As we near the APEX of the countertrend rallies in
many markets and economies, the air is full of HIGHLY-COMBUSTIBLE situations
just waiting for someone to light the MATCH. The full debacle of the next leg down
in developed world economies is at the doorstep. What event will act as catalyst is
unknowable, and the list of candidates is mountainous. Corruption and criminality within the
public sectors, crony capitalists and banksters set the stage for an
explosive cocktail, are set to immolate the private sectors that still
produce wealth and the public at large.
The greatest transfer of wealth from those that hold
it in paper to those that don’t is UNDER WAY! A Crack-up Boom is on the
As the downturn in developed-world economies once
again accelerates to the downside, volatility will expand just as it did in
2007 and 2008; volatility is opportunity to the prepared investor. Markets will zoom up and down as the
NEW NORMAL unfolds, thus creating HUGE opportunity’s for those who
embrace absolute return investments with the potential to thrive in these
markets. Buy and hold is DEAD,
absolute return investing strategies need to be a part of any diversified
portfolio as the global financial crisis continues to unfold. The competitive devaluation raceway is
UNDERWAY to substitute for the policies of growth.
“Currencies don’t float, they just sink at different
What is the new normal? It is rising inflation and slow or
no-growth economies where the public sectors, banksters and crony capitalists
CONFISCATE, through taxes or regulatory favors , the remaining wealth in the
private sector and transfer it to themselves. Governments pick winners and losers,
misallocate increasingly-scarce capital and place their economies into
regulatory STRAIGHTJACKETS, thus enshrining into law poor decisions and
mandating politically correct and practically incorrect solutions, and
prohibiting superior ones. As a
consequence, competitiveness, economic recovery and common sense recede
further and further and are substituted with money PRINTED OUT OF THIN
AIR. Take a look at this quote
from the grand old sage Richard Russell (www.dowtheoryletters.com -- I urge you to subscribe):
“It's truly remarkable. Within the space of three or four
generations Americans no longer even recognize Constitutional money! I've
said before that gold is imbedded in the DNA of mankind. We're closing in on the time
when, like a light bulb turning on, Americans will finally realize that
they've been hoodwinked by one of the greatest swindles in the history of
civilized man. They've been working and saving printed paper with the firm
conviction that the paper they worked so hard for was money (emphasis mine).
Wait, why is that printed paper worth anything at all? It's worth something
simply because the government has pronounced by fiat that dollars are
"legal tender for all debts, public and private." So the
"dollars" that we work our whole lives for, is backed by nothing
but the "full faith and credit of the United
States." And how good is that credit?
Two credit agencies are now threatening to lower the rating of US bonds. If
that happens, it will be a monumental shocker? And yes, all sovereign money
is now being judged and classified as to its worth. Did anyone ever gauge or
debate the value of gold? As I see it, we're watching the very beginning of
the end of fiat money.”
- Richard Russell
Money printed out of thin air IS NOT Capital; it is
not money; it is an IOU of morally- and fiscally-bankrupt public serpents,
central bankers and the bankster cartels. CREDIT IS NOT MONEY. When people WAKE UP to this fact there
will be riots in the streets.
One need look no further than Washington DC
PURPOSELY steering the economy off a cliff using the Cloward-piven strategy
or Saul Alinsky’s: Rules for Radicals; these playbooks are being fully
implemented at the quickest speed possible.
the moment, we see the government spending excessively and making promises to
spend that cannot be kept. This is already a major problem in states like California
and countries like Greece,
but the federal government will soon join them. At all levels of government,
promises to pay state and local pensions and to provide health care far
outstrip its capacity to pay. The Congressional Budget Office and many others
have been warning for years about the $50 or $60 trillion of unfunded
answer on health care? Offer an expensive drug benefit followed by a more
expensive ‘reform’ that increases the unfunded Medicare-Medicaid
liability. Dissemble about the real costs.”
That is Cloward-piven in action -- expand government
and make impossible promises until the collapse occurs and they nationalize
EVERYTHING to make essential payments.
It is the recipe for collapsing a market economy into a socialist one.
In Congress we see Queen Nancy declaring “we
must pass the healthcare legislation so we can all see what’s in
it”, as if this is some present sent to us by Santa Claus and we are
just breathlessly waiting to unwrap the goodies. Now she is going to pass it without a
vote in the House of Reps, saying she “likes it as it means they don’t
have to vote on it.”
