GOLD 0.51% $1,391.7 gold futures

bob chapman the international forecaster

  1. 2,131 Posts.
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    US MAREKETS







    Every time we get a positive statistic, we have to cut it in half to arrive at the truth, and every time we get a negative statistic, we have to double it to get the real picture. So you know that when the New York-based Conference Board's Consumer Confidence Index falls to 75 in February from 87.3 in January, its lowest level since February 2003, and the Bureau of Lying Statistics reports that the PPI, wholesale inflation, rose by 1 percent in January -- more than the "experts" estimated -- on rising oil and food costs, you can just imagine what the real truth might be. Even the official statistics are nothing less than terrifying. Then we hear from Standard & Poor's, which reports that U.S. home prices fell 8.9 percent in the last three months of 2007 from a year earlier, its sharpest drop ever, as two trillion in home equity is vaporized in one quarter. As this news transpires, we of course get back-to-back rallies in the stock markets as the Dow adds over 300 points. We guess that the lies about the bailout of the monoline insurers who will have to be nationalized later on take precedence over the obvious truth that real estate is plummeting while inflation is exploding. Why worry about annualized inflation of 12% that will either cause consumer prices to skyrocket or corporate profits to evaporate? Not a problem, let's buy equities! Traders who get burned in the stock markets at this point deserve every bit of grief they have coming.



    Anyone who is a non-insider and who thinks they can beat the market when it pulls cutesy moves like this is a first class moron.



    This rally was not because of monoline bailouts, which were given as the explanation du jour for another psychotic market rally but because of a manipulated and much weaker yen versus the euro (Tuesday's 160.399 versus Friday's 158.598) and PPT brute force. This was yet another "puff the fluff" extravaganza that gives the cartel over 1,000 Dow points of market-crashing power from its current 12,684.92 to its recent intra-day low of 11,644.81, or 700 Dow points of market-crashing power from its current level to its recent closing low of 11,971.19, both lows having been set on January 22, 2008. Do not think for a moment that the cartel will not reverse the stock market rally to hit gold by causing margin calls in hopes of causing liquidations of precious metals positions. Large specs who get lazy with their protective derivatives (stock index puts and yen calls versus the dollar and euro) will get reamed. And you must always bear in mind that as soon as the Japanese bankers start their write-downs of toxic waste which they have kept well hidden to prevent a stock market catastrophe, the carry trade and stock markets are toast because everyone in the oriental zone will flee to the yen in the form of cash and money markets and to yen-denominated Japanese government bonds, thereby driving the yen to sub-100 levels against the dollar.



    The perpetual IMF gold sale which our Treasury and other Administration officials purportedly support, and which supposedly caused a small sell-off on Monday which could very well have been central bank selling instead in order to make it look like everyone was "shuddering in fear" over the "dreaded" IMF sales, has become little more than a passing fancy and a golden (excuse the pun) opportunity. The various sovereign wealth funds are simply drooling. This is their chance to buy gargantuan chunks of gold without driving the gold price up so they can continue their steady buying later at bargain prices. Adding to this potential demand are the jewelers in India, China, the Orient and the Middle East as well as investors worldwide who are watching their dollar holdings swirl around the financial toilet bowl as the US economy, lead by its decimated and ever-declining real estate market and derivative toxic waste, explodes and goes down in flames while consumer demand tanks, speculation and inflation run rampant, bailouts, stimulus packages, nationalizations and bank runs become commonplace and the FDIC goes bankrupt. It will be like dropping a side of beef into a fish tank full of piranha. As you have already witnessed, the 250 tonnes of gold bullion to be sold by the Swiss National Bank as announced last June has resulted in a 300 dollar per ounce gold rally since that time. If these are the results we get from these cartel-orchestrated extra-Washington Agreement gold sales, then we say: "BRING THEM ON - YEE-HAH!"



