The bullion dealer's goal is to provide gold and silver bullion investors with market commentary when significant developments warrant updates. 
 

November 21, 2009:  America's Condition Has Worsened In The Last Year, Not Improved.


It is will great sadness that I observe the sorry state of the American Union in the waning days of 2009.  This year has been anything but one of renewal and recovery, but one of profound incompetence, prevarication, and misrepresentation.  Our Founding Fathers are in mourning somewhere in the ether, that the foundation they labored to construct with the blood of 100's of thousands and the sweat of many a brow is crumbling before our very eyes.  The heck with the Chinese expression, "We are blessed to live in interesting times"; we are cursed to witness the accelerating demise of a once Great Nation.  Led by career politicians, many of whom have never run even a Mom & Pop Grocery Store at a profit, those in power in the United States are more intent on inflicting their version of societal governance at all levels of life and proliferate-spending policies on an almost bankrupt populace than extracting the nation from the jaws of bankruptcy and subsequent social ruin.  Our nation will be great again someday in this New Millennium, I hope I live that long, but it will not be with the Ship of Fools, the utter self-serving, arrogant Political Hacks we have in Washington today getting all excited about a healthcare package that will impair the economy even more with additional taxes, inevitably higher premiums and healthcare costs to the public (not Congress and government employees of course!), and eventual rationing of services to individual American patients.  What idiots under God's blue skies come up with such irresponsible, campaign-payback policies at a time when the economy is the single most important issue for American constituents, BAR NONE.  Wealth preservation comes before wealth redistribution.

Heed you well on Capitol Hill and the White House.  Enjoy the time you have left for the American Mob known as the Citizens of the Land are coming to take back their country.  They are not Republicans, they are not Democrats, they are the Seed of the Founding Fathers. 

Politicians can only stay out of touch with those they purportedly represent for so long before they are replaced.  I feel a Sage Prediction swelling up:  Congress will be set on its ear in 2010.  Not by a Republican landslide, but by a Founders' Party landslide of Americans of all political thought united in their utter disgust of what passes for Governance in 2009 America.  The Country is headed in the wrong direction; the American people always have and always will put the country back on the correct course to freedom and prosperity given time and adequate resources.

All of the political contributions from Broad and Wall which seems to own the U.S. Government at this point will not be able to buy the votes of millions and millions of Americans who are struggling to keep a roof over their heads and food on their tables.  Look at what food shoppers have in their grocery carts these days.  It is more and more the basics with the treats of yore being left idly on the shelves.  More and more shoppers are paying with Food Stamps.  Look at the increasingly empty restaurants.  Look at the empty houses down the street, with not even a For Sale Sign in front of them, the foreclosing entity not wanting to compete with other empty houses this lender is currently saddled with, trying to unload or even rent.

This past week saw once again the utter falsehood of claimed employment gains from the Failed Stimulus & Recovery Act of 2009 on Recovery.Org, another signpost that it is not only business as usual in Washington with the truth-challenged Obama Administration, but their level of falsification of information and outright dishonesty takes Executive Branch ethics to newly plumbed lows.  They can no longer blame the Bush Administration for every failing they themselves elicit.  And all of the errors to date in even the correct Congressional Districts have been to the Plus Column, not the Minus Column, naturally, of Imaginary Stimulus 2009 Jobs.  It is not Government's role to even attempt to create jobs, they bungle the vast majority of projects they ever attempt and cost the American Taxpayer greatly and generations to come with bloated budgets and cost over-runs as far as the eye can see.  Few governments in the history of the world have been the epitomes of efficiency, and this one is certainly, certainly, no exception.

It is not only the fact that the Green Shoots so frequently bandied about via the airwaves are mostly illusionary as was the 3.5% one-shot GDP Growth of the Third Quarter, but that they are based on unsustainable spending that puts the Country on a path to fiscal bankruptcy.  And to hear King Obama talk about eventually reducing the Federal Deficit ......... it is so disingenuous that you want to puke!!!  The Fourth Quarter is going to be a Shoot Killer.  Stay tuned.

Now that many Cash-for-Clunkers participants realize that the $4,500 maximum tax credit was not a true credit at all with it being taxable as ordinary income, but also that they drove off the lots with vehicles that lost manufacturers' discounts of some $3,500 the minute the Government Subsidy Program began.  Nice to be saddled with another $25,000 to $35,000 of back-breaking debt during an unfolding Depression when the serviceable "Clunker" was destroyed like Hoover or Coolidge did to hogs and crops under another ill-conceived Economic Stimulus Gesture in 1930.  When you push the real numbers in this American Auto Industry Bail-Out, Phase II or III, I have lost count, the unwary consumer was behind some $1,500 to $2,000.  THIS IS THE GOVERNMENT THAT CAN'T SHOOT STRAIGHT, but it will never be made into a movie because people don't pay $15 ticket prices to see something that makes them cry or throw up throughout.

$1.5 Trillion Deficits for the next decade is the Death Knell for the A+ Credit Rating of the United States.  We currently do not deserve this highest investment grade rating anyway ( okay, who paid off Moody's and Standard & Poor's on this one??? I guess Uncle Sam just told them they would not be arrested for the over-rating of the Trillions of Collateralized Mortgage and Debt Garbage they were involved in!!! ) due to some $106 Trillion of future obligations that the Country will never be able to meet with only a $14 Trillion economy.  Even at a 100% tax rate that Globe Trotter Obama would like to see some day since He is certain middle-class people stole everything they have, there is no way you can pay it off prior to outright default.  And those presently-identified LIABILITIES will not be stagnant in this Dollar Amount as the decade unfolds, but will balloon with each 100 basis point increase in U.S. interest rates that our FOREIGN OWNERS WILL INSIST UPON BEGINNING SOME TIME IN 2010.  I am amazed that rates are still only around 4% on the long-end of the Treasury curve since inflation is decidedly north of 7% as we speak, but the Federal Reserve in cahoots with Goldman Sachs and JP Morgan has been buying unwanted Treasury Notes to the tune of some $300 to $400 Billion so far this year.  SO WHO THE HELL IS ON FIRST BASE?????????  This ploy cannot go on much longer even as the official Federal Reserve Program of Buy-Your-Own-Debt known affectionately in the vernacular as Quantitative Easing is set to expire in March, 2010.  THE CHINESE WILL BREAK BERNANKE'S LITTLE PRINCETON ARM IF HE DOES NOT DISCONTINUE THIS BANANA REPUBLIC SHENANIGANS BY THEN.  Spoken any Mandarin lately?!!

I have not changed my mind whatsoever about the upcoming WATERFALL DECLINE DESTINED TO COME TO A STOCK MARKET NEAR YOU.  I am not that good a top caller, as to the exact day, week, or month, but I do know a developing top when I see one.  THIS ONE IS GOING TO BE A DUSEY!!!  There is little of fundamental support for Dow 6500 or S&P 600 at this point in time, much less for where we are now on the indices as this is written.  We are heading back to the old, March, 2009 lows sportsfans, because corporate insiders and the really smart money has been selling with both hands and both feet all the way up!!!  And we go back to negative GDP growth with the First Quarter of 2010 government report, no matter how much they try to fudge the figures into positive territory.  Geeze Louise!  Why not just understate the inflation rate for the millionth time!!!

Such slights-of-hand keep those pesky Social Security Annual Adjustments at bay, don't they???  What these intelligence-challenged prevaricators of economic data don't remember is that SENIORS PACK ONE HELL OF A PUNCH AT THE VOTING BOOTHS.  And they generally have the time and money to stay very, very active politically until their voices are heard through real legislative change.  Can you spell T-E-A  P-A-R-T-Y.  Of course, in 2010, the Tea Party will morph from that politically acceptable phrase of over-liquified colonists to the stark reality of "ANGRY LYNCH MOB".  Figuratively of course, not literally.

The Sage is holding with his 2009 price target of $1,250 Gold, but has reduced his Silver projection to a mere $21.65 for the yearly high price.  Who really cares because THIS Congress and THIS Administration and  THISFederal Reserve and  THISTreasury Secretary and THIS Wall Street have all guaranteed that the Dollar is a doomed vehicle of domestic and international exchange that could go into its own Waterfall Decline at any moment.  It is the boulder resting on the edge of the global cliff that the slightest gust of wind is going to send careening down into the valley below with devastating consequences to the Global Villagers nesting there.  Most non-American villagers below the cliff are already scrambling to get out of the Dollar's way.  It is the majority of Americans who have not gotten the message yet, and will pay dearly when that loaf of bread takes a Wheelbarrow of Dollars in exchange.  Maybe we should teach German History in our schools.

