KitcoKitco
 

Selling Fear

 

By Roger Wiegand

Oct 2 2008 10:29AM
www.webeatthestreet.com

   

The U.S. Congress (Senate) approves bailout using a fear and greed set-up.

It appears Congress is well on its way to completion of the bailout bill, which will not bailout anything but in fact creates an extension and worsening of the global credit crisis. The stolen taxpayer money will primarily be used for building cash on broken global banker’s financial statements. Next the Senate approved another $150 billion in earmark extensions not only adding on more wasteful pork but reinstating expiring pork from yesteryear. Congratulations to the Federal Reserve, US Treasury and New York banksters for completion of another massive political and financial fraud. The House has yet to approve the Senate bill but we are certain they will as most of congress views this legislation as toxic to re-election and they want it overwith quickly. We say it’s toxic to our financial world and longevity of America. How nice it would be if we could vote them ALL out of office for malfeasance.

Our wonderful senators, soon to be followed by the U.S. Representatives not only managed to save the big banks from their crooked dealing but pumped more billions of spending into their respective districts buying votes for the coming election. Credit crisis problems have not been cured but merely cooled down for a few days. We have no doubt our representatives in the house will follow with a swift voting approval on the senate package so they can scurry home for election campaigning. Basically, consumer-taxpayers got nailed once again and the silk suits are big winners. The business of the people is flatly stopped until after November 4 and they’ve just taken another legendary and massive haircut. Crooked political business as usual prevails.

Something is Wrong And Going Wronger

It’s bad enough our country must suffer the imposition of this terrible bill designed to save broken, crooked banks and bankers. But now we are facing vastly improved negative powers given to the U.S. Treasury, Federal Reserve and The Executive Branch by instigation of this crisis and formulation of new and very ominous rules and laws. Foreign analysts and observers of American finance and politics call it no less than the fall of the United States relegating this one proud nation to becoming a third rate loser.

Observe The Following News Events

We told our readers long ago Europe and Asia would tank fast and hard right after the Chinese Olympics. Now it’s happened. China’s growth has slowed dramatically and they are even taking steps to pump-up their economy if you can imagine that one. Europe is faring much worse, skidding down the recessionary hill into deflationary depression. European news this week is not only all bad and depressing but is spiraling out of control. Spain is on the verge of revolt and Italy is not far behind. The U.K. financial community is totally out of control and they cannot seem to stop the waterfall of disasters. Ireland’s stock market fell nearly -10% in one day and their central bank immediately announced they would back-stop their top six biggest banks with billions in one fell swoop.

An internet rumor this week told us of the shipment of $800 Billion in the proposed new American currency the Amero to China. Is that a payoff to be quiet and not dump dollars? Is it true?

One U.S. global bank has been printing signs for bank branches giving instructions to depositors and customers as to what to do if their banks are temporarily closed due to bank runs. True?

The U.S housing crisis has gotten so bad new mortgage lending has slowed to a trickle and new home building starts are now running at an annual rate of 460,000 versus 1,700,000 in normal times. This fell below even our worst previous forecasts of 550,000 annually. Now we say the next lower count on the 4th quarter of 2008 and being reported in early 2009 will be 250,000. When do we hit zero?

The Detroit News headline this morning of October 2, 2008 says, “U.S credit crisis crushes auto sales.” Lack of credit means no sales and one of the largest Chevrolet dealers in the nation just closed its doors in bankruptcy throwing 3,500 employees out of work in several dealerships. Within GM, Cadillac and Chevrolet dealerships are coveted-prized for consistently profitable sales. September sales reports were terrible and year to date changes portend more massive failures. Credit is the lifeblood of auto sales and it is very scarce.

In one of the worst surprises we’ve seen, Warren Buffet bought $3 billion of GE stock while the company is selling more billions in shares to prop-up its failing credit-finance unit. This company is urgently trying off-load its non-performing divisions to raise cash but there are few buyers with the credit or cash to do so. GE is the number one big boy. When they are hurting what’s next?

GM is selling everything but the kitchen sink. News this week says they are dumping closed factories and vacant land in numerous panicky sales to raise more cash to stay alive. Further, new lay-offs continue as more and more skilled and unskilled auto workers are either paid to leave or just plain fired. GM shares are valued where they were in the 1950’s with no inflation adjustments.

We predicted in 2003 one US automaker would file bankruptcy. In 2005, we predicted they would all file bankruptcy.

In 2003 we predicted the Euro currency would not last. And, eventually Euroland member nations would revert back to older pre-Euro currencies first trading them in parallel with the Euro to exit that money. Our predictive trend is spot on. The Euroland breakup is at hand.

Thousands of sit-down restaurants are going bankrupt. Numerous formerly very popular chains are being shunned by broken consumers with no cash flow. These companies have thousands of employees as the food business is very labor intensive. Lots of jobs are being lost in food service.

Walmart, Costco and McDonald’s are still doing well as they have the lowest prices in their fields of business. Despite this, Bank of America is no longer offering credit to blue chip McDonald’s franchisees for expansion of new stores. The credit vise continues to tighten across the board.

