By: Ty_Andros
http://www.marketoracle.co.uk/Article18193.html
As we near the APEX of the countertrend rallies in many markets
and economies, the air is full of HIGHLY-COMBUSTIBLE situations
just waiting for someone to light the MATCH. The
full debacle of the next leg down in developed world economies is
at the doorstep. What event will act as catalyst
is unknowable, and the list of candidates is
mountainous. Corruption and criminality within
the public sectors, crony capitalists and banksters set the stage
for an explosive cocktail, are set to immolate the private sectors
that still produce wealth and the public at large.
The greatest transfer of
wealth from those that hold it in paper to those that don’t is
UNDER WAY! A Crack-up Boom is on the
horizon….
As the downturn in developed-world
economies once again accelerates to the downside, volatility will
expand just as it did in 2007 and 2008; volatility is opportunity
to the prepared investor. Markets will zoom up
and down as the NEW NORMAL unfolds, thus creating HUGE
opportunity’s for those who embrace absolute return investments
with the potential to thrive in these markets.
Buy and hold is DEAD, absolute return investing strategies need to
be a part of any diversified portfolio as the global financial
crisis continues to unfold. The competitive
devaluation raceway is UNDERWAY to substitute for the policies of
growth.
“Currencies
don’t float, they just sink at different rates.”
-Clyde
Harrison
What is the new
normal? It is rising inflation and slow or
no-growth economies where the public sectors, banksters and crony
capitalists CONFISCATE, through taxes or regulatory favors , the
remaining wealth in the private sector and transfer it to
themselves. Governments pick winners and losers,
misallocate increasingly-scarce capital and place their economies
into regulatory STRAIGHTJACKETS, thus enshrining into law poor
decisions and mandating politically correct and practically
incorrect solutions, and prohibiting superior
ones. As a consequence, competitiveness, economic
recovery and common sense recede further and further and are
substituted with money PRINTED OUT OF THIN AIR.
Take a look at this quote from the grand old sage Richard Russell
(www.dowtheoryletters.com -- I urge you to subscribe):
“It's truly remarkable. Within the space of three
or four generations Americans no longer even recognize
Constitutional money! I've said before that gold is imbedded in the
DNA of mankind. We're closing in on the time when, like
a light bulb turning on, Americans will finally realize that
they've been hoodwinked by one of the greatest swindles in the
history of civilized man. They've been working and saving printed
paper with the firm conviction that the paper they worked so hard
for was money (emphasis mine). Wait, why is that
printed paper worth anything at all? It's worth something simply
because the government has pronounced by fiat that dollars are
"legal tender for all debts, public and private." So the "dollars"
that we work our whole lives for, is backed by nothing but the
"full faith and credit of the United States." And how good is that
credit? Two credit agencies are now threatening to lower the rating
of US bonds. If that happens, it will be a monumental shocker? And
yes, all sovereign money is now being judged and classified as to
its worth. Did anyone ever gauge or debate the value of gold? As I
see it, we're watching the very beginning of the end of fiat
money.”
-
Richard Russell
Money printed out of thin air IS NOT
Capital; it is not money; it is an IOU of morally- and
fiscally-bankrupt public serpents, central bankers and the bankster
cartels. CREDIT IS NOT MONEY.
When people WAKE UP to this fact there will be riots in the
streets.
One need look no further than
Washington DC PURPOSELY steering the economy off a cliff using the
Cloward-piven strategy or Saul Alinsky’s: Rules for Radicals; these
playbooks are being fully implemented at the quickest speed
possible.
“At the moment, we see the government spending
excessively and making promises to spend that cannot be kept. This
is already a major problem in states like California and countries
like Greece, but the federal government will soon join them. At all
levels of government, promises to pay state and local pensions and
to provide health care far outstrip its capacity to pay. The
Congressional Budget Office and many others have been warning for
years about the $50 or $60 trillion of unfunded liability.
Washington's answer on health care? Offer an expensive drug benefit
followed by a more expensive ‘reform’ that increases the unfunded
Medicare-Medicaid liability. Dissemble about the real
costs.”
–Allan Meltzer
That is Cloward-piven in action --
expand government and make impossible promises until the collapse
occurs and they nationalize EVERYTHING to make essential
payments. It is the recipe for collapsing a
market economy into a socialist one.
In Congress we see Queen Nancy
declaring “we must pass the healthcare legislation so we can all
see what’s in it”, as if this is some present sent to us by Santa
Claus and we are just breathlessly waiting to unwrap the goodies.