Bullion product backlogs are now out to 10 days to 2-weeks.  THIS IS A SIGN, SPORTSFANS, OF LONGER BACKLOGS TO COME AS A SPIKE IN DEMAND IS RIGHT AROUND THE CORNER FROM THE EQUITY (OR BOND!) WATERFALL DECLINE.  This time may indeed be different from the Everything-Gets-Sold-To-Get-Liquid phenomenon of October, 2008 that saw highly-leveraged speculators whack the fundamentally strong assets as well as the fundamentally sick assets such as stocks.  I think the Precious Metals laggards or non-believers will have finally gotten the message this time around concerning the Store of Value merits of owning PHYSICAL GOLD & SILVER.  While the precious metals will dip when the bottom falls out of the Stock Market and/or Dollar (not a big Dollar Rally proponent at this time), they will be bought up so quickly that the pullbacks will be brief .... if scary at all .... and dollars escaping the slippery fate of no-retirement for holders will plow by the Billions into our shiny friends.  Gosh, they have been a friend to my retirement accounts.  I started buying gold for an IRA back in 1997 when it was around $275 and silver in 2003 when it was around $7.  THERE IS NO BETTER WAY TO GET EVEN WITH ANYONE WHO ANGERS OR HARMS YOU THAN TO BE SUCCESSFUL IN YOUR INVESTING, BUSINESS, OR LIFE PURSUITS. 
 

HAPPY THANKSGIVING, we can still give thanks for the plenty we generally have as a Nation, even though our Leaders have failed to lead.  GIVE CHARITABLY TO THOSE WHO YOU KNOW ARE SUFFERING THIS HOLIDAY SEASON.



THE SAGE OF WEXFORD, pitchfork, garden hoe, axe, railroad rail, tar & feathers, Tea Party sign, steamer ticket, diaper bucket, funeral marker, repelling rope, and shovel ready.




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December 21, 2009:  American's Need To Shift Gears or PREPARE TO WALK.


Most human beings are creatures of habit, some habits being very self-destructive ones.  Although the purveyors of FINANCIAL GARBAGE masquerading as stocks, bonds, muni's, money markets, and Treasuries (no National "Treasure" there, just mountains of eventually non-payable debt!) have continued to suck in the no-return-on-cash crowd since March of this year, the stock market in particular and the bond market secondarily show all of the classic technical signs of a topping action which will be prelude to another severe reduction in Personal American Wealth.  WHEN WILL THEY EVER LEARN was a song I used to play on my guitar.  Why Americans keep going back to Wall & Broad, the true casino of the East, is beyond me as I started virtually eliminating my exposure to financial assets back as early as 1999.  I may have left some money on the table as to never-to-be-realizable capital gains, but have basically stayed out of the financial markets since then.  Was short the market in August of 2008, thank you very much, and have been adding to targeted short positions since September of this year.  This is strictly "play money" which would not buy the average SUV, since I know that the Fed and Treasury are printing money at virtually no cost to borrowers.  BUT ALL ARTIFICIAL MONETARIZATION EFFORTS EVENTUALLY HIT A BRICK WALL, and the bill comes due with absolute resistance to future U.S. debt purchases by investors.  No gains in my strategic short positions as of yet, but expect some juicy ones once reality sinks into the pricing of stocks.  This is not investment advice, kids don't try this at home, just letting you know that I put my money where my mouth is in my business affairs ( sorry, Tiger, not that kind of "affair" ) and personal investing.  I am not bad-mouthing the financial markets to sell bullion.  I truly believe that the financial markets will soon enter Panic Sell-Off Phase TWO.

http://www.thedailybell.com/678/Stocks-Suffer-Worst-Decade-Ever.html

( Please come back to my ezine after reading this eye-opening article or you will get coal in your stocking!!!)

Americans are moths to the flame.  Not sure where the money is going that is currently leaving the niggardly yields of money market funds, some decidedly is going into precious metals bullion from my firsthand experience.  But even if it is going into bonds instead of stocks this is a big mistake being repeated by American investors:  Investing in Debt is only as good as the issuers' abilities to service and repay that debt and during a developing Depression, those abilities are well in question going forward.  ESPECIALLY SINCE MOST DEBT ISSUERS IN THIS COUNTRY ARE CURRENTLY SADDLED WITH RECORD LEVELS OF DEBT TO BEGIN WITH.  NOW SAY AFTER ME:  "THE FUNDAMENTALS STILL COUNT WHEN IT COMES TO INVESTING."  And American and Global fundamentals stink right now, thank you Bennie Boy, Timmy Boy, B.O., and all of the other agenda-driven clowns on Capitol Hill that have dug the economic and financial hole deeper in this developing DEPRESSION.  THROW MONEY AT EACH AND EVERY PROBLEM THAT WE HAVE AND DON'T ALLOW THE ONCE- ENVIED AMERICAN SYSTEM TO CORRECT ITSELF IN A MANNER THAT GUARANTEES THE SOLVENCY AND SURVIVAL OF THE SYSTEM AND ITS PARTICIPANTS.  The American I.O.U. is about to get a very cold shoulder from global investors.  If it were not for the Federal Reserve being the key buyer at some 5X Treasury Auctions this year, U.S. Treasury yields would be well north of 8%.  Not the end of the world at that level, but just a harbinger of much higher yields to come.  I have heard the expression many times this year and it is still totally fitting for all to hear:  "If you are in a deep hole, at least put the shovel down and stop digging!"  But appointed and elected officials always have to look like they are doing something to help even when they don't have a clue as to strategy, and this bunch of guys and gals need to be shipped to Siberia for a year or two so we citizens can straighten this mushrooming mess out.

Since this is my bully pulpit as the English would say, I will continue to rail against those that put the current and future fiscal solvency and standard of living of our once great country in harm's way.  Multiple Trillion Dollar Deficits as far as the eye can see will guarantee that our offspring and grandchildren will have no choice but to default on the payments of same, either outright or technically indirectly.  But expect the change for the better we did not get in 2009 to begin to come to a polling and voting place near you in 2010.  Even the seasoned professional political analysts out there are going to be shocked as to the degree of displeasure of the American voting public.  When the ruled suffer to the extent of struggling to hold a job and keep food on the table while elected officials vote themselves raises and increased spending budgets, THE POPULACE IS GOING TO REVOLT.  Hope Harry next year and Nancy the following year have their resumes updated in time.  Even the once-exalted Barrack Hussein Obama  with a disapproval rating of some 46 percent now, will have to go back to community service by the beginning of 2013, the only job he has ever held where his performance could even be remotely measured as "AS PROMISED".  This guy has really proven to be a charlatan in the worst of performances of political theater; it is all smoke and mirrors coming out of the White House today.  Bold face lies are spewed forth daily, but the body language under the camera's telling eye reveals the faint, momentary twinges of a conscience long dead to all who know the signs.  To call Copenhagen a success is right from the Theater of the Absurd.

Gold and silver and palladium and platinum suppliers and refiners around the world are once again into backlog situations mainly due to the tremendous demand for these Anti-Financial / Anti-RealEstate Assets.  Secondarily is the time of year effect where much-deserved vacations are taken, refineries and Mints are partially shut down for maintenance and change-over to 2010 products, and weather-related delivery delays occur even from sovereign Mints.  But expect higher premiums on most products going into 2010 as the wheels fall off the Wall Street Bus once again, the Dollar continues its search for true value ( hint: much, much lower ), and our politicians add fuel to the fire to accelerate the double dip of the economy and the financial markets through outmoded progressive policies that re-distribute wealth, BUT DO NOT CREATE IT.  Probably 40% of WCM's much cherished business is new buyers these days, so be patient with the Sage if he is not patient with you after answering the same, "How do I buy precious metals bullion from your company?" question for the 100th time in a day.  In fact, since I am soooooooo in the Christmas Spirit right now after shoveling and snow-blowing 20 inches of snow this weekend, here is a clue to the answer::::::

 

I do not mean to be unkind when I take a very deep breath and bark back a curt answer, but I is gray-haired, my back hurts, I am crankier by the year, and Americans were taught to read around age 6!  So please, please, if you want the Sage to be around for another 21 years in business ( I will never make it cause the wheels are already coming off of this old battered bus! ), PLEASE PERUSE MY VERY INFORMATIVE WEBSITE THAT TOOK MANY MAN-YEARS TO PUT TOGETHER BEFORE GETTING ME ON THE PHONE ( and I did not expend all of this limited Sage Energy for the fun of it ).  Okay, I will take my meds, get happy again, down a spiked eggnog, and try not to beat that dead horse again.  I will get you the best prices possible on the most-liquid, highest quality bullion in the world, but don't make me do my job multiples times on the same easily-sourced answers.

Back to the bullion market.  Higher bullion premiums over spot are definitely inevitable because regardless of what your lying Government is telling you about inflation, insurance premiums for bullion shipments are escalating, fuel premiums for shipping are persistently higher even with reduced volumes for carriers, and the outright scarcity of bullion products without 2 to 3 week delay times to first shipment dates are FACTS OF LIFE TODAY IN THE BULLION BUSINESS.  I will continue to make my whooping 1.1% over wholesale cost for Gold and 1.7% for Silver and may even reduce them as Gold gets to $1500 and Silver to $30 in 2010.  No guarantees, but things are worse today than in October of 2008 with the purported economic recovery a statistical blip on the radar screen and little else.  Third Quarter GDP just revised DOWNWARD to 2.2%, mostly artificially stimulated / tax-credit / one-time growth that will never provide the tax revenues necessary to either SERVICE or PAY-OFF THE BALLOONING NATION DEBT under Obama and his lackeys on Capitol Hill.  FINAL DEMAND is the key ingredient missing on all of the economic assumptions bandied about from Above.  An economic concept that Washington bureaucrats have no grasp or experience with.  How can final demand be increasing in a consumer-driven economy when basic expenditures for subsistence are shrinking and are difficult if not impossible to meet at the wage-earner level that does not have a Bernanke or Obama Printing Press???

