|
Use the above link to subscribe to the paid research reports, which
include coverage of several smallcap companies
positioned to rise during the ongoing panicky attempt to sustain an unsustainable
system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by
compromised central bankers and inept economic advisors, whose interference
has irreversibly altered and damaged the world financial system. Analysis
features Gold, Crude Oil, USDollar, Treasury bonds,
and inter-market dynamics with the US Economy and US
Federal Reserve monetary policy.
Numerous favorable signals point to a resumption of the commodity
bull. It had been stalled for almost a year. The US Federal Reserve interest
rate cut on September 18 clearly marked a turning point, a watershed event, a
sea change. The USEconomy is the weakest on the
planet, not surprising since it grew on the back of a housing bubble, which
has since entered a slow motion crater. The US
financial sector, the engine behind the so-called FIRE economy, has sputtered
from bubbles mixed with kooky engineering mixed with leverage steroids laced
with mispricing misrating
fraud. So the next phase will be powered by the USFed
doing regular and frequent back-peddling on monetary ease, which is a
euphemism for making money cheaper as officials flood the system so as to
avert a breakdown, and secretly bail out the big bankers that wish not to hide
losses or have them subsidized by public money. Included this week is a
potpourri of charts and summaries. Many more details appear in the October
issue of the Hat Trick Letter, due out in mid-month.
THE
PURE COMMODITY INDEX
Let’s use the index
without the rigged nonsense ordered by Goldman Sachs, used to paint a false
picture of moderating commodity costs. These guys ply their craft well, the
quintessential rig being their cut of the gasoline weight in their GSCI index
in August 2006, which engineered a significant drop from $2.30 to $1.45 in
just a couple months time. Congressional elections were their motive last
time. Hiding the cost explosion is their motive this time on the CRB index. So
turn to the Continuous Commodity Index instead. Reminds me of Classic Coke
and their ploy to replace Coke. The CCI index has revived strongly, a clear
direct response to the expectation of a new monetary easing cycle. If not an
entire cycle to kick in quickly, probably a new cycle which will come with
the USFed kicking and screaming as their incorrect
forecasts, false perceptions, and inept policies must be constantly and
predictably reworked.
THE
AUSSIE DOLLAR AS RESOURCE CURRENCY
A telling chart ratio is seen with the Aussie
Dollar as a ratio of the Continuous Commodity Index. Its message is loud,
that the commodity trade is back, and certain currencies like the Aussie$ and
Canadian Dollar are leaders. The loonie ratio chart
is similar, but with a little more slump upon an early 2007 exchange rate
correction. Reversal upward is next, with some amplified but favorable volatility. First the flow of funds goes into
the proper currencies, then into the individual investments like corporations
and stocks.
MINING
STOCKS OVER GOLD METAL
Since the USFed rate
cut, a sure turning point, the precious metal mining stocks have responded
with more vibrancy than the gold metal price. This is urgently needed by
investors in stocks leveraged to the price of metal in the ground. The ratio
of HUI to gold actually began to rise before the Sept 18 rate cut. It has
continued upward. Note how the current week is displaying a BULL HAMMER
pattern. The open and current prices are at highs, while intra-week prices
have fluctuated lower. This
is a bullish signal, indicating higher ratios ahead.
ENERGY
STOCKS OVER OIL PRICE
Pressure on the energy stocks has come from
two opposite forces. The prospect of slowdown in the USEconomy
points to reduced energy demand. The weaker USDollar
pushes higher the crude oil price. Add to the mix the lack of damaging
hurricanes, warmer winters, and more volatility is seen in this ratio than in
the metal ratio above. The strong main current is growth in the developing
nations, led by China.
The message here is that a reversal off a double bottom is rather clear. The stochastix cyclical is flashing positive. Keep an eye on
the moving average crossover. We need to see the faster 20-wk MA cross back
above the slower 50-wk MA. My guess is it will very soon. Hey, Chevron is
buying back $15 billion of its own stock, a signal that energy stocks are
under-valued.
MINING
STOCKS POISED IN BREAKOUT
The major precious metal
stock indexes are all showing the same positive picture. The HUI, XAU, GDX
are showing breakout and current consolidation. Notice how the HUI refuses to
stay down on an intra-week basis. Attempts at selloff
failed in the last two weeks. The old technical adage applies here. The
longer a price remains in a bound range, the bigger and more powerful is the
breakout when the resistance is overwhelmed. Very positive technical
indicators are the rising cyclical powered by the rising moving averages. Notice
how both the uptrend channel has been overwhelmed, AND the current
consolidation is occurring above the old 730 high mark from April-May 2006. Targets
are outlined in the September and October Hat Trick Letter reports.