Now she is going to pass it without a vote in the
House of Reps, saying she “likes it as it means they don’t have to
vote on it.” Yesterday she crowed about the
numbers out of the Congressional Budget Office (CBO), stating she
loves hard numbers; unfortunately, they are based on assumptions
which are FAIRY tales; in other words: lying with
numbers. The media reports them as facts, to
cover corruption. What breathtaking statements,
and evidence of absolute moral bankruptcy and corruption at the
highest level of government SWORN to uphold the constitution.
Talk about transparency, this is not
it; it is 2,700 pages of criminality and corruption which NO ONE
HAS SEEN OR READ, but about to pass into law under the harsh grip
of our masters in the beltway. Make no mistake,
the healthcare bill is a TAX BILL, first and foremost, to cover up
general revenue shortfalls and the ballooning deficits as Social
Security and Medicare trust funds have already been squandered and
have DISAPPEARED down the government rat hole of GENERAL
expenses.
The treasury report just released
acknowledges the budget deficit is not the $1.6 trillion advertised
by the administration and the main stream press in 2009; it was
actually $4.5 trillion in GAAP (generally accepted accounting
principles) adjusted terms. The difference is
unfunded entitlements and stolen money from trust fund
accounts. Thieves and scoundrels, remember this
next time they tell you budget fairy tales.
The Gang of 535 in the US, and the
capitals of Europe have been selling the fruits of our labors to
special interests for generations, unfortunately the parasites in
Europe (public serpents, crony capitalists, elites, trade
unionists, banksters) KILLED the host private sectors decades ago
and in the US they are poised to do the same to the last vestiges
of the private sectors. The recoveries are
statistical lies courtesy of public serpents that REFUSE to reform
themselves, curb and roll back years of overspending and the public
sectors’ policies of insolvency.
Socialists calling the prudent and
responsible people in society criminals and putting a target on
those who have to create the incomes and jobs to end the
crisis. Insane, self
destructive. Unions have destroyed every industry
in Europe and the US and are now KILLING affordable
government. Government workers literally make
double that of workers in the private sector and produce less than
half. There’s a wing in the White House and labor
department dedicated to union consultants, in support of their
agendas with phones directly into the oval
office. These bureaucrats and public serpents are
your masters and enemies, not your servants.
Today Christine Legarde, the Finance
Minister of France called on Germany to: quit
producing more than you consume; quit saving, spend, spend, spend
and never save for the future just as we do; quit driving socialist
economies to their doom by competing vigorously, abandon the
competitiveness you have carefully built up over the last decade by
holding down wages in a gradual but effective manner; quit lowering
corporate taxes so customers choose your corporations over other
suppliers (the businesses don’t pay the tax, they just pass it
through to the customer); quit benefiting from the competitiveness
you have built up in the global marketplace, producing trade
surpluses as consumers choose you over your higher-priced,
lower-quality competitors in the social welfare
states.
Message to Christine from Mother
Nature and Darwin: You are unfit -- mentally,
morally and fiscally and the strong are going to send you to your
doom. Sending future generations of your citizens
to their doom as slaves to government, fiduciary irresponsibility
and debt in order to maintain your CURRENT political power and
reward something-for-nothing constituents is
VILE. You are not God and cannot COMMAND others
to embrace your weakness, contempt for history and inability to
understand the laws of nature and man.
You and your country’s economy
(France) are increasingly “DEAD men walking,” just as your banks
and financial systems are as they die in your socialist
embrace. Subsidize failure, rescue the imprudent,
subsidize businesses that lose money, as you are and you will get
more of it. These are policies of
INSOLVENCY. It is an epidemic running throughout
the developed world, a fatal virus that has sent every empire to
its doom and is doing so again. History is
repeating, but you would not know that as apparently you haven’t
studied it... Ditto Mr. President, Prime Minister
of Greece, UK, Italy, Portugal, Spain and the rest of the developed
world welfare states… Refuse to reform your
governments and economic policies or fall to your
doom… Game, set and match, as your economies die
-- something inconceivable to you.
Along these same lines, we find the
fellows who introduced national ID cards, aka branding of the
public as government slaves, because in order to work you must have
one; its government as GATEKEEPER to jobs. Do as
we say and you can work, don’t do so and YOUR PAPERS will be
revoked. Reminds me of HITLER’S
Germany.
