“Gold isn’t just another commodity. Gold is money. Some day an international monetary crisis may rudely awaken us to this reality.” –Mark Skousen, Gold Newsletter, May, 1997, from James U. Blanchard’s Golden Insights.
With year-end portfolio balancing and fund managers striving for bonuses, this transition time among major markets is blanketed with crisis, making trading and investing difficult to say the least. We think we now have enough technical and fundamental data to forecast most of our markets deep into 2009. The next few months are fraught with danger and blessed with superb opportunities.
Proven laws of fundamentals, technical indicators, prices, and most of all the herd mentality are showing us the way.
There is no engine of cash, finance, credit or, government program that has the capacity to pull the global economy out of its current death spiral.
We have watched as New York and Washington have thrown trillions at banks and large corporations for bailouts. Nothing is working as the money is just sucked down the drain into the vapors of lenders scooping it up and not lending it to promote any growth. The cash is being used for balance sheet repairs.
Our on-going real estate decline continues to worsen. The next wave of mortgage defaults and foreclosures will hit in the April-May 2009 markets just in time to exaggerate the annual “Sell in May and Run Away” syndrome.
We’ve read about and have seen first hand unbelievable stories discussing housing tragedies and resultant wrecked families. The prime sunny spots of California, Phoenix, Nevada, Florida and a few others are prime locations for more widespread disasters. Everything is for sale. Buyers are rare and difficult to find.
Now, commercial real estate is tumbling along with residential. Donald Trump’s mammoth new, Chicago high rise is a victim of law suits precipitated by slow lease-buy markets and cost over-runs during construction.
Whenever in history someone’s ego goes out of control and they develop “The Tallest Building in the World,” it’s a sure sign commercial real estate has peaked and readies for a giant smash. The Dubai developers are skidding to a halt and their “Big Boy Building” is now a dream turned nightmare. Not only have their markets considerably softened but oil revenue—their engine of growth—is price wrecked.
“Durable goods plunged -6.2% in October,” says David Rosenberg at Merrill Lynch, with other failures in consumer electronics, primary metals, aircraft, machinery, and electrical equipment. A long laundry list of regional manufacturing failures came rolling in last week, some of them posting or, nearly posting modern record lows.
Consumers are smashed on the floor with housing, autos, credit cards, small business failures, rising unemployment, stagnant wages, and a deep seated fear of spending money on anything. Discretionary spending of any kind has been halted after falling swiftly into the category of flagrant budget indiscretion.
Our derivatives originators in New York are laying-off thousands of workers in the financial industry while trying to remain solvent. Many of these companies and banks should have died years ago but have continued to march forward like zombies continually seeking more credit from any fool or, government willing to extend it. Sadly the instigators remain employed while the Sheeple are kicked out.
The Big Three auto companies are about to shrink into The Little Three and then vanish from America. Ford has more cash to live longer but they will all file Chapter 11, be broken-up, merged, and sold-off on the cheap as remnants depart for foreign shores. The U.S. Government will be stuck paying for The Big Three health care and pension liabilities. These shrunken companies, once proud flagships of The United States, turn into shadows of their former selves dropped into automobile sales purgatory.
Autos are off -40%! This number quickly dismembers any hope of a return to profitability and with it the ability to pay-back a mountain of debts these dudes owe. The UAW will be relegated to the dust-bin of history. The new Washington administration is doing to its best to make union organization easier, which further kills and ruins current and planned business in a weak economy. This remarkable disincentive caused several currently successful auto plants to relocate-build in America’s sunny south. Our rustbelt Midwest is toast.
Consumer sentiment declined so low it is beneath the bottom of the porcelain bowl with more folks everyday becoming hapless, helpless and indecisive.
The last official number on food stamp recipients was over 11mm and rising fast with a heartbreaking 750,000 of them being defenseless children. Probably another 10mm actually need food stamps and either do not qualify or, have not yet applied for this badly needed help.
Wayne County, the region containing Detroit and all of its once magnificent auto supported suburbs, just reported 147 pages of real estate foreclosures. We are seeing local house prices resembling something from the 1950’s; and yet the buyers remain few and far between.
Housing inventories are rising quickly with millions of them vacant, left to be damaged by weather and taken-over by squatters. Pent-up demand has become pent-down demand.
Some analysts tell us this isn’t the 1930’s as we have so many safety nets non-existent in the 1930’s but available today. To that we say "[email protected]#$%^&." This year was the worst for equity markets since 1931. Old retired people having lost most of their savings and pension dollars are returning to work to eat.
The idiots in Washington and New York who designed this drama are telling us to borrow more and go deeper into hock to keep their magnificent, spendy, inflation machinery well oiled. Sorry dudes, but your rusty, buy-it-now gears seized up in April 2007 when we called this cycle a real, honest recession. They had the audacity to finally report an official recession yesterday, December 1, 2008, and the stock market immediately took a high dive.
We continue to see supposedly smart people keep telling us the bottom is in view and lies just over the horizon. We politely suggest they reconsider and review some of these cold hard facts. This cyclic event is going on for years and will end in a new world war, which is always the ending to a depression.