DANGEROUS
DEPENDENCE FOR US$
Emerging markets are the
driving force for global FOREX reserve growth. Clearly, the trend is led by China, but other nations
such as South
Korea, Russia, and Brazil
are accumulating money quickly. The growth is powered by emerging economies.
In the past four quarters, emerging economies have financed almost the entire
US Current Account deficit. These are not all friendly nations to the
increasingly pushy hostile feisty desperate Untied States. See the trade
protection legislation directed against China.
Its duplicity screams loud, since trade partner Japan is a chronic
violator of currency manipulation, an order of magnitude worse than China
for at least two decades. The difference is that Japanese bankers are US
lackeys, fully subservient. The other difference is that the US
has heavy influence on Bank of Japan so as to ensure the financing of the Yen
Carry Trade. The US
financial syndicate wants to control China.
Aint gonna happen. The
ugly response to any trade sanctions against China
could reliably be a shun or boycott of USTreasury Bond purchases from trade surplus recycle. China
is going to take its place as the primary major global banker in the next
couple years. With that change comes a tectonic
shift to global power, and a certain topsy turvy to the global monetary order. They might choose to
stand by and watch the colossal waste of money on US military pursuits. The
must see the futility of US Military emphasis. The real game is industry and
accumulation of wealth.
TAKE
YOUR BEST SHOT AT GOLD & OIL & EURO
We all know the powers that be, closely
aligned to governments and their central banks, will take a shot at the gold
price and crude oil price, as they try to push back down the euro currency
exchange rate. Well, they have not succeeded in doing much. They whacked gold
almost $20 on a single day last week, yet the gold futures price remains near
745. Artificial sell pressure from paper futures is enormous, all
uneconomically inspired, yet permitted by lapdog regulators. They tried to
take down the crude oil price, a couple days knocking it down by almost $2 on
single days, yet it remains above the 80 level. The rigged goofy September
Jobs Report, a jobbed tally, triggered a profit taking session for the euro. It
fell from 142.7 to about 140.5, but has regained its balance in the mid-141
range, well above the breakout at the 138.5 level. The USDollar,
gold, and crude oil make for a key currency
triangle, all inter-connected. If this is the best the corrupted desperate
megalomaniac power centers can muster, we are going
to have a powerful follow through when the USEconomy
shows its next bout of weakness.
NEXT
USFED RATE CUT
The great unwind of the
nightmarish bond bubble will continue to put downward pressure on not only
the housing market but the USEconomy generally. We
are in a very early phase of the great unwind where
structured finance has proved to be of substandard construction, certainly
not to meet the building code. The USFed will be
cornered repeatedly. The USDollar is secondary as a
priority to the USEconomy. Foreigners have noticed!
The retired serial bubble engineer Sir Alan Greenspan has spoken on the
housing decline certainty, on the economic recession likelihood, and more. The
most recent important forecast call comes from Standard & Poor economist
David Wyss. “The panic has subsided but
the housing market has not hit bottom yet. It will not hit bottom until
winter. Housing prices will not hit bottom until next summer and the losses
will not peak for another two years, until 2009. We are not halfway through
this crisis yet.” Since the rate reset procedure in adjustable rate
mortgages (ARM) continues into the first quarter of 2008, we should regard
the Wyss assessment as very optimistic. Officially,
the S&P sees the USFed cutting interest rates
another 50 basis points before year end. The Fed Funds futures contract has
lost some of its enthusiasm. The prospect of a second big rate cut has faded
somewhat. They must be paying too much attention to the nonsensical Jobs
Report. Perhaps the decisions by the Euro Central Bank and the Bank of
England not to hike rates influenced them. These converted monetary doves
have taken pressure off the USFed, so they think. In
reality, easier US$ money offered means more funds, investment, and emphasis
will be directed toward Europe, making their
need to hike rates even more motivated.
USECONOMY
WEAKENING SLOWLY BUT SURELY
The USEconomy
is destined to suffer a recession. How can one be avoided when housing is in
decline? If the USEconomy rode the back of the
housing bubble boom on the way up, it will ride it on the way down also,
since the manufacturing sector is still absent, missing in action, or better
described as dismissed and abandoned. There are limits to US exports, with
aircraft, military hardware, and telecom computer networking equipment as the
three-horse team pulling that load. The home equity raid trend is long gone.
What was once $700 billion per year in power assist to spending by
households, has been reduced to $140 billion per year nowadays. That amount
is less than the $180 billion spent on alcohol annually, to put it into
perspective.
Job losses from large companies dominate the
scene. Small businesses are struggling to remain alive with rising costs
across the spectrum. Try to tell that to clueless corrupted conmen at the
Bureau of Labor Statistics, who issue the Jobs
Report. Their Birth-Death Model showed +120 thousand job additions in August,
even construction job adds, indefensible to be sure. The Challenger Gray
& Christmas tally of job cuts at large financial firms has jumped
markedly. The finance sector is shedding jobs, and every such job lost
probably results in two lost jobs downstream in the tangible economy.