Yesterday she crowed about the numbers out of the Congressional Budget
Office (CBO), stating she loves hard numbers; unfortunately, they are based
on assumptions which are FAIRY tales; in other words: lying with
numbers. The media reports them
as facts, to cover corruption.
What breathtaking statements, and evidence of absolute moral
bankruptcy and corruption at the highest level of government SWORN to uphold
Talk about transparency, this is not it; it is 2,700
pages of criminality and corruption which NO ONE HAS SEEN OR READ, but about
to pass into law under the harsh grip of our masters in the beltway. Make no mistake, the healthcare bill
is a TAX BILL, first and foremost, to cover up general revenue shortfalls and
the ballooning deficits as Social Security and Medicare trust funds have
already been squandered and have DISAPPEARED down the government rat hole of
The treasury report just released acknowledges the
budget deficit is not the $1.6 trillion advertised by the administration and
the main stream press in 2009; it was actually $4.5 trillion in GAAP
(generally accepted accounting principles) adjusted terms. The difference is unfunded
entitlements and stolen money from trust fund accounts. Thieves and scoundrels, remember this
next time they tell you budget fairy tales.
The Gang of 535 in the US, and the capitals of
Europe have been selling the fruits of our labors to special interests for
generations, unfortunately the parasites in Europe (public serpents, crony
capitalists, elites, trade unionists, banksters) KILLED the host private
sectors decades ago and in the US they are poised to do the same to the last
vestiges of the private sectors.
The recoveries are statistical lies courtesy of public serpents that
REFUSE to reform themselves, curb and roll back years of overspending and the
public sectors’ policies of insolvency.
Socialists calling the prudent and responsible
people in society criminals and putting a target on those who have to create
the incomes and jobs to end the crisis.
Insane, self destructive.
Unions have destroyed every industry in Europe and the US and are now
KILLING affordable government.
Government workers literally make double that of workers in the
private sector and produce less than half. There’s a wing in the White
House and labor department dedicated to union consultants, in support of
their agendas with phones directly into the oval office. These bureaucrats and public serpents
are your masters and enemies, not your servants.
Today Christine Legarde, the Finance Minister of
France called on Germany to: quit
producing more than you consume; quit saving, spend, spend, spend and never
save for the future just as we do; quit driving socialist economies to their
doom by competing vigorously, abandon the competitiveness you have carefully
built up over the last decade by holding down wages in a gradual but
effective manner; quit lowering corporate taxes so customers choose your
corporations over other suppliers (the businesses don’t pay the tax,
they just pass it through to the customer); quit benefiting from the
competitiveness you have built up in the global marketplace, producing trade
surpluses as consumers choose you over your higher-priced, lower-quality
competitors in the social welfare states.
Message to Christine from
Mother Nature and Darwin: You are
unfit -- mentally, morally and fiscally and the strong are going to send you
to your doom. Sending future
generations of your citizens to their doom as slaves to government, fiduciary
irresponsibility and debt in order to maintain your CURRENT political power
and reward something-for-nothing constituents is VILE. You are not God and cannot COMMAND
others to embrace your weakness, contempt for history and inability to
understand the laws of nature and man.
You and your country’s economy (France) are
increasingly “DEAD men walking,” just as your banks and financial
systems are as they die in your socialist embrace. Subsidize failure, rescue the imprudent,
subsidize businesses that lose money, as you are and you will get more of
it. These are policies of
INSOLVENCY. It is an epidemic
running throughout the developed world, a fatal virus that has sent every
empire to its doom and is doing so again. History is repeating, but you would
not know that as apparently you haven’t studied it... Ditto Mr. President, Prime Minister of
Greece, UK, Italy, Portugal, Spain and the rest of the developed world
welfare states… Refuse to
reform your governments and economic policies or fall to your
doom… Game, set and match,
as your economies die -- something inconceivable to you.
Along these same lines, we find the fellows who
introduced national ID cards, aka branding of the public as government
slaves, because in order to work you must have one; its government as GATEKEEPER
to jobs. Do as we say and you can
work, don’t do so and YOUR PAPERS will be revoked. Reminds me of HITLER’S Germany.
