"No country upon earth
ever had it more in its power to attain these blessings than United America. Wondrously
strange, then, and much to be regretted indeed would it be, were we to
neglect the means and to depart from the road which Providence has pointed us
to so plainly; I cannot believe it will not ever come to pass." --
George Washington
Although Treasury Bonds are in a giant bubble,
the bubble will not just burst because of the S&P downgrade. They have
been in a bubble for quite some time now and by downgrading Treasury Bonds;
the S&P has just opened everyone's eyes, but given the financial condition
of Europe where else but the USA can you park the loads of counterfeit paper
the USA and Europe are printing.. The multi-month long fiasco that went on in
Washington, instead of coming up with even a partial solution, just
highlighted the fact that Washington was unable to agree on taking even just
the first step toward a solution and made the whole situation worse to the
tune of another $4 trillion. That included a further $2 trillion increase in
spending (but no real spending cuts). Hopefully this will be a wake up call
to Washington, but I doubt it.
WHAT CREATED THE TREASURY BOND BUBBLE?
And the answer is: The same type of forces (the
FED) that created the Tech Bubble in the late 1990s and the Housing Bubbles in
the early and late 2000s. That in conjunction with 75 years of government
mismanagement and ever increasing Socialism, have created the untenable
situation we find ourselves in.
As usual, the majority of investment
professionals are reacting perversely to the crisis. On the day after the
first ever downgrade was issued on American government debt, investors
reacted by igniting one of the biggest bond rallies in the history of the
treasury market. Such an illogical kneejerk reaction suggests that investments
of better value and fundamentals continue to be overlooked as safe Havens
investments. Primarily because no other market is big enough to absorb all
that scared money.
On the other hand, for us little guys I see many
places to find shelter from the growing economic storm. While media attention
is focused on weakness in the Euro, other currencies are doing quite well
against the dollar. Over the last 12 months, the Australian dollar is up
12.6%, the Canadian dollar is up nearly 20% and the Swiss franc is up 37%. I
believe investments that produce reliable income denominated in these and
other currencies offer meaningful protection from declines in the U.S.
dollar. However Gold, which I consider to be the only real money, is up over
40% so far this year alone and 10 days ago had its biggest one day gain in
history. I believe that in the current environment, investments in precious
metals (bullion and PM stocks) offers the best and safest way to preserve and
grow your wealth.
Wild uncontrolled growth: Just in the last 4 years, the amount of
Treasuries outstanding will have grown by $5.6 trillion. Amazingly, that's $1
trillion more than the total outstanding Fed Government Debt for all of the
232 years of America's existence.
Artificial props: Treasury Bond prices have been artificially
pumped up by a series of unprecedented government efforts - first, when the
Federal Reserve pushed short-term interest rates down to nearly 1% in the
early 2000s, driving up stock & bond prices into a Bubble. Second, when
it again drove rates down to 1% in the mid-2000s creating both a stock and
Real Estate bubble for the ages: And now with its bond-buying rampages called
"quantitative easing" that pushed rates down to Zero creating the
millennium bubble that will set the stage for the Millennium crash that will
last 4 to 10 years or longer and take the DJII to below 1000.
Don't Just Look to Blame Europe or the Japanese
Tsunami or the S&P Downgrade. The U.S. has a series of issues all of Its
own making.
Europe may have the PIGS (Portugal, Ireland,
Greece, and Spain) battling with debt issues in Europe. Spain is not fully
there yet, but will inevitably need to find money and what about Italy? They
are all looking for money, but whether they find it or not or have the ECB,
like the FED, just print it; the money is just their short term PROBLEM. The
main problem for both Europe and the U.S. is that Socialism has reached the
inevitable end of the road. Capitalism is no longer big enough or strong
enough to carry the Socialist load and there is not enough money in the world
to carry both the US and European Debt and growing compounding interest
expense loads for much longer. Drastic changes are required. Can the
politicians and economists finally admit their mistakes and do what is
required? We will soon find out, but they don't have all that much time
before the street riots and violence become common place in the world's major
cities. Will the world then crash and degenerate into World War III? History
tells us this always happens in the midst of a world wide Depression. Thus
far, the real problems are not even being mentioned let alone addressed let
alone solved.
