“President Barack Obama said on Tuesday that worrying about the U.S. government's finances keeps me awake at night" and the country needed to start planning now to tackle soaring deficits.” –Reuters
Yes, Mr. President we agree. However, you are totally on the wrong path by implementing an FDR-like fiscal destructive nightmare. With a soaring debt-to-GDP ratio, we saw big trouble when the numbers went past 6% but are now heading toward 12%. Historically, no nation, after ruining their finances past the 6% number has ever been able to find a normal recovery. The U.S. won’t either and they are instrumental in taking down Asia and Europe with all the Americas from Brazil all the way to Canada.
Columnist Mona Charen has told us, “The entitlement mentality so carefully cultivated by liberal academics, politicians, clergymen, and journalists continues to corrode the self-sufficiency that once defined the American character.”
Mr. Alan Greenspan spawned the technical Nasdaq stock bubble that blew-up in 2000 when all markets should have endured an identical correction. Instead, Mr. G. moved swiftly lowering interest rates and tossing gobs of cash at big banks. In the hollow, er, hallowed halls of congress his persona was redeemed. Nobody with half a brain (many half brains reside in congress) could understand what in the world the Greenman was saying anyway. We are not so sure he did either. However, this is the kind of corrosive economic policy so damaging to character and country as Ms. Charen has told us.
When bankers have the cash what do they do? They loan it, spend it and worst of all moved it into derivative land where most lenders previously feared to tread. Instead of a shorter term and less nasty recession we are getting a prolonged Greater Depression II. This one will be the mother of all big ones with a distinct potential for giving us a one in 300 years cataclysmic catastrophe.
On normal cycles, the 70 year K-Wave was right on time in the year 2000. We’ve seen various expressions of K-Wave cycle times but ours says its every 70 years. Thus, 1929 plus 70 is 1999; just when the big smash was to be found. It hit on a perfect beat as Mr. Nasdaq took a heroic smash.
This was distinctly unpalatable for Mr. G, and his other Federal Reserve Cabal Members and those New York banksters. With almost invisible interest rates, global banks had a reckless lending-spending field day. Take a minute and think. How did those super-rich hedgies, bankers, and other fund managers get so much money so fast? It’s quite obvious in a simple review of the past ten years. It used to be hot stuff when a guy became a multi-millionaire. Now we’ve got multi-billionaires regularly worshiped in the halls of New York lenders and on daily CNBS news. Pirates and robber barons have reached a lofty new high within their respective vocations of stripping fund cash.
Normal lending was not good enough for these boyz. Instead they invented derivatives of all stripes giving them exotic names old-time country bankers could not even imagine let alone pronounce or spell. As we all know, markets go up and they go down. When the rubber band is overstretched the snapback is inevitable. This is the normal trading and investing routine and must be expected.
However, this time, due to a superman stretch, the snapback was so swift and vicious, it tore their little banker heads-off and cut-off their fiscal legs at the same time. In hindsight we would have rather taken the big bank smash and its terrible aftermath. Now it’s us working dolts who are faced with decades of pain paying for the market antics of rich criminals in New York and Washington.
What we get is a 10-20 years of dripping economic water torture with unimaginable pain for all.
After watching top business leaders in nearly a lifetime of observation, we now see these CEO wusses caving-in to Uncle Sam Obama, forgetting about their shareholders, or in fact paying any attention to normal business operations. Instead, they pander to politicians with tin cup in hand, force-feeding themselves with the next government give-away program staying alive, keeping lofty personal perks, hoping to escape this tragedy with a hot pension and all the benefits going with it. As for you and me, we can eat cake or maybe dog food.
Market Hopes And Wishes Spring Eternal
It’s nice to be positive and believe or not we are quite positive on a daily basis due our engaged outlook for the special kind of contrarian investing and trading we recommend. However, we are realistic and will trade either long or short; taking whatever Mr. Market will offer. In that realistic vein, let’s review some cold hard facts and clarify our short, intermediate and longer range thinking.
The funds, fund managers, hedgies, banksters, congress, and Federal Reserve along with all of their other minions, buddies and buddettes, tell us all is well, buy now and buy often as we are in for the long pull. And of course, you know wide-spread diversification and buy and hold forever really is the best approach. Ask Warren Buffet the world’s champion buy-and-hold guy who lost -40% in 2008.