The radical progressive public serpents have now
slipped government control of the student loan market into the Healthcare
Bill, so student loans will go to political supporters. Banks as issuers and service providers
only look to financial qualifications, now this is being taken from
non-partisan banks and transferred to the FEDERAL government which will
ignore those considerations and substitute the POLITICALLY-correct for
practically-correct criteria. I
guess my son need not apply!
Last but not least, as the G7 economic collapse
continues SCAPEGOATS must be FOUND to pin the tail on the donkey. Now a SMOOT HAWLEY resurrection of epic
proportions is being introduced to pin the tail on china for a FAILING-US
economy. The US economy is
failing because of RUNAWAY taxes, mandates, government policies of high
energy prices and regulatory straightjackets, so capital FLEES to where it
If currency devaluation was the key to economic
growth, Mexico, South America and Italy would be export powerhouses like
China, and Asia. No, it takes
government policies of growth and support of capital and manufacturing, which
the developed world ended decades ago.
They prefer policies that BENEFIT entrenched crony capitalists and
politically-connected elites, such as big unions and banksters, instead of
NEW growth from fierce new competitors.
New entrants to challenge entrenched dinosaurs are regulatorally
Of course who pays? You do. America no longer makes everyday
items, and hasn’t for decades.
In a trade war, WE LOSE as there are NO domestic suppliers. DITTO for
EUROPE. If the Yuan rises 20%, so
will your prices on everyday items.
The trade deficit has been trimmed over 20% since the global financial
Just as China rises, so has Germany as they BOTH
have embraced the laws of nature and created lean mean corporate production
machines. They have lowered corporate
taxes and made their citizens and companies MORE competitive in the global
marketplace. They provide
INCENTIVES for people to produce rather than PUNISH them for doing so, as
does MOST of the developed world.
They have realized that economies are no longer closed and they must
compete or die at the hand of GLOBAL consumers who demand and choose superior
goods and services for less money.
It is the rational thing to do.
Both countries UNDERSTAND that economic and income
growth is PRIORITY ONE before anything else, including expansion of
government and FREE goodies. That is why they are winning the war to create
prosperity and wealth. They are
embracing, rather than running from, COMPETITION. It is not good public policy to
embrace weakness and failure and penalize strength and virtue. In the thriving parts of the globe
strength and virtue are rewarded and something for nothing is an ABSURD
idea. Hence their economies are
GROWING and have expanding income and employment.
Conversely, if you remove government statistical
adjustments (aka, politically correct), the economy is still comatose
in the US, let’s look at www.shadowstats.com unmasking of the cruel hoax public serpents are
presenting to the public through their mainstream media lapdogs:
Wow, it actually shows how little REAL growth has
occurred during the great debasement starting when Alan Greenspan sold out to
be re-nominated as Fed Chairman when the Clintons were elected. This was when the easy money and
debasement really accelerated to support the economy as Clinton PILED on the
structural impediments (higher taxes, regulations, etc.). The official Bureau of Economic
Analysis growth (top line) is courtesy of misstated inflation and government
ADJUSTMENTS to the economic reports.
The current gap between the top line and bottom line has rarely ever
Take a look at this chart (courtesy of David
Rosenberg at www.gluskinsheff.com) and his comments showing the UPS and DOWNS in the S&P 500 since
2000; keep in mind that the S&P 500 is down approximately 26% from the
“When we look at the last 12
years, dating back to LTCM and the bailout that ensued, we have endured a 60%
rally, followed by a 50% selloff, followed by a 100% rally, followed by a 60%
selloff, followed by a 70% rally.
The whole way along, the equity market is basically flat for a
buy-and-hold investor. The point in all this is the intense
volatility that has been and continues to be nurtured by government
stop-and-go policies. The really important lesson though is that this is a
great case for active portfolio management, also a lesson that investors
will not lose out by going long after a 50% collapse from the high; nor are
they likely to feel much pain from selling into a 70% rally from the
low.” – David Rosenberg
Lots of huffing and puffing from Wall Street, CNBS,
main street media and the banksters, but no gains for YOU. Here is a NOMINAL S&P 500
Chart (with a horizontal trend line drawn from the 200 highs) denominated in
FIAT currency, aka the dollar:
Not a pretty picture denominated in FIAT
currency. Quiz: Now that the
markets have run up 50 to 100% around the world since the March 2009 low,
based on the chart above how much risk are you taking for very little upside
if you are long?