The radical progressive public
serpents have now slipped government control of the student loan
market into the Healthcare Bill, so student loans will go to
political supporters. Banks as issuers and
service providers only look to financial qualifications, now this
is being taken from non-partisan banks and transferred to the
FEDERAL government which will ignore those considerations and
substitute the POLITICALLY-correct for practically-correct
criteria. I guess my son need not apply!
Last but not least, as the G7
economic collapse continues SCAPEGOATS must be FOUND to pin the
tail on the donkey. Now a SMOOT HAWLEY
resurrection of epic proportions is being introduced to pin the
tail on china for a FAILING-US economy. The US
economy is failing because of RUNAWAY taxes, mandates, government
policies of high energy prices and regulatory straightjackets, so
capital FLEES to where it can thrive.
If currency devaluation was the key
to economic growth, Mexico, South America and Italy would be export
powerhouses like China, and Asia. No, it takes
government policies of growth and support of capital and
manufacturing, which the developed world ended decades
ago. They prefer policies that BENEFIT entrenched
crony capitalists and politically-connected elites, such as big
unions and banksters, instead of NEW growth from fierce new
competitors. New entrants to challenge entrenched
dinosaurs are regulatorally assassinated.
Of course who
pays? You do. America no longer
makes everyday items, and hasn’t for decades. In
a trade war, WE LOSE as there are NO domestic suppliers. DITTO for
EUROPE. If the Yuan rises 20%, so will your
prices on everyday items. The trade deficit has
been trimmed over 20% since the global financial crisis
began.
Just as China rises, so has Germany
as they BOTH have embraced the laws of nature and created lean mean
corporate production machines. They have lowered
corporate taxes and made their citizens and companies MORE
competitive in the global marketplace. They
provide INCENTIVES for people to produce rather than PUNISH them
for doing so, as does MOST of the developed
world. They have realized that economies are no
longer closed and they must compete or die at the hand of GLOBAL
consumers who demand and choose superior goods and services for
less money. It is the rational thing to
do.
Both countries UNDERSTAND that
economic and income growth is PRIORITY ONE before anything else,
including expansion of government and FREE goodies. That is why
they are winning the war to create prosperity and
wealth. They are embracing, rather http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image002.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />than running from,
COMPETITION. It is not good
public policy to embrace weakness and failure and penalize strength
and virtue. In the thriving parts of the globe
strength and virtue are rewarded and something for nothing is an
ABSURD idea. Hence their economies are GROWING
and have expanding income and employment.
Conversely, if you remove government
statistical adjustments (aka, politically
correct), the economy is still comatose in the US, let’s look at
www.shadowstats.com unmasking of the cruel hoax public
serpents are presenting to the public through their mainstream
media lapdogs:
Wow, it actually shows how little
REAL growth has occurred during the great debasement starting when
Alan Greenspan sold out to be re-nominated as Fed Chairman when the
Clintons were elected. This was when the easy
money and debasement really accelerated to support the economy as
Clinton PILED on the structural impediments (higher taxes,
regulations, etc.). The official Bureau of
Economic Analysis growth (top line) is courtesy of misstated
inflation and government ADJUSTMENTS to the economic
reports. The current gap between the top line and
bottom line has rarely ever been wider.
http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image004.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />Take a look at this chart (courtesy of
David Rosenberg at www.gluskinsheff.com) and his comments showing the UPS
and DOWNS in the S&P 500 since 2000; keep in mind
that the S&P 500 is down approximately 26% from the
2000 highs.
“When
we look at the last 12 years, dating back to LTCM and the bailout
that ensued, we have endured a 60% rally, followed by a 50%
selloff, followed by a 100% rally, followed by a 60% selloff,
followed by a 70% rally. The whole way along, the
equity market is basically flat for a buy-and-hold
investor. The point in all this is the
intense volatility that has been and continues to be nurtured by
government stop-and-go policies. The really important lesson though
is that this is a great case for active portfolio
management, also a lesson that investors will not lose out
by going long after a 50% collapse from the high; nor are they
likely to feel much pain from selling into a 70% rally from the
low.” – David Rosenberg
Lots of huffing and puffing from
Wall Street, CNBS, main street media and the banksters, but no
gains for YOU. Here is a
NOMINAL S&P 500 Chart (with a horizontal trend line
drawn from the 200 highs) denominated in FIAT currency, aka the
dollar:
http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image005.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />Not a pretty picture denominated in
FIAT currency. Quiz: Now that the markets have
run up 50 to 100% around the world since the March 2009 low, based
on the chart above how much risk are you taking for very little
upside if you are long?
