Solari Action Network

[Catherine]

QUESTIONS TO INFORM INVESTMENT STRATEGY
By Catherine Austin Fitts
December 10, 2004

Republished at http://solari.com/campaign/TipsInvestQuestions.htm


After a discussion this afternoon with loved ones, I thought I would write up questions that would be useful for a discussion with investment advisers and brokers about investment strategy given the rising risks related to the general economic picture.

These questions would be useful for anyone managing family retirement savings and other assets. For those who do not have savings or financial assets, these questions are useful in understanding the financial and political implications of recent events.

INTEREST RATE RISK

Alan Greenspan, chairman of the US Federal Reserve warned recently in a meeting in Frankfurt that rate rises "have been advertised for so long in so many places that anyone who has not appropriately hedged his position by now is obviously desirous of losing money".

What are the implications for the fixed income investments in our portfolio, particularly the long term maturities as well as the credits that are dependent on the health of the US mortgage market? What is the implication of higher interest rates to our equity portfolios?

Where will the risks and opportunities be in a rising interest rate environment?

RISK OF FALLING US DOLLAR

The US dollar has fallen in recent months. Given the significant federal deficit and trade deficit and the report of significant corruption in the federal finances (the refusal to comply with laws for audited financials, more than $4 trillion of undocumented adjustments to balance unaudited financials and the truth of 9/11, etc) there is a chance that the US dollar could continue to fall against the Euro and other world currencies.

What can we do to protect our principal and portfolio from the impact of a falling dollar? Should we shift a portion of
our assets into precious metals and European currency denominated high grade fixed income? What are the potential risks and opportunities of a falling US dollar?

MORTGAGE BUBBLE

America has experienced significant growth in consumer debt and mortgage debt. A recent report by Northern Trust
showed a record household deficit of $342 billion. Essentially, households are liquidating their home equity to make ends meet. They can do this only as a result of continued real estate value growth. As this growth slows, as more jobs are shipped abroad and if interest rates rise, the inability of households to carry their debt load could have a ripple impact on the mortgage markets and consumer markets.

Northern Trust Study
http://www.northerntrust.com/library/econ_research/weekly/us/pc102904.pdf

What are the implications of a downturn in the US mortgage markets, whether because of a rise in interest rates or continued household deficits in the face of greater movement of high pay jobs abroad-- or both. In particular, Fannie Mae is under criminal investigation related to accounting irregularities. Should we be invested in Fannie Mae and any of the GSE's in the mortgage markets?

Where will the risks and opportunities be in a slowing mortgage market?

PEAK OIL

America's dependency on fossil fuel has continued to grow while our domestic reserves have peaked. We are in a position of funding very expensive foreign military occupation and wars to ensure the flow of middle eastern and foreign oil. What are the implications of "peak oil" to our investment portfolio -- both risks and opportunities.

9/11 TRUTH

Legislation and appropriations enacted since 9/11 give the federal government far more centralized control of the economy and far greater supra-constitutional powers. This is antithetical to free and liquid markets and respect for individual liberties and property rights. In addition, disturbing information is now coming to light around the events of 9/11. What are the implications to our portfolio and investment strategy?


WHAT IS THE WORST CASE SECENARIO WE NEED TO PREPARE FOR?

Here are selected articles related to some of these trends. In particular, there is a report and then article from Stephen Roach, economist at Morgan Stanley, that describes his concerns about a severe economic scenario. In a worst case scenario such as the one Roach describes, what is the ideal investment strategy? What are the risks and opportunities?

In addition to these articles, it might be useful to recommend that they read Mike Ruppert's "Crossing the Rubicon."

[CEngelbart]

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A T T A C H M E N T S
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(1)
FT.com
Lex: US treasuries
Sunday November 28, 2:55 pm ET

Alan Greenspan hardly minced his words. The chairman of the US Federal Reserve warned recently that rate rises "have been advertised for so long in so many places that anyone who has not appropriately hedged his position by now is obviously desirous of losing money". Has the US Treasury market done enough to factor in the monetary tightening still to come?