On the major capital expenditure front, Ford Motor Company may well end up being the only American automobile company to survive by 2015.  Just a well-educated guess on the part of the Sage.  Much of the American Taxpayer Money put into General Motors and Chrysler will go down the toilet, especially when the stock market tanks early next year.  My Subaru Forester is now over 7 years old, and I have no plans for a new vehicle for the next 5 to 7 years along with our equity investments in these Dinosaurs.  And the Scrooge Sage is not alone in this perspective, because New Millennium vehicles last well into the 150,000 to 200,000 mile range without engine or transmission replacement AND MANY AMERICAN WILL NOT BE ABLE TO AFFORD A NEW VEHICLE IN THE NEXT 5 TO 7 YEARS I AM REGRETFUL TO INFORM THE BAIL-OUT KINGS IN WASHINGTON.  Cash For Clunkers was a glaring economic stimulus failure, taking sales from yet-to-come periods, and putting already debt-laden Americans on the hook for vehicles they truly cannot afford.  Now we have the Anointed One promoting Cash for Caulkers which once again fails to see the necessity for Americans to come up with extra loot, regardless of the Al Gore Green-ness of the effort  to make the net, after-tax expenditure in the first place.  Al needs to lose weight, his bulk is adding to Global Warming AND THAT TENET IS REAL SCIENCE!! ),  Let's see:  Uncle Sam pays 30% of the non-basic, can't-eat-it expenditure and Joe/Josey Citizen still pays the other 70% that his or her Green Heart may not have.  Wow!  Let's stimulate some more entrants to Debtors' Prison to keep the Cash-For-Clunkers Debtors company!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Got a little side-tracked there, but I am sure you enjoyed it.  My Axelrod Spy Camera can see you rolling in the aisles!  Gold is at $1092 and Silver at $17 as I type, so put down that wrapping paper, STUDY MY WEBSITE, and give me a call.  Although I had my second best year ever in 2009, the 2008 Panic Year being the best, I still have to make more money to send to Washington to pay for ObamaCare, ReidCare, and PelosiCare, not to mention Nancy's airplane rides to an fro her husband's vineyard in California.  So help me out here in the interest of the nation.  Just saw the President-elect of the AMA, American Medical Association, support the Senate version of Healthcare Armageddon, so I am sure we will see this shill greeting shoppers at a WalMart near you when the majority of American Doctors who strain to take Medicare and Medicaid patients currently under 80% reimbursement rates throw the guy out of office.  Anyway ........................................ it is tough to go to bed at night after watching the news and settle down enough to fall asleep right away.

BUT US SERFS OF THE UNITED STATES WILL EVENTUALLY RISE UP AND THROW THE SELF-INDULGING ROYALTY OFF OUR WEARY BACKS.

I know that I over-shot in my forecast the annual high price of Silver for 2009, and no you cannot have your money back for this free ezine.  However, there is more and more data available today that educates investors to the true scarcity of this precious metal, THE POOR MAN'S GOLD, and I will stand, for now before I get a spanking-new position on the White House teleprompter, by my $30 target for 2010, a stock-market-like rise of 76% from today's measly $17 price per ounce.  Sounds far-fetched, right?  How about a stock market that had a March, 2009 low of Satan's 666 on the S&P 500 and now trades at 1114 for a 67% 1930's rally.  And the latter done with flat to deteriorating Fundamentals, not improving ones like the Precious Metals; just wait until First Quarter, 2010 results come in, they will not be pretty regardless of the tweaking down by the Statistical Serfs at BLS.

NOTHING IS IMPOSSIBLE IN A WORLD OF SEEMINGLY ENDLESS LIQUIDITY FROM GLOBAL GOVERNMENTS AND IN A WORLD OF SHRINKING SUPPLY FOR BOTH SILVER AND GOLD.  Especially when virtually all other asset markets will head South with abandon some time in (early?) 2010; expect more economic and financial turmoil in 2010, not less.  Forecast:  Real Estate problems will actually accelerate again next year as more mortgage resets occur on underwater homes, commercial real estate implodes, and home prices continue to decline with a record 14 months of supply sitting on the market.

SPEAKING OF SILVER AND GOLD: 

MERRY CHRISTMAS, HAPPY HOLIDAYS, AND A HAPPY NEW YEAR TO ALL, EVEN THE UNFUNDED LIBERALS OUT THERE.

GOD BLESS THE MEN AND WOMEN OF THIS COUNTRY THAT ARE WILLING TO PROTECT US COUCH-POTATO, ARMCHAIR DIPLOMATS AGAINST ANY AND ALL THREATS.  They are part of the stuffing that will make this country great again within the next 50 years.

Now we just have to protect ourselves from the threat within.


( THANKS ALSO TO EVERY PAST AND PRESENT CLIENT OF WEXFORD CAPITAL MANAGEMENT FOR MAKING MY EVENTUAL EXODUS TO NORWAY A REAL POSSIBILITY WITHOUT HAVING TO TRAVEL VIA STEERAGE. )


THE SAGE OF WEXFORD, holly branch in hand to put on Nancy's Senate seat.


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January 17, 2010:  Most Landmines from 2008 Still Threaten The U.S. Investing Landscape.


Hate to be the party-pooper this early in the new year, but the celebratory language coming out of Washington and the increasingly skeptical News Media about financial system and economic system recovery in progress are misguided to put it politely and incorrect to put it succinctly.  Government stimulus efforts in 2009 merely created temporary bursts of spending by cash-strapped American consumers, forcing them to take on additional debt at a time they could ill afford to do so, and basically robbed final sales from the Fourth Quarter, 2009 and the First Quarter of 2010.  The number of jobs, permanent, wealth-building jobs, created by the 2009 $787 Billion Economic Stimulus Bill are so insignificant in number and economic impact that one can only conclude that The Government has failed to date to pull the U.S. economy out of the Economic Morass it is still firmly stuck within.  This is no surprise to any student of Economic History.  The private section of the American economy has always been the Job Engine for sustainable growth and will continue to be under a Democratic Capitalist System ( DCS ).  Within a DCS, and in order for that system to survive intact over hundreds of years, success need be rewarded with the fruits of labor while failure need be rewarded with the disappearance of mismanaged, imprudent, fraudulent, or greed-driven enterprises and its captains.

On the contrary, the Government sector of the economy has ballooned over Obama's first year in office, a sign of his misguided preference for Big and Over-Reaching Government to attempt to cure any and all of what ails American Society, even those areas such as Healthcare where the majority of Americans are reasonably content with their existing coverage such as MediCare, OR AREAS WHERE AMERICANS TOTALLY OBJECT TO GOVERNMENT MANDATES AND INTERFERENCE.  Most damaging outside of the economically punitive legislation continually coming out of Washington such as ObamaCare, the Financial Bail-Outs starting in late 2008 under Bush and put on steroids under Obama have only put on life-support, with temporary reprieves, such failed institutions as Fannie Mae, Freddie Mac, AIG, General Motors, GMAC, and Chrysler; these entities in a true democratic capitalist system would have been allowed to fail, the chips falling where they DESERVE to, but not on the backs of American Taxpayers.  To even begin to think that Americans will make money on any of these so-called "investments" is to be gullible at best and uninformed at worst.  Chrysler is almost a sure bet to fail along with GMAC, as auto loan defaults set new records almost monthly.  So there is some $30 Billion to $40 Billion down the taxpayers' drain.  The pre-bankruptcy money put into General Motors of some $13 Billion is already down the drain, with the stock that we lucky citizens own quite likely to go close to zero in the next several years as GM shrinks to maybe one or two car lines from the vastly reduced four of today.  I think the number for AIG is some $80 Billion and counting, with most of the toxic assets originated by this Titanic of the Insurance World still smoldering on their books and still awaiting extinguishment.  Add Ginnie Mae, the new guarantor for Government Mortgage Relief and the FDIC, the under-capitalized Government Bank Insurer, to the list of failing institutions since they are already insolvent, the FDIC carrying a Negative Net Worth of over $8 Billion this moment.  A total of 140 private bank failures in 2009, 3 banks as of this past Friday in 2010, and many more to come as one loan category starting with Subprime Mortgage to Prime Mortgage to Commercial Real Estate to Credit Card to Auto Loan to Student Loan go bad one after the other.  This reality is virtually guaranteed in a budding Economic Depression after a Colossal Debt Collapse precipitated by Excessive Monetary Looseness at the Fed and Excessive Risk-taking in hand with Excessive Leverage in the private sector:  corporate, banking, and homeowner.

SIDEBAR:  Now the Federal Government is hell-bent on Excessive Leverage.