Nor is this a pretty picture measured in REAL
money: Gold, it is down more than
75% in REAL purchasing power terms since 2000, additionally measured
in REAL money the 2002 to 2007 rally and the whole rally since March
The Federal Reserve and Congress can blow as much
hot air as the main stream media can distribute, but nothing changes the fact
that they, and the economies they control, are BANKRUPT and MUST print the
money. Credit spreads such as
2-year –vs- 10-year, 3-year –vs- 10-year, 5 –vs- 10 and 10
–vs- 30 are all near record wide, signaling huge supply and the
debasement of which the long end of the market will be victims.
Interest Rates can never rise again, as by November
2010 the ON BALANCE SHEET debts of the United States will be $14.5 trillion;
a 3 percent rise in short-term yields is $420 billion of additional interest
expense per year, ON TOP OF the current $1.6 trillion deficit, thus expanding
it by 1/4th , to $2 trillion a year.
Interest rates can never be normalized
again, ever, and if measured accurately they are profoundly NEGATIVE. Take a look at this alternate measure
of inflation from John Williams of www.shadowstats.com:
Wow, after unwinding the ADJUSTMENTS (made by
government to lie to you) inflation is at almost 10 percent on the items you
use EVERY DAY; if interest rates were normal, overnight fed funds should be
10% RIGHT NOW! Notice how the GAP
has widened over the last three DECADES?
Just like Pinocchio’s nose, the lies just keep getting bigger
and bigger. Think of it, negative
interest rates approaching 9% -- trillions of dollars of government spending
throughout the developed world and NO GROWTH in incomes and economies. An inflation MEGA trend is firmly in place
and will continue to unfold.
There is no escape route except printing the money
and they will do so, as there is NO APPETITE for doing the right thing,
cutting spending and cutting government.
A clear indication that the “something for nothings” are
in the majority. Look no further
than the United Kingdom where labor has climbed to parity in opinion polls as
the something-for-nothing public refuses to realize the depth and enormity of
the unfolding insolvency wrought by Gordon “sold the gold” Brown.
Housing is forming another BUBBLE; the bubble is in
delinquencies and bank-owned foreclosures. After 2.9 million foreclosures in
2009, if the dam is allowed to BURST that figure will double this year. The longer the government puts their
finger in the dike the greater the next debacle downturn will be. High-end homes have a 5-year supply,
and it is growing daily. Take a
look at the reset TIDAL wave facing the banking and mortgage industry in
addition to the current state of affairs:
Hundreds of billions of resets over the next two
years; notice how the resets approach the levels of 2007 just before the
economy collapsed in 2008? How
many of those loans will be repaid?
This is trillions in potential losses. In an explosive interview with Charlie
Rose, Harvard Law School’s Elisabeth Warren of the Tarp Oversight
Committee confessed that her projections indicate OVER 2,800 community and
regional banks face INSOLVENCY (http://www.youtube.com/watch?v=ERlMxc84_EM&feature=player_embedded).
commission has been repeatedly stonewalled by the FED and the banks on who
got how much money and under what terms.
She says that about 3,000 of the nation's 8,000 banks will be in
trouble over the next three years. At least half of commercial real estate
loans are under water. Over the next three years, they will come due. These
loans are balloon loans. The banks get to re-negotiate them. The problem is,
the underwater loans cannot be rolled over at the face value of the original
loan. That would violate accounting rules. Will the government allow the
banks to violate accounting rules? Will banks be willing to do this?
loans are not rolled over, then the banks must take back the properties and
seek buyers. Until there are buyers, the loans must be taken off the banks'
balance sheets: dead assets. When they are officially buried by the
accountants, the banks must find capital to replace the losses or else call
in old loans to reduce the banks' liabilities. This is why banks are
depositing money at the Federal Reserve Banks as excess reserves: to cover
for the expected bad loans” -
First let’s answer the question at the end of
the first quoted paragraph: Yes,
the government will let banks violate accounting rules (they already are;
many are operating zombies that the FDIC cannot afford to close), as to the
second question: They will have
no choice. Bernanke in recent
testimony has already said CASH flow is the measure of a good loan, not
collateral values. This is
setting the table for more BAD loans and rollovers via REGULATORY
forbearance. The problem is set
to grow rather than be resolved.
