rather than examine his lines carefully to see if they really make sense...he'll speak the speech given him. "Stimulus," he will say. "Protect jobs...save homes...avoid financial meltdown." he has heard them before. He will say them again. And why not? Almost everyone wants to hear them. They all want bailout. Almost everyone wants to be saved. Almost everyone wants to duck the bill collector...and stop the hangman. We all have to play our roles, dear reader. We are all turkeys...waiting for the axe.
Wednesday, November 26, 2008
Think about what you are really thankful for and about. Then vow to eliminate all the extraneous crap out of your life, including people who don't provide support to your well-being. This might include relatives. Relish that holiday meal...it may be the last one that isn't out of an MRE plastic pouch...or a garbage can.
Gary North's REALITY CHECK Gold's price: http://www.GaryNorth.com/snip/300.htm The Federal debt: http://www.GaryNorth.com/snip/544.htm To subscribe to this letter: http://www.snipurl.com/subscribenow Issue 809 November 25, 2008 FIVE SUNDAYS TO NATIONALIZATION As a conservative, I grew up in the threat of socialism: the nationalization of the tools of production. What no one warned me was that this could be accomplished by way of a unique form of nationalization: the nationalization of insolvency. We have lived through this process in 2008. The process will continue for several more years. Insolvency is being transferred from the banking sector to the government sector. How much insolvency? So far in 2008, the government and the Federal Reserve System are on the hook for as much as an additional $7.7 trillion. http://GaryNorth.com/snip/725.htm Solvency is being retained by the bailed-out banks: the private sector. Insolvency is being transferred to the those who depend on Social Security and Medicare, and also to future investors in U.S. government debt. This is being done with full compliance of Congress, both Administrations, Wall Street, and most voters, who do not understand the nature of the transfer process. One man does understand it. He shares a common bond with Treasury Secretaries Henry Paulson and Robert Rubin: he served as CEO of Goldman Sachs. His name is John Whitehead. He has watched the financial markets for seven decades. On November 12, he offered his assessment. The United States faces a slump deeper than the Great Depression. Unlike the Great Depression, however, this will be accompanied by the downgrading of Treasury debt. We're talking about reducing the credit of the United States of America, which is the backbone of the economic system. I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America. . . . The public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs -- all very costly and all done by the government. http://GaryNorth.com/snip/723.htm All this has taken place behind the scenes this year. It has taken place on five Sundays. Then, on five Mondays, the announcement of the transfer of insolvency to the U.S. government has been announced by Treasury Secretary Paulson. The public cheers. CITIGROUP It happened again last weekend: another Sunday surprise. The government on Sunday guaranteed the survival of Citigroup, which was about to go bankrupt. Citigroup includes Citibank. Citigroup in 2006 had a capitalized value of $274 billion. By Thursday afternoon, this was down to $26 billion. This was not much of a surprise. The stock market had already anticipated it. The Dow rose by almost 500 points late on Friday in expectation of the bailout. It was up another 400 points on Monday. American investors believe in bailouts. For them, salvation happens on Sunday. As taxpayers, they shrug it off. "We'll grow our way out of this." They really mean, "Our children will grow their way out of this, and will pay us our Social Security and pensions as our government has promised on their behalf." Think of this as the equivalent of the United Auto Workers' faith in the pension guarantees made by the Big Three American automakers. As investors, they cheer. "No more losses!" Think of this as the United Auto Workers' view of competition in 1965. To understand the enormous gullibility of investors, let me cite directly from a Citi document that I downloaded this week. Save it before senior management takes it down. You'll never be alone with the CitiMortgage Correspondent Team by your side. When it comes to running your business, confidence and support mean everything. We know how important it is to work with an investor who has your best interests at heart, with a proven track record for consistent stability in the industry. As a financial institution that's been a trusted leader, innovator and model of consistency for over 200 years, you can feel confident working with CitiMortgage Correspondent. We take pride in our ability to instill confidence in both our people and our clients, which translates to stronger, long-term relationships. If you are interested in becoming a CitiMortgage Correspondent, please read below to learn more about the benefits CitiMortgage offers. The Power and Stability of Citi -- As one of the leading investors in the industry, CitiMortgage offers the power and stability our clients need to grow their businesses. http://GaryNorth.com/snip/724.htm It goes on like this for two pages. Inspirational! Investors believe in government bailouts with the same confidence that readers are expected to believe this promotional piece by Citi. Before I comment on the Citi bailout, let me review the history of recent Sunday deliverances. I call these Sunday surprises. THE FIRST SURPRISE The first Sunday surprise took place on March 16. The "New York Times" described it late that afternoon. Bear Stearns, pushed