    We commented in the last IF about how the dollar rallied against the euro when the Fed cut 1.25% and the ECB held. Apparently, that fanciful fairytale could no longer be maintained after the PPI report put wholesale US inflation at 12% annualized. Or was it $100+ oil? Or was it OPEC threats to cut dollar pegs to stem their own inflation problems? Or could it be the big "R" and the Fed plan to cut to perhaps 2% or lower to save the banksters and the economy? Or could it be the potential blow-up of the EU if they cut and the German housewives go wild over inflation? Or could it be the massive and growing trade deficit and the gargantuan national debt? Or how about the miniscule Treasury bond rates - boy, they must be very, very attractive to foreigners as even official CPI puts them into negative territory, never mind actual inflation of 12% and M3 at 16%? And what if the dollar becomes a carry trade currency like the yen or the Swiss franc when the Fed cuts to below 3% and everyone outside the US decides to borrow the dollar here at miniscule rates and then sell it to buy assets denominated in stronger currencies? No matter what lies the cartel tells and no matter how it manipulates the markets, the fundamentals always win out in the end. This realization has sent the USDX to new lows and gold, silver and the euro to new highs. The USDX has completely broken down to set new all-time lows. The previous intra-day low for the spot USDX was set on 11/27/07 at 74.753, while the closing low was set on 11/26/07 at 74.859. Then on Tuesday, the intra-day low came in at 74.509 and the closing low was 74.763. And today, Wednesday, the USDX has continued to tank much lower and looks like it could go even lower still while gold has already set a new all-time high today of 965.05, silver has gone on an unbelievable rampage to a new 28-year high of 19.47 and the euro has set a new all-time high of 1.5071 dollars per euro. Gold 1,000 and silver 20, here we come! Oh, and did we mention that oil set new all-time records Tuesday with an intra-day high of 101.43 and a 100.88 close? Even the much-abused resource stocks came to life again with the XAU and HUI pressing against their all-time highs! LET'S GET READY TO RUMBLE!!!



    Note how the IMF sales and the mountain of shorts for gold futures on the COMEX are both scheduled for April, the month where the spring rally usually begins its final ascent. Do you think this is a coincidence? This has been planned for quite some time now. And do you know what the cartel is really worried about? One word - EARNINGS! The earning reports this April will be among the ugliest ever reported by Wall Street, as will the CPI and PPI reports. It will be a poster advertisement for stagflation! This will create the perfect atmosphere for a gold rally as everyone flees in stark, raving terror, not to 2% treasuries denominated in the imploding dollar, but to skyrocketing gold, silver, oil and other commodities!




    Sales of existing homes fell 0.4% in January. Mounting foreclosures are adding to a glut of unsold homes that is driving down property values. The median sales price fell 4.6% to $201,100 yoy. The median cost of a single-family home fell 5.1% to $198,700, and condos and co-ops fell 1% to $220,400. Sales fell 3.6% in the Northeast, 2.1% in the West and 0.5% in the South.



    The official recession hasn’t begun yet; debt-strapped Americans are starting to tap into their 401(k) retirement plans. Double-digit increases in hardship withdrawals have doubled in recent months. They are up 17% since December. It looks like home equity has been topped out and credit cards are maxed leading to the last resort, retirement funds. Americans simply refuse to deal with reality.







    The financial and monetary problems are so dire that a cloak has been thrown over everything. The only news that comes out is what has to be released by corporations. The rest will get via leaks. It is incredible the secrecy and the lying. Today that is the hallmark of Washington and Wall Street. They do not want you to know that crisis of credit has permeated not only the US financial markets, but also all world markets. Contagion is rampant.