It’s the best approach if you choose to toss hard-earned cash into the stinking swamp of investments designed to pay huge fund fees, commissions and bonuses. Where is your yacht? Where is your McMansion? Where is your pension? Those crooks got it all and worse yet are still busy taking more!
Of course this plan is best; just like those broken-dreams of 25 long years from 1929 to 1955 taking late 1920’s investors forever to entirely recover. Thousands of those formerly solvent investors and wage-earners died as paupers before Mr. Market reappeared with vigor in the 1950’s. Is that where you are going?
Ain’t No Silver Lining Except In Pure Gold And Silver
1. Keep in your mind the major fact that mainstream market pundits and stock-pushers must be invested, or their investors pull-out. If they pull out its adios personal gains. Many of them know of the forthcoming disaster but deliberately invest-trade anyway encouraging more Sheeple to contribute. Gotta earn those big fees to feed the McMansions, yachts and private jets. Momma demands big diamonds and jewels, and vacations. Also, do not forget the private schools for kids and the hired help. It’s very important to keep up with the Joneses, Clintons, Greenspans and of course the Obamas. Keep sending in the money you suckers.
2. This is the system. This is the game. This also represents 90% or more of all players. This is why we are in the tiny minority and why our ideas are so reviled. Gold and silver and other contrarian investments ruin mainstream trading and investing ideas. We are the antithesis of the way the New York trading dudes and dudettes prefer you to think and behave. The juxtaposition of our ideas versus theirs makes us their trading enemy. This is why the top three, global Big-Boy-Banks gang-up on us periodically and short gold. Have patience; they will lose big time. Nobody can corner a market. Ask the Hunt brothers about trading silver.
3. The best and largest successful mainstream fund I know of last year posted +60% gains. Almost all of their trades were shorting credit, banks and financials as well as some individual shares and short-only ETF’s. This success flies in the face of those comprising the larger majority. Those derivative origination gang members prefer you should not know this.
4. Since the largest majority controls the US Congress, Treasury, Federal Reserve and most of the get-in-line-or-else-media, most Sheeple still do not get it. When they finally do, it’s Hi-Ho silver and gold with a vengeance as new buyers pile in disregarding failed trading ideas.
5. In our camp, we all watch the US Dollar’s direction for signals on our stuff. Be careful with this. As foreign nations and their residents dump domestic debts and trades, they do so mostly in dollars. This tends to support our very weak and over-printed dollar creating temporary USDX rallies. This also tends to fool participating traders. The dollar should be crash selling but there are other more powerful mitigating factors propping it up. Watch this carefully and consider gold and silver can rise right along with the dollar; temporarily.
6. We are not fans of shorting gold and silver bull markets during pullback, profit-taking corrections. This can be done but you better be a pro and be fast on the buy-sell button. Rather, our choice is to use faster, short-selling share’s ETF’s. Trade and invest in gold and silver shares, on the long side using ETF’s, futures, options and spreads. Buy physical first.
7. The stronger (temporarily) dollar will create shorter term selling in commodities including gold and silver in mild and normal corrections. The current event, now in process, could take gold back to $850 as a maximum low in our view. Could it be worse; yes of course but we doubt it.
8. Our primary concern for now is the potential selling and profit-taking on senior and junior precious metals SHARES. Many of our readers are share traders and investors exclusively. With this view we get either a hard or soft shares sell, and you can (A) sell them all; (B) sell half and keep half; (C) hang-on, get a grip, and stay in for the longer view understanding you can potentially get either a mild hit, or nasty one like last year. It’s your choice, but protect gains if possible and for heaven’s sake stay watchful as trading speeds-up in all markets.
9. When you find a good short in most markets and its works per your plan, the event is usually 2-3 times faster than sitting long in a rally. These can be fun but plan your entire entry, trade management and exit strategies all before you install new positions. Making critical trading decisions on the fly in the middle of mayhem creates mistakes. Stick with your plan.
10. We’ve got a near bearish double top in gold right now. Does this mean this is the end of this longer view trade? Absolutely not. We personally recommend and hold gold positions out to December, 2009 and are looking for more. All markets in rallies climb in steps and stairs. Do not be out when the big one takes-off, which could be later this year. We think once gold decisively cracks the price sound barrier at 1050, we should be moving up faster than the recent 15% annual average over the past few years.
