<font color=red>GOLDEN DROPPINGS FROM THE DOGHOUSE</font>
"a train wreck approaches with unsustainable directions
real estate prices continue upward
BUT
layoffs mount, income creeps up for those working, barely keeping pace
real estate prices continue upward
BUT
most every other asset price associated with debt is crumbling, many outright killed to zero
real estate prices continue upward
BUT
supporting financing arms are bending all the rules, struggling to maintain the charade
I conclude a train wreck is coming soon
Real Estate has been a HARD ASSET IMPOSTOR
it has been regarded as a safehaven among asset classes
it is regarded as the supreme hard asset
that is largely true, backed by history
but it is an impostor, since so much debt supports it
when mortgages downpaymts are dropping, the property price is more highly leveraged by debt, rendering claims of being a hard asset as LAUGHABLE
the other train wreck is the Dow/S&P itself
earnings management continues, spin control
making the analyst estimates by layoffs and one-time charge excision
expected S&P earnings are now 60-70% lower than previously set
bigname stocks see the same trickle down effect
the economy is slowing, not responding to lower rates
then we you misinformation foisted upon the illiterate masses on economic policy
IN A DEBT LIQUIDATION ENVIRONMENT, LOWER RATES SLOW THE ECONOMY DOWN FURTHER, RATHER THAN STIMULATE IT
interest income is twice interest payments
bank lending profit margins widen somewhat, but their total lending is severely lower than past years, even as some of their major clients are collapsing
available creditworthy customers have become far fewer
strong companies see no need for borrowing to finance expansion
this is precisely how the Liquidity Trap works
lower rates beget slower economic activity when debt implodes
the only way out is heavy heavy MONETIZATION of debt
basically "helicopter drops" upon the households and companies
essentially giving the people and firms money to spend
they will at first use the money to pay down debt
but eventually they will spend more and kickstart the economy
the price of Monetization is a debased currency
I see this as the only solution
but it will pop the dollar and stock bubble in the nearterm
a train wreck is coming"
AND:
"at least 80-90% of all government economic policy achieves the opposite of the intended effect... as I age in this strange world, I have gradually come to conclude that government is counter-productive... thus my recent stance as a Libertarian
some examples:
- Democrats routinely raise tax rates, only to find lower total tax revenue !!!
- Bush raised trade tariffs in June, only to find a fast selloff of the USDollar, followed by higher steel prices
- Congress thwarts a wide tax refund to stimulate the economy, it is watered down and passed, only to produce such little stimulus that the economy slides toward recession
- Clinton orders the dismantling of our intelligence apparatus in the Middle East, and we get a WTC attack, noting we have not a single Arabic speaking agent to deploy in the region
- S&L bailouts in 1981 only encouraged reckless banking practices to continue
- all attempts to toughen SEC compliance thwarted by Congress, with scandals and failure to follow, such as WorldCom's amateurish easily identified accounting fraud
- all attempts to regulate derivative casinos thwarted by Congress and the President, with LTCM failure and more coming soon
- all attempts to provide income tax reform have led to 3-fold increases in complexity, and a broader income tax prep accounting industry
- govt budgets must be spent, even if stupidly, in order to have them renewed for the following year at similar levels
- OPEC quadrupling of oil prices led to establishment of a new Cabinet for Energy, with no clear advancement of nextgen fuelcells, only a few years of subsidized natural renewable programs, all canceled later, while the national energy policy can now be summed up as "SUV"
- WTC attack led to establishing a new Cabinet for Homeland Security, with no improvement to security, only larger burokracy and cost
- a 1982 Packard Commission concluded with 20 suggestions for streamlining and reducing costs for Defense Spending, but not one single item was implemented
- in the early 1980s an AirForce WarGames event took place between a group of small F-5 versus a group of larger F-15 fighter aircraft, with the F-5 winning every match, but all subsequent orders were for the larger F-15, then F-16, with larger payload cited as the reason
- gold sales subsidized the USTBonds and the USDollar all thru the 1990's, only to produce an historic Stock Bust in 2000, and a likely endless recession, or worse, a depression
I conclude that govt attracts the dumbest and slowest, as well as those seeking fame and opportunity for corrupt gain
our presidents are elected after passing backroom dealing, with final votes based more on good looks and speaking ability, as well as photogenic nature on TV
economic policy is totally undermined by politics and illiteracy
- PPTeam and NYSE Curbs are two more examples, which will each make the bear longer and deeper
I once sent an email last spring to CNBC "Power Lunch" and told them.....
