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More Of The Same Only Worse For 2009

By Roger Wiegand      Printer Friendly Version
Nov 5 2008 2:08PM

www.webeatthestreet.com

“George Washington is the only president who didn’t  blame the previous administration for his troubles.? -Unknown

Both American presidential candidates preached change in an effort to get your vote. After the dust settles, reality strikes viciously and it’s not very pretty. Our new president, as near as we can determine, is stuck in a mess beyond historic comprehension. We do not discuss religion or politics as both are the third rail in journalism. I cannot afford to electrocute myself in those bear-traps as we have too much work to do helping our traders building a personal pension. It is equally important, in our view, to assist family members and friends to the best our ability.

Instead, it is our mission in life to

  1. Be a realist;
  2. Take what we are given and determine what’s next;
  3. Design an investment-trading plan to contend with our projected outcome;
  4. And, above all no whining.

The “What we get? part is even beyond 1929-1938 and World Wars One and Two, and the Nasdaq crash all rolled into one gargantuan mess.

Please note the following points and consider them very carefully.

Multiple credit bubbles have been manufactured for years. The Green man in his heroic efforts to avoid any financial discomfort for anybody built a global house of financial cards now in the process of falling down. This situation reminds me of the great domino train builders stacking thousands of these little blocks in rows presenting a world’s champion crashing puzzle set. When it’s a game, it’s fun to watch. When it’s for real, as in our current recession skidding towards depression, fear levels scream ever higher.

The most important point to understand is that the outcome is carved in granite. There is no turning back and no amount of fiddling, intervention or financial repair work can stop the nasty ending. Our lives are permanently changed and we must deal with it. Socialism is here and more is on the way.

The United States of America is bankrupt. Kaput ! The interim response from our lustrous Federal Reserve and US Treasury is more money creation at an ever faster pace. They can slow the crash with phony media and market interventions but the result is the same; implosion of international credit and years of misery.

Eventually, most all of our paper including currency, notes, bonds, bills, mortgages, derivatives, insurance, and other credits are blasted into oblivion. There are always exceptions but these would be precious few and nearly impossible to discover.

The larger disasters so far are in the financial and automobile industries. Jobs within those groups have been decimated and we only getting started. Next spring, credit cards and auto loans take the pipe. We see lots of bankruptcy and bike riding for transportation.

Unemployment in Michigan is nearing 20% with an almost indisputable outcome being 25% to 30%. US national unemployment is 16% and rapidly moving into the stratosphere. Of course, official numbers are mere fractions of these amounts. The official unemployment in the Great Depression was 25%. We believe it.

These Paulson bailouts were designed to protect the big banks and bankers-not the public. These folks made the mess and then took more from taxpayers to clean it up and stay in business. Once again, the consumer-taxpayers were the suckers left holding the bag.

This entire effort was a huge criminal scam perpetrated on US citizens and foreign nations. The derivatives fraud is so large it can never be counted and audited. The instigators will get away with piles of cash, without punishment, free to do it all over again.

Do you wonder why Mr. Paulson, when first suggesting the $700 billion bailout plan wanted absolute freedom and discretion to pass out the goodies, while being shielded from any litigation or criminal responsibility? Now you know.

Bailouts were planned to re-liquefy the banks, protect the banking scam from being revealed and forget about new loans purportedly planned for all this money.

Japan’s stock market tanked -80% from 1989 and has never fully recovered. The US is following the same path. Throughout most of November stocks should rally. After Thanksgiving, we are mostly flat to down in mild correction. After Christmas, share buying resumes. However, early January trading sets the new, annual tone.

It’s often said the first ten trading days of January accurately forecast the coming year. We are waiting to see the January shares cycle while watching closely to see if gold and silver shares might diverge.  Are PM shares going to rally as the others sell down in correction? It’s going to happen but when? Soon we’ll know.

The recent pop in our US Dollar index was an eager effort by others to pay down debts, and unwind the Yen carry-trade while needing dollars to do so. This will not last as the dollar appears to be peaking this week. Eventually, it can fall to our forecast of 46.22. We expect this to be quite gradual over many months with more pronounced rallies and selling events sprinkled throughout a longer selling cycle.

Keep in mind indexes for shares and currencies are being tugged two ways. First the dollar is sinking from over-printing and dilution in an effort to inflate away the massive debts. Secondarily, and for a shorter duration, it is supported for the reasons we spoke of in our previous paragraph.

Most important of all, the dollar and share indexes could still support and be stuck at lower levels but not wiped out. This is due to rapidly increasing inflation. Gold could be 5,000 and compared with .4500 inflated dollar values the cash has actually become an almost zero value. Inflation adjusted numbers are important.

Another part of these cycles allows dead cat bounces. We are having one in shares right now. Those with a New York agenda to sell shares at any cost encourage the Sheeple to stay invested despite the fact they will be decimated in the longer view. They are busy earning fees and commissions on your investments.