All of this deterioration is destined to occur just as the Net Tax Burden on Americans will be legislated to increase at the County, State, and Federal levels.  Desperate Bureaucrats do desperate things, and God forbid that civil service payrolls be cut in the Nation's time of need.  There are now more $100,000 plus salaries being paid out in Washington than in any time in history.  While the Nation's people suffer, those feeding at the Public Trough squeal with glee.  For the Citizens of the Land, it will be a cut in services across the board even as your net payouts to Government go up quarter after quarter whether it be from new fees for formerly free services, higher income tax rates at both State and Federal levels, a 1/2 percent increase in Sales Tax, more limiting or outright elimination of current tax deductions, or tax penalties & added premium costs under a New PelosiReidObamaCare Healthcare System.  The allowed-to-expire Bush Tax Credits are a Middle Class Tax Increase that will be like a thief in the night that most Americans won't realize have picked their pockets until it is time to do their taxes in 2011.  State Sales Tax and Income Tax increases are virtually inevitable in the most destitute States such as California, New Jersey, Nevada, Michigan, Rhode Island, Florida, and maybe even Your State.  These increases will get many politicians thrown out of office in 2010 and beyond, but many current politicians gauge their own political power by the number of government employees under them, their annual budgets, and the number of new programs they can add to the till each year to attempt to stay in power.  Property related taxes such as the Real Estate Tax and Personal Property Tax will see Appraised Values that will be persistently overstated in relation to the realities in the respective property markets within a Depressionary America.

THE FACT THAT PRESENT AND FUTURE AMERICAN TAXPAYERS ARE GOING TO BE ASKED TO PAY FOR THE MISMANAGEMENT, IMPLICIT FRAUD, AND EXCESSIVE COMPENSATION OF THESE FAILED INSTITUTIONS IS ABSOLUTELY APPALLING TO THE VAST MAJORITY OF AMERICANS. Not only is it appalling, it seals the fate of the country's economic future, which is no longer a bright one, but one of a subpar performer burdened with unpayable debt at all levels.  This shifting of private sector imprudence and $Trillion Losses onto the backs of present and future Americans is a watershed event that in conjunction with $1.5 to $2.0 Annual Federal Deficits as far a the eye can seem ARE GUARANTEED TO FURTHER BANKRUPT AN ALREADY BANKRUPT COUNTRY, THE UNITED STATES OF AMERICA.  The efforts to date of our elected and nominated officials have merely been to dig our financial and economic system further into a much deeper hole that will take decades to exit from.  Welcome to the Greater DEPRESSION of 2008 my fellow Americans.

To think that 7 of the 8 major Money Center Banks of this country have paid back the American Taxpayer with interest on the TARP funds borrowed ( Citi is the exception )and that this whole Government Intervening Subsidy Plus Bail-Out was a success, THINK AGAIN.  These very same banks sold $Billions of newly-issued stocks and bonds in 2009 ( IN ORDER TO PAY THE GOVERNMENT BACK AND GET THEIR COMPENSATION LARGESS GOING AGAIN ) that were gleefully and blindly purchased by ............ drum roll, please ......... AMERICAN TAXPAYERS.  Robbing Peter to pay Paul?  Now to point out that American Investors do some very stupid things these days is not my intention here.  My intention is to show that you, Joe and Josephine Citizen, will still be left holding the rotting asset bag when the music stops.  Can you get a 5% interest rate on an unsecured loan at the same bank that Uncle Sam lent YOUR MONEY to?  Nope.  What toxic, defaulted mortgage assets did the Federal Reserve take in from both Fannie and Freddie last year, to hold until the stench grows so strong that the insolvency of the U.S. Central Bank causes either a U.S. Debt Default or Dollar Devaluaton?  I get a little confused in here as to who is on first base, per Laurel and Hardy, but I think the number is $400 Billion with a new "faux ceiling" of some $600 Billion, please correct me if I am wrong.  In any case, a BIG NUMBER, and this ceiling had just been increased by Congress at the request of the Fed.  Hey, we are Americans!  Nothing is too big for us to handle!!!  We have money coming out of our ears, or so says Obama and Congress!

Now what is the amount of VIRTUALLY WORTHLESS SECURITIZED ASSETS that the Central Bank, God bless Bernanke because this academic will eventually need His Help, has taken onto Public Books via the Fed in order to help the banks not to lend money ........ I mean LEND MONEY?  Audience participation is encouraged here, but I am going to say $500 Billion to $1 Trillion of toxic assets that you the proud American Taxpayer now owns because the banks will lobby and contribute to never have to take them back; or at least they will not have to take them back at Original Cost, some 90% to 80% more than Current Market Value.  Plus, the banks still have $Trillions of rotting Securitized "Assets"/Derivatives still parked on their books AT ORIGINAL COST, NOT MARKET VALUE, that have not been written down to what a sober person would pay for them TODAY!  There is data on the internet to confirm this number, but you get the picture, another BIG NUMBER.  Then we have the Quantitative Easing campaign by the Fed that has a ceiling of $300 Billion for U.S. Treasury BUY-BACKS that is set to expire on March 31, 2010.  FAT CHANCE OF THAT AMERICAN SUCKERS!!!  Now it has been documented that the Fed's Quantitative Easing program stepped up to the funding plate no less than 4 to 5 times in 2009 to assist the U.S. Treasury sell its endless stream of Government Debt that Barack helped make.  The Fed is tagged to have purchased from Goldman-Sachs and JP Morgan-Chase some $400 Billion in 2009, the very next day after technically failed Treasury auctions, so Bernanke and Crew must have hired Bernie Madoff's accountant to create balance sheet categories that don't show over-stepping of the Fed's self-stated limit on BUY-YOUR-OWN-DEBT, YOU-BANANA-REPUBLIC-YOU.  No this is not the name of the new Federal Reserve Balance Sheet Category, or Shell Game Shell, but it should be.  Madoff's bean-counter will definitely be called upon for Creative Fed Accounting ( CFA ) in 2010, because there will be fewer buyers of U.S. Treasuries who want Banana Republic Debt or low interest rates on this Gar-Baaage ( pronounced with a French accent to give it some panache or class or credibility! ).  Interest Rates are in the process of heading higher, a death knell for the bond market, the stock market, AND THE ECONOMY, green shoots be damned.

Wall Street is starting to see disappointing earnings reports already from Fourth Quarter, 2009, and they will likely get progressively worse as 2010 unfolds due to THE LOSS OF CONFIDENCE BY AMERICAN CONSUMERS.  The recent Consumer Confidence readings about current and near-term conditions were at record lows, and this is a fact that all the spin-meisters in Washington and the Financial Press cannot airbrush over.  A frightened Consumer is not one to open his or her purse in any significant amount in the Quarters ahead.  THE LOSS OF CONFIDENCE PHASE, Washington you have not helped one iota, IS FIRMLY IN PLACE FOR THE GREATER DEPRESSION.  Once the Sheeple, a.k.a., Sheared People, get frightened that stock prices as well as home prices do not just grow to the moon each and every year, the rolling over action that we have seen in the Stock Market since September, 2009 will turn into what it inevitably must:  AN OUTRIGHT ROUT.  Stock investments via the S&P 500 over the last ten years returned a NEGATIVE 9%, so if you think you are going to retire partially on your stock portfolios, think again.  We are at the edge of another cliff circa late 2008, stock investors.  SELL NOW OR THINK ABOUT SELLING YOUR FUTURE DOWN THE RIVER.

NOW SAY AFTER ME:

THERE CAN BE NO SUSTAINED ECONOMIC RECOVERY UNTIL BANK CREDIT GROWTH TURNS POSITIVE AGAIN.  Not a single economic recovery has ever occurred in the United States without an increase in overall borrowing at the private level, period.  This is an outright DEFLATION IN DEBT, but it is an essential ingredient that must occur before any FUTURE SUSTAINABLE ECONOMIC RECOVERY CAN TAKE HOLD.   Just like over-eating at the dinner table, the American diner is pushing the Debt Plate away and striving to pay down as much debt as possible as quickly as possible.  As debt collapses or deflates, partially through default of distressed borrowers, real prices continue to increase for the average consumer as Monetary and Fiscal policies take highly inflationary paths that devalue the currency and, resultantly, inflate real goods needed for basic subsistence.  Add pending Tax Increases to the mix, and last year's Tea Party events will be very mild compared to what is to come.

The Sage is available to the White House and Congress on a $100,000 per week consulting rate or whatever Failed Central Banker Greenspan is getting these days.  ECON 101, NOT ROCKET SCIENCE.

