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Use the above link to subscribe to the paid research reports, which
include coverage of several smallcap companies
positioned to rise during the ongoing panicky attempt to sustain an
unsustainable system burdened by numerous imbalances aggravated by global
village forces. An historically unprecedented mess
has been created by compromised central bankers and inept economic advisors,
whose interference has irreversibly altered and damaged the world financial
system. Analysis features Gold, Crude Oil, USDollar,
Treasury bonds, and inter-market dynamics with the US Economy and US
Federal Reserve monetary policy.
EDITOR
NOTE: Strange times in Costa Rica.
No article last week. They have a strange custom here, closing the bus door
in the face of gringos. This time, my reaction was to catch it with my left
hand. Dumb move. The door closed on my wrist, like 150 lb weight. After some
confusion, the driver opened the door. Fingers did not function for a few
days, numb fingertips. Next time my shoe, not my hand. A learning process,
maybe take more cheap taxis. Still a ‘plebe’
at heart.
A
profound broad gold rally is underway. It is occurring in almost every single
major currency. Unsure about Zimbabwe
though. In the last article, two major forecasts were made, both hit
squarely. The euro fell, heading toward the 143 stated target
forecasted. Talk circulates about the Euro Central Bank eventually
cutting interest rates. Pressure will grow enormously. The Germans are
isolated in wanting a hard line against price inflation. A Latin Bloc has
formed, urging a rate cut as the southern nations of France,
Italy,
Spain,
Portugal,
and Greece
suffer from housing declines. Even Ireland
has joined that bloc. A compromise will be worked out, more like a gang-up
against the Germans. In my view, the 143 target is still on the board, as the
euro 20-week moving average serves as a few logs on the roadway. In time, a
cleared path down a little more. Much of the euro rise has been predicated in
the last year or more upon continued rate hikes. Not only will they not
happen, but rate cuts will be more the norm. The Competing Currency War
ensures it. The US Federal Reserve has exported its monetary ease policy. Foreign
currencies simply cannot fight it.
A
twist has occurred in addition. The USDollar
enjoyed a bounce, jumped up from the vigorously defended dangerous 75 level, touched 77 at the 20-week moving average, only to be
rebuffed. That US$
bounce was the second forecast. Look for a rally toward 78 after the euro
comes down a bit more. The key is the Euro Central Bank. Incredibly,
pressures are growing which might actually pull apart the European Monetary
Union. To preserve the union, the ECB will cut rates, although much much much more slowly than the
openly utterly desperate Americans. The United States is the source of the
banking implosion, the source of the mortgage bond destruction, the source of
the bond insurer disintegration, the source of the risk model meltdown, the
site of the credit derivative pyramid topple, the source of the urgent
interest rate cuts. WHAT A MISERABLE FAILURE THE US
BANKER CUSTODIAN PERFORMANCE HAS BEEN FOR TWO DECADES!!! The USFed will cut rates down below 2%, perhaps even to 1%,
in total desperation. The tragedy is that the lower rates will not stop the
banking wreckage, will not stop the USEconomic
recession, will not stop the housing crash, will not stop the credit
derivative meltdown, but will ensure the eventual USDollar
demise.
GOLD RALLY IN
EUROS
The effect
of a euro in retreat, but a gold price hovering over 900, is a nice gold
rally in euro terms. This effect is not fully visible to Americans, who tend
to think 90% about US factors, and 10% about multi-national firms, and do not
speak foreign languages. Yet they consider themselves superior to the swarthy
foreigners who are bilingual and even multi-lingual, as well as being better
educated in mathematics and science. The gold price is rallying in euros,
which is tremendous news for the global gold rally. Gold is also rallying
hard in swiss franc terms, a strong confirmation
for gold. Given the importance of banking supremacy returning to Europe, to Switzerland
in particular, the new foundation of the gold rally rests in Europe. So a gold rally in euro
and swissy terms is of ultimate importance. The
greater accommodation given by the Euro Central Bank will provide a strong
continued lift to gold on the old continent.