Probably not. Perversely, as the Fed has pushed up rates since June, yields on 10-year Treasuries have fallen from 4.58 per cent to 4.24 per cent. The stock market has also rallied and the dollar has weakened. The real effect on the economy has been a loosening of financial conditions.

The behaviour of Treasuries suggests that investors remain relaxed about the dangers of inflation and that economic growth will weaken enough for the Fed to move gingerly in its mission to normalise short-term interest rates. Proof of a strong, self-sustaining recovery does remain patchy.

Globalisation and productivity improvements could help keep a lid on inflation. More importantly, heavy buying from price insensitive Asian central banks has helped keep yields down at historically low levels.

However, Mr Greenspan has made clear his intention to keep raising rates into next year. Markets could be too optimistic in expecting the target Fed funds rate to rise from 2 per cent to about 3 per cent by the middle of next year before pausing or only inching higher at a slow pace. Further signs of inflationary forces, or further strong payroll data, signalling better-than- expected traction in the economy, could be enough to reset expectations. Any signs of a reduction in Asian buying would also send yields up.

Treasuries are clearly not cheap. That does not make them a one-way bet as those who got hurt this year by betting against yields remaining so low will confirm. A catalyst will be required for a significant shift. But the pressure on yields should remain upwards.



http://business.bostonherald.com/businessNews/view.bg?articleid=55356

(2)
Economic `Armageddon' predicted
*By *Brett Arends*/ On State Street
/Tuesday, November 23, 2004/

Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish.

But you should hear what he's saying in private.

Roach met select groups of fund managers downtown last week, including a group at Fidelity.

** His prediction: ****America**** has no better than a 10 percent chance of avoiding economic "armageddon."**

Press were not allowed into the meetings. But the Herald has obtained a copy of Roach's presentation. A stunned source who was at one meeting said, "it struck me how extreme he was - much more, it seemed to me, than in public."

Roach sees a 30 percent chance of a slump soon and a 60 percent chance that "we'll muddle through for a while and delay the eventual armageddon."

The chance we'll get through OK: one in 10. Maybe.

**In a nutshell, Roach's argument is that ****America****'s record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants. **

**The result: ****U.S.**** consumers, who are in debt up to their eyeballs, will get pounded. **

Less a case of "Armageddon," maybe, than of a "Perfect Storm."

** Roach marshalled alarming facts to support his argument.**

**To finance its current account deficit with the rest of the world, he said, ****America**** has to import $2.6 billion in cash. Every working day. **

** That is an amazing 80 percent of the entire world's net savings. **

**Sustainable? Hardly. **

**Meanwhile, he notes that household debt is at record levels. **

** Twenty years ago the total debt of ****U.S.**** households was equal to half the size of the economy. **

** Today the figure is 85 percent. **

** Nearly half of new mortgage borrowing is at flexible interest rates, leaving borrowers much more vulnerable to rate hikes. **

**Americans are already spending a record share of disposable income paying their interest bills. And interest rates haven't even risen much yet. **

You don't have to ask a Wall Street economist to know this, of course. Watch people wielding their credit cards this Christmas.

Roach's analysis isn't entirely new. But recent events give it extra force.

The dollar is hitting fresh lows against currencies from the yen to the euro.

Its parachute failed to open over the weekend, when a meeting of the world's top finance ministers produced no promise of concerted intervention.

It has farther to fall, especially against Asian currencies, analysts agree.

The Fed chairman was drawn to warn on the dollar, and interest rates, on Friday.

**Roach could not be reached for comment yesterday. A source who heard the presentation concluded that a "spectacular wave of bankruptcies" is possible. **

** Smart people downtown agree with much of the analysis. It is undeniable that ****America**** is living in a "debt bubble" of record proportions. **

**But they argue there may be an alternative scenario to Roach's. Greenspan might instead deliberately allow the dollar to slump and inflation to rise, whittling away at the value of today's consumer debts in real terms. **

** Inflation of 7 percent a year halves "real" values in a decade. **

** It may be the only way out of the trap. **

Higher interest rates, or higher inflation: Either way, the biggest losers will be long-term lenders at fixed interest rates.

You wouldn't want to hold 30-year Treasuries, which today yield just 4.83 percent.