 

For a CEO of a major Money Center bank to state that he did not know that home prices do not always go straight up, and, hence, he kept lending with both hands and feet using Other People's Money well past the August, 2005 peak in prices:  "ME BAD" is his excuse for bankrupting the Bank!  GIVE ME A FRICKING BREAK!!!  Either fire him, hang him in the public square, or give him a placard in the Banking Idiots' Hall of Shame.  Or, all of the above.  But since this unenlightened, VERY highly-paid U.S. banking executive owns the loyalty of many occupants in the White House through prior contributions, I will leave his name out of this for fear of the Black Boots.  WOULD YOU KEEP YOUR MONEY IN HIS BANK AT A LESS THAN 1% ANNUAL INTEREST RATE???  It is no wonder Americans have lost faith in their Government, their Government institutions, and the U.S. banking & financial system.  Oh, oh, oh, I just remembered:  How about the Goldman Sachs executive who said such $Billion-Dollar-Bonus-Pools such as his were really just rewards for doing "God's work" in helping the American public obtain financing to run the economy???  Whoa Nellie.  Pay them a vote of "NO CONFIDENCE", America.  TAKE YOU MONEY OUT OF THEIR BANKS.  Dig a hole in the ground, put 3- to 6-month's worth of living expenses into it in Cash form only.  At some point in the next year or two, we will have a Bank Holiday in the United States.  It could be days or weeks before you have access to your money again, so be prepared.  Based on the cover-up of asset values on the majority of U.S. bank balance sheets and the continuing failure rate of U.S. banks, The Sage is going to glibly forecast 200 U.S. bank failure in 2010?  Based on Japanese LOST DECADE ACCOUNTING being adopted here and the real state of the U.S. economy from the MAN-ON-THE-STREET view, I think this devastating event is almost inevitable.  AND OF COURSE, BUY GOLD AND SILVER WITH THOSE WASTING, IN-HARM'S-WAY, BANK DEPOSITS AND STOCK SALE PROCEEDS.  You knew that was coming, but I put my own money where my petite mouth is.

Speaking of the Precious Metals:  It is impossible to know in advance whether or not both Gold and Silver will pull back when the financial markets hit the impending Brick Wall of Price Rationalization ( Hint: much lower prices ) that we are fast approaching, if not upon.  In my humble opinion, there may be a temporary fainting spell for the Precious Metals at that juncture, but I think it will be both shallow and short-lived.  I know I have said the same thing for prior corrections, but have the odds and conditions on the ground behind me on this one!  Investors have literally few-to-none other places to put cash created from asset sales these days other than the safety of Tangible Assets.  In another tentacle of the Obama Administration's reach into every aspect of American life, talk of the CFTC actually limiting the size of commodity positions on the exchanges is a positive, not a negative for precious metals investors.  While this may constrain price actions ignited by otherwise larger long positions, it has been the history of the exchanges to allow much larger short positions in relation to long positions in the precious metals.  Not to mention short positions as much as 10 times the ability of short-sellers to deliver physical metal to meet their obligations if forced to do so.  This situation is particularly true in the much smaller Silver market.  So if the likes of Goldman-Sachs and JP Morgan cannot pile on the shorts in humongous positions in a heartbeat, the longs have a much better chance of winning the day and not getting washed out at every drubbing handed them by a mega-financed Cartel of Precious Metals Shorts ( CPMS's ).  It will be a more level playing field than one potentially having received virtually zero-rate financing from the New York Fed and the Plunge Protection Team.  Governments out of control always outside hire hacks to carry out their most dirty deeds.  Remember, this potential limitation on position size is only to limit U.S. trading, but I submit that is where the majority of transgressions occur, partially due to implicit Government intervention.

In the real world of physical Gold and Silver there are very few sellers in relation to the number and dollar volume of buyers; I know this from first-hand experience running a very successful bullion business.  This applies to the global precious metals market as well, and even if the longs in the U.S. cannot carry the day, the longs in Hong Kong and London and Dubai can more readily do so with a reduction in the ability of U.S. shorts to overload the U.S. exchanges AND SET THE PRICE FOR THE DAY.  The jig is up for the U.S. Dollar, it is not a matter of "if", but a matter of "when".  The forecast that overseas central banks would become net buyers of Gold in particular was made within these electronic pages back as early as 2003 by The Sage.  That forecast is coming true in spades.  The short sellers in Gold and Silver had better keep their resumes updated.  Of course, they can always go work for a Ballooning Government.  Expect a spike in the metals as we enter "Financial Panic, Part II" in 2010.  Also expect real shortages to re-appear with 4- to 6-week backlogs as we enter the Fall ( or sooner, this is a very tough call ).  Buy now or expect to pay higher prices for refined/minted products not only because of higher spot gold and silver prices, but higher delivered premiums on bullion products as shortages re-develop.  Exploding demand with limited production capacities around the world invariably leads to much higher prices. 

Now back to the playoff games.  However, the SuperBowl of Investing has already begun.

Are you on the winning team?



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February 23, 2010:  New Debt Is Not An Element The U.S. Economy Needs Any More Of.


What our elected officials are thinking about when they fall all over themselves to attempt to get our very sick U.S. banks, a.k.a., Zombie Banks a la Japan's experience, to lend money again, I don't have a clue.  There is always two parties to any lending transaction, the Lender and the Borrower (duh!), and neither party is exactly in great shape today to engage in an expansionary increase in debt on their respective ledgers.  It is unencumbered assets that all parties need to counter the massive leveraging of the past 30 years and IT WILL TAKE ADDITIONAL DECADES TO STRENGTHEN THE U.S. BALANCE SHEET AT ALL LEVELS.  I think the Keepers of the Public Gate have rapidly forgotten that it was Excessive Debt that got us into this mess in the first place, and how more of an offending drug can help an overdosed patient is beyond me; I did not go to Med School, but logic can easily prevail in this instance for anyone with a pea of a brain.  When America's primarily insolvent banks can buy Treasuries and Agency paper with the $100's of Billions of basically free money thrown at them by the Federal Reserve and the U.S. Government under a myriad of Bail-Out, "Bank Liquidity" schemes, would someone in Washington or at the Fed please tell me what is the motivation for any shaky bank to make a loan to an increasingly financially-challenged world of consumers, small businesses, and corporations.  THERE IS ZERO MOTIVATION ( aside from protecting bank executive compensation programs from Washington's control and capping ) FOR A U.S. BANK TO BE LENDING IN AMERICA TODAY.

When the Bond Vigilantes come screaming back to put rational yield pricing back into the debt markets based on ability to service and repay in a timely fashion, then there may be some vapors of motivation to take the risk and originate a loan to the outside world.  But with the pricing of short-term money by the Fed at less than 1% in almost all forms, Fed Funds and Discount Rate included, a virtually risk-free spread can be enjoyed by these not-so-prudent, honest, or even bright lenders without having to even take the time to review a loan application or to analyze the credit-worthiness of the applicant.  There is hope in Mudville, though, as I pound this ezine out.  The bond vigilantes are back, especially at the 10-year through 30-year maturity regions and, drumroll please:  LONGER DATED YIELDS ARE NOW HEADED STEADILY HIGHER.  The chart of the Treasury notes and bonds shows a classic cup and handle formation that usually breaks to the upside with a vengeance, and we will have 6% yields before summer of 2010, a level not even experienced prior to the Lehman Brothers Financial Collapse Trigger.  Much higher yields are to come due to the financial condition of most American borrowers, especially the United States Government which should be rated at Junk Bond status by now if the credit-rating agencies were not petrified of government penalties for being part and parcel of the Sub-Prime Mortgage Collapse.

Quantitative Easing by the un-enlightened Federal Reserve under pure academic Bernanke is to end on March 31st, an event which remains to be seen from a central bank that never saw ultra-easy credit as ever a threat to the very foundations of the American system.  Trying to provide liquidity to an economy and system that have little appetite for additional risk via leverage (aside from the leveraged crowd on Wall Street!) is the classic pushing on a string analogy used so many years ago in the financial media.  Cheaper rates on mortgages that few Americans can afford to take on even at 5% still find only a modicum of qualified candidates due to rising homeowner costs of maintenance, utilities, and property taxes.  Property taxes from bankrupt counties across the land are going to rise no matter what appraised values do because the localities critically need to maintain this revenue stream as business and sales taxes recede significantly during this Depression; the fall-off rate is easily 15% to 25% in most locales.  To think that inflation is staying modest during this collapse is to ignore the realities of food costs, energy (gasoline to $3.35 by Fall), taxes, health insurance, property insurance, and most elements of everyday life in America.  As a businessman, who has run several profitable businesses in his lifetime, I know my costs are going up year to year on the same goods and services.  With a grossly understated official inflation rate the Government can starve Social Security recipients via niggardly annual COLA increases (Zero in 2010!!!), and OVERSTATE GDP ON A CONSISTENT BASIS THAT MAKES A CONTINUING DEPRESSION APPEAR TO HAVE AN ILLUSIONARY RECOVERY.  Even the Bureau of Labored Statistics will have to release one or two quarters of negative GDP results before 2010 is over.

Now I don't want to be critical of the Obama Administration, Congress, and the Federal Reserve, many whose members know virtually nothing about running a business, much less the largest economy on the planet, but prudent humans only take on more debt when their incomes are stable or have the prospect of increasing sufficiently to service the new incremental burden.  Promoting more borrowing by the private sector in today's depressionary environment sounds very much to me like the oh-so-good advice that Alan Greenspan threw out to the American Public when he extolled the "virtues" of variable-rate mortgages that allowed much-less-qualified borrowers to have a place to call "home".  I have yet to find in the U.S. Constitution where owning one's home or, more correctly in most cases, owing a bank or mortgage company 100's of thousands of Dollars for decades, is an inalienable right of any people, but we will leave that touchy subject alone to keep the political ire generated by this newsletter to a minimum.  But when Harvard and Princeton grads espouse statements that we would be just fine if only the Lending Floodgates would open up again, is pure, unadulterated crap.  Disingenuous political pabulum at best, outright stupidity at worst.