Nor is this a pretty picture
measured in REAL money: Gold, it is down more
than 75% in REAL purchasing power terms since 2000, additionally
measured in REAL money the 2002 to 2007
rally and the whole rally since March 2009 disappears:
The Federal Reserve and Congress can
blow as much hot air as the main stream media can distribute, but
nothing changes the fact that they, and the economies they control,
are BANKRUPT and MUST print the money. Credit
spreads such as 2-year –vs- 10-year, 3-year –vs- 10-year, 5 –vs- 10
and 10 –vs- 30 are all near record wide, signaling huge supply and
the debasement of which the long end of the market will be
victims.
http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image006.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />Interest Rates can never rise again, as
by November 2010 the ON BALANCE SHEET debts of the United States
will be $14.5 trillion; a 3 percent rise in short-term yields is
$420 billion of additional interest expense per year, ON TOP OF the
current $1.6 trillion deficit, thus expanding it by
1/4th , to $2 trillion a year.
Interest rates can never be
normalized again, ever, and if measured accurately they are
profoundly NEGATIVE. Take a look at this
alternate measure of inflation from John Williams of www.shadowstats.com:
Wow, after unwinding the ADJUSTMENTS
(made by government to lie to you) inflation is at almost 10
percent on the items you use EVERY DAY; if interest rates were
normal, overnight fed funds should be 10% RIGHT
NOW! Notice how the GAP has widened over the last
three http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image008.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />DECADES? Just like
Pinocchio’s nose, the lies just keep getting bigger and
bigger. Think of it, negative interest rates
approaching 9% -- trillions of dollars of government spending
throughout the developed world and NO GROWTH in incomes and
economies. An inflation MEGA trend is
firmly in place and will continue to unfold.
There is no escape route except
printing the money and they will do so, as there is NO APPETITE for
doing the right thing, cutting spending and cutting
government. A clear indication that the
“something for nothings” are in the majority.
Look no further than the United Kingdom where labor has climbed to
parity in opinion polls as the something-for-nothing public refuses
to realize the depth and enormity of the unfolding insolvency
wrought by Gordon “sold the gold” Brown.
Housing is forming another BUBBLE;
the bubble is in delinquencies and bank-owned
foreclosures. After 2.9 million foreclosures in
2009, if the dam is allowed to BURST that figure will double this
year. The longer the government puts their finger
in the dike the greater the next debacle downturn will
be. High-end homes have a 5-year supply, and it
is growing daily. Take a look at the reset TIDAL
wave facing the banking and mortgage industry in addition to the
current state of affairs:
http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image010.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />Hundreds of billions of resets over the
next two years; notice how the resets approach the levels of 2007
just before the economy collapsed in 2008? How
many of those loans will be repaid? This is
trillions in potential losses. In an explosive
interview with Charlie Rose, Harvard Law School’s Elisabeth Warren
of the Tarp Oversight Committee confessed that her projections
indicate OVER 2,800 community and regional banks face INSOLVENCY
(http://www.youtube.com/watch?v=ERlMxc84_EM&feature=player_embedded).
“The commission has been repeatedly stonewalled by the FED and
the banks on who got how much money and under what
terms. She says that about 3,000 of the nation's
8,000 banks will be in trouble over the next three years. At least
half of commercial real estate loans are under water. Over the next
three years, they will come due. These loans are balloon loans. The
banks get to re-negotiate them. The problem is, the underwater
loans cannot be rolled over at the face value of the original loan.
That would violate accounting rules. Will the government allow the
banks to violate accounting rules? Will banks be willing to do
this?
If the loans are not rolled over, then the banks must take back
the properties and seek buyers. Until there are buyers, the loans
must be taken off the banks' balance sheets: dead assets. When they
are officially buried by the accountants, the banks must find
capital to replace the losses or else call in old loans to reduce
the banks' liabilities. This is why banks are depositing money at
the Federal Reserve Banks as excess reserves: to cover for the
expected bad loans”
-
Gary North
First
let’s answer the question at the end of the first quoted
paragraph: Yes, the government will let banks
violate accounting rules (they already are; many are operating
zombies that the FDIC cannot afford to close), as to the second
question: They will have no
choice. Bernanke in recent testimony has already
said CASH flow is the measure of a good loan, not collateral
values. This is setting the table for more BAD
loans and rollovers via REGULATORY forbearance.