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http://www.morganstanley.com/GEFdata/digests/20041115-mon.html#anchor0

(3)

The Armageddon Foil

Stephen Roach (New York)



Spinning a tale of global imbalances does not exactly make me the most popular person in the investment community. In large part, that's because many take great umbrage at the implications global rebalancing have for the US economy. Current-account adjustments, dollar weakness, deficit reduction, and a rebuilding of national saving are widely perceived to be an unusually painful price for America to pay to put itself and the world back on a sounder footing. I have been on the receiving end of that push-back for some time, and that same response was very much in evidence at our just-completed annual investment conference at Lyford Cay.

I'll be the first to admit that we may have been guilty of overkill in making the case for global rebalancing at this year's conference. Not only was it the focus of my remarks but it was very much on the mind of two outside speakers — Pete Peterson, Chairman of Blackstone and author of the best-selling book, Running on Empty, and Jeffrey Sachs, Professor at Columbia University and one of globalization's most provocative advocates. Peterson focused on the worrisome juxtaposition of America's profound saving shortfall and some $45 to $74 trillion of unfunded liabilities — especially Medicare and Social Security. Sachs spoke of a deficit-constrained America that was likely to have an increasingly difficult time of maintaining its leadership role in the global economy.

This is not the message a group of inherently bullish investors wants to hear. In the discussion that followed, the focus was on what it would take for America to change its seemingly reckless ways. Peterson shrugged and admitted, "It will probably take a crisis."

That's when the light bulb went on for most of the assembled investors. Crises are, of course, very rare events — outcomes that may be worthy of concern but not worthy of guiding baseline investment decisions. Even if you buy into the Armageddon scenario — and former Fed Chairman Paul Volcker is on record attaching a 75% probability to a dollar crisis at some point in the next five years — timing is next to impossible to predict. Consequently, as soon as investors are able to associate global rebalancing with a low-probability crisis scenario, they inevitably breathe a collective sign of relief and get back to the basics of asset allocation. I've seen this response repeatedly in my travels around the world in the past year, and I saw it again this year at Lyford Cay.

There are, in fact, three possible endgames that can spin out of the global rebalancing framework: For starters, I could be dead wrong in worrying about global imbalances. After all, many believe that a "new symbiosis" has emerged between American consumers and Asian producers and financiers. All it takes is the vision of an expanded dollar bloc, and imbalances quickly vanish into thin air. The crisis is at the other end of the spectrum — probably triggered by a foreign buyer's strike of US Treasuries that would then spark a dollar crash and a spike in US interest rates. But there is a third alternative — the in-between outcome of a measured venting of global imbalances that need not be associated with a wrenching crisis. In my view, the measured venting outcome is the most likely of the three possibilities. That would entail a managed but sustained decline in the dollar, a gradual increase in real US interest rates, a moderation of growth in interest-rate sensitive components of US domestic demand, and a related rebuilding of private saving. It would also require a regeneration of domestic demand elsewhere in the world — gradually transforming Asia and Europe from savers to spenders.

In my view, the broad consensus of investors is guilty of a dangerous compartmentalization — call it the Armageddon foil. By presuming that global rebalancing boils down to nothing more than an end-of-the-world scenario, investors have implicitly adopted heroic assumptions that have all but defanged the very serious threat of unprecedented global imbalances. Several such presumptions come to mind: First would be the belief that a shortfall of US domestic saving doesn't matter; the corollary of this view is that US budget and current-account deficits don't matter. Second, non-US saving is being taken for granted — especially the inevitable emergence of consumers in Asia and Europe.

Third, there is the presumption that the economics of trade liberalization outweigh the politics of worker angst and trade frictions. Fourth, Asian financing of US imbalances is being taken for granted — as is the lack of currency diversification of foreign-exchange portfolios of Asian central banks, as well as the related perils of a major fiscal hit to Asian governments in the event of a sharp depreciation of the dollar. Fifth, there is the presumption that America remains on top and that the world can continue to enjoy solid support from saving-short, overly-indebted US consumers.