Some CEO’s of manufacturing firms are saying they are doing well when in fact they are just moving stuff around on balance sheets to look good. Sales are falling everywhere and in the U.S., ten million manufacturing jobs have been moved overseas in the past few years for cheaper labor. A trickle of these are returning from China going to Mexico and the southern USA as company owners find the “China advantage” is no longer what it was. Asia must pay more for commodities and manufacturing materials as their labor costs increase to avoid riots. Now it’s just easier for US and other North American manufacturers to stay home with their businesses.

College kids are postponing attendance as they cannot get student loans or credit for school. Yet tuition continues to rise higher on inflation and tenured teacher demands. Wachovia is holding student prepaid savings cash for over 1,000 schools. Nobody knows how long it takes to recover this money. New student loans have been vastly curtailed and kids are not anxious to borrow under current credit conditions anyway. Instead, smart qualified kids are going off to work in menial jobs at minimum wage.

International banks do not trust doing business with each other. Credit, the life blood of commerce is frozen and stopped dead in its tracks. European banks were quietly told off the record to stop any new business with USA global banks on credit fears.

While most of these problems were instigated by real estate connected derivative failures, newer disasters in auto loans and credit cards loom just ahead. We noted this week the card charge-offs could be $94 billion in 2009. We cannot even begin to estimate the auto loan damages.

Auto companies have stopped offering leases for the most part. Newer used cars coming off lease show falling values are destroying profits in those leases. The car lots are already piled-up with gas hog trucks and SUV’s. They certainly do not need more used lease inventory adding to this dilemma.

The stock market is a disaster covered over with massive intervention and manipulation. Technicals tell us the Dow should currently be cut in half from its former recent highs. We say today’s Dow should be 7250 or something less if adjusted for inflation. Watch for the Dow to sink gradually in steps and stairs in a turtle race to the bottom, probably near Dow 3,000.

We saw one report telling us 25% of cash heavy, hedge funds have closed with more slated to shut-down. They have such a massive presence that when redemptions hit and fund managers are forced to sell portfolios, this adds to the already rampant shares selling driving down all stocks at a faster clip.

Commodities fund managers, who are typically long only, ran for the door en masse in late summer, selling huge portfolio baskets in a panic race to avoid falling values. These funds have built-in drop dead price points where investors are allowed to redeem accounts and bail out. Many were at -38% and they did just that. The fund managers had to produce exit cash in the millions within only five days. This destroyed many of these funds and crushed the commodities and futures business temporarily; especially crude oil. This sector is down but portions will regain former highs and go even higher.

The Russians are claiming the US has defrauded international investors and Putin was particularly angry as he personally took a massive haircut on his stolen-invested billions. No tears from us.

International shipping, reported by The Baltic Dry Index (BDI) has fallen straight down. This tells us raw material shipments are curtailed and end-user manufacturers and miners are slowing dramatically. We think this is primarily tied to copper, iron ore, zinc, lead, sand, gravel, etc. used in basic industry.

Shining stars of growth are gold, silver, energy and food. All are poised for new rallies and higher inflation. Next, with all of these market disturbances and international volatility, trading currencies offers great rewards if you can manage these markets.

The US Dollar has rebounded toward 80.00 on the index but we think it’s forming a bearish double top before additional heavy selling on over-printing and dilution by our Treasury and Federal Reserve gamesmanship-manipulation.

Bonds and other credit instruments are gyrating wildly when they are normally smooth in direction on very large trading volumes. We are still waiting for the longer term short trade on the 30-year bonds when price slips under 115.00 on the index and continues to sell. It may take time but is will arrive on the fundamentals.

The very important commercial paper market is largely under the radar. This shorter term lending vehicle is mandatory for inventory financing and payroll in many companies. For now it’s paralyzed and business owners are very frightened as to how they can continue operations.

Gold and silver daily trading ranges are going wider. Formerly gold would move $2-$4 dollars on a good day and now we see $20 days more often than not. Silver is still weaker but will recover as its apparent uses shift from commercial ideas to being mostly a precious metal and a currency.

Physical gold and silver is being held by private owners and not sold. New PM buyers are on waiting lists being forced to pay high premiums for delivery. We have some new coin buying and trading ideas which will be discussed in our newsletter for our traders and readers. There are several ways to buy coins.

America’s Treasury, Federal Reserve and the New York banksters have pillaged the domestic and international financial system in a massive fraud and misuse of power. Americans are slow to catch-on and are very forgiving for the most part. New and virulent anger toward the bailout shows us an about-face with these forgiving attitudes. We have no compassion or sympathy for those who committed these trillions in crimes against the global financial community. Despite many of them hiding behind the shield of government protections and residing in “too big to fail institutions,” we suspect there is going to be hell to pay as the smashed street people demand justice.

Watch for new rallies in most all commodities markets. It’s near time to buy. Our early fall precious metals haircut is almost over. The only action to prevent selling is our stunningly time-worthy Plunge Protection Team who had multiple recent failures propping shares. Will they win during the fall push-‘em--up event? With the election silliness underway the PPT will and must prop shares.

We think with October pre-election market dangers they will prop their little hearts out and not permit the Dow and S&P 500 to get out of control; but it will sell somewhat. 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.

We would appreciate your response to planned attendance at our new futures and commodities training-trading seminar this winter. Send emails if you are interested in participating.

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

Should you be having difficulty buying physical metals on new orders, we suggest placing an order and being patient. Big traders are always ready to buy on 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. - Traderrog

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