EXTEND and PRETEND solvency.
The “too-big-to-fail” banks HAVE NOT
disposed of their toxic assets.
Accounting gimmicks have substituted for addressing the problems and
they are more insolvent now than 2008, and a tsunami wave of commercial and
residential write-offs and bankruptcies LOOM. The new financial regulation bill
basically puts the Fed (Fox) in charge of the hen house, leaving the banks
free to fleece consumers as they have in the past.
A seminal report on the Lehman Brothers’
bankruptcy was released and, needless to say, it outlined potential
criminality in management and cast light on the New York Federal
Reserve’s potential complicity in the cover up. Swap 105’s which allowed Lehman
to move problem assets off the books and claim 105% of the face value. When I read this report all I can
think of is Dennis Gartman’s COCKROACH rule. There is never just one, we are
waiting to discover the rest.
Where are the regulators?
Bought and paid for by the BIG players.
Chris Whalen of Institutional Risk Analytics has
reported that many CDO’s and MBS (collateralized debt obligations and
mortgage-backed securities) did not contain mortgages equivalent to their
sold-for value and many had loans equal to only 95% of selling price. The buyers were CHEATED by the seller
and not given the full value of the loans underlying the securities. This is a TIME bomb for the big banks
and brokers who sold them. Where
are the regulators? Bought and
paid for by the BIG players.
2010 will also be challenging for G7 Sovereigns as
they TRY to rollover inconceivable sums of existing debt while borrowing NEW
money to pay for the WELFARE states’ spending. Trillions of dollars of borrowing
challenges lie directly ahead; let’s look at some illustrations of the
rollover requirements for Germany, France, Portugal, Ireland, Italy, Spain
and Greece from www.newyorktimes.com and Reggie Middleton’s Boom Bust blog;
These are just the rollover requirements for the
United States and do not include NEW BORROWING of $1.6 TRILLION. So, a total of OVER $3.5 Trillion is
required, providing that the deficits are as projected by the CBO (are they
ever accurate?). That’s
almost $300 Billion a month, or $10 Billion a day (10,000 million a
day). Mind numbing numbers! Inconceivable sums. Now let’s look at European
rollovers from Reggie Middleton:
Think of the US issuance and add this to it. Where will the money come from? The printing press in one form or
another. That’s just the
rollovers; now let’s look at NEW issuance to cover 2010 DEFICITS from www.forbes.com:
This is called INSANITY. Only India, China and the emerging
world are growing in REAL terms, the rest of the borrowers are DEADBEAT
welfare states with shrinking incomes and economies, when properly adjusted
for inflation. How the US and
Europe are going to navigate the rest of the year without some MISHAP is
will be the appearance of the “when HOPE to FEAR” moment we are
looking for in 2010.
This DOES not include BANK and brokerage debt (totaling OVER a
trillion dollars) which must roll.
And, of course, what about the private sectors’ funding needs
which are not included here.
Just today the Greek Prime Minister Papandreou basically
threatened/demanded that within a 30-day period the EU arrange for lower
financing costs, saying they CAN’T afford the interest rates lenders
are now demanding, intimidating that they need SUBSIDIES (think guarantees)
to pay part of the interest. As a
committed socialist, he must rely on capitalists to subsidize them. This is a gigantic game of chicken
with the Euro currency as hostage.
Can you say EXPLOSIVE?
What is it he doesn’t understand about being a broke, deadbeat
socialist government and investors/lenders needing to be compensated for the
risk? I predict they will, in one
way or another, do as he says.
It’s called PRINTING the money, and it is how ALL problems are
solved in the western world.
Bonds are bombs, and WE KNOW this because the public
is PILING in with hundreds of billions of dollars into these investment
vehicles since March of last year, while stock funds have seen barely a
trickle of new investment:
THE PUBLIC ALWAYS gets their heads handed to them,
because the bomb, er… bond market is the epicenter of the crisis, they
will again. They will CRASH
before this global financial crisis is over, and many will just never be
repaid. There will be far more
failures then you can conceive today because the incomes and CASH FLOWS to
service them is in freefall.