The Armageddon foil — focusing on but ultimately dismissing the low-probability crisis alternative — effectively sweeps all of the above concerns under the proverbial rug. Most investors argue that the benign condition of the US bond market validates this attitude. After all, goes the argument, with yields on 10-year Treasuries holding in the low 4% range, financial markets are effectively saying that imbalances don't matter. That's a very risky interpretation, in my view. The Treasury market is being supported by many factors — low inflation, measured monetary tightening by the Fed, equity-market risks associated with peaking profit margins, and, of course, buying by Asian central banks. Meanwhile the dollar is slipping again after a nine-month hiatus — a classic early warning sign that financial markets could well be starting to take global rebalancing imperatives far more seriously than the bond market seems to imply.

My own view is that the odds are now shifting in favor of the measured-venting strain of global rebalancing — a more optimistic stance than I have previously held. Three factors recently have come into play that have encouraged me — oil, China, and the dollar. With oil prices down about 15% over the past two-and-a-half weeks, the likelihood of a full-blown energy shock has receded a bit. I have long maintained that the $50 threshold is a very dangerous price point for a vulnerable global economy. So far, that threshold was breached for only about five weeks. I have no idea what lies ahead for oil prices, but if they hold at or below present levels, then any disruption to global demand will be limited. As for China, my latest visit left me much more encouraged than before I arrived (see my 8 November dispatch, "Rethinking the China Slowdown"). The possibility of a boom-bust endgame for an overheated Chinese economy was a worrisome wildcard for a world that is now being heavily influenced by the "China factor." To the extent that the Chinese downside now seems limited, I have tempered my concerns in that regard.

The dollar's recent decline is equally encouraging. Despite being characterized as "brutal" by ECB President Trichet, I believe the renewed depreciation of the US currency is a very welcome development for an unbalanced world. In real terms, the broadest measure of the dollar has basically only retraced the run-up that occurred in the first nine months of this year — leaving the index about 15% below its February 2002 peak. For a US economy with a current account deficit of 5.7% and rising, this adjustment is modest, at best. In my view, there is at least another 10–15% to go on the downside. The trick will be for the world to manage the coming currency realignment in a fashion that is fair and equitable to all countries and regions on the other side of that trade.

What this means, of course, is that Asia now has to give and accept its role in accommodating the dollar's adjustment. I have made two treks to Asia in the past six weeks, and my sense is that Asian officials are now increasingly resigned to this responsibility. Japan and China are, of course, the linchpins to pan-Asian currency adjustments. While the latest Japanese GDP statistics were surprisingly soft, officials in Japan are nearly unanimous in believing that the Japanese economy is now strong enough to withstand the pressures of yen appreciation. In China, the near-term verdict is more guarded, but I get the sense in Beijing that the move to a more flexible foreign-exchange mechanism — either widening the bands on the existing dollar peg and/or shifting to a peg against a basket of currencies — is now likely to come sooner rather than later. I also got the impression from my travels elsewhere in Asia that diversification of foreign-exchange reserves is becoming an increasingly important objective of regional policy makers. Add to that current-account and dollar-related concerns expresses by senior Federal Reserve officials from the United States, and there is good reason to believe that the world has basically come together in attempting to manage the dollar lower.

The weak-dollar bet was very much a part of the consensus verdict at Lyford Cay this year. Of course, for those who worry about the pitfalls of consensus forecasts, the fabled "curse of Lyford Cay" is good reason for caution in assessing currency risk. But, consistent with the Armageddon foil noted above, few expected big moves — for example, a euro that might go past 1.40 against the dollar or a yen that would strengthen through 95. Yet one of the savviest foreign exchange traders of the lot — also a dollar bear — didn't seem concerned. The dollar's renewed slide had only just begun, he noted, and there was little leverage to the trading positions that normally drive major moves in currencies.

In the end, a significant currency realignment is central to global rebalancing. It is the functional equivalent of a shift in the world's relative price structure. For a lopsided, US-centric global economy, a weaker dollar is the most important relative price shift that needs to occur. While I am encouraged that such a shift now appears to be under way, there is still a long way to go in defusing the tensions of a severely unbalanced global economy.