"you guys dont understand CAPITULATION or END OF BEAR MARKET, never did, never will
both of these events will have occurred 4-6 months after CNBC is off the air"
how is that for wisdom???
yes, it is a bad day for golds, and a bad hair day in the Northeast
if only I had some hair at all
but I digress
this country has earned an endless recession, a debt collapse, and possibly a depressed
heck, I have been depressed for two years
why shouldnt the economy get depressed in sympathy???"
AND:
"short end of Treasury yield curve is now inverted
FedFund spread has now turned negative
refers to FedFunds vs 2-yr TBill
it is negative now, indicating a market urging more Fed rate cuts
they refuse, but why?
could it be for USdollar support?
horrible imbalances are now pulling and tugging Treasurys
in my adult life, I have never seen such historically obscene and enormous imbalances, distortions, and calamitous controls at work simultaneously
if the inversion process continues, then we will have outright INVERTED YIELD CURVE, which forecasts a recession
this is what I expect in the next few months
the USA has earned a Greater Depression
from irresponsible economic management and banking policy
from arrogant manipulation and finacial hegemony
we cheated GOLD and now it is time for THE REVENGE OF GOLD
zealllc.com;
AND:
"Gold and the Impending Financial Storm, by Farfel
We are headed into the mother of all stagflations, a stagflation I predicted as early as 1996, but one that was "deferred" as a consequence of the Clintonites' covert rigging of various markets, most notably the precious metals and currency markets via the precious metals carry trades and currency carry trades.
It is patently impossible that we are headed for a pure deflationary spiral simply because there are too many infrastructural deficits (e.g., impending national medical care crisis, which will send medical costs soaring; impending insurance industry crisis, a consequence of September 11, plus the insurance industry's financial devastation as a consequence of failing equity investments; impending utilities crisis, a consequence of the Enron failure and the resultant negative multiplier effects, etc.), not to mention the obvious fast developing commodities deficits (e.g., platinum, palladium, silver, natural gas, etc.).
.................
In concise terms, the PM stocks will become valued entire upon liquidity inflows and will cease to have any relation to fundamental valuations. The P/E's of precious metals stocks will simply explode, just as occurred with Internet stocks.
In this new world of soaring PM prices and PM stocks, the old timers (those who believe in fundamental valuation vs. liquidity preference valuation) will be the first ones to exit and they will miss the amazing rocket launch. The old timers will simply not believe their eyes, just as the old timers failed to comprehend the verticality of Internet stocks and the role that liquidity preference played in those astronomical valuations.
.................
In conclusion, let me state that I am not a pure goldbug since I do not feel a return to a gold/silver standard will solve all economic ills of the world. The gold/silver standard failed in the past, it will fail again.
However, in the perfect financial storm fast approaching, I do believe that gold and silver will prove to be the prime flight to safety sectors simply because, over thousands of years, during the currency crisis of any leading economic nation, the precious metals have become favored targets of liquidity preference.
The precious metals will serve as a bridge toward the reconstruction of the global economic system. During the perfect storm, PM owners will be protected, and in a relative sense, they will prosper too. The key dilemma facing PM owners in the future will be to recognize the moment at which the perfect storm ends, economic stabilization returns, and the time arises to shift from PM's into the currency and financial instruments of choice.