to the brink of bankruptcy by what amounted to a run on the bank, agreed late Sunday to sell itself to JPMorgan Chase for a mere $2 a share, narrowly averting a collapse that threatened to cascade through the financial system. The price represents a startling 93 percent discount to Bear Stearns' closing stock price on Friday on the New York Stock Exchange. Bankers and policy makers raced to complete the deal before financial markets in Asia opened on Monday, as fears grew that the financial panic could spread if Bear Stearns failed to find a buyer. The deal, done at the behest of the Federal Reserve and the Treasury Department, punctuates the stunning downfall of one of Wall Street's biggest and most storied firms. http://www.garynorth.com/snip/710.htm Less than a week earlier, the CEO of Bear Stearns, Alan Schwartz, had assured the public that the company was solvent, that there was no problem. A Reuters story was typical of the press's handling of the story. Schwartz, in a televised interview on CNBC, also said he is comfortable with the range of analysts' earnings estimates for the fiscal first quarter ended Feb. 29. Results for the quarter are due next week. "We don't see any pressure on our liquidity, let alone a liquidity crisis," he said. Bear finished fiscal 2007 with $17 billion of cash sitting at the parent company level as a "liquidity cushion," he said. "That cushion has been virtually unchanged. We have $17 billion or so excess cash on the balance sheet," he said. Schwartz denied speculation that other brokers were turning down Bear's credit on trades for fear of counter-party risk. According to an article published weeks later, this "speculation" was introduced by the CNBC interviewer, who cited an anonymous source that Goldman Sachs had turned down a Bear Stearns trade. Schwartz denied it. "There's been a lot of volatility in the market, a lot of disruption. That's causing some administrative pressure, getting trades settled. We're in constant dialogue with all the major dealers, and I have not been made aware of anybody not taking our credit," he said. The Reuters article went on the describe the state of the markets. As one of the largest players in mortgage-backed bond markets, investors have assumed Bear's exposure would lead to crippling losses. "None of that speculation is true," Schwartz said. When speculation starts in a market, one that has a lot of emotion in it and people concerned with volatility, "they will sell first and ask questions later," he said. "That creates its own momentum." http://www.garynorth.com/snip/711.htm The critic of this chain of events argues that there never was verifiable evidence that Goldman Sachs or any other firm had turned down Bear Stearns' business. http://www.garynorth.com/snip/712.htm The market did not care. This supposed solvency turned out to be irrelevant within hours. Bear Stearns' stock price continued to fall on Thursday and Friday. By Monday morning, Bear Stearns was no more. A rumor cannot create this outcome except when fears are rampant and leverage is high. Bear Stearns was the victim of high leverage and bad forecasts. It took a fire sale on Sunday, initiated by the New York Federal Reserve Bank, to keep Bear from going bankrupt on Monday, March 17: St. Patrick's Day. To sweeten the deal, the Federal Reserve absorbed the risk for $29 billion of Bear Stearns' debt. The public outcry and the threat of shareholder' lawsuit against the $2 per share price later led to Morgan upping the price to $10. As for the $17 billion in liquidity, Morgan must have gotten it as part of the firm's assets. We never heard any more about it. Paraphrasing Bunker Hunt's statement in 1980, as he was going bankrupt, when the FED had to lend him a billion dollars, "Seventeen billion just doesn't go as far as it used to." THE SECOND SURPRISE On Sunday, September 7, Treasury Secretary Paulson announced that Fannie Mae and Freddie Mac had been taken over by the U.S. government. He issued this press release. Before I turn to Jim to discuss the action he is taking today, let me make clear that these two institutions are unique. They operate solely in the mortgage market and are therefore more exposed than other financial institutions to the housing correction. Their statutory capital requirements are thin and poorly defined as compared to other institutions. Nothing about our actions today in any way reflects a changed view of the housing correction or of the strength of other U.S. financial institutions. Note these words: "Nothing about our actions today in any way reflects a changed view of the housing correction or of the strength of other U.S. financial institutions." A week later, Paulson & Co. were at it again. They tried -- and failed -- to keep Lehman Brothers Holdings from going bankrupt. Paulson's press release then made a statement that will haunt the financial markets for the news two years -- maybe three. I have long said that the housing correction poses the biggest risk to our economy. It is a drag on our economic growth, and at the heart of the turmoil and stress for our financial markets and financial institutions. Our economy and our markets will not recover until the bulk of this housing correction is behind us. I can think of no more accurate statement from Mr. Paulson during his term of office. The housing correction is in its early phase. As it accelerates, so will the "the turmoil and stress for our financial markets and financial institutions." Count on it. This was the nationalization of America's mortgage industry. By September 2008, Fannie and Freddie were supplying 90% of all residential mortgages in the United States. But Paulson did not use the N-word. He picked another. I support the Director's decision as necessary and appropriate and had advised him that conservatorship was the only form in which I would commit taxpayer money to the GSEs. "Conservatorship." How reassuring. Nationalization would have seemed so crass, so anti-free market. Then he admitted what is still true: the mortgage market is at the heart of the U.S. economy. The economy was heading for a cliff. And let me make clear what today's actions mean for Americans and their families. Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe. This turmoil would directly and negatively impact household wealth: from family budgets, to home values, to savings for college and retirement. A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation. That is why we have taken these actions today. This is the issue of systemic risk, or, as the old spiritual put it, "the knee bone connected to the thigh bone. The thigh bone connected to the. . . ." And so on. Paulson called for government intervention to keep the market from imposing its negative sanctions on bad decisions made by the leaders at Fannie and Freddie. And policymakers must address the issue of systemic risk. I recognize that there are strong differences of opinion over the role of government in supporting housing, but under any course policymakers choose, there are ways to structure these entities in order to address market stability in the transition and limit systemic risk and conflict of purposes for the long-term. We will make a grave error if we don't use this time out to permanently address the structural issues presented by the GSEs. There was no mention of the taxpayers' price tag on this "conservatorship." Combined, the two outfits have guaranteed over $5 trillion in mortgages. To this was added the Mortgage Backed Securities (MBS) that had been sold -- and borrowed against -- to buy these mortgages. What of these investments? Because the U.S. Government created these ambiguities, we have a responsibility to both avert and ultimately address the systemic risk now posed by the scale and breadth of the holdings of GSE debt and MBS. http://www.ustreas.gov/press/releases/hp1129.htm The move was immediately praised by Ben Bernanke. Bond fund manager Bill Gross also praised it. http://www.garynorth.com/snip/713.htm THE THIRD SURPRISE A week after the nationalization of the mortgage market, there was another emergency meeting. This time, the survival of the huge investment banking firm of Lehman Brothers Holdings was at stake. So little known was this 160-year-old institution that knowledgeable commentators still do not know how to pronounce Lehman: "Leeman" or "Layman." ("Leeman.") Another institution facing bankruptcy was Merrill Lynch, the largest and most famous retail brokerage form in the United States. The result of Sunday's meeting: Lehman declared bankruptcy on Monday morning and Merrill was bought by Bank of America for $50 billion of BofA stock. All of this was done behind closed doors over a weekend. That was how desperate the government and the Federal Reserve were to get the deals done by Monday morning. They failed with Lehman. No deal. Lehman had over $100 billion in bonds outstanding. It reported its debts at $613 billion and its assets at $639 billion. http://www.garynorth.com/snip/714.htm According to its former CEO, Richard Fuld, he took out $300 million in the eight years prior to the collapse of his company. http://www.garynorth.com/snip/715.htm By the end of the week, September 21, two other investment banks, Goldman Sachs and Morgan Stanley, filed with the FED for bank holding company status. That was on a Saturday. This switch was immediately granted. This entitled them to the bailout money being offered by the Federal Reserve System and anything Congress might pass. Congress passed a $700 bailout plan, plus $150 billion in pork, by the end of September. That was the last of the Big Five investment banks. The survivors are minor players that only specialists have heard of, such as Jeffries. Goldman Sachs' press release on September 21 is worth considering. It mentioned that it had been founded in 1869. It was a private banking firm open only to "high net worth individuals." No longer. "When Goldman Sachs was a private partnership, we made the decision to become a public company, recognizing the need for permanent capital to meet the demands of scale. While accelerated by market sentiment, our decision to be regulated by the Federal Reserve is based on the recognition that such regulation provides its members with full prudential supervision and access to permanent liquidity and funding," said Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs. "We believe that Goldman Sachs, under Federal Reserve supervision, will be regarded as an even more secure institution with an exceptionally clean balance sheet and a greater diversity of funding sources." http://www.garynorth.com/snip/716.htm That said it all. The rich no longer could survive on their own. From now on, they will need to be "under Federal Reserve supervision." We are at the end of an era that stretches back to early nineteenth-century America. The whole nation now looks to fiat money and government bailouts. The era of American entrepreneurship has ended in the financial markets. THE FOURTH SURPRISE On the weekend of September 27, FDIC officials met with officials of America's fourth largest bank, Wachovia, and officials of America's no longer largest bank, Citigroup. They hammered out a merger. This was done with no public announcement. The announcement came in a press release on Monday morning, before the stock market opened. Citigroup Inc. will acquire the banking operations of Wachovia Corporation; Charlotte, North Carolina, in a transaction facilitated by