The public thinks bonds are safe because they have
been told this for five decades by the main stream media, public serpents and
now by the banks, brokers and governments who are borrowing the money and
issuing the bonds. Maybe they
were safe when economies, credit and incomes where growing, but now that the
situation has reversed they are soon to be NUCLEAR waste. Huge borrowing and
declining income to service it. This
is a CASH FLOW depression. NEVER
forget this. Trillions of
Dollars, Euros, Swiss Francs, UK Pounds of bombs, er… bonds and not
enough income to pay the interest, let alone the principle. They will print
the money for some and let others fall to their doom….
Inextinguishable and unpayable debt is the core of
the crisis. Remember that the
bonds are IOU’s, as are the currencies in which they are denominated;
if one debtor doesn’t get you the other one will. Government bonds, Muni’s,
Mortgages, CDO’s, MBS, consumer lending, pension bonds, state bonds --
basically, everything in bondville -- is in crisis to one extent or
another. Many corporate bonds are
in extend-and-pretend mode. All
levels of developed world societies are in death, er… debt
spirals. Defaults have only just begun,
and many multiples of the defaults which have occurred to date are on the
horizon over the next several years.
I would HATE to be Pimco right now. What are Bill Gross & Company
thinking? They better be VERY
selective. It’s probably a
good time to consider retirement before the going gets REALLY rough.
Quantitative easing in the United States
can never end. Who will buy the
gigantic issuance and finance the crashing housing market with mortgages (the
US government is already over 90% of this market). Look at this breathtaking
head-and-shoulders top in the 30-year bonds from a recent Richard Russell www.dowtheoryletters.com :
Wow, a top built over a two-year period (an
identical top can be seen in ten-year notes), gargantuan is the word for this
and it signals the end of a bull market which began 28 years ago in 1982,
when Paul Volker broke the back of inflation. This is also a sign of the
inflationary mega trend we have now entered. Break that right shoulder and interest
rates are headed higher than you can imagine. Bonds are toxic and capital
destruction is dead ahead.
Please understand, the Federal Reserve can read
charts too, and they will do EVERYTHING in their power to avoid this pattern
becoming active, because when it does break, the money required to soften the
blow will become exponentially LARGER.
They will print whatever is required to buy and hold that
neckline. They will fail. Mother Nature and the holders of bonds
are bigger than they are, but the printed money will become many of the seeds
of the coming hyperinflation.
If you think this picture of bonds is bad, take a look at them priced
in REAL money, Gold:
Wow, 75% losses and the 10-year Note priced in gold
is identical. Well, bonds have
hardly been safe, even when the interest payments are arriving. This is just a glimpse of debacles to
come, as borrower after borrower succumbs to bad cash flow and receding
Trillions of Dollars, Yen, Euros, Pounds and Swiss
Franc’s will be PRINTED to underpin the financial systems and
governments in the coming year and near future. IT IS THE ONLY OPTION as developed
world incomes continue their collapse.
This is how ALL FIAT currencies fall to their demise, WITHOUT
EXCEPTION. This episode in FIAT
folly (unsound money) will be NO DIFFERENT.
Now let’s look at a confirmation of the
inflationary MEGA trend and the mirror image of the BOND top (from www.dowtheoryletters.com), in only one of the true currencies in the world, GOLD (the other is
This is a MASSIVE reverse head-and-shoulders BOTTOM,
but unlike bonds, it is active and signaling a $350 move ($1,350) from the
breakout area (another 20% loss of purchasing power from current
levels). It was also formed over
the last 2 years. Gold is not a
bubble, this is an orderly market and the public is barely aware of it. This is a picture of a well-supported
BULL market and NO WAY can paper currencies gain against it over time. it is called a precious metal because
there is limited supply, while FIAT currencies are, and will be, printed in
UNLIMITED amounts. Bottom and top
technical formations constructed over 2 years time are extremely significant
MACRO signals and, once active, they RARELY fail, so the bond top (not active
yet) and gold bottom (fully active) hold a lot of weight. The only people who believe fiat
currencies can gain on gold I call PAPER boys, they either do not know
history, or for them, history began in the last 50 years.