Mark my words, we have a very hot, long summer ahead in the larger cities. Somebody in big government believes this too, as yesterday they authorized a battalion-sized group of marines or rangers to be on standby for terrorists. What they are not saying is those expected bad boys will be domestic city folk not from the Middle Eastern Big Sandbox of Mayhem.
As we review FDR’s New Deal solutions in hindsight it is simple to sort out the bad and useless programs from the good ones. Several of those ideas were similar to what we see today; handing out cash and credit to big failed businesses and banks as Washington takes good care of their buddies and the Sheeple take a fiscal pounding.
We saw a long list of failed retailers last week, bankrupted or, about to file Chapter 11. We are used to seeing some real eye-openers but that list almost made us choke. For those heaping platitudes and smooth talk trying to persuade us the bottom is in and next spring will be fine we can only shake our head in dismay and disgust.
History has proven (in the 1920-1921 U.S. depression), that if left alone the economy will quickly right itself. This is not to be in our current cycle however, and the same old tired mistakes are being implemented again, and again driving us deeper into dark and scary big trouble. These misdeeds prolong the pain and extend it needlessly for years. Our Depression Skilled Professor, Chopper Ben, is repeating the 1930’s errors and doesn’t even know it.
As bad as all this stuff is we could survive it with great hardship if only our rulers permit the American Constitution and Bill of Rights to remain alive. I really fear for my country. This is THE largest and most important unanswered question of all. What happens to our founders’ vision of American life when its difficulties potentially become unbearable?
As in the Past, Gold and Silver Is the Answer
On this second day of December, 2008, our dollar is selling with other currencies. Bonds and shares are up together as traders are buying a technical stock rebound while others buy bonds for protection and security. Later in 2009, they could all jump in the selling tank.
We expect buying markets through March. After that, look out.
Gold and silver stabilized in the green after selling back on a stronger corrective wave two in our current five wave up-trading cycle. Soon, the largest wave three opens for business as precious metals can rebound for about two weeks.
As we’ve mentioned so many times before, when asking questions about pricing forecasts, be careful to determine whether the question is about daily, weekly, monthly, intermediate, annually or, longer time spans. These time-cycle questions continue to confuse. We’re always watching nearby most active futures in our favorite markets but also keep an eye on further out months for trend confirmations. Those who live-watch prices day- to-day in these faster markets with wider trading ranges can easily be fooled.
Most stock markets will be preened and propped producing higher prices until April 1, 2009. Within days after that cycle, spring selling could be legendary.
Several analysts tell us everything is down and deflationary. We disagree and know we have the ability to short some of these markets as these trading gifts keep on giving. For others, like gold, silver, crops, and currencies, we trade long or short. We have been stalled for weeks this fall enduring this rather convoluted transition period but daylight is appearing and gradually coming into focus. There is no question the deflationary aspects of markets are over-powering. However, we think a potential rough cycle of intermediate, hyperinflation is both possible and probable. Should this occur, the following deflation would be most pronounced.
Don’t miss the next metals rallies in gold and silver. However, it might be best to pass on base metals with our recession turning into a depression. Despite the fact fear stalks the world and it seems rampant failure visits us all, keep in mind 75% of all USA workers in the 1930’s did have work and kept on slogging through until improvement finally arrived.
Strangely, our demeanor is currently one of peace and confidence as mayhem roils global markets. This is because we have a solid plan based upon history and truth as expressed in years of trading and investing by others. We can go long or short and fully intend to hunker down and avoid all debt. Live far under your means, forget the discretionary stuff and remain serene. Hold cash, and physical precious metals; buy daily needs-stuff for months in advance and care for and help others. You will not only become a winner but have comfort going through it.
We think with fall market dangers mostly over and the election settled, the PPT will continue to prop shares not permitting the Dow and S&P 500 to get out of control. After all, New York still needs to prop markets for their annual bonuses. In our newsletter, Trader Tracks, we provide weekly guidance and extra e-mail alerts to report our best new trades and offer suggestions for trade management. Visit our website at webeatthestreet.com for more information on our spectacular futures and commodities trading record.
Whatever you do, make a concerted effort to stay with our trend and hang onto your core holdings of favorite shares, cash, and coins. Physical gold should never be sold or, traded but rather accumulated steadily on a monthly savings plan.
Recent news says you cannot find any coins or, others. We see delays and back-orders but some dealers have goods in hand right now. Go shopping. Should you have difficulty buying physical metals, we suggest placing an order and being patient. Big traders are always ready to buy the dips and normally never sell their gold and silver. You would be amazed how quickly your physical gold and silver will accumulate using this strategy.
In our conversations at conferences, several readers and others have shown interest in attending a futures and commodities trading-training seminar. Please contact our offices with this request as we plan a private conference for our traders to help them in the first quarter of 2009.
Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information.
Contact Claudio Bassi, at Trader Tracks New York City publishing offices for a free 30-day trial subscription 718-457-1426 Monday through Friday, 9:00am to 5pm or, e-mail Claudio at [email protected]