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There are plenty
of good five-cent cigars in the country. The trouble is they cost a quarter. What
this country really needs is a good five-cent nickel.”-
Franklin P.
Adams 1881-1960.
“We would suggest
current cigar smokers compare Mr. Adams 1960 quarrelsome 25 cent cigar price
with current prices. This would demonstrate some serious inflation as our
dollar is frittered away into nothingness. Beginning with the birth of the
Federal Reserve our currency has gone one way-over a cliff. Too bad the
Federal Reserve wasn’t aborted or better yet, stillborn.”- Traderrog
Mr. Dollar Rides a Fast Freight Train into Oblivion “It
wasn’t raining when Noah built the Ark.” – Howard Ruff
We don’t see the Federal Reserve residing in a
freezer with a toe tag (hey its Halloween give me some slack) but rather
riding in on a white horse with a new rate cut. Is this a trick or a
trap? That stallion’s name is Rate Cut but it’s a
belated six months’ rescue attempt to benevolently smother their
previously instigated, and terminal economic mistakes. As one smart analyst
has said, “They are always six months too late.”
As I prattle on this morning, the dollar is mildly
basing and rising given a nice boost from the boyz
at the FOMC. Never underestimate their prowess to move markets with specious
language. In an inverse response, gold and silver are selling. This is not to
say this action created a major correction but we think it’s merely a
mild pausing blip in the bigger scheme of this falls’ precious metals
rally.
The thing these market proppers
cannot hide is precious metals buying from non-United States sources, the
fall Indian seasonal gold rally and most important of all the sad corporate
earnings being reported. The big boyz like global
investment banks, the Dow top 30 and the Dow 500 have some latitude to monkey
around with numbers games adding here and delaying there, manipulating
quarterly earnings reports to either add earnings or delay losses until
future quarters. But the others, many companies on smaller exchanges and of
lesser size than the larger handful of dominant companies, usually do not
have reporting space to fiddle with their reports. They have to tell like it
is and Mr. Auditor is watching closely. These latest figures are not pretty.
Next, Asia with the exception of our helpers in Japan
fully intends to move markets in ways only benefical
to their respective nations. This would include the Middle Eastern and South
American oil producers and some other isolated cases.
But, since the United States Dollar is the reserve
currency for 85% of the world, when we cut rates and overprint and dilute
dollars, the currencies of others become terribly costly in their homelands. In
self defense, they must dilute and print cash as
well plus focus their interest rates to benefit themselves. We noticed
Iceland, long a recent play land for currency and bond traders just increased
their interest rates above +11%.
Structured Finance
In this world of structured finance (manipulated)
reactions to market manipulation can sometimes backfire as in the case of the
Greenman providing thousands in loose housing ATM
cash to the masses. Yes, they took it and spent it but most of the pile went
for toys, plastic junk and depreciating ephemeral assets.
What are markets doing now as result of these fiscal
adjustments?
Our favorite economist,
David Rosenberg, told us this week in his regular report that U.S. Homes
prices are deflating in 75% of the country.
He also told us commercial real estate is feeling
pressures. We reported this several months ago when we could see weakness in
the REIT fund charts.
Our home state of Michigan continues on the road to collapse
as now the politicians cannot resolve a way to manage the balance of the
nearly $500mm budget shortfall and worse, the last deal they made to cover
most of the total budget is now in question and might be repealed only days
after being voted into law. The business people and consumers are screaming
about these new tax implications.
It looks to me like this state is going bankrupt,
and Chrysler just announced pink slips for nearly 10,000 more employees and
the canceling of five new car models. The
Midwestern housing bust deepens and the nearly 30,000 real estate brokers in
this state are seeking other work and leaving the state. The Michigan population
should continue to slide downward for years. The WSJ reported several
states’ sales taxes are either rising or states are planning increases
to cover diminishing tax income badly needed for their bloated budgets. Watch
these taxes increase in several states and the end game will be less taxes
collected as buyers simply go on strike with no spending power.
We always watch Walmart
for a quick retail sales report since they dominate the lower priced buyers
as well as many in the middle class. This news is important and here is what
we have found:
- Two years
ago WMT did Christmas sales planning as per usual with the fall holiday
season being opened on Black Friday, the day after Thanksgiving. That
year was the beginning of retail weakness. As time melted away and WMT
sales were woefully short, they instituted a panic end of year selling
program spending millions on new discount ads and huge markdowns. They
escaped in the nick of time but got a very good scare. Sales failure
here would have created warehouses full of seasonal un-salable goods.
- Last year,
WMT implemented holiday sales and discounting earlier than normal plan. This
worked reasonably well but did not create any super selling dollars they
were hoping to find. Last year was average to mediocre.
- This year,
WMT sees the retail failures ahead and put the holiday discounts and
sales into operations on October 30 way before Black Friday, which
falls on 11-23-07 nearly one full month from now.
- Their
marketing and sales planning objective in our view is to pound the
market with sales and scoop up as much as they can BEFORE Black Friday. In
essence, this leaves the others in the dust to fight for the holiday
sales scraps that remain. These markets are turning into dog-eat-dog and
WMT has the horsepower to get things done their way. Watch for retailers
filing BK in droves during the first quarter of 2008.
What Does The FOMC Do Next?
The inks barely dry on this week’s rate cut
and the analysts are already wondering along with bond traders if the next
December 11 meeting provides another rate cut. We know these boyz would love to do nothing and not appear panicky, but
by then the other wild, uncorralled economic
troubles should demand another 25 basis points in interest rates.
Consumer confidence is weaker and waning fast while
overseas China
has not stopped growing but is growing at a slower pace. Their
stock markets remain very over-bought and toppy and
copper sales have slowed temporarily. Japan has stopped their mild
economic up-tick and threaten to slide backwards
into continued deflation. It appeared for awhile they were out of the
deflationary woods but now, to us, growth has stopped and a new softness is
pervading that nation. Europe is weakening faster than the U.S. having
to deal with slower housing sales, more joblessness and stagflation. The junk
paper foisted on Europe by New York
incorrectly labeled AAA turned into broken trash
and has had a nasty impact on Euroland.
Looking at the bigger picture, the USA is now in a recession but its not acknowledged as phony
numbers keep the announcement from the news. Do not be downcast and
disappointed but move to trade and invest in the things that continue in bull
markets such as gold, silver and energy.
We wanted to show our readers several new charts
this week but market action today created selling on most everything and this
is untimely in the short term giving us choppy sideways patterns. Look for
some good charts and bullish progress in future Kitco
essays and stay with the trend. Today’s selling blip was nothing but a
pause on the road to bigger rallies. - Traderrog
By : Roger Wiegand
www.Tradertracks.com
Roger Wiegand is Editor of Trader Tracks
Newsletter and his soon to be opened Daily Tracker for active
gold, silver and energy traders. Roger provides recommendations for
short and longer term trading using stocks, futures and commodities with
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Contact Claudio Bassi, at Trader Track’s New York City publishing offices for a
trial subscription. Call
718-457-1426 Monday through Friday, 9:30am to 5pm or, e-mail cbassi@miningstocks.com
Recommendations
made in “Trader Tracks” are exclusively those of Roger Wiegand
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