the Federal Deposit Insurance Corporation and concurred with by the Board of Governors of the Federal Reserve and the Secretary of the Treasury in consultation with the President. All depositors are fully protected and there is expected to be no cost to the Deposit Insurance Fund. Wachovia did not fail; rather, it is to be acquired by Citigroup Inc. on an open bank basis with assistance from the FDIC. It was a sweet deal for Citigroup. Citigroup Inc. will acquire the bulk of Wachovia's assets and liabilities, including five depository institutions and assume senior and subordinated debt of Wachovia Corp. Wachovia Corporation will continue to own Wachovia Securities, AG Edwards and Evergreen. The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk. http://www.garynorth.com/snip/717.htm It was too sweet a deal. Wells Fargo sued Citigroup. Citigroup was offering $2.2 billion for Wachovia. Wells Fargo was offering $15 billion. Wells Fargo eventually triumphed. That move gave Wells Fargo more branches than any other bank, plus deposits equaling Bank of America. http://www.garynorth.com/snip/718.htm THE FIFTH SURPRISE Citigroup was the institutional heir of the Rockefeller family, through William, the brother of John D. William's son James Stillman Rockefeller became chairman in 1959. The bank's history goes back to the War of 1812. So large was this bank that it was the first contributor to the Federal Reserve Bank of New York in 1914. On November 4, 2007, its CEO, Chuck Prince, resigned. The next day, I told my Website's subscribers to get out of stocks and short the S&P 500. According to a report on Bloomberg, in late 2006, the capitalized value of Citigroup was $274 billion. It was the largest bank in the United States in terms of market value, with Bank of America second. By September 21, 2008, its capitalized value was in the range of $26 billion. http://www.garynorth.com/snip/719.htm The extent of the bank's condition was published only after the Sunday bailout. At that point, the government and the Federal Reserve had to come clean. The disaster could no longer be concealed. What had been the largest bank in terms of market value had slipped to #6, and was about to go bust. This is why the government intervened. The government (you and I) will shield the bank's shareholders and creditors against most of the losses in its portfolio of toxic loans. Terms of the asset guarantees mean Citigroup will cover the first $29 billion of pretax losses from the $306 billion pool, in addition to any reserves it already has set aside. After that, the government covers 90 percent of the losses, with Citigroup covering the rest from assets that include leveraged loans and so-called structured investment vehicles. The government will pay $20 billion for $27 billion of preferred stock, which will pay 8%. (It will pay 8% only because the government will pay off the bad loans.) The government has already provided $25 billion in the Troubled Asset Relief Program, which is part of the $700 billion bailout bill, passed in late September. "This is a partial government takeover," Christopher Whalen of Institutional Risk Analytics, a Torrance, California- based research firm, said in a Bloomberg Radio interview. "We have been telling people for a while that some of the top banks were going to end up controlled by the government next year. It looks like that's happening sooner than even we expected." http://www.garynorth.com/snip/720.htm In a lengthy, detailed article published in the "New York Times" on November 22 -- two years too late -- the reporters trace the history of bad decisions made by senior managers at Citi. The article shows that there were red flags, but no one paid any attention. The article also indicates that there may be more bad news to come. http://www.garynorth.com/snip/721.htm Call it "Citi bailout, phase I." CONCLUSION America's biggest banks are going bust or have gone bust. Little banks are toppling each week. There is no end in sight. The government, which is running a trillion-dollar deficit this fiscal year, is adding ever more debt to save the favored banks. It is buying the banks' insolvency in the name of future taxpayers. The buyers of Treasury debt and the Federal Reserve System are funding all of this. They think future taxpayers will pay them back. I don't. I think there will be a tax revolt: mass inflation. Meanwhile, every dollar that flows into the Treasury does not flow into the private sector. The nationalization of insolvency continues. The authority of make decisions regarding who will get the shrinking supply of private savings that the banks have not already absorbed to keep their doors open have been transferred to a new generation of capitalists, people who live in fear of government regulators, not depositors. The year 2008 has seen the end of free market financial capitalism. Forget about efficiency. Forget about stable economic growth. Forget about everything except solvency as defined in fiat money. Moral hazard is alive and well in the West. Free capital markets are not. It was nice while it lasted. But it could not last. State capitalism always demands bailouts. It always gets what it asks for. Senior managers got the gold mine. Taxpayers got the shaft.
TODAY'S REPORTS: Jobless claims Consumer spending Personal incomes Core PCE price index Durable goods orders Chicago PMI Consumer sentiment New home sales Could be a very interesting day for gold. Don't be surprised if you see it soar today! As I have stated before, some of the largest moves I've seen happen on pre-holiday trading days and sometimes right at the end of the session. But don't wait for it to happen. Buy any big dips and hang on and sell the top as soon as the price rise slows.