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http://www.morganstanley.com/GEFdata/digests/20041203-fri.html

Dec 03, 2004

Bubble Day

Stephen Roach (New York)

**December 1, 2004**** could well go down in history as** **yet another important milestone for ****America****’s bubble-prone economy**. No, I am not referring to the 162-point surge in the Dow Jones Industrial average that occurred on that day. Instead, my focus is on two widely overlooked statistical reports put out by US government statisticians -- **the latest tallies on home prices and personal income**. Collectively, these reports **paint a worrisome picture of an asset economy that has now truly gone to excess**. **As was the case in early 2000 when Nasdaq was lurching toward 5000, denial is deep over the potential downside of yet another post-bubble shakeout. That’s what worries me the most.**

The just-released report on US house prices for the third quarter of 2004 was a shocker -- an 18.5% annualized surge from the second quarter and a 13.0% increase from year-earlier levels, according to the tabulation of the Office of Federal Housing Enterprise Oversight (OFHEO). That represents a stunning acceleration from the 9.8% Y-o-Y increase of the second quarter and pushes nationwide house price appreciation to a 25-year high. It’s an even larger rise in real, or inflation-adjusted, terms. The surge over the past year is now running nearly five times the 2.7% annualized increase of the non-housing components of the CPI.

Housing analysts and central bankers often chide those of us who draw macro conclusions from a highly fragmented US real estate market. In the housing business, where “location” matters, concerns over nationwide trends are often dismissed out of hand. In a recent speech, Federal Reserve Chairman Alan Greenspan noted while discussing housing prices, “Overall while local economies may experience significant speculative price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity” (see his October 19, 2004 speech, /The Mortgage Market and Consumer Debt/, at America’s Community Bankers Annual Convention, Washington DC). It’s a nice theory, but the risk is that it may now be wrong. **According to the latest OFHEO tally, house-price inflation over the past year has run at double-digit rates in 25 out of 50 states plus the *******District of Columbia****. In six states -- Nevada, Hawaii, California, Rhode Island, Maryland, and Florida --- home prices increased by 20%, or more, over the past year. Housing is an asset class that is just as prone to excess as are stocks, bonds, currencies, or commodities. If it feels like a bubble, acts like a bubble, and looks like a bubble, it probably is one.***

***Meanwhile, also on December 1, the Bureau of Economic Analysis of the ****US**** Department of Commerce released its regular monthly update on personal income.** The stock market loved the October numbers -- stronger-than expected gains in both income (+0.6%) and consumption (+0.7%) that were perceived as signs of ongoing resilience of the indefatigable American consumer. **I found the report appalling. What caught my eye was a further reduction in the already sharply depressed personal saving rate -- down to 0.2% in October from 0.3% in September.** The September numbers were widely thought to have been distorted by temporary hurricane-related losses to personal income. Most expected personal saving would rebound from this artificially-depressed reading. There was no such bounce in October. The consumer saving rate has now basically gone to zero. *

*Nor is the profligate American consumer the only source of the US saving shortfall. **A day earlier -- November 30, to be precise -- the government also released its third-quarter report on national saving. This broad measure of saving -- the combined saving of households, businesses, and the government sector -- is most meaningful when expressed on a “net” basis by taking out the depreciation that goes toward replacement of worn-out, or obsolete, capacity. The resulting concept of net national saving measures the saving left over to fund the net growth in productive capacity -- the sustenance of any economy’s long-term productivity and growth potential. On this basis, America’s net national saving rate fell to just 1.2% in the third quarter of 2004 -- down 0.9 percentage point from the already depressed second quarter reading and nearly back to the record low of 0.4% recorded in the first quarter of 2003.** The rest of the story is all too familiar: Lacking in domestic saving, the US must then import surplus saving from abroad in order to grow -- and to run massive current-account and trade deficits to attract that capital. In other words, a further sharp reduction in national saving is not exactly a desirable outcome for an already unbalanced US economy. *

