By: Short Fuse & The Daily Reckoning Crew - 24 August, 2007
-Central banks - the glue that holds together the gears of economy…desiring a painful correction… -Florida's best kept secret…the concept of 'free lunch' is America's only mainstream religion… -Nothing wrong with gold just hanging out…wheat hits an all-time high…Greenspan as a 'scapegoat'…and more! Full Story
By: Peter Schiff, Euro Pacific Capital, Inc. - 24 August, 2007
The current economic debate really boils down to one essential question: "Will there be a recession?" To me, the question has about as much vitality as debating whether Roger Clemens will be inducted into the Baseball Hall of Fame. (With over 300 wins and more strikeouts than any other pitcher besides Nolan Ryan, the Rocket is a sure thing for Cooperstown). Similarly, a recession is not a question of “if” but merely of “when”. Full Story
By: Adam Hamilton, Zeal Intelligence LLC - 24 August, 2007
After weathering a consolidation running for 16 months now, the remaining precious-metals-stock investors and speculators are a pretty hardened lot. Used to being the ridiculed black-sheep contrarians, it takes quite a bit to faze us. Yet the brutal downside action in the HUI last week certainly fit the bill. Full Story
The August 17, 2007 Fed Discount Rate Cut of half a percent created a positive reaction on Wall Street, resulting, inter alia, in the Dow closing up over 200 points. But it behooves investors and traders to look beyond any emotional reaction to the rate cut and other Fed decisions in order to determine the effects they are likely to have and not have. Full Story
Flooding Wall Street and Main with freshly printed bills – whether through sharply lower interest rates...or through direct intervention by the "Reconstruction Mortgage Corporation" that Bill Gross is calling for – will only remind the world why it was so bearish on the Dollar before the start of this month. Full Story
Earlier this month in Nashua, New Hampshire, congressman Ron Paul said that, “1913 was a bad year. We need to repeal that entire year.” The crowd cheered him. Well what exactly happened in 1913? Two very important events took place in the United States that year. The first was in February when the 16th amendment was declared passed and income tax began. (see thelawthatneverwas.com) The second event occurred in December of that same year when congress authorized another Federal Bank in the form of the Federal Reserve Bank. Full Story
On August 15, the 90-day T-bill rate was 4.21%. The next day it fell to 3.79%. That was a one-day drop of .42 percentage points. As a percentage, it was a 10% drop. We rarely see 10% moves in one day. The next day, Friday, it was down to 3.76%. On Monday, August 20, it fell to 3.12%. That was another 17% decline. This was not a merely rush for safety. It was bordering on panic. Full Story
By: Richard Daughty, The MOGAMBO GURU - 24 August, 2007
As evidence of that surprising 'economic laws don't apply here' statement…almost $500 trillion in financial derivatives exist…and the number of derivatives 'is increasing at the rate of 40 percent per annum. Full Story
We usually think of the Fed as operating quietly behind the scenes to help keep the credit-based economy lubricated. Not this time, though. The central bank has had to come out in the open, mainly because the troubles it has been trying so frantically to paper over are as visible as the plague of weathered “For Sale” signs on our neighbor’s lawns. Full Story
By: Short Fuse & The Daily Reckoning Crew - 23 August, 2007
-The naïve thinking of capitalism's true believers…posing the question no one wants to answer… -The real "Greatest Boom Ever"?…surrounded on all sides by the different stages of life… -The country's four largest banks go to the Fed for a bail out…the first agriculture business ETF…golden wealth insurance…and more! Full Story
The US financial system is experiencing a combination of a heart attack (fibrillation from absent trade recycled surpluses), a massive hairball (subprime debt securities) working through the bank arteries, and a realization (like Wiley Coyote in cartoons) that no terra firma lies beneath the economic feet as the depths below are vividly apparent. Full Story
If all outstanding debts were repaid under our current debt-based monetary system, there would be no money left in existence. I stress our current debt-based monetary system because other types of monetary systems are possible. Most people never stop to think about this (usually because they're too worried about paying their bills), but our current system (which is controlled by the Federal Reserve) is just one of many possible money systems. Full Story