Tuesday, November 25, 2008
How much is 6 trillion dollars? I worked this up in a slightly different presentation about 15 years ago as a letter to an editor for an Idaho newspaper when Washington began talking routinely in terms of trillions of dollars. The approximations and math are mine, so corrections are welcome. Once before I posted this on Marketwatch, but I think the reminder is due again. A typical tractor-trailer rig that you see on the highway weighs in at about 80,000 pounds, including the rig weight, so the load weight would be less. There has been some talk of setting load weights at a maximum 50,000 pounds, so that will be the figure I will use for the following. But again, how much is 6 trillion dollars? A. 62,500 tons of $100.00 bills. B. A convoy of 2,500 eighteen wheelers each loaded with 50,000 pounds of $100.00 bills. C. A stack of one dollar bills reaching all the way to the moon and 1/3 of the way back to the earth. Answer: Any of the above. I assumed that a stack of one dollar bills = 300 per inch. Then, 300 bills/inch = 3,600 bills/ft, or about $19 million/mile (for $1.00 bills stacked). $6 trillion divided by $19 million = 315,789 miles. With the distance from the earth to the moon being 238,857 miles (old data from a 1966 dictionary), 1.32 times this would be 315,291 miles (close enough for government work, pardon the pun). Also assume that 30 ($100) bills = 1 ounce. (I used a postage scale with several small bills to approximate the weight.) So, using now $100 bills, each ounce would = $3,000. One pound would = $48,000 of $100 bills. One ton would = $96 million. Then, $6 trillion divided by $96 million = 62,500 tons. And 2,500 loads at 50,000 pounds each = 125,000,000 lbs = 62,500 tons. By the way, a convoy of 2,500 eighteen wheelers, if you allow even just 200 feet per vehicle including following distance, equals 500,000 feet, or a steady convoy 95 miles long.
Hourly Action In Gold From Trader Dan Posted: Nov 25 2008 By: Dan Norcini Post Edited: November 25, 2008 at 2:53 pm Dear CIGAs, The 100 day moving average near the $832 level provided the overhead selling resistance in today’s gold session. The chatter was that $100 worth of gains in gold over the past three trading sessions was enough of a move to bring in some short term profit taking. That is probably true although I would not be surprised to learn that the bullion banks showed up at the $830 level trying to draw another line in the sand. Dip buyers are appearing however which is a good sign as the technicals have flipped to friendly with the turn higher in the 10 and 20 day moving averages and the consistent trade above the 40 day. Thus far gold has managed to maintain its footing above the 50 day as well which comes in closer to the $800 level. It looks as if we are oscillating around the 50% retracement level from the October peak. If gold can maintain a general consolidation-type trade around this level, it will be constructive. We are headed into a holiday shortened period in which liquidity can dry up some - that leaves the market vulnerable to wide swings in price on even relatively small orders. Technically, a closing trade above the $835 level should enable gold to run to $850 before it encounters anything much in the way of overhead resistance. Stops are building just above today’s session high. Support lies at today’s lows and then the $790 level. Open interest numbers remain very, very low which does give me a bit of concern. Figures from yesterday reveal that a large amount of the buying was indeed short covering. It is constructive to push the shorts out as no doubt happened when the market pushed into stops that were located above the $800 - $810 level but we need fresh buying, not just short covering, to sustain prices at these levels and set things up for an extended push higher. We must see a continued increase in open interest (an end to the deleveraging) before we can mount a sustained rally. Interestingly enough, the Euro-Yen cross was knocked lower today even in the face of the newly announced Fed plan to buy up FNM and FRE debt. Stocks initially greeted the plan with happiness but then moved lower mid-morning. That took the cross lower and as it faded, so too did gold but as that cross began to recover off its lows, so too did the gold price. The HUI managed a close above the horizontal resistance level near 225 yesterday but could not manage (thus far) to get a second consecutive close above that level. It will need to do so in order to bring in more technically based buying into the mining shares. So far the selling in the HUI and the XAU has not been unmanageable. The Dollar (USDX) did dip below the critically important 85 level in today’s session but it managed to claw its way back above that by mid-morning. Watch that level closely as two consecutive closes below it will begin to push the concentrated speculative long side positions into liquidation. Right now the USDX is bouncing from its 40 day moving average which tells me that the fund longs are attempting to defend their positions. If they cannot hold it there, they will be forced out and a top will be confirmed on the technical charts. Their exodus will bring the 83.50 level into play quite quickly. They know that and so do we. (SEE CHART AT JSMINESET.COM)
