Monday, August 18, 2008

We're Still Astounded At What's Going On.......


Breath-Taking Collapse

The speed and volatility of credit and share markets’ collapse this week has been astounding.
While tout TV, international banksters and market manipulators did their level best to hide it, prime supports are caving-in with scary rapidity. Most all global stock markets have posted the arbitrary 20% declines, or more taking them “officially into recession.” The USA was there long ago but has not been recognized for several nefarious reasons. Canada is the last major nation not in official recession. Stock markets tell us the future for months in advance and it’s not at all pretty. Bond markets take it a step further as these traders forecast credit standards and interest rate trends with remarkable accuracy. In many respects, the bond traders predict more than the manipulated shares’ markets. As we’ve been shaken and rudely reminded by the bond boys; credit, bonds and cash are driving the bus not share markets.
We were hoping Chopper Ben and nervous Hank could hold it altogether with Federal Reserve and US Treasury chewing gum and bailing wire. It’s only not working but it appears another soon-to-be-named monster corporation or global bank is going over the falls into a gigantic smash. Worse yet, Australia, a leading commodity indicator and shining light mining provider had a big bank post a massive derivative write down ala Merrill Lynch. This super nasty event sets the credit quality bar infinitely lower than their credit system can manage. As in America, they are on the edge with a cataclysmic firestorm at their backs.
In the worlds’ of trading and finance, exiting holders of small positions have little affect on price. But when a nation has six dominant banks mutually holding piles of derivatives and one sells out with a BK-like discount what do you suppose the other five banks’ stuff is worth? All it takes is one and they all cave-in with massive write-downs and a falling domino lack of confidence in this paper.
It appeared earlier this week that new bottoms were found in commodities including our favorites. We’ve been snake bit before years ago when being a tad too eager. This is why our forecast for a new beginning was either 8-15-08 or, 8-18-08 for this new rally. Considering more damage done yesterday overseas and a large trading error in silver last night, the repairs might take even more time.
We checked with our broker this morning and he figured somebody had a large silver futures order posted with thousands of contracts and didn’t meet a margin call. The broker had to close ‘em out and silver skidded $2.00; a rather large negative move to say the least. Since this apparently happened in the night during thin electronic trading, there was nobody on the other side of this failed trade to help.
Silver fell from roughly 14.30 to 12.30 on the December, 2008 futures. This morning it came back to 13.19 by 10:16am and we predict it could close at 14.32 to 14.48 for this Friday, if it can recover. Monday is another day and hopefully better realigned after this mess to base and rally some more. We would suggest the worse case recovery could now be in the last week of August or after Labor Day next month. The only caveat would be if some other outlier or Black Swan (vulture) came flying in out of nowhere and hit us again.
Currency Disruptions Real and Accidental
Central banks of the world including the USA noticed the August 15, 2008 breakout time was due for precious metals on the historical cycles and Mr. US Dollar was looking pretty punk. Further, there has been an increasing storm of foreign whining (deservedly so) about the dollar’s sinking valuations. Lots of folks have been increasing upset about taking dollars for manufactured stuff and then watching their newly acquired paper skid toward trash levels. This is why Asia, Europe and others, forced to take US bonds, notes and currencies have been spending it with vigor to purchase hard assets of value.
The intake of dollars into China, Japan, India, Europe and Middle East for oil has been offset with follow-on trades for exiting those dollars. First these nations moved dollars into stronger currencies but now those formerly stronger currencies like the Euro are sinking, too. Next secret sovereign banks used dollars to buy US shares. The embarrassment of riches is too much so any hard asset is the last resort and that is where off-loaded dollars are moving right now.
Currency traders yahooed the new dollar rally saying it had improved. Wrongo! The dollar is just as crummy as before, it’s just that the Yuan, Euros and others dumped over and are selling BRIEFLY, faster than our dollars. This is a temporary re-jiggering of currencies in the marketplace. Soon the dollar resumes its skid into oblivion. None of these fiat currencies is backed by gold so the next great trade is toward the Swiss Franc, long considered the premier, blue chip currency, yet un-backed by gold.
These so-called superior credits of US Treasury bills, notes and bonds have already posted lower credit scores as somebody wrote two weeks ago the USA national credit is AA not AAA. Traders need to keep currency valuations in perspective to get a better handle on speeds of up-down trading, overall volatility and relationships in dominant groups.
