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Hyperventilating Hyperinflation
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“We read over Chopper Ben’s speech from Berlin yesterday evening and conclude the Federal Open Market Committee is more entertaining than the USA’s cartoon network. On the other hand, Janet Yellin, the San Francisco Federal Reserve President, chose to tell the truth in her speech. We found that one alarmingly refreshing.” - Traderrog
Fiat currency chopper pilot Benjamin Bernanke wowed ‘em in Germany with a new economic theory that easily surpasses anything Pinocchio could offer. He said the “Global saving glut” is still helping to keep interest rates low, and they may not rise much in the event that the pool of excess capital dwindles in coming decades.” We think if his mother heard this one she would wash his mouth out with soap and give Benny a good spanking.
If we read the entire news report, it would appear Benny is learning to talk in riddles as his former teacher Sir Alan Greenspan championed for so many years in his remarkably circuitous discussions with Congress. Ben has learned to offer both sides of a statement in one sentence with the omnipresent “On the other hand,” stuck between those two ideas. What a neat path to escape while telling the truth and holding your self harmless.
He didn’t comment (of course) on the current economy or, FOMC’s interest rate policies. Instead we got, “We are again reminded of the need to maintain appropriate humility in forecasting.” For this fabulous cover “your you know what” clause we suggest he should be promoted from Chopper Captain to at least Major or, maybe even Colonel. One or two more of these wowser’s and he’s a genuine fiat General for sure.
It’s Not China’s Savings but a Pile of Valueless Paper Sinking to
Unheard of Depths Faster than You Can Say We’ve Been Tricked
To say that the Trillions in bonds, notes and currency held by China and Japan is “SAVINGS” is beyond even our wild imagination. China has been taking these failing dollars in return for their plastic junk and stuff sold to greedy, non-saving Americans. Asia is getting real tired of this short stick and falling bond sales reflect this. Japan has had a Yen-carry trade enjoying a near zero interest rate for eons to make money for themselves, and prop-up Mr. and Mrs. USA, Asia’s biggest buyer and customer.
The whole deal is a big sham. We keep their Chinese workers employed, bubble-balloon our economy and theirs and con New York Hedgies, LBO’s and Banksters into fueling this monster with additional billions. The New York boys involved with this game aren’t happy with just billions in legitimate sales, they lend and the Chinese borrow even more for huge fees. We can assure you those borrowings shall vanish. All of this paper trash soon goes into the ionosphere never to return or be repaid again. Calling that savings is legendary and beyond bold. Apparently, if something super-preposterous is uttered, the Sheeple are supposed to believe it. This beauty is one for the liar’s history book.
Now Janet Tells the Truth
One of our favorite World Champion Economist’s, whom we revere for his clear thinking and experience is David Rosenberg at Merrill Lynch. Mr. Rosenberg released a two pager analyzing Janet Yellin’s talk and pronounced her speech “a hard-hitting and sober assessment.” Yes!!
David told us, “First, it is worth noting that while she is not a current voting member of the FOMC, she is a highly regarded senior Fed official whose words carry a lot of weight.” We might also add Janet’s opinions have been 100% consistent with overall FOMC voting and attitudes. She has not opposed any of them even once. This tells us when she speaks, that is probably the internal, unspoken consensus within the group and her ideas and opinions are where this bunch goes next. Bottom line says, rate cuts ahead to save the immediate world.
Ms. Yellin said, “The present financial situation has added appreciably to the downside risks to economic activity and some markets have become downright illiquid. (Emphasis editor). She went on to say, “The illiquidity and sharply restricted credit terms in the secondary mortgage market and short-term asset-backed commercial paper market has increased the borrowing costs facing households and firms. And, it is these interest rates that influence spending decisions and aggregate demand.” Trader Tracks says, AMEN.
To this talk, we say you tell ‘em girl. It is totally refreshing to hear the truth being told rather than the usual party line, politically-correct crap. Her final conclusion says, “All together (this is) what we could characterize as a stark picture of increasing downside risks facing the consumer.” Mr. Rosenberg agrees and so do we.
Tricky Part is the Short Term Forecast
Some of the best analysts we know have been saying in the next few weeks we get the big one-a giant smash-crash. In our view, we heartily agree the danger is very high and they could in fact be totally correct. However, we have learned based upon cycles, time and history; the authority manipulators always have one more ace up their sleeve(s). Our forecast is for a Dow drop to 10,700 or 11,700 at worst by the end of October 31, 2007. We then expect a stocks’ recovery in November and the inevitable “Big One” to arrive in the fall of 2009.
There is Only One Way Out-Print the Bucks with Ferocity
In our view they cut rates 25 basis points at the next FOMC meeting and stocks rebound in ecstasy for a few days. After the dust settles, reality is recognized and stocks sell-off hard as the pros use this event to sell into strength and bail-out until November. Subsequent, further rate cuts would also seem inevitable.
Gold has been very strong and the shares of both gold and silver are responding with higher prices. We bailed out of a trade yesterday after recommeding a great, long silver futures move. We nearly called the top perfectly enabling our traders to exit with thousands. Last night, the gold traders took profits and gold returned to unchanged just before the open this morning. Our gold and silver forecasts are unfolding just as we have expected according to our forecasts. Between now and November 15th we expect some of our traders to double their accounts in value. To enjoy this, we must have hard, steady trends and they have arrived in both gold and silver. Silver has been weaker, but some of our favorite silver companies and their shares made nice moves over the past few days.
This is only the beginning. The dollar is trading this morning beneath 80.00, which is a line in the trading sand. If the dollar closes below 79.70, we forecast the next support to be 77.50 followed by something even worse. These dollar prices show us a monumental turning point in the global economy. The largest existing gold shorts with thousands of contracts are getting hammered like never before. They are deep with cash and have substantial staying power. However, we think this time, conditions have gone over the brink and they must somehow return with short-covering buying.
Unprecedented Inflation
Janet Yellin told us the truth. We are now in stagflation. Food, energy, services and others see rapidly rising prices. The remaining stuff, euphemistically called Core Inflation, is sinking. Next, the general economy drops hard while the necessities of life hyperventilate into hyperinflation including Mr. Dollar. These cycle shifts are gradual but evident. Moves from older conditions to newer ones should change steadily throughout the next 30-60 days.
Protect yourself without delay. Buy physical gold and silver along with tradable equities and others. You will not be disappointed but rather much relieved. - Traderrog
Roger Wiegand
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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information.
Contact Claudio Bassi, at Trader Tracks New York City publishing offices for a modestly priced trial subscription 718-457-1426 Monday through Friday, 9:30am to 5pm or, e-mail Claudio at cbassi@miningstocks.com
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