full article:
gold-eagle.com;
AND:
"BLUEPRINT GENERAL PLAN FOR END GAME ON GOLD (2006)
the keys will be reading properly the Treasury yield curve
surely an edumacational process for me also
an inverted yield curve shows longer maturity with lower rates than shorter maturity, indicating future money is worth more than current money
thus inverted, signaling RECESSION
a sharply sloping yield curve shows long yields much higher than short yields, indicating future money is worth less than current money
thus long maturities must reward with an offset for that inflation evident
a gently sloping yield curve shows normalcy, with neither the threat of a recession nor a ravaging inflation... the usual contango with future money worth only a little less than current money, what we regard as normalcy (since debasement began in the 1950's)
I think the yield curve signature for PANICKY RECESSION BORDERING ON DEPRESSION BASED ON BANK FAILURE shows itself as a steep inversion, with long yields staying low while the short yield fights the losing embattled USdollar currency war
(Mike, your input here is seriously desired)
during the panic, the long bond yield will stay low because of the widespread deflation, and from protection from any immediate issues with currency and hotmoney "bond currency"... I constantly refer to how the US$ is backed by debt... well, as hotmoney flies around and out of the country, 3-month TBills will be the interchangeable currency utilized as dollar proxies... our money is really debt, as will be quickly and dangerously witnessed... short yields will rise as the dollar is sold off furiously
I expect the real confusion to be the rising of short yields while long yields remain subdued... bank failures will occur when the yield curve inversion begins, and they will worsen when the inversion becomes pronounced... as I wrote yesterday, bigbanks are now "net short on the yield spread"... they will get their nuts cut off and their legs cut off when inversion takes hold in force... DERIVATIVE EVENT ACCIDENT DESTRUCTION HAPPENS IN THIS STAGE... the entire world will simultaneously pursue GOLD then!!!
then, after the storm hits, after our interest rates rise considerably to meet the panic in dollar selling, the US system will be stabilized at higher rates than other industrialized nations, and the storm will pass... but not without a horrible recession, huge loss of jobs, numerous bankruptcies, rioting on the street, bread lines, calls for overthrow of govt, lynch mobs seeking Alan Greenspam (who has left the country seeking asylum in Botswana), and possibly some wider war ensuing
finally, the long yield will rise to reflect greater reflation inflationary pressures, while the short yield will fall to reflect the end of the panicky foreign selling... thus the yield curve will slowly transition from steep inversion to flattening, then gently upsloping, and lastly steeper upsloping
you definitely want to own GOLD during this next-to-final phase where inflation is crushing deflation, where the yield curve is moving to an upsloping shape... GOLD WILL SOAR ON A BLOWOFF TOP THEN !!!
the time to exit GOLD might be after the yield curve changes from flat to upsloping, but not during that transition
when inflation is expected... inflation will then be engineered successfully with all the inherent govt-forfeited power of the Federal Reserve, we will see price inflation just like the Weimar Republic... only when inflation has won will the time be right to exit GOLD
because then we will have the USGovt restraining inflation with a final rise in shorterm interest rates... THEY WILL NOT ATTEMPT TO RESTRAIN INFLATION UNTIL THEY ARE CERTAIN THAT DEFLATION HAS BEEN OVERCOME AND DEFEATED !!!
you do NOT want to own GOLD at that time, late in the game
gold miner shares should peak about 3-6 months before it is clear that inflation was won
inflation must win, or else our economy dies
comments welcome, I dont have this all down pat
but this outline is roughly a blueprint on panic, depression, action, reflation, inflation, and final subduing with control"
AND:
"real estate will hit a sudden brick wall
rates will shock the housing sector very soon
I seriously doubt we will see RichRussell's expected 3.0%
a combination of three things will kill real estate pronto
1. jobs are fast slipping away from the adult public, as corporations are running out of time and ideas and alternatives for shoring up profitability... their only outlet soon will be layoffs, since economic recovery is now out of the question sadly
2. rates will not come down with lower TENS yield, and will rise with higher TENS yield due soon... a huge wide crack hit the TENS in the last two weeks, with yields rising from 3.6% to 4.1%... that popping sound is the broken bubble in bonds
3. MortgBacked bonds are about to get creamed, as default rates are fast rising, word is getting out, the games of POWER mortgages are known as a gimmick... as layoffs mount further, delinquency and default will shatter this bubble quickly
we are just about here with the last bubbles getting flattened
huge supply of new homes and existing homes will flood the market
gonna be tragic for homebuilders
gonna be horrible for layoff victims who recently bought with zero downpaymt
gonna be tough on anyone who bought after June 2001
this will feed upon itself viciously
everything about the dollar-based vicious cycle will be utterly vicious
as RE prices come down, spending reduces, jobs are shed, incomes drop, defaults rise, MortBack securities fall, rates rise, RE prices come down further
and meanwhile, the dollar will come down and break support at 104
then Trez yields rise, pushing mortgage rates higher still
the center of the upcoming storm will be the dollar and bonds
when either Trez bonds or MortgBackeds falter, it is all over" |