YEN TO
SOFTEN, GOOD FOR GOLD
The
Japanese yen has put in an intermediate top. Rather than to show the gold
chart in yen currency terms, observe the yen chart. The gold-yen chart
looks much like the gold-euro chart, a rising bull. The importance of the
yen is incalculable for to sustain the global liquidity movement in favor of continued speculation. It was no coincidence
that the US
stock market suffered hefty declines while the yen currency rose from 87.5 to
94 in
the past two months. Speculative money, heck basic investment money, was
drained from the system. That phenomenon gained attention. The Yen Carry
Trade, whose principal beneficiary is the Bank of Japan itself, will
continue. Even though the BOJ has a lunatic 0.5% official rate, it could be
lowered! There is no way the USFed descends to the
shameful 1% or 2% rate level without the Japanese obediently heading toward
0% themselves, maybe not actually zero but closer to zero. The yen is soon to
fall toward the 90-91 range, giving more support for the beleaguered USDollar. As the BOJ cuts rates, as the yen comes down a
little, it encourages the gold bull market in their corner of the world.
AUSSIES SHOOT
THEMSELVES IN FOOT
Last
week, the Reserve Bank of Australia (RBA) actually hiked their official
interest rate by 25 basis points. Rather than show the gold chart in aussie currency terms, observe the aussie$
chart. The gold-aussie chart looks much like the
gold-euro chart, a rising bull. At 7%, they invite a carry trade to
invest in the Aussie Dollar with money borrowed from the low US
rate. This is just theory, hard to put into practice, and here is why. Many
reasons apply. The US
has not finished lowering interest rates. Going short the USTreasury
when rate cuts continue would be risky. The 2-year USTBill
yield is more stable, but it should descend under 2% with more vigor before long, as the USEconomy
shows unmistakable recession evidence. Lower bond yield means higher
principal value, and damage to shorts. Also, the Australians do not have a
huge robust bond market. Inadequate liquidity obstructs any serious effort to
institute or encourage a carry trade. The Aussies responded to price
inflation, while putting their conventional economy and housing market at
great risk. The Aussie Dollar will come down. It registered a double top. Their
central bank will remove that rate hike within a couple months. It was a
kooky maneuver. The great commodity bull market
cannot be halted by Aussie rate hikes. Live with it, by holding back on
monetary growth. As the RBA cuts rates in response to a declining housing
market and thus economic falter, the aussie$ will
come down a little. That will encourage the gold bull market in their corner
of the world.
INFLATION DRIVES
GOLD & SILVER
The
main driver for the precious metals has shifted to inflation. The chief lever
is not the USDollar anymore, as hidebound dolts
miss the point and the enlightened see the shift. Put aside the nutty
definition by the clowns of Wall Street and agencies of the USGovt. Prices are not the key, but rather supply of US$
funds flooding the global system. From 2003 to 2006, we had an inverted USTreasury yield curve. That clearly indicated the
economic recession we find ourselves in now. So-called economists, more like
carnival barkers and whores in three piece suits, called it a conundrum. The
signaled recession is here. Next the steepened USTreasury
yield curve is screaming about inflation. The yield spread went from zero at
the beginning of year 2007 to around 180 basis points now. Combine the
successful previous signal with the current signal are you arrive at a loud
STAGFLATION situation. This is not complicated. In order to foment
confusion, Wall Street prefers to complicate things. Nothing confusing about
the ratio chart shown, of the 10-year yield ratio versus the 2-year yield.
Its relative strength is almost off the chart, hovering at 90 in an occurrence rarely
seen in any chart. It confirms the money growth enforced globally, and
provides a strong signal for the gold price. All central banks will soon be
cutting official interest rates.
GLOBAL ENERGY WAR
Meanwhile,
more grenades on the oil front, as weakened strongman Hugo Chavez is
embroiled in an international court battle with Exxon Mobil. Did Hugo expect
the oil giant to take it lying down? They have lawyers on the payroll. A
multi-billion confiscation usually invites a reaction. Ironically, if Hugo
cuts off the US
on oil or gasoline or diesel shipments, he might not be able to adequate
replace such ongoing contracts with Chinese contracts so quickly. Maybe the
Venezuelan people can follow up their refusal to permit his dictatorship to
become an institution, with some measure that leads to his removal from
office. Not likely, but if major revenue is cut off, tens of thousands of
demonstrators led by students might take to the Caracas
streets. The prospect of New York
courts making decisions with national appropriation in the background somehow
seems laughable. What is the legal precedent for retaliation after seizure
theft by a state corporation? Crazy times. Just another factor to keep the
crude oil price chronically high. Besides, if the New York court acts in strong terms, it might
set a precedent for action against US
rogue financial firms engaged in fraud and home seizures!
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By : Jim Willie CB
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Jim Willie CB is
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