Stocks WORLDWIDE are hopelessly overvalued, representing
a Zimbabweization of many of them.
These are the fingerprints of a Crack-up Boom. Cash chasing returns regardless of
price or value. Cash
fleeing the sidelines as they REPRICE to reflect the debasement of the
currencies in which they are denominated. I don’t care what the earnings
are -- they are at the high end of historical P/E ratios and dividends are
miniscule in relation to the risk.
People say Shanghai is a bubble.
Who cares? It is a
punter’s market and not a very good reflection of the Chinese economy,
but you can say that about almost every market in the world.
Mutual fund cash levels are nearly at
record lows, as most new investments that have gone into the bond markets
send them to nosebleed levels, as well in terms of interest earning and
price. Money leaving cash
equivalents, aka money market funds, are heading mostly into bonds and, to a
small degree, foreign stocks.
Shanghai is about to move 30% when the triangle it is in breaks up or
down. Let’s take a look at
Shanghai courtesy of www.stocktiming.com :
Doesn’t look to bullish to me, and it is FAR
OFF its highs from 2007. In fact,
a test of the lows seems certain if the breakout of the triangle is
lower. But the rising and falling
of China’s stock market offers little to glean for economists, as this
recent quote from Jon Authers of the www.ft.com
“The Shanghai stock exchange is an inefficient market driven by
retail investors, where the government maintains controlling stakes in the
largest players. The critical points are that investments in Shanghai stocks
are not bought with borrowed money, generally, and do not account for a large
chunk of the economy. It can continue its boom and bust cycle without causing
great collateral damage elsewhere.”
John’s comment on the Chinese property bubble
is relevant also as people try to extrapolate developed-world banking
practices to the emerging world and it is not so; the speculators in China
put up almost 50% down, not zero as in the developed world. John goes on to say:
“As for property prices, nobody denies that there are bubbles in
the big cities. But again, the argument is that these need not have big
ripple effects on the broader economy. Much of the market is fuelled with
cash, while mortgages have not been resold on capital markets. A fall in
property prices could not, therefore, have the disastrous economic effects
that the fall in US property prices had after 2006.
China's banks will take it hard, many believe. That is a problem for
the banks' shareholders, including the government. But it need not necessarily
be a problem for the broader economy.”
There may be empty cities and buildings in China,
but they are half paid for and plenty of future inhabitants from the
countryside just aching for a more modern and well-paid future.
The Financial Reform Bill is just an expansion of
TOO-BIG-TO-FAIL and quasi government-sponsored enterprises (we’ve gone
from two to over twenty in the last year: AIG, GMAC, GM, too big to fail
banks, etc.). Let’s look at
a quote from Economics Professor Alan Meltzer of Carnegie Mellon University:
talk a lot about systemic risk. They do not—and probably
cannot—give a tight operational definition of what this means. So
setting up an agency to prevent systemic risk, as Mr. Dodd has just proposed,
is just another way to pick the public's purse. Systemic risk will forever
remain in the eye of the beholder. Instead of shifting losses onto those that
caused them, systemic risk regulation will continue to transfer cost to the
taxpayers. The regulators protect the bankers. They continue to lose sight of
their responsibility to protect the public.” –Alan Meltzer
Socialize the risks and privatize the profits for
banksters, elites, crony capitalists and government, there is nothing new
here. It is a description of all
government actions since the crisis began and it is how BANANA republics go
bankrupt and their currencies die, and it will be the demise of the US and
In closing, we are afloat on a sea of liquidity
printed by central banks; the liquidity is not capital, it is credit and
ever- DEFLATING IOU’s, which the public thinks is money. It is not money; it is credit and
credit is not money. NO ONE KNOWS
the value of currencies because no one really knows how much has been printed
out of thin air or created with a keystroke in the last few years by public
serpents and their bankster colleagues.
Everything is mispriced because there is no money as
a standard of value other then gold and silver. Anything (stocks, bonds, homes, real estate,
cars, anything) measured in those terms are in freefall, also known as
DEFLATION. When measured in FIAT
currencies, they are possibly UNDERPRICED, as the respective currencies are
deflating in value at a pace that is hard to quantify. As a cross current to that, the bonds
businesses and other businesses are also collapsing on the top-line revenue
growth, thus causing downward pressure fundamentally, while currency
debasement provides buoyancy as they reprice to reflect the lower purchasing
power of the currency in which they are denominated. A devilish conundrum.