HOW NOW DOW
Stock markets are battling negative sentiment,
not only here but all over the world as well. Just check out the charts of
the fastest growing BRIC countries. Their economies have started to slow down
in the face of inflation and rising interest rates and led by their Stock
Markets. Our situation was helped along by the crisis in Europe, but my
economic analysis says that you cannot blame the Europeans, as it was our 40
plus years of massive printing of fiat money that has slowly but steadily
spread inflation around the world. Now we have finally reached the end of the
road. We have a financial mess of our own that can no longer be easily
papered over. It has come to the forefront due to its severity and that's
does not include the fact that 48 states cannot balance their budgets:
Further Increasing the threat to the world's financial structure.
The key stock market indices are crashing below
their respective 50-day moving average (MA) and 200-day (MA) (The Death
Cross). The near term technical picture is bearish and we are in very
dangerous territory without a good technical base for support. Look for an opportunity
to go SHORT on any 300 to 500 point Rally's. Perhaps after everyone figures
out that Bernanke although he did not announce QE3 outright hinted that it
was coming, only by a different name. (if necessary LOL)
THE ADVENTURESOME and SWIFT A FOOT can trade the
coming Rally by buying options but for me I am sticking with my Gold even
though it too may be due to correct it can just as easily explode.. You may
sell out of the money calls against some of your GLD holdings and use the
money to buy calls on greatly undervalued Gold and Silver mining shares.
The debt resolution that was approved by the
Senate and White House that calls for a $2.1 trillion increase in the debt
ceiling to around $16.5 trillion is an attempt to pull the wool over the
world's eyes in a desperate move to buy some more time. (time to do what) It
is an out and out sham as there were no real enforceable cuts. First of all,
this is just adding to a massive debt load. In return, there were supposed to
be spending cuts of approximately $2.4 trillion, but only in the future over
a 10-year period (2 congresses from now) and this deal, as bad as it is,
cannot be enforced on any succeeding Congresses. The deal is so bad that
investors the world over have recognized it for what it is; a sham, long
before the final deal was announced. This is exactly what the markets were
expressing for over a week now and the S&P downgrade (which is always
late and understated) finally confirmed only a hint of the danger. (Hooray
for S & P).
CAPITALISM vs. SOCIALISM
SOCIALISM (MARXISM, COMMUNISM) has been tried the
world over for the last 90 years and been found wanting in every instance.
The oldest Communist countries have seen the light and switched their
economies over to a form of non Democratic Capitalism (In reality Fascism).
They have become the fast growing economies while the Capitalist countries of
the west have gone in the opposite direction and have so damaged the
Capitalist aspects of their economies by overloading them with Socialist
programs that they can no longer be supported. Can you imagine the impact of
a return to higher, normal, market driven interest rates on their Governments
balance sheets and more importantly, their cost structures? The problem, as I
have been trying to explain, is that the U.S. economy is floundering and
following President Obama's hoped for plans of destruction according to
Clowen and Piven. The useless spending of nearly a trillion dollars in
supposed infrastructure spending (less than 10% was spent on infrastructure)
along with $800 billion of QE2 (all going to the major banks, Wall Street and
Obama's cronies) signed the economy's death warrant.(as will be come evident
within the next 2-3 years)
The sky is not falling yet, but we may be pretty
close to it.
Just take a look at the second-quarter GDP that
came in at a meager 1.3%, well below all the experts' lofty estimates. In
contrast, China is slowing, but is still growing at around 8.5% (they lie
too). Making matters worse was a downward revision (as expected) in the
previous first-quarter estimate to a dismal 0.4% from 1.9%. It should be
obvious that the projections of 4% to 5.5% GDP growth for the 4th quarter
were all just pie in the sky projections, conjured up by using the
government's false, feel good, but misleading statistics for over 2 years now
(just as I have been showing you every month).