***The key to this puzzle is to recognize that the housing bubble and the saving shortfall go hand in hand. The “asset economy” is a conceptual framework that brings these two seemingly disparate trends together.** **As seen through this lens, “rational” consumers take their income-based saving rates to zero only if asset-based saving provides an offset. As long as asset markets keep rising, that makes perfect sense. However, when asset markets correct, this decision can backfire. That was the case when the equity bubble popped in 2000 and could well be the case following the bursting of today’s rapidly expanding US housing bubble. **** That’s why the latest trends in house prices and saving are so disturbing. In my view, they underscore the distinct possibility that ****America****’s asset economy is in the midst of yet another bubble-induced blow-off. ***

*Not surprisingly, these circumstances put the Fed in an especially difficult position. That’s because the US monetary authority used up most of its basis points in order to contain the damage from the equity bubble. Unfortunately, in doing so, the Fed kept interest rates at extraordinarily low levels for far too long -- setting the stage for the housing bubble that was to follow. The risk all along is that the Fed had only a one-bubble damage containment strategy -- leaving itself with little ammunition to deploy in the event of another serious problem. While the US central bank has tightened to the tune of 100 basis points over the past four months, a federal funds rate of 2% hardly offers much leeway for easing should conditions take a turn for the worse. Yet there’s an added complication to all this: The housing bubble-induced saving shortfall has pushed America’s current account deficit into uncharted territory -- raising the risks of a sharp correction in the dollar and a related back-up in longer-term interest rates. The last thing America’s housing bubble needs is an interest rate shock. That is a classic recipe for a sharp decline in US housing prices -- an outcome that might spell curtains for an overly-indebted American consumer. *

*Ironically, there have been a number of positive developments that have fallen into place recently -- an orderly depreciation in the dollar, sharply declining oil prices, and grounds for encouragement on the prospects for a soft landing in China. But **America****’s imbalances have taken a turn for the worse, and the housing bubble could well be the final straw. Income-short consumers are playing this bubble for all it’s worth -- enjoying the psychological benefits of the so-called wealth effect and utilizing the technology of refinancing and second mortgages to extract purchasing power from this over-valued asset.** **Unfortunately, these trends have led to the virtual elimination of US saving **-- triggering a classic current-account-adjustment dynamic with attendant risks to the dollar and interest rates. **That makes the downside of this bubble potentially far worse than that of the equity bubble.** That would be an especially worrisome development for the US economy, since household real estate holdings of some $14 trillion currently are almost double the aggregate size of equity portfolios. *

***While it has only been four and a half years since the bursting of the equity bubble, memories have already dimmed of that extraordinary speculative excess. Yet in retrospect, that may have only been the warm-up for the main event. Bubbles have a way of feeding on each other -- ultimately compounding the problem and leading to an even more treacherous shakeout.** That’s certainly the lesson from Japan and could well be the case in the United States. America’s housing bubble is now in the danger zone. So is its saving rate, current account deficit, and overhang of consumer indebtedness. It’s been a US-centric world for so long, that everyone takes it for granted. Yet global rebalancing poses challenges for all major countries in the world. Saving-short America will not be spared -- especially if it must now come to grips with the biggest asset bubble of them all.
*


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Location: Hickory Valley, Tennessee (USA)
Post http://www.solariactionnetwork.com/phpBB2/viewtopic.php?p=4301#4301
Posted: Sun Nov 21, 2004 9:25 pm
Post subject: Jim Sinclair on a Falling Dollar
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TO SOLARI ACTION NETWORK


http://www.jsmineset.com

Greenspan Ambushes the U.S. Dollar

by Jim Sinclair

Is the Chairman spending too much time in Basel? It almost seems that he’s falling back to his Ayn Rand roots. Maybe Alan is going to change his name to "Our Crowd." Maybe Alan is part of "Our Crowd?" Maybe I am related to Alan?

His ambush of the dollar has six points, all uttered by his own lips.

1. He said, "Anyone who has not appropriately hedged his position by now is obviously desirous of losing money." That can only mean that the U.S. dollar is going much lower, in my opinion.
2
. He warned that the state of the U.S. Current Deficit was "increasingly less tenable." He warned of fresh falls in the U.S. dollar.

3. He said that foreign investors would eventually reach the limit of their desire to finance U.S. deficits.

4. He said that the U.S. dollar was going to bear much of the brunt of adjusting a Current Account deficit, now 5% of GDP. In English, this means the dollar is going a lot lower, in my opinion.