You Ain't Seen Nothing Yet By Mike Whitney http://www.informationclearinghouse.info/article21313.htm "The problems we face today cannot be solved by the minds that created them" Albert Einstein November 24, 2008 "Information Clearinghouse" -- Obama hasn't even been sworn in yet, and already the Wall Street cheerleaders are celebrating his first great triumph. According the pundits, the stock market staged a surprise 494 point rally on Friday because--get this--it was announced that Timothy Geithner would be appointed Obama's Treasury Secretary. Timothy who? What nonsense. The sudden turn-around in stocks had a lot more to do with short-covering than anything else, but don't let that get in the way of a good story. Even so, the last minute surge on the NYSE couldn't stop another week-long bloodbath that ended with the Dow and S&P 500 tumbling another 5 percent. That's not to say that Geithner is not bright and talented guy. He is; and so is his White House counterpart, Lawrence Summers. But the media hype is way overdone. Geithner doesn't drive the markets and he isn't "change you can believe in". In fact, he's a protege of Henry Kissinger, a member of the Council on Foreign Relations, and has the same political pedigree as his predecessor, Henry Paulson. They're both part of the ruling fraternity and their views of the world are nearly identical. There's no doubt that Geithner will be more competent and effective than Paulson but, then again, who wouldn't be? Paulson may be the biggest flop at Treasury since Andrew Mellon steered the country onto the reef during the Great Depression. The recent flap over the Troubled Assets Relief Program (TARP) just proves the point. After convincing Congress to pass a $700 billion bailout plan--by invoking the specter of economic Armageddon and martial law--the former G-Sax chairman proceeded to set up a program for buying back mortgage-backed securities (MBS) and other junk paper from his banking buddies. Paulson argued that removing the crappy loans would help the banks get back on their feet and start lending again. Of course, no one could really figure out how the process was going to be executed, but maybe that's just nit-picking. Fortunately, Paulson never got a chance carry out his plan. He was torpedoed by the stock market which plunged seven days in a row losing nearly 20 percent of its value until Paulson threw in the towel and did what 200 economists had suggested from the very beginning---buy preferred shares in the banks so they could rev-up their credit engines again. (http://www.informationclearinghouse.info/article21313.htm)
Borrowing Your Way Out Of A Debt Crisis By Colin Twiggs November 25, 2008 5:00 a.m. ET (9:00 p.m. AET) Barack Obama boasted that his new economic recovery program will create 2.5 million new jobs. The question is what kind of jobs? What the US needs are manufacturing jobs. Preferably in industries with strong export sales. What it does not need are more roads, more community halls, more schools, more dams or more bridges. These may stimulate consumption in the short term, but will have a negligible impact on GDP in the long run. To restore long-term stability the program will need to address the "terrible twins": the current account deficit and the budget deficit. From the mid-1990s the burgeoning current account deficit reflected rising external debt, needed to maintain strong levels of new investment. External debt was needed for one simple reason: national savings were shrinking in response to artificially low interest rates maintained by the Fed to "stimulate" the economy. In effect the US traded a higher exchange rate in return for cheap finance from China, Japan and other East Asian economies. Asian manufacturers benefited from the artificially low exchange rate which stimulated exports. The US financial sector in turn benefited from artificially low interest rates, encouraging consumers to borrow cheap money and invest in inflationary assets such as housing. While the financial sector and consumers gained in the short term, we are now aware of the long-term consequences. The strategy backfired with the collapse of the housing bubble damaging the financial sector, the housing market, the stock market and the manufacturing sector. There is a further hidden cost of the earlier trade-off, however. That is the loss of manufacturing jobs. Manufacturers could no longer compete in export markets against the very same East Asian economies, due to the strong dollar. In short, the US traded cheap finance for manufacturing jobs. This appears to have been a conscious decision rather than gross stupidity. I suspect that the financial sector bought more influence in Washington than the manufacturing sector. And sold legislators on the idea that the future lay in the (then) rising share of GDP attributable to financial services: "Growing more high-paying white-collar jobs in the US and exporting cyclical blue-collar jobs to Asia will eliminate inflation and make us recession-proof". They drank the Kool-Aid. In 2001 private investment fell by almost 4 percent, which should have resulted in a smaller current account deficit, but was replaced by a growing federal budget deficit. In addition to artificially low interest rates, which discouraged savings, the Federal government also ran increasingly large deficits in an attempt to stimulate the economy, funding the shortfall with more external debt. The situation is now a whole lot worse with the federal government forced to run even larger deficits in order to shore up the banking system and create "2.5 million jobs". Funded by even more external debt. A recession is supposed to reduce the current account deficit, but this was not allowed to happen during 2001 because of the strong dollar policy. And is unlikely to occur in 2008/2009. David Axelrod, senior adviser to the president-elect, warned that automakers would have to come up with a long-term plan to restructure the industry before they received any federal assistance. I would suggest that the federal government faces similar tough decisions in order to assure their own long-term survival. What is needed is a weaker dollar. To discourage imports and stimulate manufacturing exports. And to minimize federal budget deficits as far as humanly possible. The US has one major advantage over emerging economies who find themselves in a similar position: external debt is denominated in US dollars. Depreciation of the dollar would not result in an increase in external debt as with an emerging economy. Rather, the cost of the depreciation would be borne by creditors. While this may harm the dollar's status as a reserve currency, it should be weighed against the benefits of export-led growth. For those interested in the nuts and bolts of current account deficits and capital account flows, I recommend this excellent though lengthy 2004 paper by Nouriel Roubini and Brad Setser: http://pages.stern.nyu.edu/~nroubini/papers/Roubini-Setser-US-External-Imbalances.pdf (65 PAGE PDF DOC)