For example, the UK’s British Pound has been hammered as they are suffering a housing bubble and related credit mess even worse than in the US if you can imagine that one. Now that Australia has tripped and our F&F Fannie and Freddie specious rescue plan’s in place, it seems everybody is going one notch closer to Armageddon, or at least crash city.
The End Game
We’ve watched this rolling disaster with unblinking amazement as Benny and Hank furiously stomp out the weekly forest fires. We’ve learned throwing mountains of taxpayer cash is not a solution. With each succeeding fire, it takes more credit, more lying, and more taxpayer robbery to snuff the latest conflagration. These credit firemen are about out of water as next they face the largest hurdle of all-consumer collapse.
The entire saga goes back first to give-away real estate lending and related companion derivatives. Since consumers have been the traditional locomotive of America’s economy we now reside in some really deep pasture piles.
The green guy pumped real estate to avoid a recession after 2000 when the Nasdaq dumped. It worked but made things much worse only delaying the inevitable.
Foolish unqualified consumers got nearly free money not only for houses but subsequent crazy inflation enabled them to buy lots more stuff using the follow-on transparent, phony ATM house equity.
New York seized the moment packaging and re-packaging mortgages, selling them several times into a derivative abyss.
Everybody loved the game. Consumers got a freebie new home and lots of Monopoly Money. Banks and brokers got rich on fat fees and derivative peddlers got really rich selling billions of this crap. The latest scorecard this week says the banks must payback $50 billion collectively but the real damage was more like $350 billion; or worse.
As in any 60-70 year Bubblemania event, the bubbles burst and we all fall down. It’s called the Kondratieff Cycle. We think it keeps happening as the last bunch that went through it died of old age. So the new and inexperienced bunch learns the same lesson all over again-the same old hard way.
After bubble time is over governments are dealing with a depression, angry Sheeple, and finger pointing becomes the new indoor sport. From there government must invent a catastrophe to start a war as a war is the monetary engine of recovery. It puts everybody to work or fighting this new war effort working in the factories. Roosevelt did it when he jumped into Europe and ignored the warnings about Pearl Harbor after cutting off Japanese oil and gas. He gave them no choice but to fight.
Since the US is busy in Iraq, Afghanistan and maybe next in Iran, we would suggest all western nations including the US stay extra vigilant for another manufactured event ala Reichstag in Germany in the early 1930’s. Could we see another 9/11? I think it’s entirely possible. I doubt our country would mount such an illegal event but would they stop one if it could be used for political gain? Probably not. These are very harsh criticisms of the west and others but if you suggest I’m full of prunes read history and not the homogenized phony versions either. War profiteering is very big business. Those making the big money never send their sons into battle. They make better arrangements ahead of time.
What’s Next? This is 1938.
Read history about Europe, Asia and the United States from 1920 to 1945 and expect a re-run with some new nasty twists. Further, if you think the government will be there to bail you out after they mess everything up forget it. You are on you own. Either get busy and take intelligent measures to protect your family, home and self or try to endure years of misery. The western world’s standard of living is falling and the spoiled American brats will be hurt the worst. We wish we were wrong on all of this stuff but we read a lot and we know how to count. This simply doesn’t add up. Be careful out there.
As they say so often when lightening bolts hit us out of the blue; “This too shall pass.”
Gold and silver traders, shares’ investors and those with enough foresight to prepare, will endure this mayhem without too much disruption and can in fact be handsomely rewarded.
Late Summer Buying Cycle Arrives Near August 18-September 8, 2008
Watch for new rallies in most all commodities markets after the current profit-taking event. Channelized mini-rallies in gold and silver are completed. Now its time to buy. Our late summer forecast is a completing haircut in most stock shares including precious metals. The only action to prevent selling is our stunningly time-worthy Plunge Protection Team who had multiple recent failures propping shares. Will they win during the summer-fall push-‘em-up event? We think with all the other market dangers they will prop their little hearts out and not permit the Dow and S&P 500 to get out of control. 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 the trend and hang onto your core holdings of preferred shares, cash, and coins. Physical gold should never be sold or, traded but rather accumulated steadily on a monthly savings plan and squirreled away. Big traders are always ready to buy on 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. -Traderrog

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