Americans don't need to dig their financial holes deeper right now, using the Federal and State Governments as examples of what happens when you continue to spend at will even when the tax revenue stream has evaporated by some 20% across the nation.  I just love it when Prez Obama preaches fiscal discipline and creates a Debt Review Committee on Day One, and then, on Day Two, proposes a $1 Trillion Health Care Bill that this nation just can't afford.  This guy is all over the map.  He either thinks we are stupid OR really doesn't care what we think which is probably most accurate since he now realizes that he is destined for only one term and is determined to shove his style of Socialism down our Proletariat throats while he rules from the White House.  In a truly democratic capitalist system, which we unfortunately no longer have, cycles are allowed to run their course to the absolute benefit of the populace over the long term.  Let the chips fall where they should; DON'T REWARD PRIVATE SECTOR FAILURES WITH PUBLIC SUBSIDIES.  Would you raise your own children this way???!!!  Me thinks not.  Unless you want Freddy or Suzie on the Public Dole the rest of their lives.  We have bastardized the American economic and financial system so much at this point, that I am not sure what label one could correctly place on this hodge-podge of "rescue" efforts and Government Take-Overs, but Elitist Socialism is as close a moniker as I can come up with.

This is Socialism where the biggest campaign contributors to the hacks currently in Washington are spared their jobs, financial packages, and duly-deserved incarcerations while the majority of the financial burden for these well-connected elite's massive business failures is placed upon the backs and shoulders of the Taxpayers, the Commoners or Proletariat.  Not just those Taxpayers alive today, but those that will come after us for generations and generations.  This ultra-expedient approach to problem-solving has created a precedent in American history that will affect our way of life for not only decades, but possibly for the next 235 years.  If we were fiscally doomed in the Fall of 2008, we are decidedly "fiscally doomed" in the winter of 2010.  Unusually heavy snows are not the only thing that will be falling from the sky before Spring.  THE INCREASING REFUSAL OF FOREIGNERS TO BUY U.S. DEBT IS THE WEATHER EVENT THAT IS ALREADY APPEARING OVER THE HORIZON.  Interest service on the National Debt will become the largest item by far in the Federal Budget within the next several years, partially due to rising interest rates on that debt due to sinking U.S. creditworthiness and rising Dollar devaluation prospects.

Americans are, in most cases out of necessity, cutting their spending and, hence, borrowing in today's Depressionary Economy.  I literally what to throw up when I hear the so-called experts in the financial media refer to the "Great Recession" in some distant past-tense phrasing.  Number one this is hardly a "recession" that we are experiencing.  No economic system can have an utter collapse of the financial system where some $4 to $6 Trillion of bad debts have yet to be written off and have the cycle deemed a normal, recessionary one.  What about the $1.3 Trillion of Fannie Mae and Freddie Mac paper that the Federal Reserve has on its books???  How much of this utter garbage is going to stink up the American Balance Sheet??!!!  Granted, we have not had the retracement in GDP that we did during the Great Depression of the 1930's, but we also spent some $1.4 Trillion last year to attempt to keep the economy afloat.  And might I add that if you believe virtually any Government statistics today, then I have a hamster-powered snow thrower I'd like to sell you.  Oh, our Fearless Leaders created a lot of $100k plus Government jobs in Washington, but created virtually no sustainable economic recovery for this country with permanent, wealth-building jobs.  These have been make-work jobs in many cases, and State subsidies for teachers, firefighters, and policemen, but not new jobs that will maintain America's economic standing in the world.  We will forget that the majority of the $830 Billion Economic Stimulus & Recovery program (must include interest on money you do not have when you spend it!!!) has yet to be spent, but the record on job creation and economic impact for the Bill to date is anything but impressive.  The retracement of tax revenues in virtually every State in the Union of some 18% to 25% over the last year is proof enough for me that the term, "Great Recession", is a misnomer and ill-applied.  After all of the chickens come home to roost, the term, "Greater Depression" will be the accurate label to apply.

Number two, regarding the past tense references to this "Great Recession", we are hardly out of the woods with unemployment still stuck stubbornly in the 17% to 18% zone with under-employed and job market drop-outs fairly counted in the mix.  Government statistics are so manipulated these days, that I refuse to refer to U.S. unemployment at some mythical 9.7% rate as bantered about as improvement by the bureaucrats.  The Consumer Confidence index just printed, and it fell a whooping 11 points from 57 to 46 with a healthy economy boasting a 90 reading.  So are these citizens likely to open their wallets wide, OR MUCH LESS TAKE ON NEW DEBT TO GIVE THE ECONOMY A BOOST AS PROMOTED BY THE OFFICIALS IN WASHINGTON FEEDING HARDILY AT THE PUBLIC TROUGH.  Me thinks no.  Double dip here we come.  In fact, I question whether there has been any real improvement in U.S. conditions over the last two quarters when a real inflation rate is applied of some 6% per annum, but I will leave that exercise to Shadow Statistics number crunchers.  Any improvements in economic conditions in the next several quarters will be minor at best and will not be lasting given the shoes yet to fall in U.S. debt financing efforts (called auction failures), commercial real estate, and credit card debt just to name a few.  Americans do know how to read, and it is printed aplenty on the internet about the yet-to-be-recognized problems just around the corner.  As Glenn Beck calls it:  ECONOMIC ARMAGEDDON is acoming.  As a prolifgate, overspending nation, we are about to reap what we have sown.

RECENT NEWS REPORTS THAT SUPPORT THE SAGE'S ANALYSIS:

Consumer Confidence Plunges in February, 2/23/2010

Almost 10% of FDIC-insured banks "troubled", 2/23/2010

New home sales hit record low in January, 2/24/2010

Consumer borrowing falls for 10th consecutive month, dropping by record amount

Tax withholdings plunge to record lows, 3/2/2010
 

Corporations can fudge their earnings reports to Wall Street and the Proletariat Public until the cows come home (and you bet your bippy they do consistently!), but they dare not fudge taxable earnings to the Treasury's I.R.S. for fear of ending up as bunk-mates to Bernie Madoff.  54% plunge since August, 2008 when the Financial Panic was in full swing.  NEED I SAY MORE TO YOU STOCK INVESTORS PLAYING ON THE RAILROAD TRACKS OF WALL & BROAD???!!!  How do you think this affects Treasury funding requirements and subsequent bond yields going forward???!!!



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On the brighter side, the Precious Metals have provided patient and prudent investors another buying opportunity.  It can only be the leveraged players trading both Gold and Silver that are also 20 to 1 leveraged in Stocks and Bonds that are causing the selling on the precious metals exchanges at this point.  Physical demand is excellent from my end, with backlogs beginning to build in Silver products and some Gold products.  When I read the other day that a noted analyst felt that stocks would be flat this year, and not experience another Waterfall Decline, I kind of chuckled to myself.  If he really knew, he would never make the fact known to the public.  If I really knew, I would not be working for a living.  And all overpriced asset markets eventually fall back to a realistic, market-clearing level based on value.  A lot of churning is going on right now in the stock market, where corporate insiders and the smart money are selling to the "afraid-to-miss-the-train" investing public on each dead cat bounce, but it is classic distribution taking place from strong hands to weak hands.  Another 50 basis points to 75 basis points on the 20-year Treasury Bond should do the trick to knock the last legs out from under the stock market.  Many retirement plan investors are taking this opportunity to liquidate stock positions and establish Precious Metals IRA's at Sterling Trust Company, because not only am I seeing the order flows for same, but it is very difficult to get Sterling Trust on the phone.  You should also take this opportunity to get your investment portfolios in order.  Both stocks and bonds will prove to be very poor investments in 2010.  Stocks have stunk up the portfolios of millions of Americans for the last decade with a 10% LOSS, not even a smidgen of a gain, and there are certainly no fundamental changes occurring in the economy or the financial system to justify today's stock market levels.  Still expect 666 on the S&P 500 to be violated before year-end, but there will be Government Intervention to avoid this level.  However, the Proletariat is going to panic to get out at the next leg down and all the tea or Dollars in China will not save the day.

WE ARE SOON TO BREAK THE CORRELATION OF GOLD AND SILVER TO THE FINANCIAL MARKETS.  THEY HAVE ALWAYS BEEN NEGATIVELY CORRELATED TO THESE TRADITIONAL MARKETS, AND THEY WILL BE AGAIN.  EVENTUALLY, THE LEVERAGED SPECULATORS WON'T HAVE A PLUG NICKEL TO PLAY WITH AS THEIR INVESTORS AND LENDERS HEAD FOR THE HILLS AND PHYSICAL DEMAND OVERWHELMS PAPER TRADING VOLUMES.  BUY GOLD AND SILVER WHILE THE PRICES ARE STILL LOW (and backlogs are short).  THEY WILL BE MUCH HIGHER IN THE IMMEDIATE YEARS AHEAD.  I have been more right than wrong in the last 10 years, so who do you trust??!!


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March 22, 2010:  The Precious Metals Love Political and Fiscal Chaos in America.