Gold In US Dollars Is Only Part Of The Picture Posted: Nov 24 2008 By: Dan Norcini Post Edited: November 24, 2008 at 10:36 pm Dear Friends, Linked below (GO TO JSMINESET.COM FOR THE LINKS) are a few charts detailing the price of gold when viewed through the prism of differing major currencies. As you can see, gold in British Pound terms has notched another new all time high. So did gold priced in Canadian Dollar terms. Gold in Australian dollar terms is just a wee bit below its all time high. The same goes for gold in terms of the Russian Ruble. Gold in Euro terms is 20 euros below its all time high. The weakest gold chart is Yen-Gold which has been hit because of the strength in the Yen coming from the carry trade unwind. That has served to push the yen sharply higher which depresses the price of gold when measured in those terms. We Americans tend to view the price of gold only in US Dollar terms forgetting that a major portion of the world does not do so. It is my opinion that those American-based analysts who make their prognostications of gold without considering the price in terms of the other major currencies of the world do their readers a huge disservice. Ask yourself a simple question as you look at the following price charts – does this look like a metal that is experiencing a deflationary psyche among a large portion of the global investment community or does it look like a metal that is preserving the wealth of millions of international investors as the global economic chaos expands? Keep this in mind whenever you read some self-proclaimed gold expert dissing the metal because it is not trading back above $1000 US and is anxious to short it. Such gloom and doom gold dirges would be met with incredulous scorn in the UK and perhaps with amusement in Canada and elsewhere. Australian investors must be thinking that American beers are missing a few vital ingredients if this is the kind of thinking that they are producing. Whether some folks want to admit it or not, gold is an international currency of last resort and always will be, no matter how much the US based elites and their paper love-sick puppies want to pooh-pooh it. Trader Dan
TODAY'S REPORTS: GDP Consumer confidence Tomorrow there are a slew of reports, and it's the last day of trading before Turkey Day so the market can be a bit crazy from think volume. Although, some of the biggest moves I've seen have happened on the day before a holiday, so be on your toes. We could have a boomer of a rise Wednesday if people decide to jump into gold before a long weekend if they are afraid of what could happen if our "glorious leaders" have four whole days to fuck things even up more than they have already. About the only thing they haven't done so far to us directly is gas us to death. No particular news stands out this morning, but gold is looking very good to keep rising.
Sunday, November 23, 2008
Changing With Retreads The Third Clinton Administration By RALPH NADER November 21, 2008 "Counterpunch" -- While the liberal intelligentsia was swooning over Barack Obama during his presidential campaign, I counseled “prepare to be disappointed.” His record as a Illinois state and U.S. Senator, together with the many progressive and long overdue courses of action he opposed during his campaign, rendered such a prediction unfortunate but obvious. Now this same intelligentsia is beginning to howl over Obama’s transition team and early choices to run his Administration. Having defeated Senator Hillary Clinton in the Democratic Primaries, he now is busily installing Bill Clinton’s old guard. Thirty one out of forty seven people that he has named so far for transition or appointments have ties to the Clinton Administration, according to Politico. One Clintonite is quoted in the Washington Post as saying – “This isn’t lightly flavored with Clintons. This is all Clintons, all the time.” Obama’s “foreign policy team is now dominated by the Hawkish, old-guard Democrats of the 1990,” writes Jeremy Scahill. Obama’s transition team reviewing intelligence agencies and recommending appointments is headed by John Brennan and Jami Miscik, who worked under George Tenet when the CIA was involved in politicizing intelligence for, among other officials, Secretary of State Colin Powell’s erroneous address before the United Nations calling for war against Iraq. Mr. Brennan, as a government official, supported warrantless wiretapping and extraordinary rendition to torturing countries. National Public Radio reported that Obama’s reversal when he voted for the revised FISA this year relied on John Brennan’s advise. For more detail on these two advisers and others recruited by Obama from the dark old days, see Democracy Now, November 17, 2008 and Jeremy Scahill, AlterNet, Nov. 20, 2008 “This is Change? 