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September 2008 Updates & Forecasts9-21-08 Update:Gold:Before we get into the recent nuclear fission in COMEX paper gold prices, I want to point you to a huge, hyper-dangerous reversal pattern that has been inscribing itself on the walls of Wall Street with indelible flames. Take a look at this chart.
Now consider the implications for long-term mortgages if this mega-mammoth reversal really takes place and solidifies. In the 10-year note, things look even more hair-raising.
Bless their little hearts. They have been drilled time and time again with the mantra that US treasuries are 'safe'. Now, they don't know what to believe anymore. This can have one of two reasons: (1) They are confused as just mentioned, or (2) they know where the fan is and in which direction the excrement is flying and are doing their best to get out of the way - but the all-knowing US gov't/Fed conglomerate is stepping in and prevents the chart from reflecting that. Good for the traders. I'd rather get out of my positions in this environment than in one where the charts depict actual reality. They are able to save their asses, in other words. Wanna bet that "they" are the Fed's topo banking friends who are being let off the hook easy, at taxpayer expense, of course? What will happen if this thing blows and China is left holding the dripping bag of you-know-what, with pre-digested organic matter all over its face? Hmm. I wonder, wonder. Now back to gold. Here is the chart. You have probably already seen it since this isn't 'news' anymore:
An Utter Financial Coup d'EtatUnder the new plan just announced, Paulson gets unfettered power over everything financial, including non-financial companies and assets - and that means YOUR savings! Do not be deceived. This is the end of whatever has remained of true capitalism. We are now in a new global era of international socialism. All countries' central banks are cooperating in this coup. Questions such as "will gold stocks go up again, soon?" no longer have relevance. Get whatever control you can exercise over your financial assets in terms of physical gold in your possession - and sit on it! What will the 'official' price of gold-paper do? Who cares? It is but an illusion. If you don't have gold and silver in your possession, it doesn't matter. Bush talked to China's Hu Jintao by phone last night, and they "agree" that this is all necessary ind "in the interest" of both the US and China. That much is for sure - but it isn't in YOUR interest. You will eat the short end of this stick. If Americans don;t get up and fight for their country now - against their own presumably elected leaders, America will vanish from the map. The power transfer to China will be complete. Next thing you know, China will set our domestic policy. Well, maybe not China - but the Rothschilds, who have just hijacked China to do their bidding. If all of this seems rather hysterical to you, don't blame me. It's history that is turning hysterical. More later. Good night. 9-15-08 Update:The Dollar?It is nearly impossible to fully appreciate the likely consequences of what has just happened this past weekend when Lehman Brothers filed for bankruptcy, and any discussion of it must be reserved for a future article or even Monitor issue. The only thing we know is that the world's biggest names in finance are dropping like flies! Lehman in bankruptcy, Merrill sold itself into bondage under Bank of America, AIG made a deal with state and federal regulators that allow it to use $20 billion of its own capital (?!) and WaMu is next in line. The president's working group sure has its work cut out for it. AIG has (theoretical) assets worth ten times those of Enron when it collapsed. Here is a quote from a NYT piece of today: "If you were to go and sell all of the derivatives contracts (of Lehman) - what are they worth?"(NYT) In 2005, Congress has made sure that derivatives contracts are still outside a bankruptcy court's automatic stay that freezes all other contractual relations of a failing debtor. That means Lehman's counter parties can now turn around and sell their derivatives contracts for whatever they are worth, and the other creditors in bankruptcy have to wait and see what else comes their way, without any say as to how much these things are valued for. What this entire spectacle stands for is the principle of "poof". Today you think you own something and tomorrow - poof - it's gone! This is the keyword for investors in complex 'modern' financial products. The keyword for gold owners is 'told you so.' The Fed is now expected to lower its 'target' federal funds rate to 1.75 percent. During Monday's trading hours, the actual rate at which banks lend to each other tripled ti 6 percent before the Fed's mammoth phony cash injection of $50 billion smashed it back down to 1 percent. There's no telling where it will go tomorrow - and after. Central banks around the world have promised to support each other in injecting gobs of 'liquidity' into the financial markets. Everyone is holding on to their 'cash' (or whatever they now consider as cash). So much for the ‘deflation’ argument. Banks are churning out cash like there's no tomorrow. There actually may not be too many tomorrows for the current financial system. At the same time, ordinary consumers are destroying money by forcing banks to wite of the loans they refuse to pay back. (Oh, if US voters only had the insight to walk away from their incumbent US representatives and Senators in the same way. We would all be better off.) What did the dollar do during all of this mayhem? It actually rose against the euro and fell against the yen in what Reuters reported was "safe haven buying"! Why is the yen considered a safe haven? Because its interest rate is so low that it can't hardly sink any lower - a sign of things to come for the dollar and other high-flying currencies. Where will the dollar go this week? There's no way to tell in this environment of stupefied insanity. It 'should' go down, but then again, it could shoot up even higher. You know what happens if it does: the recent US export boom will follow Lehman and go "poof" as well. Yet, as of now, the dollar dropped a little before likely poking through the 80-point ceiling on the USDNDX chart.
