By: Tom Dyson & Bill Bonner, The Daily Reckoning - 9 July, 2004
"Everything is extraordinary in America, the social condition of the inhabitants as well as the laws; but the soil upon which these institutions are founded is more extraordinary than all the rest. When the earth was given to men by the Creator, the earth was inexhaustible; but men were weak and ignorant, and when they had learned to take advantage of the treasures which it contained, they already covered its surface and were soon obliged to earn by the sword an asylum for repose and freedom. Just then North America was discovered, as if it had been kept in reserve by the Deity and had just risen from beneath the waters of the Deluge."
- Alexis de Tocqueville, Democracy in America Full Story
By: Richard Daughty, The Mogambo Guru - 9 July, 2004
But lately things had been kinda nowhere as far as national debt in concerned. I mean, you hear about it, and you read about it, and you get hysterical about it, and you take the cushions from the couch and make a fort in the living room and kind of curl up in that cozy darkness into a tight little fetal position and whimper about it, but it is not really showing up in the figures. Then, Thursday, as I was waiting for some e-mail to download from some girl I never met who said she was a beautiful college coed and she has some "special" photographs of herself that she is just dying to send me as soon as I send her my credit card number, I absent-mindedly clicked the button that took me to the official National Debt figures provided by the government, and was astonished to see that the debt had ballooned to $7.274 trillion, up from $7.206 trillion, in one day. One day! $68 billion dollars in new debt in one freaking day! Full Story
By: Richard Benson, Specialty Finance Group - 8 July, 2004
For the economy, it’s surprising how weak it really is; for inflation, prices in the pipe line are on the rise, allowing the Fed to remain very moderate in its interest rate increases. For the financial markets there is a growing realization that not only is the Fed behind the curve on inflation, they are happily behind the curve. If the Fed even thinks of fighting inflation, they could crush the economy and bring back real deflation fears. Wage increases across the board are not enough to pay for the current standard of living, let alone start paying interest on old debt borrowed to live well.
America’s massive trade and budget deficits, weak economy and rising inflation, will leave the U.S. dollar increasingly vulnerable to a significant decline in value. Full Story
By: Addison Wiggin, Bill Bonner & Dr. Hans F. Sennholz, The Daily Reckoning - 8 July, 2004
"Out of debt out of danger" is an old proverb that says it all. It applies to personal debt as well as to the liabilities of business and government. It may even pertain to the world monetary order and the U.S. dollar standard that rests on mountains of debt. They cast dark shadows not only on the dollar itself but also on American economic conditions. The world monetary order consists of a large assortment of national currencies all of which are fiat money. They are made legal tender by the decree, or fiat, of their governments. The U.S. dollars we know are money because the courts say they are legal tender and we accept them. Internationally, they have no legal status but are readily used because of their relative prominence and good repute. As the world's most popular money, they have become "standard" money. Unfortunately, it is a precarious standard that may soon sink in the quicksand of debt. Full Story
The gold market has always been the financial thermometer of America; even the Founding Fathers knew the perils of fiat paper. It says so right there in the bleating constitution. The gold market is far more important than as simply a store of wealth. It is a psychological measure of the true nature of our economy, and to a large measure, the world’s economy. When we allow “them” to manipulate gold to their own ends, especially via paper and derivatives; we are allowing “them” to destroy, to smash, to stomp on the financial thermometer of America, the backbone of America and perhaps even the world.
That weakens us all to the point where there ultimately may not be a need, or even worse a desire, for a thermometer at all. Think about that! Then it’s all about promises, as in IOU nothing. Then, we have to start all over again—all the way back to point zero. Full Story
By: Julian D. W. Phillips, Gold-Authentic Money - 7 July, 2004
This is the second part of this series on “What really drives the Gold Price?”, in which we highlight the way Indian Scrap gold sales may prove to be a silent, but major force in the market, in the third quarter of this year. How, by its reduced presence! It has not been properly appreciated as a major component of the gold market, but now could shove supply and demand right off balance, so that demand could fail to find the supplies it needs to maintain prices below $400. Full Story
By: Tom Dyson, Bill Bonner & Dan Denning, The Daily Reckoning - 7 July, 2004
If there is a real estate bubble in North America, it has not expanded out to Canada's maritime provinces. Unlike the hot markets of California and New York, here in Nova Scotia, the property market is as cool as an abandoned corpse. Many houses appear to have not merely been taken off the market, but simply forgotten by it. Grass grows high on the lawns. Trees begin to poke through garage roofs. And prices?