I guess all Precious Metals bullion dealers like myself should be grateful to Nancy Pelosi and Barack Obama as to the extremely dire consequences they have now unleashed with the passage of so-called Healthcare Reform.  Since these Socialist Zealots have chosen to ignore the will of the majority of Americans who do not want the increasingly Socialistic Federal Government in every aspect of their once free lives, the conditions that are now in play with an additional multi-Trillion Dollar UNFUNDED PROGRAM mandated upon the States and the now furious majority of American Citizens will prove to be the undoing of not only the party in power, but this once great nation.  For all you free-spending liberals out there who feel that there is no bound or limit to what centralized government should do for its populace, YOU HAVE JUST HIT THE PROVERBIAL BRICK WALL!  Goldman Sachs and fellow Government Hack JP Morgan-Chase are active in the stock market today trying to prop up the sagging March 2009 Relief Rally, but Obama's left-handed signature on this Gargantuan Intrusion in Americans' Lives AND POCKETBOOKS will be a singular event to turn the financial markets solidly on their heads and the Nation on the path to bankruptcy.  We are in the dying throes of the Super Bear Market Rally of 2009.  The trend will be re-established in the weeks ahead.  Inflated values, like inflated egos, always deflate.

Having a military background myself, I must say that our sworn enemies in the Middle East could not be happier today, provided they do not have a Predator missile coming up their behinds.  Thanks, Pakistan.  Once your own Pakistani citizens and civilian and military leaders were the victims of Islamic Extremist suicide bombers, you got "religion" real fast and started going after the real enemy with a vengeance.  DIVIDE AND CONQUER.  CREATE CHAOS.  DECIMATE THE ENEMY FINANCIALLY.  RESTRICT THE CITIZENRY'S INNATE FREEDOMS TO CHOOSE.  DEMORALIZE THE ENEMY.  PUT THE ENEMY UNDER THE THREAT OF MARTIAL LAW IN THE NAME OF NATIONAL SECURITY.  CREATE A GIANT SCHISM BETWEEN THE ENEMY'S GOVERNMENT AND ITS CITIZENS THAT MAY NEVER HEAL.  Maybe Nancy and Barack will get the Al-Qaida Medals of Honor for single-handedly doing more to defeat the principles, solvency, and morale of the once greatest nation on earth, more damage accomplished with the single stroke of a pen than a squadron of passenger airplanes could have done on September 11, 2001.  The glory days of the United States are long gone thanks to the fiscally-irresponsible players in Washington, on both sides of the Aisle and in the White House, that could never say NO to another Government Bureaucracy or pork-infested, Perpetual Spending Program as the resurrected Obama Health Care Bill; maybe historians will call it the "Fiery Phoenix Bill", having risen from the ashes around an incompetent Administration.  We all know what a great job the 2009 Obama Stimulus Bill has done to date with real unemployment counting job-seeker-dropouts still stuck close to 17%.  The savings bandied about by these Political Shills on Capitol Hill will never materialize just based on the massive costs that will be necessary to establish and administer this over-reaching take-over of no less than 16% of the American economy.  Shadow Government Statistics has inflation now running at some 9%, so most GDP numbers released by the BureauOfLaboredStatistics ( BLS ) really show negative growth rates, not positive, but we don't want to bore you with more Government Lies!

I am not going to go into all of the details of how damaging the $2.4 Trillion Escapade into Nationalized Medicine is going to be to not only the solvency of this country, but the ability of small businesses to be created and survive during the Greater Depression we are squarely within.  What incentive is there for any small businessman (or any American!) to make over $200,000 per year and effectively subsidize non-employees with a 3.8% surtax on investment income and ordinary income?????  Not to mention the other tax increases to attempt to pay for more Social Justice/Wealth Re-Distribution from Middle Income America that are waiting behind Obama's Door Number Two such as the perpetuation of the 55% Death Tax on AFTER-TAX ASSETS.  Real motivator Nancy and Barack!!!  Tax revenues are already down with the decline in economic activity, but put higher taxes on the road to alleged recovery, and that road will be a long and windy one.  THE IMPLEMENTATION OF OBAMA-CARE WILL WORSEN THE GREATER DEPRESSION WE ARE STILL MIRED IN AS TAXES RISE, HEALTHCARE PREMIUMS RISE, AND BUSINESS OPERATING COSTS RISE TO COMPLY.  Not to mention the numbers of medical professionals that will retire early or switch over to a government job where efficiency and cost-containment are just words.

The lawsuits initiated by no less than 27 States of the Former Union ( I am personally going to succeed from the Union at the first opportunity ) will attack the Constitutionality of whether the Federal Government in any manner can mandate that private citizens purchase any product, health insurance or GM autos or "I Love Nancy" bumper stickers.  Plenty of negative effects will be delineated in the coming legal briefs that will also attack this historic violation of the States' Rights clauses of the U.S. Constitution via mandated spending replete with special deals to prostituted Congressmen and Congresswomen for selling their votes.  THE UNITED STATES GOVERNMENT IS CLEARLY CORRUPT AS EVIDENCED BY THE LEGISLATIVE PROCESS OR "SAUSAGE-MAKING" OF OBAMA-CARE AND THIS GOVERNMENT IS NOW IN THE PROCESS OF MAKING MANY AFRICAN DICTATORSHIPS LOOK DEMOCRATIC.  An Executive Order to buy Stupak's gutless vote that cannot legally change established law is one example of the Obama Administration's determination to inject its form of Socialist Americana upon today's already suffering American People.  SOME DAY IN THE NOT-SO-DISTANT FUTURE, HUNDREDS OF THOUSANDS OF AMERICANS ARE GOING TO DESCEND UPON WASHINGTON, D.C. AND BRING THE FEDERAL GOVERNMENT TO A VIRTUAL STANDSTILL.  THE WRATH OF A PEOPLE IGNORED IS THE WRATH OF A CAUSE IGNITED.  Rest assured that deals have also been struck with Representatives who districts voted for McCain in November, 2008 where Barack uses his Public Checkbook to guarantee these hacks a job when the voters throw them out on their sorry asses this year.

There will be continued manipulation of stock prices in the days ahead to attempt to calm investors who already know that they should have voted with their feet months ago and exited the financial markets.  Nothing like being the last guest at a drinking binge party.  However, as more and more deals get the cleansing light of day through the recalcitrant media and the costs of this monstrosity are calculated on other than a luncheon napkin without double counting of Medicare and Medicaid "savings", with the $250 Billion Doctors' Fix regarding current Medicare reimbursement rates, with an economic growth rate closer to zero after real inflation, with the ingenuity of insurers to find other, non-premium ways to increase revenues, with the true costs to the Middle Class via taxes and premiums and quality-of-care with many Medicare patients losing their doctors, and with the lengthy and expensive legal counter-attacks that have already begun.  However, we are also on the cusp of the Second Dip to the Greater Depression for the U.S. economy.   Great timing, Nancy and Barack!!!  Anyone who has regularly read this epistle knows that the Green Shoots are dying from Debt-Laden Round-up as I type and Cash-For-Clunkers, Credit-for-Homebuyers, and Mortgage Garbage Buy-ups by the Fed from Fannie and Freddie are ending in the weeks ahead.  YES, THERE IS CHANGE IN THE AIR.  AND, NO, IT IS NOT THE CHANGE THAT 53% OF VOTING AMERICANS PULLED THE LEVER FOR IN NOVEMBER OF 2008.  We will never fully recover from the passage of Obama-Care in 2010.  The disruption to our governing bodies and our individual lives with take years and years to rectify, but IT WILL NOT PASS THE MUSTER OF TIME AS LONG AS A SINGLE FREE CITIZEN ROAMS THIS LAND.


 

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BELOW IS THE CARRYING COST TO ALL PRESENT AND FUTURE AMERICANS OF SOME OF OBAMA'S SOCIALISTIC PROGRAMS TO DATE.  IS HE INTENT ON BANKRUPTING THE COUNTRY TO "FUNDAMENTALLY CHANGE" IT???  AND WE ALL KNOW FROM DECADES OF EXPERIENCE THAT THE CBO ESTIMATE OF INTEREST RATES IS GOING TO BE TOO LOW AS OUR FOREIGN "KEEPERS" UP THE ANTE BY DEMANDING HIGHER RATES ON U.S. SOVEREIGN DEBT.  JUNK BONDS COST MORE, DON'T THEY???!!!
 

WHAT DO YOU THINK CHINA, JAPAN, U.K., AND OTHER POTENTIAL INVESTORS OF U.S. SOVEREIGN DEBT THINK ABOUT OBAMA-CARE AND THE IMPLICATIONS FOR AMERICA AVOIDING DEVALUATION AT A MINIMUM AND DEFAULT AS WORST CASE???  A financing crisis for the U.S. Treasury is right around the corner.  Since we pay foreign investors virtually nothing to buy our debt and we truly deserve a junk bond rating, the jig is up for selling U.S. Treasuries at pauper interest rates.  The world will demand more from us if they are to buy our junk bonds at all.  Gold and silver have pulled back today as Wall Street tries to put a happy face on American Spending Run Amuck by rewarding the healthcare stocks for virtual nationalization, but my phones have been ringing off the hook all day with Precious Metals buyers.  Sad to say, more and more people, here and abroad, know that our country is currently on the road to ruination.  The premeditated and callous events over the weekend just nail another spike into our collective coffins as a fiscally unsound country on its way to outright bankruptcy.  Get insurance for the next collapse while you still can and prices remain relatively cheap for both Gold and Silver.  It is a very sad day for responsible, financially-prudent, law-abiding Americans.  But a very good day for Precious Metals investors.  Too bad we may be forced to retire elsewhere such as Norway or cannot even recognize the country we grew up in.