Back in the ‘50’s being free of funded debt was a leading business virtue. The bluest of the blue chips had no bonds outstanding. Memories of the Depression were still so strong that investors insisted stocks have higher dividend yields than available from bonds to compensate for their inherent risk. Later in the ‘60’s the conglomerates used relatively conservative capital structures: the debt markets would never have absorbed debenture issues totaling six to nine times corporate cash flows so prevalent today. Full Story
By: Gary Dorsch, Editor, Global Money Trends - 23 August, 2007
For long-term buy and hold investors in the US stock market, who simply sit through wild market gyrations, it’s good to know that you have “Plunge Protection Insurance.” The dynamic duo of US Treasury chief Henry Paulson and Federal Reserve chief Ben “B-52” Bernanke are working overtime these days, and using all the weapons in their arsenal to prevent a bear market from materializing, while Wall Street faces its worst financial crisis in many decades. Full Story
In this article we will meet a ravenous Beast that goes by the name of Substantial Inflation, and find out just how difficult it is to keep this Beast from shredding our investment portfolios and consuming our real net worth. Next, we’re going to find out how the exact same inflationary conditions which create the Beast, also simultaneously and necessarily create a ravishing Beauty. Full Story
The stock market triggered a Dow Theory sell signal Friday, with both the Dow and Transports closing below June lows, and new lows for the move. Now we have confirmation from a very reliable indicator the stock market is in real trouble to go along with our own observations last week. In relation to this, speculators continued to take put / call ratios down on Thursday, which was part of the reason stocks fell Friday. Full Story
Most of us choose to secure our valuables and tangible assets in different ways, depending on our individual circumstances, experience and levels of trust. For example, if we need to access them frequently (e.g., jewelry), or if they are important, but replaceable and not inherently valuable (e.g., a stock certificate), we may simply keep them at home or hold them in a near-by safe deposit box. Full Story
By: Richard Daughty, The MOGAMBO GURU - 23 August, 2007
The doors of the Mogambo Bunker Of Stark Terror (MBOST) are in full lockdown mode, I am armed to the teeth, and I have a tasty pizza in the oven whose delightful aromas are already working their calming magic. With those precautions out of the way, I thought I was ready to take a look at Total Fed Credit, that gushing fount of money and credit called "monetary inflation", which is what causes price inflation, which is what destroys societies and economies. Full Story
To paraphrase Tinkerbell, “A little more fairy dust, and u-u-u-p we go!” We boasted here yesterday that we could short the market almost risklessly no matter how strong it acts, and so we did. Our trading vehicle was the Diamonds (DIA), an ETF that tracks the cash Dow average point for point, and our precise target was 132.00, a Hidden Pivot. The Diamonds fulfilled the forecast almost exactly with a powerful surge on the opening to 132.10. This allowed us to buy October 130 puts for 3.20, somewhat less than anticipated. Full Story
By: Short Fuse & The Daily Reckoning Crew - 22 August, 2007
-False gods in the Theology of Capitalism…eight years of reckoning can make you tired… -Flim-flam prosperity makes paupers of us all - mostly…McMansions bought with bad credit… -Stormy markets watch Dean closely…protecting yourself from Sentinels at the door…and more! Full Story
As we write this article it appears that fear is abating and that the financial markets are getting back to business as usual. Nevertheless, one major piece of bad news could send the markets tumbling once again. So, have we just witnessed the worst of the market declines or was this just a dress rehearsal for a much more severe and perhaps catastrophic decline ahead? Full Story
By: Bob Chapman, The International Forecaster - 22 August, 2007
Our latest Fed Chairman Helicopter Ben Bernanke, a devoted Keynesian, has made his first move to bail out our crumbling financial system and particularly the banks and Wall Street. He has cut the discount rates to banks ½% to 5-3/4%. He now expects long lines to form at the discount window. The Fed has fed almost $200 billion into the system in the past two weeks and the CDO, ABS and commercial paper markets are still frozen. We believe another ½% discount rate cut will follow with another $200 billion in repos, CDO and ABS buyouts to follow as Ben leads us to the precipice of hyperinflation. Full Story
