May 28 2009 4:09PM
Welcome To The New Banana Republic Of The United States of America and Black Markets.
We would not, under any circumstances, believe our government would make decisions flying in the face of sacred United States contract law. What they have done to auto company bondholders is to favor unions for political votes forcing bondholders into a lower, non-preferred payment order. This says corporate contracts in the United States are now meaningless.Auto union people were moved to the head of the bankruptcy line while bondholders with a preferred first lien position by CONTRACT LAW, are now forced to the end of the line.
If your government will do this to auto bondholders, what will they do to the Sheeple?
News this morning told of GM bondholders finally reaching a settlement providing $.17 on the dollar in two parts as GM shares trading was halted. Further news stated GM shareholders are receiving 1% of the deal. Watch for a following clarification as to what all this might mean.
In Our View It’s All Just Grave Dancing
We expect Chrysler for sure and GM being a strong maybe, to enter their final resting places in the automobile manufacturing graveyard. For these companies to survive, they have to build and sell cars. We project years of falling vehicle sales with more lean years afterward. We think they have zero chance to continue in business in the longer view. Ford has a long shot chance to survive IF they can downsize the company another 35-50%. We would suggest their chances are one in three to get through it all and expect their bankruptcy as well. If Ford makes it, Chapter 11 comes first.
I just saw a report that FDR taxes in the 1930’s were temporarily as high as 80-90%. I have not confirmed this but pass it along for what it’s worth. Destruction of wealth by the Obama administration is moving breathtakingly faster in escalation mode reinforcing Marc Faber’s prediction of certain hyperinflation.
Should the Federal Reserve stop their reliquification-reflation program, the whole system could cave-in overnight. So far, they’ve tossed roughly $2 Trillion of taxpayer cash at all these problems but Bill Gross at Pimco says they must inject a total of $6 Trillion to begin to cover the messes creating a recovery market reaction.
We would expect a world-wide systemic crack-up at around $4 Trillion as key components of the global credit and bond markets in Europe, Asia and the U.S. will simply not be able to take it. Our expectations for the next 90 days are for convoluted choppy markets with a mild stocks’ selling event in the shorter term.
After Labor Day, this fall, we forecast a false stock market rise followed by most professional traders selling into strength with ferocity. September, 2009 30-year bond futures are trading this morning at 115.12. Next support is 112.50, 110.00, 108.00 and then 106.00. Our longer range forecast is 80.00 with larger potential for something much worse. We told our readers it gets scary when the 30’s sink under 120.00. Well folks we have arrived.
Our new forecast for later September, 2009 through early October would be a 62% crash from the early fall high. This means a selling event of at least 4-6,000 points lower on the Dow Jones.
Numerous Reasons For System Failure
The big U.S. investment banks wrote crooked deals (derivatives) destroying our financial system. Our Federal Reserve (not federal at all but composed of these same crooked bankers) along with the U.S. Treasury have stolen nearly a trillion to replenish the banks’ capital and financial footing.
Those banks were supposed to lend the money to make the economy find support and rally. Most of these funds have been bank-held to meet capital-to-loan ratios. No loans; no help for businesses.
A further expansion of (TARP), The Troubled Asset Relief Program, will be expanded to cover U.S. states’ budgets shortfalls. The worst example of this problem is California. Obama when asked if he would bailout California said, “No.” This means they get bailed out along with several others crying and pleading for help after recklessly spending their individual states into the fiscal ground.
Many of these idiotic state governments have still not made any serious moves to cut spending. They keep expecting the gravy train to continue on forever. It won’t as the tax revenue crashes.
The administrations’ policies cover funding of two current wars in Iraq and Afghanistan with a new expansion into a third in Pakistan. Potentially, additional wars will open with North Korea and increased action relative to the forthcoming Israeli-Iranian nuclear conflict. We not only cannot afford all these war costs, but do not have the men, women and equipment to manage all of this war-mongering simultaneously.
In our view, enemies of the US are determined to pull us into several wars, and drain the US Treasury destroying America and turning its residents into rural serfs and economic slaves. They seem to be getting a good head start.
We suspect the increased aggression from North Korea is a test to see how Obama manages foreign policy. Since he has no foreign policy except to waffle and hide under the covers and wish it would all go away, these conflicts and new international tensions shall escalate. In our view, this is a lot worse than our economic problems.
Our country is at risk floating in an ocean of disasters with no captain at the helm. Neighborhood organization as a vocation is quite different in scale than leading the engagement of international conflicts going potentially nuclear. Mr. Obama giving the visiting U.K. Prime Minister Gordon Brown some plastic gift K-Mart DVD’s was a strong and meaningful signal this kid is way out of his league.
U.S. housing mortgages of several toxic varieties began their final descent in June, 2005 when we predicted the housing crash. At that date lumber futures tipped-over and the handwriting was on the wall. With skidding lumber prices and Mr. Greenspan’s cash giveaway on the table, the only final solution was a housing meltdown. We were correct in our predictions and the worst is yet to come.
Contrary to current Pollyannish opinions, housing cannot see a new base until 2012 at the earliest, in our view. In recent days we were wondering out loud thinking this might be too optimistic. Our latest forecast is for housing to fall another 30% nationwide on the national averages.
Obviously, some false green shoots appear randomly as bottom feeders bargain hunt, but 95% of America is dead housing hay turning rotten and moldy. This summer in some down-trodden urban areas, housing hay catches fire in an escalation of riots and violence. This is not the preferred method of urban renewal.
Builders are currently operating at 25% of normal capacity. Our new forecast says this number sinks to 10% of the formerly 1.7mm new homes per year; building 170,000 homes annually if they are lucky.