Our recent 50% haircut in commodities is a normal cycle. Despite its trauma, those commodities necessary to exist like grain, some softs and other food items along with gold and silver will rally. Base metal markets connected to business and industry get beaten down and stay down for years. None of them disappear but prices stay far lower than recent historic higher prices.

One analyst says we endure a many years, hangover from this mess. I say it’s a lot worse and that major structural changes are either implemented voluntarily or Mr. Market slams us giving no choices. Non-USA nations are eager to barter and avoid using dollars for transactions. Currency losses can be massive in larger trades. This isn’t a migraine but a series of strokes and heart attacks.

Housing prices are near to basing in some regions but most have years to fall, especially in California, Nevada, Florida, and Arizona. When housing is priced to pre-bubble valuations and buyers and sellers begin to make transactions with mortgages at mere fractions of former selling highs, then we are on the bottom.  We suggest 2011 to 2012 could be potential dates. Housing must be cleaned-up before anything can find any semblance of normality.

The auto industry is broken and will be broken-up in mergers, sell-offs, and bankruptcies. Cars got mighty cheap in the 1930’s. My grandfather traded a 100 pound bag of potatoes for a nice used Model T. We expect to see new cars and trucks in America selling for 2/3rd’s off former highs. Some of today’s bargains are real eye-openers. It gets worse. The auto builder’s industry model is permanently changed forever. Larger international unions will be under immense pressures.

The argument over inflation or deflation is difficult as today we have both. Commodities, utilities and taxes will inflate while the rest deflate. Eventually, it all deflates with precious metals holding values while providing safety and security.

Government responses will be a continuation of all the wrong antidotes already thrown at these problems. More taxes, and monster bailouts for failing companies, states, municipalities and banks, along with a laundry list of new earmarks deepening national debts. In an effort to “Do Something? a new and fierce, firestorm of regulations become law smothering an already weakened international credit system.  

Investors and traders in the long term buy and hold category will be smashed. With lightening speedy computers, unsurpassed volatility, and shorter time horizons, investors must become swing traders. Swing traders shall become day traders, and day traders will be new scalpers.

Agriculture has a new and different problem to consider; lack of credit or, costly credit. Larger farmers might be forced into risking millions on one crop and yet be at the mercy of weather and unknown prices. We can see a substantial percentage of growers not planting at all in spring 2009 as the risk of a wipeout is too extreme. Fundamentally, crops are in shorter supply with static farmland availability, but yet we have millions more mouths to feed.

We think our new president will be forced into propping up the state and local governments throughout America. They refuse to install new economies, have broken budgets and continuous profligate spending. Those states taking most of their annual income from real estate taxes will hike them up even more.

This further damages the real estate industry. Bankrupt states like my Michigan will be in Washington, hat in hand begging for help despite billions of spending in their budgets. They refuse to cut and just keep adding more expenses. Health care and pensions are the larger spending categories.

Consumers and traders need to think carefully about personal budget items that cannot be cost contained. These would be all taxes, food, fuel, and utilities. You can be free and clear of all debts yet get hammered with this stuff. These costs are literally open-ended with no upside caps. We saw this when the Juneau, Alaska grid was broken as some households faced monthly electric bill increases from $600 to $3600. Fortunately, repairs were swift and the worst damages limited. Now these power users must pay +50% more than before the accident that took down several high tension towers in a powerful avalanche. You get the idea.

We think with fall market dangers mostly over and the election settled, the PPT will continue to prop their little hearts out not permitting the Dow and S&P 500 to get out of control. After all, now New York needs to prop markets for their annual bonuses. In our newsletter, Trader Tracks, we provide weekly guidance and extra e-mail alerts to report our best new trades and offer suggestions for trade management. Visit our website at (webeatthestreet.com) for more information on our spectacular futures and commodities trading record.

Whatever you do, make a concerted effort to stay with the trend and hang onto your core holdings of favorite shares, cash, and coins. Physical gold should never be sold or, traded but rather accumulated steadily on a monthly savings plan.

Recent news says you cannot find any coins or, others. We see delays and back-orders but some dealers have goods in hand right now. Go shopping. Should you have difficulty buying physical metals, we suggest placing an order and being patient. Big traders are always ready to buy the dips and normally never sell their gold and silver. You would be amazed how quickly your physical gold and silver will accumulate using this strategy.

In our conversations at conferences, several readers and others have shown interest in attending a futures and commodities trading-training seminar. Please contact our offices with this request as we plan a private conference for our traders to help them in the first quarter of 2009.

Roger Wiegand
Editor Trader Tracks Newsletter
& The Rog Blog at webeatthestreet.com

 

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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 stock shares, 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 free 30-day trial subscription 718-457-1426 Monday through Friday, 9:00am to 5pm or, e-mail Claudio at cbassi@miningstocks.com