Pity the poor man who tried to get rich leveraging property in the Annapolis Valley. On George Street, in Annapolis Royal, a realtor's office offers what appears to be a nice 3-bedroom, two bath Victorian-era house near the center of town for only $129,000 - Canadian dollars. That's less than $100,000 US dollars. Outside town, a farm of 130 acres, including a 4-bedroom, 2-bath house and several outbuildings, is offered for only $199,000 Canadian. The farm is situated on the neck of land between St. Mary's bay to the east and the Bay of Fundy to the west - with frontage on both. Full Story
It didn't take long to see how the unusually large remaining open interest in the July COMEX silver contract would be resolved. First, there was a big transfer of 21 million ounces from the eligible to registered category in the Brink's and Delaware warehouses, followed by the 2nd notice day delivery of 5200 contracts (26 million ounces). I'll review more facts, and then some speculation on these developments in a moment. Full Story
By: Bob Chapman, The International Forecaster - 6 July, 2004
Gold derivatives are primarily driven by transactions among central banks and major bullion banks for the suppression of gold prices. As of 12/31/03, the total notional value of all gold derivatives rose to $344 billion from $304 billion six-months earlier. That $344 billion consisted of $154 billion in swaps and forwards and $190 billion in options. JP Morgan Chase, Citibank and HSBC held almost all the derivates. It seems HSBC has moved into second place and that is understandable in as much as the British Royal Family, which speaks for Europe’s black nobility, controls them. It looks as though the year-end short position by central banks was almost 13,000 tons of a possible 32,000 tons. The new Washington Agreement will allow the sale of 500 tons a year for five years. As we have written before, not enough gold has been pledged for sale so it is assumed that France and Italy may sell about 500 tons each. There is absolutely no telling how much gold central banks have left. Our guess is between 5 and 10,000 tons. They single-line their whole gold position and you cannot tell what it consists of. We believe the ability of the gold cartel to continue to suppress gold prices will soon be at an end. Once that happens the gold price will explode. We might say that nowhere else could this happen but in a corporatist-fascist state. Full Story
By: Bill Bonner, Tom Dyson & Dr. Kurt Richebächer, The Daily Reckoning - 6 July, 2004
Oh reader, dear reader...
Once again, we stopped dead in our tracks and gasped for air. The whole thing is a fraud we keep yelling. American capitalism - like its democracy - has become corrupt, degenerate, and enfeebled. But we are a lone voice lost in a vast wilderness of up-to-the-minute information and crackpot optimism.
And yet, there is the evidence, right there on the front page. "U.S. wages losing ground," says the Rocky Mountain News. The story is simple enough - simple enough even for an economist to understand. Wages rose 2.2% in the 12 months to the end of May. Inflation - CPI inflation, the kind that makes things more expensive for the people earning wage income - rose 3.1%. Full Story
The bears are taking this COT data and heralding it as the start of a new bear market (or a resumption of the old bear market, however you want to look at it). Some investors take the extreme position that the equities market is about to tumble into another phase of crashing followed by prolonged depression of stock prices. But is this necessarily so? Full Story
Housing, bonds, and stocks, in general, are very overvalued.
Home ownership levels are at all time highs, and the public, always buys at the top, when values are at the highest. Mass buying by the public creates a top. Home prices are boosted by the availability of cheap money due to low interest rates, and easy-to-qualify Federal loans from Freddie Mac and Fannie May. The easy money from the cheap loans creates extra buying pressure. Whenever there is extra buying pressure, prices will rise higher. Whenever most buyers are using borrowed money to buy things, it creates overvalued prices. Full Story
This week we once again look at the US housing market. We explore what may be the prime contributor to spiraling home prices. (I bet this once catches 95% of you by surprise, but in hindsight, you will all nod and think to yourself that is what you suspected all along, just as I did.) We look at the relationship between income and housing prices, and even find a new ratio to suggest when it is a good time to buy homes. It will make for interesting reading. Full Story
Over the past few months you may have heard me refer to the expected bullish conditions that should prevail in 2005 based on stock market history, viz., that there has never been a down X-5 year in the past century. Yet a conflicting view to the expected bull market in 2005 is that with next year being the first year of a new presidential term, history also shows first presidential years to often be bearish. So which historical pattern is likely to prevail in 2005? Full Story
By: Chris Temple, The National Investor - 4 July, 2004
As for that last comment, consider gold for a minute. It should be up $20.00 per ounce today, given the euro’s sharp rally against the dollar, and all the foregoing. But it isn’t. It can’t even get back above $400 per ounce and stay there because (and NEVER forget this, you gold bugs out there!) the masses of investors don’t see things as we do. As I wrote in a previous commentary (“Gold’s Achilles’ Heel” – June 10, 2004) many investors who arrived late to the precious metals party only to get badly bruised in April and May have no urgency to tempt fate once more. As far as they are concerned, if the Fed is going to move as slow as frozen molasses in hiking rates, it can only be because the economy’s growth and inflation are both sufficiently muted. Thus, who needs gold? Full Story
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