The inflationary depression continues to
unfold. Governments cannot create
economic recoveries and job and income growth; they can only destroy them,
and in the developed world welfare states they are doing so in spades. Relentless destruction of incentives
to invest and hire are being implemented regularly. The
current political leaders throughout the developed world are putting the
final nails into the coffins they used to call economies. Then we will be buried, as the next
leg down in the developed world will make the last one look like a picnic.
Never in history
have the opportunities been greater as markets zoom all over the place to
price in these unfolding new realities.
Volatility is opportunity, embrace it. Buy and hold is dead, absolute return
investments with the potential to thrive in up and down markets and restoring
the functions of money to your IOU’s, er… cash to preserve
purchasing power is recommended diversification of your portfolio. If you have an
interest, contact me.
bill is not reform, it is a takeover and tax bill. It is
how Washington works: Take a
problem, call for reform and build more government with political solutions
rather than practical ones. The
only thing it accomplishes is what government wants, which is more control
over our economy, the money and you.
This is how government grows.
The energy department was created by Jimmy Carter to end our
dependence on foreign oil, now it is a $30 billion behemoth, with 16,000
employees and our dependence is greater than ever.
This is how Cloward Piven works, create a crisis and
build government until it collapses creating the EXCUSE to seize more power
to solve the NEXT emergency.
That is what awaits us with the healthcare bill, lots of money spent
and problems BIGGER than ever.
Did I forget to mention it will be enforced at the point of a
GUN: THE T@XMAN. This is how you know you live in an
emerging dictatorship as all socialist governments become: The government DEFIES the will
of the people… they KNOW better than the ignorant man on the street who
cannot take care of himself, so the government needs to.
In order for economic and income growth to resume in
the developed world, there must be aggressive
structural reforms such as: Removal of regulatory and institutional
complexity, reduced taxes, government spending restraint, and restoration of
incentives to produce.
the opposite is being implemented:
Layers of new complexity and reams of new laws and regulations,
mountains of new taxes, exploding government spending and destruction of the
incentives to produce at all levels of the developed-world economies.
Radical big government Marxists are in control and implementing the policies
of insolvency creating new impediments to growth.
So, the next leg down in the developed world
can be expected to unfold soon. You need a microscope to see any improvements
in growth or incomes in developed-world economies after trillions of Dollars,
Yen, Euros and Pounds of stimulus have been spent to no avail. When
they try to withdraw you can expect the next ECONOMIC FREEFALL… and
that will be when HOPE turns to FEAR. It will happen this year…..
Theodore “Ty” Andros
Managed Futures & Alternative Investment Specialists
233 West Jackson Blvd. Ste. 725, Chicago, IL 60606,
PH:. 800.253.7689 // +1.312.338.7800
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is authored by Theodore "Ty" Andros, and is registered with
TraderView, a registered CTA (Commodity Trading Advisor) and Global Asset
Advisors (Introducing Broker). TraderView is a managed futures and
alternative investment boutique. Mr. Andros began his commodity career in the
early 1980's and became a managed futures and forex specialist beginning in
1985. Mr. Andros duties include marketing, sales, and portfolio selection and
monitoring, customer relations and all aspects required in building a
successful managed futures and alternative investment brokerage service. Mr.
Andros attended the University of San Diego, and the University of Miami,
majoring in Marketing, Economics and Business Administration. He began his
career as a broker in 1983, and has worked his way to the creation of
TraderView. Mr. Andros is active in Economic analysis and brings this
information and analysis to his clients on a regular basis, creating
investment portfolios designed to capture these unfolding opportunities as
the emerge. Ty prides himself on his personal preparation for the markets as
they unfold and his ability to take this information and build innovative
professionally managed portfolios. Developing a loyal clientele.
This report may
include information obtained from sources believed to be reliable and
accurate as of the date of this publication, but no independent verification
has been made to ensure its accuracy or completeness. Opinions expressed are
subject to change without notice. This report is not a request to engage in any
transaction involving the purchase or sale of futures contracts or options on
futures. There is a substantial risk of loss associated with trading futures
and options on futures.