JP Morgan downgraded its estimate both for itself
and for the 3 quarter GDP to 1.5% from 2.5%.That is terrible, but not as bad
as it should have been without all their balance sheet manipulations that the
FED IS ALLOWING THEM TO DO. (Without it, the Banks would have been forced to
declare bankruptcy 3 years ago.)
DOUBLE DIP RECESSION
You have got to be kidding. There will be no
Double Dip Recession since we are still in the 1st Recession heading for
Stagflation, leading to a full blown DEPRESSION by 2012 - 2013. Nothing new,
it just takes them awhile to catch up.
The manipulated manufacturing numbers continue to
show a stagnant economy. The ISM Index was flat at 50.9 in July, its lowest
reading in years and well below the revised 54.0 in June. An ISM
reading below 50.0 represents contraction. The ISM Services index was also
weak and grew at its lowest rate in 17 months. In addition, factory orders
also declined in June.
Is their any doubt that all of these numbers have
also been over stated? If anyone not in government ever lied to the extent
that the President and Congress lie, they would be in jail for their next 10
life times. See why they pass laws that exempt them from having to follow the
laws that the rest of us must adhere to?
Now I'll ask you all one question: How is it
possible for companies to be making so much money with the economy in
recession, 25 million + unemployed, sharply rising commodity prices and no
inflation? And the street is still projecting 10 to 20% earnings growth?
APOCALYPSE NOW?
While our nation's entire financial system is not
yet on the brink of collapse, it soon might be. It all depends on the actions
that will be taken in Washington in the near future.
The proposed 1% tax on all banking transactions
is really a 2% plus tax That is across the board, regardless on your level of
income: Will that create Jobs and grow the economy? One of the unintended
consequences will be that people will withdraw their savings out of the
banks, which could lead to the very breakdown that we are so worried about.
Banks need money in order to lend. Banks are the conduit of money from savers
to investors and spenders. What happened to taxing only the rich? Did everyone
who has a bank account suddenly become rich?
WATCH OUT FOR MORE OF THESE KINDS OF HIDDEN TAXES
(oops, sorry, USER FEES).
"The Obama Administration and Congressional
Democrats as well as the NEOCON Republicans are betting their political
futures on the hope that the American electorate is ignorant and forgetful,
and hence the memo has gone out to functionaries all over the country from
David Axelrod to John Kerry: This is to be called the 'tea-party downgrade.'
That this is said with straight faces bespeaks either an unshakable contempt
for the mind of the American voter or an as yet unplumbed capacity for
Democratic self-delusion. Let us revisit the facts. The original debt ceiling
deal put forward by the Democrats totaled $0.00 in debt reduction. This would
have fallen approximately $4 trillion short of the $4 trillion in debt
reduction the credit-rating agencies suggested would constitute a 'credible'
step toward maintaining our AAA rating and avoiding a downgrade. The
Democrats have suggested that the Republicans' refusal to accede to tax hikes
is the main reason Standard & Poor's felt it necessary to issue a
downgrade, the first in American history. Lastly, in their assessment of
Standard & Poor's reasoning, the Democrats are acutely at odds with
Standard & Poor. The credit-rating agency did not call for tax hikes, but
S&P, along with the other credit-rating agencies, has long taken a
position on one aspect of our fiscal troubles: entitlement reform. As anybody
who has looked at our long-term deficit projections knows, entitlement
spending is the major driver of our future deficits. Tea Party leaders, far
from being a barrier to entitlement reform, have demanded it. The deal that
finally did pass would have contained significantly more in deficit-reduction
except for the fact that Democrats categorically refused to consider it -- is
this sounding familiar? -- Entitlement reform, the most important issue.