20 Hawks, Clintonites and Neocons to Watch for in Obama’s White House.” The top choice as White House chief of staff is Rahm Emanuel—the ultimate hard-nosed corporate Democrat, military-foreign policy hawk and Clinton White House promoter of corporate globalization, as in NAFTA and the World Trade Organization. Now, recall Obama’s words during the bucolic “hope and change” campaign months: “The American people…understand the real gamble is having the same old folks doing things over and over and over again and somehow expecting a different result.” Thunderous applause followed these remarks. “This is more ‘Groundhog Day’ then a fresh start,” asserted Peter Wehner, a former Bush adviser who is now at the Ethics and Public Policy Center. The signs are amassing that Barack Obama put a political con job over on the American people. He is now daily buying into the entrenched military-industrial complex that President Eisenhower warned Americans about in his farewell address. With Robert Rubin on his side during his first photo opportunity after the election, he signaled to Wall Street that his vote for the $750 billion bailout of those speculators and crooks was no fluke (Rubin was Clinton’s financial deregulation architect in 1999 as Secretary of the Treasury before he became one of the hugely paid co-directors tanking Citigroup.) Obama’s apologists say that his picks show he wants to get things done, so he wants people who know their way around Washington. Moreover, they say, the change comes only from the president who sets the priorities and the courses of action, not from his subordinates. This explanation assumes that a president’s appointments are not mirror images of the boss’s expected directions but only functionaries to carry out the Obama changes. If you are inclined to believe this improbable scenario, perhaps you may wish to review Obama’s record compiled by Matt Gonzalez at Counterpunch. Ralph Nader is the author of The Seventeen Traditions.
What MUST Be Done To Avoid Financial Destruction Posted: Nov 22 2008 By: Jim Sinclair Post Edited: November 22, 2008 at 10:48 pm Filed under: General Editorial My Dear Extended Family, Things are now "Out of Control." This international financial crisis is now out of control as the world asks if the USA has two presidents, one president or no president at all. It would appear that Paulson is in financial control with Bernanke as his second. I warned you by personal email long before the statement was proven totally correct that “This is it.” That was followed by “This is it, and it is now.” Many people laughed it off. This is it, and it is now. Now it is out of control. Now we enter the Collapse of Confidence period. Then we begin the Weimar Experience. It has all hit the fan, and still the absolute majority have no clue. The OTC derivative dealers broke the system into millions of pieces of glass. This broken glass cannot be put back together. It is heart rending to see a picture of GM autoworkers holding a prayer meeting for their retirement funds. The retirement money was never funded. It is a lost hope. This is another responsibility the government has undertaken that is going to go wild. Those of you still in freeze frame are headed for lines around your bank. Your bank will likely be acquired by another bank that also is in deep trouble. The US dollar, like a leaderless company, will lose its respect and therefore value. In order of importance the following MUST be done unless you want to be one of the suffering masses that will be all too visible this winter: 1. You must have your assets held anywhere they are in true custodial-ship accounts. That type of account at a bank or broker states clearly that the assets held there are not on the balance sheet of the host financial entity. Those assets are clearly segregated in your name. This must be reviewed by counsel to be sure you have what you think you have. Don’t cheap out. All you have is depending on the validity of true custodial-ship accounts. You cannot know all the banks are broke, however I feel ALL banks are broke because finance is an intertwined system that if visible would look like a spider’s web. Problems on the top will materialize all along the web. Therefore the singular most important step you must take is the establishment of a true custodial-ship account. Do not assume you have this type of account unless a competent attorney reviews the account papers. 2. I am extremely concerned about those of you who persist in holding certificates for gold rather than holding the actual metal either delivered to you or held for you in a true custodial-ship type account. The scams out there in gold are plentiful. The only way to avoid these scams absolutely is to have your gold in your own possession. Every other means of holding gold is steps away from perfection. Some will be ok, but many will not. 3. Why would anyone fail to either take paper certificates or order their financial agent to make direct registration book entry at the transfer agent? In most cases you only have until year-end to accomplish this strategy. 4. Withdraw from ETFs. 5. If you carelessly keep large assets with your broker you are as mad as a hatter. The FDIC DOES NOT have the money to guarantee all they are undertaking. Withdraw excess money constantly from any net broker. If you are so stubborn that you think you can trade to insure yourself when your funds are not making money while still getting your money that counts you are nuts. Admit to yourself you are nothing more than a gambling addict in a downward spiral. 6. Leave no gold or coins with any coin dealer. 7. If you can withdraw from your corporate retirement plan do it. 8. Withdraw from credit unions. 9. Withdraw from all money market instruments. 10. This is it. 11. It is now. 12. It is out of control NOW. The next two months are going to be shocking, but nothing compared to what you will have to experience in 2009. Respectfully yours, Jim