After the emergency measures employed, some columnists are already making reference to the "Trichet Put." Which just goes to show... at the end of the day, you can't trust any paper currency. The more prepared the world's central bankers are to massage the system with credit, the better gold looks long term... especially in its function as "the only currency not subject to a printing press." Full Story
Cheap and plentiful credit is what caused the current mess. More of the same can only make it worse. It is only a matter of time before this shot of credit heroin wears off. Sometimes the best medicine is none at all. Full Story
Gold held up remarkably well last week given the carnage all around, with silver and Precious Metals stocks cratering, and despite the sharp drop on Thursday it did not break below critical support, unlike silver. Full Story
Silver failed to break clear above the Distribution Dome evident on its 2-year chart and paid the price last week when it cratered. This was in marked contrast to gold, which having looked stronger than silver for some time, broke above its Dome and did not break down below important support last week. However, there have been important developments over the past couple of weeks and especially late last week that are believed to be creating a positive environment for gold and silver. Full Story
In my view, the above data combined with the prevailing negative sentiment is screaming a "MAJOR BOTTOM". Investors are advised to accumulate major positions in resources (miners, energy stocks, uranium stocks, precious metals stocks) and the emerging markets during this widespread doom and gloom. After some additional consolidation and a re-test of last week's lows the advance should resume. Full Story
Collapse of U.S. mortgage market has burned many foreign investors They most likely will be forced to become net sellers of U.S. dollar debt. Dollar's structural bear market will continue as foreign investors shun and sell dollar debt. Gold is the only true refuge in such an environment. Full Story
The Credit Crunch has been hitting the UK Mortgage Sector hard as many easy credit mortgage deals have been removed from the high street shelves in recent weeks. Despite central bank actions to ease financing terms and increase liquidity, this does not address the real issues of illiquid mortgage related bonds and expectations that the UK Housing Market will slump on the back of a surge in foreclosures. Full Story
The capital markets are stable…or are they? I doubt that many are looking at what is going on in the shorter term interest rate market, but yields there are dropping like a rock. I continue to hear from my sources of reports that firms needing to sell commercial paper can’t sell the paper at rates they consider even remotely reasonable. While CNBC is saying things are fine, I am suspect. Full Story
By: Richard Daughty, The MOGAMBO GURU - 22 August, 2007
The big, big problem with the whole subprime/CDO/Armageddon market thing is that while the values on these assets can go down, the debts incurred to buy the assets don't. In fact, the debts remain theoretically constant. Full Story
The chart below shows the Industrial Average working on a bullish flag. This is accumulation, plain as can be, and it suggests the stock market is looking for a reason, any reason, to grab shorts by the balls and squeeze them for a quick 200-400 points. Search brokerage houses from Maine to San Diego and you wouldn’t find a single investor with a compelling reason to buy stocks at these levels. But neither would you find any bears eager to get short, given the strafing they took last Friday when the Fed announced a surprise cut in the discount rate. Full Story
By: Short Fuse & The Daily Reckoning Crew - 21 August, 2007
-The flim-flam boom's menace to genuine prosperity…"Bernanke's first big mistake"… -A shift in business - from business to debt…increase in number of millionaires keeps the mob fired up… -Learn to appreciate trouble…maybe Bill should move to Florida after all - there's sure to be a flood of homes on the market soon…and more! Full Story
Make no mistake, the intent of the recent silver sell-off, was to liquidate as many leveraged traders as possible. It not only applied to silver, but many other commodities and currencies. A quick review of the Commitment of Traders (COT) market structure in the markets involved shows that whatever side the large non-commercial speculators (hedge funds and other traders) were most heavily weighted, the markets moved sharply the other way. Thus, the price moves in a great number of seemingly unrelated markets, from metals to soybeans to oil, moved against the large speculators. It was a perfectly executed campaign against the speculators. Full Story
