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We would not, under any circumstances, believe
our government would make decisions flying in the face of sacred United States
contract law. What they have done to auto company bondholders is to favor unions for political votes forcing bondholders into
a lower, non-preferred payment order. This says corporate contracts
in the United States are now meaningless.Auto union people were
moved to the head of the bankruptcy line while bondholders with a preferred
first lien position by CONTRACT LAW, are now forced to the end of the line.
If your government will do this to auto
bondholders, what will they do to the Sheeple?
News this morning told of GM bondholders
finally reaching a settlement providing $.17 on the dollar in two parts as GM
shares trading was halted. Further news stated GM shareholders are receiving
1% of the deal. Watch for a following clarification as to what all this might
mean.
In Our View It’s All Just Grave Dancing
We expect Chrysler for sure and GM being a strong maybe, to enter
their final resting places in the automobile manufacturing graveyard. For these companies
to survive, they have to build and sell cars. We project
years of falling vehicle sales with more lean years afterward. We think they
have zero chance to continue in business in the longer view. Ford has a long
shot chance to survive IF they can downsize the company another 35-50%. We
would suggest their chances are one in three to get through it all and expect
their bankruptcy as well. If Ford makes it, Chapter 11 comes first.
I just saw a report that FDR taxes in the 1930’s were
temporarily as high as 80-90%. I have not confirmed this but pass it along
for what it’s worth. Destruction of wealth by the Obama administration
is moving breathtakingly faster in escalation mode reinforcing Marc
Faber’s prediction of certain hyperinflation.
Should the Federal Reserve stop their reliquification-reflation
program, the whole system could cave-in overnight. So far, they’ve
tossed roughly $2 Trillion of taxpayer cash at all these problems but Bill
Gross at Pimco says they must inject a total of $6
Trillion to begin to cover the messes creating a recovery market reaction.
We would expect a world-wide systemic crack-up at around $4 Trillion
as key components of the global credit and bond markets in Europe, Asia and
the U.S. will simply not be able to take it. Our expectations for the next 90
days are for convoluted choppy markets with a mild stocks’ selling
event in the shorter term.
After Labor Day, this fall, we forecast a
false stock market rise followed by most professional traders selling into
strength with ferocity. September, 2009 30-year bond futures are trading this
morning at 115.12. Next support is 112.50, 110.00, 108.00 and then 106.00.
Our longer range forecast is 80.00 with larger potential for something much
worse. We told our readers it gets scary when the 30’s sink under
120.00. Well folks we have arrived.
Our new forecast for later September, 2009
through early October would be a 62% crash from the early fall high. This
means a selling event of at least 4-6,000 points lower on the Dow Jones.
Numerous Reasons For System Failure
The big U.S.
investment banks wrote crooked deals (derivatives) destroying our financial
system. Our Federal Reserve (not federal at all but composed of these same
crooked bankers) along with the U.S. Treasury have stolen nearly a trillion
to replenish the banks’ capital and financial footing.
Those banks were supposed to lend the money to make the economy find
support and rally. Most of these funds have been bank-held to meet
capital-to-loan ratios. No loans; no help for businesses.
A further expansion of (TARP), The Troubled Asset Relief Program, will
be expanded to cover U.S.
states’ budgets shortfalls. The worst example of this problem is California. Obama when
asked if he would bailout California
said, “No.” This means they get bailed out along with several
others crying and pleading for help after recklessly spending their
individual states into the fiscal ground.
Many of these idiotic state governments have
still not made any serious moves to cut spending. They keep expecting the
gravy train to continue on forever. It won’t as the tax revenue
crashes.
The administrations’ policies cover funding of two current wars
in Iraq and Afghanistan with a new expansion into a third
in Pakistan.
Potentially, additional wars will open with North Korea and increased action
relative to the forthcoming Israeli-Iranian nuclear conflict. We not only
cannot afford all these war costs, but do not have the men, women and
equipment to manage all of this war-mongering simultaneously.
In our view, enemies of the US are determined to pull us into several
wars, and drain the US
Treasury destroying America
and turning its residents into rural serfs and economic slaves. They seem to
be getting a good head start.
We suspect the increased aggression from North Korea is a test to see how
Obama manages foreign policy. Since he has no foreign policy except to waffle
and hide under the covers and wish it would all go away, these conflicts and
new international tensions shall escalate. In our view, this is a lot worse than our
economic problems.
Our country is at risk floating in an ocean of
disasters with no captain at the helm. Neighborhood
organization as a vocation is quite different in scale than leading the engagement
of international conflicts going potentially nuclear. Mr. Obama giving the
visiting U.K.
Prime Minister Gordon Brown some plastic gift K-Mart DVD’s was a strong
and meaningful signal this kid is way out of his league.
U.S. housing mortgages of several toxic varieties began their final
descent in June, 2005 when we predicted the housing crash. At that date
lumber futures tipped-over and the handwriting was on the wall. With skidding
lumber prices and Mr. Greenspan’s cash giveaway on the table, the only
final solution was a housing meltdown. We were correct in our predictions and
the worst is yet to come.
Contrary to current Pollyannish opinions,
housing cannot see a new base until 2012 at the earliest, in our view. In
recent days we were wondering out loud thinking this might be too optimistic.
Our latest forecast is for housing to fall another 30% nationwide on the
national averages.
Obviously, some false green shoots appear randomly as bottom feeders
bargain hunt, but 95% of America
is dead housing hay turning rotten and moldy. This
summer in some down-trodden urban areas, housing hay catches fire in an
escalation of riots and violence. This is not the preferred method of urban
renewal.
Builders are currently operating at 25% of normal capacity. Our new
forecast says this number sinks to 10% of the formerly 1.7mm new homes per
year; building 170,000 homes annually if they are lucky.