Democrats believe that they have discovered a cartoon villain in the Tea
Party (to replace Bush?) and they are hoping that American voters are
gullible enough to be distracted by the political theatrics. Come November
2012, Americans should keep in mind both the insult and the injury -- to the
nation and its credit." Meanwhile the Republicans are not home free .thy
better be prepared for either primary challenges or a 3ed party if they keep
breaking their promises. (So far 3 up 3 down)
GOLD
Will the Downgrade cause the FED to heed Wall
Street's call for QE3? Later if not immediately it will and when, not If
it does, you can rest assured that it will drive Gold ever higher. Either
way, Gold will go higher, much higher.
Looking at the Gold and Silver mining equities,
they have been selling off along with the rest of the markets in the face of
Gold being up more than $250 to a new all time high touching $1,800 (right in
the area of my minimum year end projection of $1,750 to $2,500). So what
gives? As I have pointed out many times, when markets crash (1,100 points in
2 days and over 2,500 in less than 2 months), we have what is called panic
selling combined with the forced selling due to Margin Calls and you end up
having the baby being thrown out with the bath water. But for those who are
members of Uncommon Common Sense, we were prepared since we saw it all coming
and there has been no forced selling on our part. Instead, we just sat back,
bought more gold and counted our money while calmly studying our "to go
short list", placing orders above the market as our favorite stocks
(ETF'S) Rally. We have learned from the selloffs in 2006, 2008 and June of
this year, not to look a gift horse in the mouth. Selloffs and sharp
corrections are all part of the game, especially when dealing with
manipulated markets.
SILVER
What's happening to Silver? If you will recall, I have always preferred Gold
over Silver because GOLD is safer as it is also money and Silver is a lot
more volatile, so only experienced traders can benefit from Silver's added
volatility. Besides, if $400 to $6,250 is not enough of a Bull Market, then
you will have to find someone who can do better and subscribe to his
newsletter as well. That said, what do we do with Silver NOW?
Do not sell out of your Silver positions: Buy
more by scaling in. It is impossible to measure irrationality. Silver has not
been following Gold because the world has turned super BEARISH. Witness the
panic selling of the last few days. Investors are no longer so sure about the
industrial demand for Silver. If the world economies are slowing down, then
so is inflation or so they think. They do not know what Inflation really
Means. But the US dollar looks weaker than it has ever looked with doubt
creeping in as to whether or not America will be able to pay its debts thus
accentuating the desire to own GOLD. But Silver will eventually catch up and
surpass Gold %age wise.
INFLATION - DEPRESSION
Inflation means increasing the money supply at a
faster rate than the growth of GDP. It
does not necessarily mean rising prices. One thing is for sure, Helicopter
Ben will have his printing presses going Full Blast to try and stop
Depression in its tracks. Of course his actions will actually cause the very
thing he will be desperately trying to avert. When it comes to depression, it
never goes from a minor Recession straight into Depression; it goes into full
recession and then into Stagflation, which can then morph into Depression.
The Rest of the Letter Is Reserved for
Subscribers
The coming debt crisis could destroy the lives of 10's of millions of
Americans: Find out how you protect yourself and even profit from the
inevitable crash by subscribing to UNCOMMON COMMON SENSE. Equally important,
it also introduces you to the kind of investments that can help you pile up
profits even as companies like Bank of America and CITI Corp the Darlings of
Wall St. and Cramer are crashing.
Aubie Baltin CFA, CTA, CFP, PhD.
2078 Bonisle Circle
Palm
Beach Gardens FL. 33418
aubiebat@yahoo.com
561-840-9767
Please
Note: This
article is for education purposes only and is designed to help you make up
your own mind, not for me to make it up for you. Only you know your own
personal circumstances so only you can decide the best places to invest your
money and the degree of risk that you are prepared to take. All Information
and data included here has been gleaned from sources deemed to be reliable,
but is not guaranteed by me. Nothing stated in here should be taken as a
recommendation for you to buy or sell securities. I am not a registered
investment advisor
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