11. Mainstream press China news is quite inaccurate. A current false commodities bull in base metals and related others is mere stock-piling. The plan is to pay cash now for future needs and more importantly dump US dollars and maybe even trade commodities for Chinese-held US bonds and notes. China knows they must dump this sinking US paper as fast as possible. Their current commodities rally is a false flag composed of restocking materials; not actual current demand for manufacturing, construction, or other normal, positive building of things.
12. When Chinese stockpiling stops the music stops on base commodities. Food, gold, silver, platinum and others in demand (in lieu of money) will skyrocket. These are the “go-to-must-have-real-items for mandatory needs. You gotta eat and must have real cash not fiat cash.
13. China needs grain, coal and other related food items. Weather is bad over the world and food supplies are way too low. These special rallies are for real as China and Japan are buying wheat wherever they can without driving prices too high. China is also buying soybeans.
14. China is now the world’s largest gold producer and they are not only not selling any but are buying more from others over the world. What does that signal?
15. Chinese bailout money was tossed with central planner impunity much faster than Obamanomics. All it did was buy some time and stockpile stuff. Their factories are closing in droves just like in Japan who is sinking even faster. Keep this one in mind: If the American consumers are broke and have quit buying Asian stuff, who will buy their export goods to keep their game afloat? The answer is nobody; and it’s all sliding faster. Some are forecasting Asian civil wars. We hope not but are beginning to wonder how they avoid it.
16. The Chinese economy is only 25% of the US’s and their exports fell the most in 13 years according to the Wellington Letter. Does that sound like good times just ahead? We say this is desperation just like all the Hail Mary TARP passes thrown by Geitner, Chopper Ben and their congressional free-cash-for-all lackies. I cannot wait for the 2010 election. This one is going to be better and more fun than the Super Bowl. Some suggest it would be outstanding if all congressional incumbents were losers and we had a new political party dedicated to the U.S. Constitution, freedom and the Bill of Rights. What we’ve got instead is the Bill of Wrongs.
17. One key measure of economic activity is production capacity. The less there is the better the economy to a point. As of this time cycle, we are seeing severe idle capacity world-wide reaching 1930’s depression levels not seen in decades. This will not change overnight.
18. Another critical measure of global growth or lack thereof is the automobile and truck industry. Our primary guideline is the very well managed Toyota Corporation now probably number one in the entire world. Last report we saw was their sales are off -40% and they lost $8 Billion in one quarter. If this is the best managed and most productive auto builder what is the condition of the rest of these auto companies?
19. Crude oil, natural gas and coal are mostly over-supplied for the shorter term and could stay that way for some time as the depression deepens. However, on the flip side, crude oil fundamentally is going short as major fields slowly decline. Mexico’s big one going dry is a major event. Yet, new larger reserves of natural gas have been discovered in Louisiana and Mississippi. Next the huge Bakken fields in the U.S. Dakotas, while being ten years from production, offer a major discovery. Coal demand has flattened but remains supported. The green guys and gals represent only 2% of all US energy for years. Solar, wind and gophers on treadmills won’t cut it. For all their new noise this one is nothing compared to traditional fuels. Oil is firm at $70 and should probably go higher as the traders go carefully long.
20. In the 1930’s event there were no less than six major share market moves up and down. With each new rally hope sprang eternal only to be crushed once again in following markets’ failures. So far we count only two. If history repeats we have at least four more and it could go beyond that cycle depending upon how much stupidity congress and the administration impose on us. We think the worse it gets the more frenzied, crazy moves are instigated by these mindless dolts. How about 8-10 more cycles and 20 more years of mayhem? Only a war can stop it and most US administrations understand this fact. Despite working with half-baked, hair-brained economics, these fools know a war makes believers and supports broken economies.
21. Housing green shoots are dying weeds. While some oversold markets are attracting bottom feeders scraping around for bargains, the worst overbuilt markets have further to fall as banks having cash won’t lend it to you. These credit markets are paralyzed. Watch what happens when the next big batch of pending five year refinancing failures arrives with a huge thud. Smart consumers will rent for 3-5 more years, or longer living under the radar, saving money, avoiding debts and hunkering down for future housing buys at 10 cents on the dollar.