REMEMBER HOW INFLATION was the investment world's biggest single worry back in...oh...back in June? Anyone snapping up 10-year US Treasury bonds back then is now looking clever. Very. Ten weeks ago, the 10-year yield touched a half-decade high of 5.32%. On Monday night in New York it closed below 4.65%. Full Story
With the 1990s stock market mania about to go bust, it was easy to conclude that the U.S. economy would see an entrenched recession. After all, the bubble was arguably larger than any before, and - thanks to easy investing via the internet and the proliferation of 401Ks, mutual funds, etc. - the fallout in stock prices was going to impact an unprecedented proportion of the population directly. Full Story
By: Dr. Ron Paul, U.S. Congressman - 21 August, 2007
As the dollar weakens, it becomes ever clearer that we need a return to sound, commodity-based money for a secure future. Money based on real value, not empty promises and secretive backroom machinations, is the way to get out of the current calamity without causing even bigger problems. Full Story
The following paper will examine the merits of what has been referred to as the “nuclear option” or threat of a premeditated crashing of the U.S. dollar, precipitated from the other side of the world – Beijing, China to be precise. Full Story
Scary? Maybe, but we’ve been there before. $21 (or 3%) drop in gold price is not so unusual. What next? Let’s take a quick look at where we’ve been and see if we can guess what to expect ahead. Full Story
By: Steven Saville, Speculative Investor - 21 August, 2007
Now, even if an important low is put in place in October of this year it won't necessarily mean that the cyclical bull market is intact. It might, instead, mean that the first downward wave in a new cyclical bear market has come to an end, in which case a multi-month rally from the October-2007 low would be followed by a decline to new lows during 2008. The next question, then, is: has the cyclical bull market that began in March of 2003 come to an end? Full Story
By: Richard Daughty, The MOGAMBO GURU - 21 August, 2007
Naturally, all of the inflation in the money supply will be reflected in inflation in consumer prices (and not just in the prices of stocks, bonds and houses like the government wants), and sure enough, here comes the Bureau of Labor Statistics report saying that the "Producer Price Index for Finished Goods advanced 0.6 percent in July, seasonally adjusted." Full Story
Here’s a front-page headline from the New York Times that gave us a chuckle the other day: “Few Heard Ticking Credit Time Bomb.” Few who are not deaf, dumb and blind, perhaps. However, for the millions of sentient humans who live outside the warp in which the Times evidently is fabricated each day, the ticking of the credit time bomb was about as hard to detect as a giant asteroid bearing down on Cleveland. Full Story
By: Short Fuse & The Daily Reckoning Crew - 20 August, 2007
-Soothing cloud of nitrous oxygen covers investors…believing in two great delusions… -The markets let out a big hoorah…gypsy wagon manufacturing services… -A rookie mistake…coming out of the hides of the fiscally responsible…how Dean affects economies…and more! Full Story
Now is the time to buy more gold and silver if you have not yet done so. This article will be short and to the point as I am using a slow dial up internet connection in northern Pakistan (which is quite safe for travel, even for Americans, and has amazing mountains in every direction). I recommended on July 2 to buy silver and gold at those levels with a possible short term rally and possible other buying opportunity between the end of Aug and Oct. The other buying opportunity is here right now. Full Story
The monetized silver coin - the “Libertad” ounce - will be a high-quality money; its merit will not reside in the sphere of quantity and its effects will not be primarily or principally detectable in the sphere of what is quantifiable, but rather in the sphere of quality, where we find such values as love of country, national pride, confidence, reasons to save, satisfaction and personal peace of mind, and therefore, social stability – none of which can be measured. Full Story
By: David N. Vaughn, Gold Letter, Inc. - 20 August, 2007
Now the title of this article is a pretty lofty accusation. We have heard this as a possibility countless, countless times but it has always been just a rumor. Is the possibility still just a rumor? Full Story