Automobile sales for North American cars and trucks sank from 17mm to roughly 9mm. Our new forecast is a further skid to 5mm. This is why Chrysler, GM and probably Ford cannot survive.
National US unemployment is now officially posted between 8% and 10% depending upon the poll- takers. In our view, current national unemployment is 20%. In Michigan, the rate is 24% and will soon be 30% after the auto manufacturer bankruptcies take hold later this year. In the 1930’s, 25% unemployed was the worst number posted and it was probably accurate.
For a Greater Depression low, national US unemployment could hit 35% with Michigan at 40-45% before World War III provides military employment for millions more.
War is the usual path to finally escape the trauma of depression. This was true in the pre-US Civil War depressions of 1840-1843 and in the early 1850’s. Preceding WW I we had the Panic of 1907 and its previous US depression of the early 1890’s. We had a preceding 1930’s depression in 1920-1921. This was followed by the 1930’s depression and then World War II finally taking us out of it.
On the K-Wave cycle timeline, our current depression was to begin in 2000. And, in fact it did with the crash of the Nasdaq but was artificially delayed by Mr. Greenspan’s billions of free cash and low interest rate pump-priming. His market interference helped delay the inevitable and cause worse conditions to last much longer. While there is open debate that 2000 repeats 1930 or, in fact it was delayed ten years to 2010, smart analysts compare the chart overlays of 2000-2010 with the 1930’s and they are scarily identical.
Consumers are busted and broken. Unemployment is rampant and escalating daily. Wages are stagnant to down. Homes, cars and other property are being repossessed. Hundreds of thousands of homeless people are living in cars, tent cities and on the beaches of warmer states. Consumer credit is shot. Families are doubling and tripling up to survive. Some households have only one person with a job feeding several. Consumers have lost most of their buying power. They represented 70% of the economy. There is no engine of growth to produce any economic rebound that we can see.
Welfare caseloads are skyrocketing and some states’ funds are nearly empty. Elderly are eating dog food to afford utility bills. Many will die in this forthcoming hot summer and freezing post-crash winter. Meanwhile governments are not equipped to help as they are disorganized. They all have food and money but no logical organization or distribution means. This suggests millions go hungry while stacks of food reside in warehouses as beltway idiots say things are better and do nothing.
The Sheeple are girding for economic and potentially civil war. Gun and ammunition sales are off-the-charts. Tea parties are growing. The next stage will be street violence confrontations and more civil disobedience. Governmental pushback will only incite more riots and escalate troubles. States are releasing inmates from over-crowded prisons to save money. Crime shall soon go to the moon.
Meanwhile, our president is flying to Las Vegas (where he told others not to visit), to politic and raise funds for the party. He supposes his current Supreme Court nominee will ethnically encourage large Nevada donations to his party. Maybe it will but we also heard news reports of widespread suspicion of this move in the Latin community. More of the voters are catching onto these political games; from both parties. Politics exists to hold power, control the Sheeple and take their money for vote promotion. That is all it is pure and simple. Will we see a new and more voter responsive third party?
In the forthcoming mid-term elections, we would suggest administration powerbrokers get a hard lesson at the 2010 polls followed by something infinitely most harsh on the streets. People vote with their pocketbooks and today and into the longer range future, those wallets are empty. Beware!
This is not a game nor is it a passing bump in the road. This dire situation presents very big trouble with a potential for bank runs, seizure of pension plans to be converted for government usage (theft) and higher taxes. The newly proposed VAT tax could take an additional 25% more of your spendable income. Most will think this is outrageous. We suspect political criminals give it a testing try.
Now is the calm before the storm. This is the eye of the hurricane. This is not a Saturday evening warm gentle rain; this is a systemic fiscal tornado and many will be economically maimed, or destroyed. You cannot imagine how swiftly events could disrupt our system. Picture the arrival of ten simultaneous Katrinas, or even worse with no warning whatsoever. You get the idea.
We are normally, easy-going and not prone to these kinds of discussions. Our view is one of optimism. I am always seeking the brighter side with ideas to protect our homes, families and retirements. However, the quickening deterioration of current events has sincerely frightened me during the past few weeks.
This is not a simple changing of the political guard but perhaps Armageddon. If you think the government is in control and has a handle on these emergencies you are only kidding yourself. They are careening from one disaster to another. More new ones seem to come each day.
Bad news arrived with a rush and its becoming nastier with each passing day. We’ve seen so much scary stuff we are reluctant to report most of it lest we upset the trading teacart. Batten down the family hatches and count on nothing from anyone to help you. Plan for the worst and hope for the best.
Those who mostly drop out of our phony system and take care of themselves should be winners. We heard similar advice from a premier lady analyst on Jay Taylor’s VoiceAmerica radio show last week.
Markets are nearing a peak in precious metals shares that generally follow primary stock indexes. When the current stock market peaking descends into the Sell in May, PM shares normally follow. With each cycle we think gold and silver shares might sell less posting higher lows. This could be decided on the shorter term by how low S&P’s trade. We expect 800 to 850 with 800 being more probable.
Do not get tangled-up in daily noise. Keep studying the larger view and buy precious metals after each profit-taking correction. Headwinds are building into an economic hurricane. Take care of business right now. My dire fall prediction might surprise us and arrive earlier. Time is short.
Personally, I can see unbelievable opportunities to trade that we would never see again for many years. Turn these problems into opportunities. Those on the right side of the trade might get rich. Those on the other side are just victims. Stay Alert. –Traderrog
Editor Trader Tracks Newsletter
The Jay & Rog Blog at webeatthestreet.com
Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information
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