Automobile sales for North American cars and trucks sank from 17mm to roughly
9mm. Our new forecast is a further skid to 5mm. This is why Chrysler, GM and
probably Ford cannot survive.
National US
unemployment is now officially posted between 8% and 10% depending upon the
poll- takers. In our view, current national unemployment is 20%. In Michigan, the rate is
24% and will soon be 30% after the auto manufacturer bankruptcies take hold
later this year. In the 1930’s, 25% unemployed was the worst number
posted and it was probably accurate.
For a Greater Depression low, national US
unemployment could hit 35% with Michigan at 40-45% before World
War III provides military employment for millions more.
War is the usual path to finally escape the trauma of depression. This
was true in the pre-US Civil War depressions of 1840-1843 and in the early
1850’s. Preceding WW I we had the Panic of 1907 and its previous US depression
of the early 1890’s. We had a preceding
1930’s depression in 1920-1921. This was followed by the 1930’s
depression and then World War II finally taking us out of it.
On the K-Wave cycle timeline, our current depression was to begin in
2000. And, in fact it did with the crash of the Nasdaq
but was artificially delayed by Mr. Greenspan’s billions of free cash
and low interest rate pump-priming. His market interference helped delay the
inevitable and cause worse conditions to last much longer. While there is
open debate that 2000 repeats 1930 or, in fact it was delayed ten years to
2010, smart analysts compare the chart overlays of 2000-2010 with the 1930’s
and they are scarily identical.
Consumers are busted and broken. Unemployment is rampant and
escalating daily. Wages are stagnant to down. Homes, cars and other property
are being repossessed. Hundreds of thousands of homeless people are living in
cars, tent cities and on the beaches of warmer states. Consumer credit is
shot. Families are doubling and tripling up to survive. Some households have
only one person with a job feeding several. Consumers have lost most of their
buying power. They represented 70% of the economy. There is no engine of
growth to produce any economic rebound that we can see.
Welfare caseloads are skyrocketing and some states’ funds are
nearly empty. Elderly are eating dog food to afford utility bills. Many will
die in this forthcoming hot summer and freezing post-crash winter.
Meanwhile governments are not equipped to help as they are
disorganized. They all have food and money but no logical organization or
distribution means. This suggests millions go hungry while stacks of food reside
in warehouses as beltway idiots say things are better and do nothing.
The Sheeple are girding for economic and
potentially civil war. Gun and ammunition sales are off-the-charts. Tea
parties are growing. The next stage will be street violence confrontations
and more civil disobedience. Governmental pushback will only incite more
riots and escalate troubles. States are releasing inmates from over-crowded
prisons to save money. Crime shall soon go to the moon.
Meanwhile, our president is flying to Las Vegas (where he told others not to
visit), to politic and raise funds for the party. He supposes his current
Supreme Court nominee will ethnically encourage large Nevada donations to his party. Maybe it
will but we also heard news reports of widespread suspicion of this move in
the Latin community. More of the voters are catching onto these political
games; from both parties. Politics exists to hold power, control the Sheeple and take their money for vote promotion. That is
all it is pure and simple. Will we see a new and more voter responsive third
party?
In the forthcoming mid-term elections, we would suggest administration
powerbrokers get a hard lesson at the 2010 polls followed by something
infinitely most harsh on the streets. People vote with their pocketbooks and
today and into the longer range future, those wallets are empty. Beware!
This is not a game nor is it a passing bump in the road. This dire
situation presents very big trouble with a potential for bank runs, seizure
of pension plans to be converted for government usage (theft) and higher
taxes. The newly proposed VAT tax could take an additional 25% more of your
spendable income. Most will think this is outrageous. We suspect political
criminals give it a testing try.
Now is the calm before the storm. This is the eye of the hurricane. This is not a Saturday evening warm
gentle rain; this
is a systemic fiscal tornado and many will be economically maimed, or
destroyed.
You cannot imagine how swiftly events could disrupt our system. Picture the
arrival of ten simultaneous Katrinas, or even worse
with no
warning whatsoever. You get the idea.
We are normally, easy-going and not prone to these kinds of
discussions. Our view is one of optimism. I am always seeking the brighter
side with ideas to protect our homes, families and retirements. However, the
quickening deterioration of current events has sincerely frightened me during
the past few weeks.
This is not a simple changing of the political guard but perhaps
Armageddon. If you think the government is in control and has a handle on
these emergencies you are only kidding yourself. They are careening from one
disaster to another. More new ones seem to come each day.
Bad news arrived with a rush and its becoming nastier with each passing
day. We’ve seen so much scary stuff we are reluctant to report
most of it lest we upset the trading teacart. Batten down the family hatches and count
on nothing from anyone to help you. Plan for the worst and hope for the best.
Those who mostly drop out of our phony system
and take care of themselves should be winners. We heard similar advice from a
premier lady analyst on Jay Taylor’s VoiceAmerica
radio show last week.
Markets are nearing a peak in precious metals shares that generally
follow primary stock indexes. When the current stock market peaking descends
into the Sell
in May, PM shares normally follow. With each cycle we think gold
and silver shares might sell less posting higher lows. This could be decided
on the shorter term by how low S&P’s
trade. We expect 800 to 850 with 800 being more probable.
Do not get tangled-up in daily noise. Keep studying the larger view
and buy precious metals after each profit-taking correction. Headwinds are
building into an economic hurricane. Take care of business right now. My dire
fall prediction might surprise us and arrive earlier. Time is short.
Personally, I can see unbelievable opportunities to trade that we
would never see again for many years. Turn these problems into opportunities.
Those on the right side of the trade might get rich. Those on the other side
are just victims. Stay Alert. –Traderrog
Roger Wiegand
www.webeatthestreet.com
Read
all the other articles written by Roger Wiegand
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