The ADP Jobs Report is far
more accurate, but less optimistic typically. So it is not placed in prominence
by the press & media. It has been proved as far more accurate over time,
but is not under the control of the USGovt
agencies, who prefer to doctor and distort all
statistics, thus painting a rosy bright picture. The ADP non-farm payroll
statistics are in steep downtrend. Perhaps, the BLS jobs data reported last
week is correct and the USA
economy truly grew by 110 thousand jobs. Put big doubt on that number! It is
not rational to expect positive job growth in the midst of a credit crisis
where both liquidity and insolvency problems threaten the system. Banks distrust the borrowers even less than other
banks.
CONCLUSION
Many more rate cuts are to come by the US Federal Reserve. They will
be caught flat footed consistently. They have never gotten it right, not
once. Greenspan has tried to explain that the USFed
shoots in the dark, employs faulty models, fails to understand the link
between economy and credit extension, and probably cannot avert a recession
led by a certain housing bear market. Horrendous home inventories and
accelerating foreclosures guarantee much lower home prices ahead. More rate
cuts are to come. Imports to the US
are in decline, year over year, with evidence being reduced Los Angeles port traffic. Not a single
economic myth mantra has been correct so far. Their claim of avoided spillover into the tangible economy is just an admission
that it has yet to occur. The latest myths promoted are that the USDollar decline is orderly, and the price inflation is
contained. Neither is true. The Euro Central Bank probably has another one or
two rate hikes ahead. Europe is powered by
exports, has a trade surplus, and can point to a viable broad industrial
core, unlike the Untied States. European corporations also benefit from
ongoing expansion in Eastern Europe,
although some relaxation in their frenetic growth is to be expected soon, if
not already.
The gold price from here
onward will react to global monetary inflation, led by the US, Europe, and Japan, MORE SO than to USDollar weakness. The gold price will rise from an
under-current of global banking distress. Capital inflows into the United States
are inadequate to meet current account deficit needs. The gold price will
rise from monetary inflation in unison, almost coordinated, as global central
banks have been converted to monetary doves at the point of a gun. Soon the
English housing bubble will unravel, leading to a benefit to the USDollar bilaterally. By this time next year, the EuroZone economy might flatten on growth. It is only a
matter of time before the higher euro currency exchange rate slows down their
economy naturally, from higher export prices. However, Europeans receive a
discount on oil costs, material costs, and possibly food costs from the
higher euro, which is the opposite effect on Americans. So the EuroZone should hum along longer than some expect.
A declining USDollar currency is a curse, despite the propaganda
doled out by Wall Street spinmeisters. If in doubt,
they are lying to you. It is that simple. Lastly, the trade war heating up
with China
points to less imports, less USTreasury
Bond subsidies, and the potential for severe capital flow disruption. That
translates to higher US
domestic prices for finished product, higher borrowing costs, and shock waves
to financial markets. Not much positive there, unless you are a precious
metal or energy investor. The US
is no longer the sole global engine of growth. China,
Russia, India, and Brazil will continue to exhibit
strong growth. In order to keep the USEconomy and US banking system and US financial markets from faltering,
constant measures will be ordered, all good for gold and energy, whether or
not the USDollar declines another 10%. When the
dust clears in a few years, the total bailout ordered by the USFed and various other USGovt
agencies will reach $2 trillion. It is still early.
THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.
From subscribers and readers:
“Great
Hat Trick Letter in September, very informative. I have been in the metals
since the 1970’s. You are right on with these issues that we all face
today.”
(BillB
in California)
“My
subscription is worth double what I pay. Once for the economic analysis, and
once for the education in wordsmithing! I am coming
to value the second one the most, as your alliteration and parable-esque style keeps me smiling even as you write about the
walls crashing down!”
(MichaelH
in Georgia)
“I
am currently subscribed to over 60 paid newsletters. Your analysis is by far
the most accurate every time. The most impressive characteristic of your
thought processes is your ability to think in multi-factorial terms. You are
one of the few remaining intellectuals with such capacity intact.”
(Gabriel R in Mexico)
By : Jim Willie CB
Home
: Golden Jackass website
Subscribe: Hat Trick Letter
Jim Willie CB is the editor
of the “HAT TRICK LETTER”
Jim Willie CB is
a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His
career has stretched over 24 years. He aspires to thrive in the financial
editor world, unencumbered by the limitations of economic credentials. Visit
his free website to find articles from topflight authors at www.GoldenJackass.com . For personal
questions about subscriptions, contact him at JimWillieCB@aol.com
|
|