5. He said the falling dollar would cause increasing interest rates.

6. He played down the effectiveness of central bank interventions in currencies in order to attempt to change the trends.

How long have you been reading these six points here? Since 2000 is the answer. Now why in the world did the St. Louis Fed publish an article about 15 months ago, saying that the growth of the U.S. Current Account was basically meaningless. Why did the U.S. Secretary of the Treasury embarrass himself Friday by saying the U.S. Current Account Deficit had to be a shared problem of other nations, at the same time that Alan was dropping a smart bomb on the U.S. dollar?

.8197 of USDX, which is the 1995 low, might give some support, but as a short-cover place only. But after a small rally in the normal pull-back toward the last neckline break, all heck will break loose in the dollar, and all the King's men and ladies will not be able to put Humpty Dumpty Dollar together again..

Weekend Tidbits from the Mad Mad Financial World:

A. As the U.S. dollar falls, major credit agencies are considering upgrading guess what nation's debt? You got it, Russia. Standard & Poors said late last week that it might upgrade Russia's credit rating to investment grade, which Fitch has already done. This is 1982 in reverse, when the mechanism of the USSR's Trade, Federal Budget and Current Account Deficits caused communism to fall. Is capitalism about to fall? Maybe it has, and we don't yet know it. Is this laying the groundwork for Authoritarian Free Enterprise, supported by military power, in a quasi-democracy?

B. France's Central Bank, the financial genius of the world, announces its intention to sell 600 tons of gold over the next five years. That is $1.72 billion per year, at today's price. When will central banks ever learn that selling their gold into a bull market for gold only makes it more bullish, because it allows major interests to buy large amounts of gold at singular prices? Think about these guys selling a reserve that is appreciating, and holding a reserve that is depreciating. Thank God those central bankers do not have to trade for a living, as I have done now for 46 years.

C. The U.S. raises its debt level by $800 billion. That sure makes $1.72 billion worth of gold for sale look silly. Google's cap-value makes that amount of gold for sale look silly.

D. How about the Pension Benefit Guarantee Corporation, a quasi-government entity that is going to blow sky-high sooner than the Wall Street financial wizards, who predicted its demise in 2021, think. My bet is 2008 to 2010. Right now this certain-to-blow-up entity needs $78 billion dollars injected into its treasury yesterday. Where will it come from? The U.S. Treasury of course. Now compare this cash call by the PBGC to France's $1.72 billion in gold for sale. France, as always in such matters, approaches the form of a joke.

The Fearsome Foursome from the New Orleans "OLD" Gold Love-In will have to start back-peddling at 200 mph, or the egg on their face is going to shrink their business. The amazing madness of this bull gold market where the so-called bright lights, almost to a person, have, from $248, spent all their time looking for tops. Well, there is a top, but it may be about $1250 higher. Right now $480 is calling, and $518 to $529 is possible. That would be fine for now.



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Location: Hickory Valley, Tennessee (USA)
Post http://www.solariactionnetwork.com/phpBB2/viewtopic.php?p=4341#4341
Posted: Fri Nov 26, 2004 8:09 am
Post subject: From Doug Noland's post at Prudent Bear
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November 17 – UPI: “As the Muslim world yearns for the days of the caliphate, the Islamic Mint is bringing back a piece of it by issuing the Islamic Gold Dinar. The gold coins are available in the United Arab Emirates and the Dubai Islamic Bank. This is the first time in recent history that gold dinars are circulating through established and officially recognized channels. The Islamic Gold Dinar was the currency of the Muslim community from its beginnings up to the abolition of the Ottoman Caliphate in 1924. The coin could well come into rapid use if for no other reason than zakat, the charity giving which is one of the five pillars of Islam, cannot be paid using a promissory note but instead must be paid using gold, silver or certain categories of merchandise. Malaysia's former Prime Minister Mohammed Mahathir pressed for the establishment of an Islamic Trading Bloc with the Gold Dinar as the bloc's common currency. The coin is 4.25 grams of 22 carat gold, following the standard laid down by Caliph Umar Ibn al-Khattab, the prophet Muhammad’s second successor.”