Oil:The price action of oil in spite of Hurricane Ike points to widespread global recession fears. Oil has dropped or done nothing on each of the last two and a half weeks' trading days. This trend will probably continue as everyone and their brother hang on to whatever 'money' they think they own. Yet, the principle of "poof" will soon expose the folly of that action. Better exchange that poofy stuff for something that actually hurts when it hits you. Gold & Silver:There is no need for discussing the price of gold and silver. Try buying some in even modest quantities - and then let's talk about what you'd be willing to give it up for as the financial world follows its venerable sponsor formerly called "Lehman." Interest Rates:The "push gold down" ploy is still working. Flight capital still takes refuge in US bonds and notes - until those, too, go "poof". Then where will they put whatever illusory money they have left? You know where. (9-09-08 Supplement):Dollar-Top Building?The dollar appears to be building a top here. Although the current climate of deception and obfuscation doesn't allow for imputing that much predictive ability to charts, the combination of its severe oversold status and the near-consecutive "dojis" on the candlestick chart strongly point in that direction.
A "doji" is simply an intraday trading pattern that shows market uncertainty. After prolonged rises or falls, it therefore often indicates a coming reversal. We have just seen three of these in a row, each spaced exactly one trading day from the next one, and each successive trading day was "up". The last one on Monday was obviously caused by misplaced euphoria about the US government's doubling its debt cargo by taking Freddie and Fannie onto its balance sheet while water is already sloshing over the railing of this fast-sinking ship. Naturally, when the dollar starts dropping, COMEX gold will start rising again. This possibility gets an additional boost from the just-announced OPEC plan to cut oil production soon. Locking in current prices would be a great idea for those who plan on buying more gold and silver. 9-07-08 Update:The Dollar:Hank Paulson to Congress: "We want a full governmental guarantee for Fannie and Freddie (the US government's bastard children) - but we we'll never need it." Yeah, right. Today, history has shown again ow much faith Americans can place i the judgment and and the pronouncements of their elected and appointed officials. Zero. The effect on the dollar was entirely predictable. It is very likely that this development will wipe out the entire bump the dollar has enjoyed since July 14th, when oil started breaking down due to the factors already discussed in the last two Monitor Issues. In the six hours since trading opened overseas until 12am midnight on Sunday, the dollar Index lost 70 basis points from 78.90 down to 78.20. The consequences for the United States' sovereign debt rating are considerable, here. Freddie and Fannie together hold $12 trillion worth of US home mortgages. By taking these institutions of higher lending onto its balance sheet, "Bank USA" has literally doubled its official debt at the stroke of a pen. In September's Monitor, we have already examined how vulnerable many these home loans are to near 100 percent losses. The risk of these vulnerabilities has now been transferred straight to Uncle Sam's pocket. The effect of this development on the US dollar can only be underestimated at huge financial risk. In January this year, Moody's warned that the US may lose its top-notch sovereign debt rating within the next decade if it fails to get its exposure to unfunded liabilities (speak: free prescription medicines for seniors) under control. Well, to that future contingency of some 46 trillion bucks, the US gov't just added another 12 trillion bucks of, not contingent and future, but vested and present debt. Under ordinary circumstances, that should double and triple the interest rates payable on US treasury debt, but we will have to wait and see how the financial media industry spins this - and how the US consumer of these manufactured news items responds to it. Remeber: things still have to look good until the election - at least as good as they can be made to look. The dollar's recent meteoric rise has already stalled in recent weeks (at the USNDX 77-point level) before it achieved its final blow-off glare. It may have just burned itself out upon reentry into reality's ultra-dense atmosphere - just in time to be repelled by the 80-point glass ceiling that used to be its floor.
Yet, the early results in from Europe testify to utter confusion. MarketWatch reports mining shares and Eu stocks up sharply,along with oil. At the same time, the dollar seems to stage an early rebound. Expect more of this confusion to reveal itself. Market participants as well as market drivers have not seen a situation like this in their lifetimes. They do not know which way to react. Early indications are further that the world is taking a sigh of relief while US treasuries are plummeting. No one seems to understand what this move will do to teh US credit rating and to US interest rates. Gold:A quote from a September 7th Business Standard article: "The dollar is going to start stalling around here," said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. "Equities are losing value. With no better choices to put money into, we’re going to see renewed interest in some commodities, and gold is going to benefit." Just what The Monitor has been predicting since October last year. Due to the unprecedented levels of deception wrought upon world institutional investors by the New York COMEX, tracking the charts for gold has become almost meaningless, except in order to gain an appreciation of the levels to which money managers and fund managers allow themselves to be duped. Retail investors are far smarter, as the recent gold and silver retail shortage has proven beyond any doubt whatsoever. Nevertheless, gold has held its ground during the last phase of the dollar's recent blow-off:
Oil:It is also interesting to note that gold has stabilized despite the dollar's continued rise and oil's continued fall after the recent stalling action.
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