The problem is set to grow rather than be
resolved. EXTEND and PRETEND solvency.
The
“too-big-to-fail” banks HAVE NOT disposed of their toxic
assets. Accounting gimmicks have substituted for
addressing the problems and they are more insolvent now than 2008,
and a tsunami wave of commercial and residential write-offs and
bankruptcies LOOM. The new financial regulation
bill basically puts the Fed (Fox) in charge of the hen house,
leaving the banks free to fleece consumers as they have in the
past.
A seminal
report on the Lehman Brothers’ bankruptcy was released and,
needless to say, it outlined potential criminality in management
and cast light on the New York Federal Reserve’s potential
complicity in the cover up. Swap 105’s which
allowed Lehman to move problem assets off the books and claim 105%
of the face value. When I read this report all I
can think of is Dennis Gartman’s COCKROACH rule.
There is never just one, we are waiting to discover the
rest. Where are the regulators?
Bought and paid for by the BIG players.
Chris
Whalen of Institutional Risk Analytics has reported that many CDO’s
and MBS (collateralized debt obligations and mortgage-backed
securities) did not contain mortgages equivalent to their sold-for
value and many had loans equal to only 95% of selling
price. The buyers were CHEATED by the seller and
not given the full value of the loans underlying the
securities. This is a TIME bomb for the big banks
and brokers who sold them. Where are the
regulators? Bought and paid for by the BIG
players.
2010 will
also be challenging for G7 Sovereigns as they TRY to rollover
inconceivable sums of existing debt while borrowing NEW money to
pay for the WELFARE states’ spending. Trillions
of dollars of borrowing challenges lie directly ahead; let’s look
at some illustrations of the rollover requirements for Germany,
France, Portugal, Ireland, Italy, Spain and Greece from www.newyorktimes.com and Reggie Middleton’s Boom Bust
blog;
http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image012.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />
These are just the rollover
requirements for the United States and do not include NEW BORROWING
of $1.6 TRILLION. So, a total of OVER $3.5
Trillion is required, providing that the deficits are as projected
by the CBO (are they ever accurate?). That’s
almost $300 Billion a month, or $10 Billion a day (10,000 million a
day). Mind numbing numbers!
Inconceivable sums. Now let’s look at European
rollovers from Reggie Middleton:
http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image014.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />
Think of the US issuance and add
this to it. Where will the money come
from? The printing press in one form or
another. That’s just the rollovers; now let’s
look at NEW issuance to cover 2010 DEFICITS from www.forbes.com:
http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image015.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />This is called
INSANITY. Only India, China and the emerging
world are growing in REAL terms, the rest of the borrowers are
DEADBEAT welfare states with shrinking incomes and economies, when
properly adjusted for inflation. How the US and
Europe are going to navigate the rest of the year without some
MISHAP is inconceivable. That will be
the appearance of the “when HOPE to FEAR” moment we are looking for
in 2010. This
DOES not include BANK and brokerage debt (totaling OVER a trillion
dollars) which must roll. And, of course, what
about the private sectors’ funding needs which are not included
here.
http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image016.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />Just today the Greek Prime Minister
Papandreou basically threatened/demanded that within a 30-day
period the EU arrange for lower financing costs, saying they CAN’T
afford the interest rates lenders are now demanding, intimidating
that they need SUBSIDIES (think guarantees) to pay part of the
interest. As a committed socialist, he must rely
on capitalists to subsidize them. This is a
gigantic game of chicken with the Euro currency as
hostage. Can you say EXPLOSIVE?
What is it he doesn’t understand about being a broke, deadbeat
socialist government and investors/lenders needing to be
compensated for the risk? I predict they will, in
one way or another, do as he says. It’s called
PRINTING the money, and it is how ALL problems are solved in the
western world.
Bonds are bombs, and WE KNOW this
because the public is PILING in with hundreds of billions of
dollars into these investment vehicles since March of last year,
while stock funds have seen barely a trickle of new
investment:
THE PUBLIC ALWAYS gets their heads
handed to them, because the bomb, er… bond market is the epicenter
of the crisis, they will again. They will CRASH
before this global financial crisis is over, and many will just
never be repaid. There will be far more failures
then you can conceive today because the incomes and CASH FLOWS to
service them is in freefall.