Lower interest rates plus rising inflation drove investors to buy gold between 2003-2005, nearly doubling the Dollar price of bullion. A sharply higher gold price may provide comfort once again if investors begin to suffer sharp inflation-adjusted losses in both their stock and bond portfolios. Full Story
Just how long did the powers to be think they could keep this Ponzi scheme of mortgage debt going before it would begin to unravel? I first wrote about it in June, 2004 when I outlined in my article “Our Worst Nightmare – the Puncture of the Current Housing Bubble” how simple mortgages were being transformed into derivative instruments called Collateralized Debt Obligations which would become bad investments if either interest rates increased or housing prices fell to the extent that they resulted in an inordinate increase in mortgage defaults. Full Story
Direct purchase of market assets for the purpose of controlling public markets, might somehow be justified if the action was public and some kind of structural market weakness was causing a problem. This hidden manipulation is a crime. A very dangerous crime. Full Story
1st Hour: Headline news & market forecast. Spotlight Picks with big dividends. The International Forecaster and Chris Waltzek answer listener questions. 2nd Hour: Peter Schiff Full Story
Prudent Bear’s Doug Noland has for years been pointing out that one of the drivers of the credit bubble has been the ever-broadening definition of money. As the global economy expanded without a hic-up, more and more instruments came to be used as a store of value or medium of exchange or even a standard against which to value other things—in other words, as money. Thus mortgage-backed bonds and even more exotic things came to be seen as nearly risk-free and infinitely liquid. Full Story
All ETFs remain on sell signals as we continue to stay in cash and out of harm’s way. The lows in June were violated except GLD this week and further weakness should be expected. Full Story
By: Bob Chapman, The International Forecaster - 19 August, 2007
What the elitist’s central banks won’t do until forced to do so is allow the system to default and be purged of its excesses. That is why in the final analysis gold is the only permanently safe asset. This flood of liquidity in a debt crisis is just a way to make default less obvious to the untrained eye. That is why there is low-level panic. Investors are getting the message even if Wall Street isn’t. Full Story
The best news the market is offering us right now comes from the 20-day price oscillators. The XAU 20-day price oscillator has hit its lowest reading in several years and I can’t remember when I’ve seen it lower than it is now (see chart below). This shows the market is stretched like the proverbial rubber band at the breaking point and I can’t see it stretching much further without snapping back and giving us an oversold rally and probably one lasting several days. Full Story
Putting an end to inflation requires not only the abolition of the Fed but also the abolition of the FDIC and FSLIC. At long last, banks would be treated like any firm in any other industry. In short, if they can't meet their contractual obligations they will be required to go under and liquidate. It would be instructive to see how many banks would survive if the massive governmental props were finally taken away. Full Story
By: John Mauldin, Millenium Wave Advisors - 19 August, 2007
End of the World or Muddle Through? This week I try to explain in simple terms the very complicated story of how we went from some bad mortgage loan practices in the US to the point of world credit markets freezing up. There is a connection between the retirement plans of Mr. and Mrs. Watanabe in Japan and the subprime problems of Mr. and Mrs. Smith in California. We find the relationship between European banks and problematic hedge funds. And finally, we try and see how we get out of this mess. Full Story
By: Richard Daughty, The MOGAMBO GURU - 19 August, 2007
And what in the hell happened to the gold lease rate? It's going berserk! And who in the hell is buying dollars to keep the dollar index above 80, and why? Full Story
Investors appeared nonetheless to breathe a sigh of relief on word Friday that the Fed had lowered the rate it charges banks to borrow by 50 basis points. As a result, the Dow Average ended the week 500 points above its recent lows, returning to the plus column for the year. But we seriously doubt the euphoria will last for more than another day or two. Should the stupidity persist beyond that, we have no plans to fight the tape. But that doesn’t mean we’ll march with all the lemmings over the cliff. Full Story
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