22. A major turning point arrived in credit markets this spring when Chopper Ben and Timmy were forced to monetize, or buy each other’s paper in a spiral down the dollar-bond drain. As foreigners shun this paper, the Boyz have to do something with it so they print dollars and bonds and pretend they’re sold putting paper on the Federal Reserve’s Bond Purgatory Shelf. The game cannot last as yields rise, inflation rears its ugly head and all this paper is recycled to the outhouse. This is big news and signals the beginning of the end. Watch for a conspicuous absence of buyers at bond and note auctions. More must be held by Timmy and Benny.
23. Obamamaniacs think all of this “spread it around” stuff is really keen policy. The problem is it cannot and will not continue. The Big Three Automakers are toast and even remaining Ford Motor will be asking for help within 18 months or less when sales skid further and their cash burn marches on. We think Chrysler and GM are goners despite major handouts. The industry Achilles Heel is failing parts companies and no sales as consumers are broke and broken.
24. Big bankers got hands-full of cash from Uncle and were supposed to lend it for economic enhancement. They kept it to replenish balance sheets, then fooled the shares markets into giving them more cash for junk paper so they can pay back the TARP. And then they say to hell with you and the public who just happened to bail them out and save their spoiled bacon.
25. As we have reported in recent weeks, Europe is falling faster than the US and so is Asia. Germany was the primary support in Euroland. The latest news from their economy was a reported dive toward the cellar along with France, Spain and the worst of them all, Gordon Brown’s U.K., essentially bankrupting faster than the US. If you think whole nations cannot go BK look at Iceland, Latvia, Russia under Gorbechov and all of those banana republic, South American failures. How about some neat stocks or investments in greater Zimbabwe?
26. Japan’s economic slide down is an astounding horrific 15%. This is an unbelievable free-fall. We haven’t seen any jobless stats but can only guess they are severe. Japan is a major exporter to the world (world’s second largest economy). In recent years much of their manufactured stuff was made in China and then resold by Japan. Both nations get a double whammy today as all this business evaporates.
27. Some of the anti-American nations along with Middle Eastern oil producers and Russia with China are moving slowly toward other currencies, bonds, and investments. Their primary problem is they have too much cash for other choices. Only the US has the big market offerings enabling cash investors to park gazillions in cash. For the time being the US dollar, notes and bonds are the only logical option for parking big cash. This will change over time but the weaker dollar can hang on longer than we all suspect. Yet, in our view the dollar is cut in half again over the next 3-5 years.
28. Government jobless reports are fiction. Most know this and we chuckle when Rick Santelli says so on TV periodically. However, this problem is not the least bit funny for those without work trying to pay bills and feed children. The food pantries are in high gear working with new energy to manage growing demand. We encourage everyone to help neighbors and friends to the extent you can. Government has the funds and the food stamps, but no workable distribution system, and they are terribly disorganized. The worst of it is these bureaucrats have no conception of the current huge and growing demand for food for the needy and hungry. I have personal plans to expand my participation to the extent I can help. Please do your part and help if you can. This mess is spreading to even well-to-do communities.
29. As we’ve been reporting, retail is a goner. Sales are off, malls are closing and the strip centers with those mom and pop stores went down first. Retail within the five major, commercial rental groups is in the worst condition. Office is still holding-up the best but hotels and industrial are falling faster. Watch for the REIT investment funds to enter a complete crash by this fall. We did forecast this in 2007.
30. The Obamamaniacs will hit us with two more double whammies. (1) Their dictatorial reorganization plans for the entire USA financial system is being announced this week and; (2) The mammoth health care debacle will follow, which the president insists must be approved and in place by this fall.
31. We predict the health care plan has a chance of being thwarted by smarter heads (he sez hopefully) if the fall stock market crash hits before this impending approval it might be stifled permanently. Really all they need to do is hand out health debit cards (pre-paid vouchers) for 23 million uninsured and go home calling it a day with problem solved. That’s too easy and effective so it won’t happen. There are not 43 million uninsured as they cannot count.
32. Lastly, the big unknowns are geopolitical fever rising in the Middle East, Russia, and China. Since the president has obviously thrown Israel under the bus they will eventually have to attack Iran to protect themselves from another holocaust. The North Korean nut job might do anything and is holding some cards. China better get busy getting that client state under control, or the US and Japan will have to do it for them making a bigger mess.
Markets are nearing a peak in precious metals shares that generally follow primary stock indexes. As the current stock market peaking descends into the tardy 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 our S&P’s trade. We expect 800 to 850 with 800 being more probable. One of these days PM shares will disregard all broken markets and rocket rally. Not yet.
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 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.
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