The public thinks bonds are safe
because they have been told this for five decades by the main
stream media, public serpents and now by the banks, brokers and
governments who are borrowing the money and issuing the
bonds. Maybe they were safe when economies,
credit and incomes where growing, but now that the situation has
reversed they are soon to be NUCLEAR waste. Huge borrowing and
declining income to service it. This
is a CASH FLOW depression. NEVER forget
this. Trillions of Dollars, Euros,
Swiss Francs, UK Pounds of bombs, er… bonds and not enough income
to pay the interest, let alone the principle. They will print the
money for some and let others fall to their doom….
Inextinguishable and unpayable debt
is the core of the crisis. Remember that the
bonds are IOU’s, as are the currencies in which they are
denominated; if one debtor doesn’t get you the other one
will. Government bonds, Muni’s, Mortgages, CDO’s,
MBS, consumer lending, pension bonds, state bonds -- basically,
everything in bondville -- is in crisis to one extent or
another. Many corporate bonds are in
extend-and-pretend mode. All levels of developed
world societies are in death, er… debt spirals.
Defaults have only just begun, and many multiples of the defaults
which have occurred to date are on the horizon over the next
several years. I would HATE to be Pimco right
now. http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image018.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />What are Bill Gross &
Company thinking? They better be VERY
selective. It’s probably a good time to consider
retirement before the going gets REALLY rough.
Quantitative easing in the United
States can never end. Who will buy the gigantic
issuance and finance the crashing housing market with mortgages
(the US government is already over 90% of this
market). Look at this breathtaking
head-and-shoulders top in the 30-year bonds from a recent Richard
Russell www.dowtheoryletters.com :
Wow, a top built over a two-year
period (an identical top can be seen in ten-year notes), gargantuan
is the word for this and it signals the end of a bull market which
began 28 years ago in 1982, when Paul Volker broke the back of
inflation. This is also a sign of the
inflationary mega trend we have now entered.
Break that right shoulder and interest rates are headed higher than
you can imagine. Bonds are toxic and capital
destruction is dead ahead.
Please understand, the Federal
Reserve can read charts too, and they will do EVERYTHING in their
power to avoid this pattern becoming active, because when it does
break, the money required to soften the blow will become
exponentially LARGER. They will print whatever is
required to buy and hold that neckline. They will
fail. Mother Nature and the holders of bonds are
bigger than they are, but the printed money will become many of the
seeds of the coming hyperinflation.
If you think this picture of
bonds is bad, take a look at them priced in REAL money, Gold:
http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image019.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />Wow, 75% losses and the 10-year Note
priced in gold is identical. Well, bonds have
hardly been safe, even when the interest payments are
arriving. This is just a glimpse of debacles to
come, as borrower after borrower succumbs to bad cash flow and
receding incomes.
Trillions of Dollars, Yen, Euros,
Pounds and Swiss Franc’s will be PRINTED to underpin the financial
systems and governments in the coming year and near
future. IT IS THE ONLY OPTION as developed world
incomes continue their collapse. This is how ALL
FIAT currencies fall to their demise, WITHOUT
EXCEPTION. This episode in FIAT folly (unsound
money) will be NO DIFFERENT.
Now let’s look at a confirmation of
the inflationary MEGA trend and the mirror image of the BOND top ,
in only one of the true currencies in the world, GOLD (the other is
SILVER):
This is a MASSIVE reverse
head-and-shoulders BOTTOM, but unlike bonds, it is active and
signaling a $350 move ($1,350) from the breakout area (another 20%
loss of http://www.marketoracle.co.uk/images/2010/Mar/outlook-2010_image021.jpgMarkets and Economic Outlook Conclusions" TITLE="Financial Markets and Economic Outlook Conclusions" />purchasing power from current
levels). It was also formed over the last 2
years. Gold is not a bubble, this is an orderly
market and the public is barely aware of it. This
is a picture of a well-supported BULL market and NO WAY can paper
currencies gain against it over time. it is
called a precious metal because there is limited supply, while FIAT
currencies are, and will be, printed in UNLIMITED
amounts. Bottom and top technical formations
constructed over 2 years time are extremely significant MACRO
signals and, once active, they RARELY fail, so the bond top (not
active yet) and gold bottom (fully active) hold a lot of
weight. The only people who believe fiat
currencies can gain on gold I call PAPER boys, they either do not
know history, or for them, history began in the last 50 years.
To be continue……
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