    The international banking fraternity is in serious trouble and they are still secretive and as arrogant as ever. How long do they think they can ignore monetary inflation and the relentless upward march of gold and silver never mind platinum, palladium and commodities? World money and credit is still expanding at over 14%. The US is 16%, the UK 12.3% and the ECB 12.9%. Who do they think they are fooling? There is no longer any doubt that the financial system is in serious trouble and it is terminal. The dollar is under severe pressure and it will remain so even if the ECB lowers rates. They have a hard time trying to induce the ECB to lower rates, but in the end they will do so and that should knock the euro down to $1.30 to $1.40, but no lower. Then it will only be a short duration. Eurozone M3 is 12.9% and a drop in interest rates should send official inflation to 4%. That will put more upward pressure on gold and silver and only bring transitory help to the dollar. Real inflation in Europe is already over 6%.



    As we said over a year ago, it will take more than $2 trillion to bail out the system and even that won’t work with all the other debt. Once the process starts it cannot be stopped. Those who believe the Fed won’t take this rescue to the end do not understand today’s psycho-politics. Almost half the population knows what the Fed, the banks, corporate America and Wall Street are up too. If they do not try to save the system they are dead meat and they know it. These parasites have to do their best to bail out the system and they know that. In the case of government action there is a good possibility that you see more fiscal bail out packages, subsidies and lower taxes. A piling on of government debt, higher inflation and gold and silver prices and an ever-falling dollar.



    One of the problems not faced previously is that of rising import prices. As other exporter currencies rise the cost of these imported goods rise as well because the dollar is falling. Then there is the matter of wages, which have been rising 3% to 4% in an 11.6% inflationary environment. We believe the cost of goods sold will continue to rise – never mind energy and food as wages stay more or less stuck. That means less and less buying power squeezing the consumer. The lower taxes and subsidies will help but all of these band aids are not a solution. They are just an extension of the current failed system. If you are invested in gold and silver related assets you can offset these losses, because gold and silver have to appreciate.



    Eventually long-term interest rates in the real market will rise. That has begun to happen already. Lenders are demanding better credit risks all but shutting marginal borrowers out of the market. If your FOIC is under 650 you will be very fortunate to get a loan. If you have noticed lending rates are 1% to 2-1/2% higher than they have been for some time. We have pointed this out in the case of mortgages, especially in jumbo loans. We would expect Congress will extend the over $700,000 limit for jumbo loans by Fannie Mae and Freddie Mac. That will slow the slide in prices, but not arrest it. The psychology has been broken. Thus, sales will continue to fall and stagnancy will set it. The increase in real interest rates will continue upward unimpeded making it very difficult for the Treasury to service debt by selling bills, notes and bonds as it is. Are central banks and Gulf oil producers going to invest in this paper of declining value indefinitely? We do not think so. A major side effect could be a derivative collapse. Thus far the 1-1/4% cut in Fed funds has done little to solve the problems. The Fed, Wall Street and American banking have lost the trust and confidence factor of other professionals worldwide and it will take some time to regain that credibility. Our present monetary system will have to be changed and the fist step is the termination of the privately owned Fed. The system no longer has credibility and we see no way it can be resurrected. Several years from now, when deflation has finally set in, there will be demands to change the system and it will be changed. This will follow our hyperinflationary blow off, which must eventually come. The markets recognize this and that is why it won’t be long before gold is over $2,000 an ounce. The intelligent investors, with a grasp of history, have already set their gold and silver positions and continue to buy knowing we have just started the second phase of 3 or 4 phases in what will be the biggest and greatest bull market in history.



    America is being subjected to the biggest fraud in history under corporatist fascism. The crooks are running the Fed, the banks, Wall Street, government and corporate America. These malefactors know once the game ends they are going to jail or will end up at the end of a rope. They are powerful now but they won’t be later. Why do you think there has been no lawsuits to speak of or criminal actions against the daisy chain fraud related to real estate? That involves the Fed, lenders, mortgage lenders, appraisers, sales people and borrowers. Doesn’t it seem strange there are no charges against these crooks?



    That is because they own the system. The recent stimulus package is a good example that wasn’t to help the economy and borrowers. It was to bail out the Fed and the lenders. There you have it. That is what is really going on and it will get lots worse before it gets better.

 
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