 

Geeze, Louise, even pushing all of this free taxpayer money at all that ails us is quite likely doing more harm than good since this chart is now showing negative GDP growth using REAL inflation numbers.  Total failure of Obama Stimulus Bill of 2009!!!  Please post this message on Bennie Boy's and Barack's foreheads so when they look in the mirror each morning they may eventually get it!!  WE HAVE MET THE ENEMY, AND HE IS US.  Waiting each day for my personal bailout from Uncle Sam.  When I was born in Germany to American parents in 1949, I just knew it was up to the State to provide for me from cradle to grave.  Watch bond yields, the jig is up.

 

THE PLUNGE IN TAX RECEIPTS AT THE FEDERAL AND STATE LEVELS CONFIRM THAT WE ARE STILL MIRED IN THE "GREAT RECESSION".  I LABEL IT THE "GREATER DEPRESSION" SINCE HISTORY WILL SHOW THAT THAT IS THE PROPER DEFINITION OF THE CURRENT ECONOMIC SITUATION AS SOME $10 TRILLION IN DEBT CLAIMS DISAPPEAR AROUND THE WORLD AND THE U.S. ECONOMY EVENTUALLY SHOWS A 20% TO 30% CUMULATIVE DECLINE FROM THE FALL OF 2007.



POSTSCRIPT, MARCH 23RD:

I realize that the dreaded beast has not been officially signed into Law as this is written, but I am sure the Demo's and Barack will do everything necessary, including selling the country down the eternal Debt River, to get their versions of Social Justice enacted.  One point that is very important in this entire episode in Corrupt American Politics is that this is a tragic DIVERSION. 

What are the main issues of importance to Americans this very moment???  JOBS, JOBS, JOBS.  Let us dust off a political sound-bite from yesteryear and present it to the Newbies in the White House as a refresher course in American history:  "IT IS THE ECONOMY, STUPID!"  Very basic comment, right to the point, and much more of an essential ingredient to the re-election hopes of the Incumbents on Capitol Hill and even the White House than a fiscally irresponsible Healthcare Beast.  Oh, lest I forget, we had another 7 banks fail this past Friday, Mr. President, bringing to 37 the number of U.S. banks that have disappeared in 2010 to date.  Bank failures are likely to accelerate in 2010 as commercial real estate and residential mortgages either go into default, reset, or become delinquent.  The President is still in campaign mode from his daily stumps to carefully chosen audiences; I guess that is the thing he does best, but he needs to get into Chief Firefighter Mode since Rome is burning.  Senator Dodd's financial reform bill, to be passed in good-old partisan fashion, strictly along party lines I assume, just scratches the surface of the reforms needed in the U.S. financial system that is another corrupt element of the American system.  How about putting some of the felons who committed financial fraud into the slammer???  That would be more encouraging to Americans than shoving a highly ideological form of healthcare down their throats.

Oh, well.  When you have never learned to lead before entering the White House, you can't be expected to pick up this life-long skill in a year or so.  Especially as the Ship of State is badly listing to port (that is the Left of the Ship!!!).  The Captain of the Titanic in Washington has never entered the wheelhouse, he is still dancing in the opulent ballroom to his admiring crowd, which by the way is getting smaller and smaller as Americans' suffering gets greater and greater.  ICEBERG DEAD AHEAD.  Would love to see this guy's expense reports.  Hey, Bennie Boy; print up a couple of $Billion for me, I have the urge to travel.  Too much heat in Washington, Prez??????????????????????????????????????????????????????????

$1300 Gold and $21 Silver are just around the corner.


Post-Postscript, Monday, March 29, 2010:

Not a pretty picture for stocks over the last decade; the long-term uptrend for stocks was broken in 2000 and has yet to re-assert itself.  Definitely a question of valuations, especially if the long-term trend in interest rates is in the process of reversing to a period of higher and higher yields which I think the sovereign central banks and treasuries of the world have guaranteed to happen with their imprudent actions since the late summer of 2008.  Most new money has flowed into bond funds this year and last, with stocks staying afloat on decreasing volume aided mainly by the Wall Street Plunge Protection Team of Goldman-Sachs & JP Morgan-Chase funded by the New York Fed and your tax dollars.  BUT THE JIG IS NOW UP WITH THE PASSAGE OF OBAMA-CARE, GUARANTEEING THE FINANCIAL DEMISE OF THE UNITED STATES and the decade's long topping action in stocks is ready to resume the Super Bear that it entered in March, 2000.  The easy money in stocks was made over a decade ago and the fundamentals have deteriorated so badly as of today that stock investors are like Mount Everest climbers coming down from the summit just before 100 mph winds strike the slippery slopes AND THEY RUN OUT OF OXYGEN.

A 5% 10-Year Treasury Note yield just around the corner represents a break-out from the 28-year downtrend in yields and the corresponding bull market for bonds.  With defaults in bonds globally to soar into the Tens of Trillions of Dollars in the quarters ahead and inflation gaining its footing once again with 9% already in 2010, how can bonds as an investment class be a safe haven from the developing storm, Storm Cluster II???!!!  It is either cash in currency form, precious metals, or fancy colored diamonds.  Simple choices, have done superbly over the last 10 years and likely to do at least as well over the next 10 to 20 years.  Sage Advice.



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April 19, 2010:  The Icelandic Volcano Is Not The Only Fissure Billowing Smoke.


Since I was so productive in my writings last month, total line count, maybe not content (?), I may not write as much this month to avoid the 99% Marginal Tax Rate dreamed about on Capitol Hill and the White House.  Plus, I may have to add a Value Added Tax to this month's missive and then the BLS will hedonistically adjust prior newsletter prices to eliminate the effect of a 5% to 10% VAT on the current-day inflation rate.  Unlike the talking heads on TV, I think it will be quite some time before VAT can even make its way past the House; these guys need pampers when it comes to imposing new taxes on the Proletariat, and indeed they should after imposing the costs of ObamaCare on the nation.  Liberals in this country are something else:  Their Utopian ideals, generosity, and "humanity" WITH YOUR MONEY.

But I digress.  I am so pissed off these days about what is happening to my country that it doesn't take much to set me off.  Maybe I am billowing smoke also, but just can't see it.  I do know that I will be giving campaign dollars to the Tea Parties and not to any traditional political party as I have in the past.  "THROW ALL THE BUMS" OUT IS THE SAGE'S BATTLE CRY FOR 2010.  I know that you did not surf all the way here to read a lot of political opinion, but we is in deep doo-doo as a nation and that just makes the precious metals shine all that more brightly when the former shining star of a nation, the U.S. of A., is in a state of decline and disarray.  Where there is a loss of confidence AND OUTRIGHT FEAR IN THE AIR, there is refuge from a wealth and spending-power preservation standpoint in the Precious Metals.

This truth of thousands of years of human history has and cannot be re-written by the bought and paid-for U.S. media that conveniently omits or under-reports any "inconvenient truths".  EIGHT MORE U.S. BANKS FAILED LAST WEEK BRINGING THE TOTAL THIS YEAR TO 50 ( now the grand total is 57 since 7 more banks failed as of April 23rd).  Anyone in the mainstream media report this fact???

Isn't it a little scary that 2010 seems to be filled with an unusually high incidence of earthquakes and volcanic activity?!!  Granted, we have until 2012 before the world as we know it ends, but maybe God is giving us a preview of coming attractions without the buttered popcorn.  I would not want to be living in California at this time.  Not just because the state is bankrupt fiscally, but because an increase in tectonic activity places California squarely in the crosshairs of some pretty sizeable earthquakes in the not-too-distant future.  And as an American tourist, I would not go to Yellow Stone Park this year either.  That is possibly the locale of the earth-ending Big One that will make the Icelandic volcano look like a piker.  The scene from Iceland is actually quite scary all by itself, since the Sage had once chosen this icy and somewhat barren land for his future escape from the madness and insolvency of America.  But since Norway now gets the nod in the Sage's Escape Plans ( an SEP plan if you will! ), I just hope that the winds blow in the right direction and at the right altitude to spare this Scandinavian treasure from harm.  Maybe these weather and tectonic events are the Black Swans that have come to roost in a manner that will precipitate the second phase of the Greater Depression along with the Second Phase of the 2008 Financial Crisis.

It is rather pitiful that so many over-paid men and women in Washington are now trying to put Humpty Dumpty back together again with none other than more unenforced laws and regulations and bureaucracy and costs to American taxpayers via what is bandied about as "FINANCIAL REFORM".  In case these Government Employees haven't noticed, THE COW LEFT THE BARN SOME 19 MONTHS AGO AND IS ROMPING WILDLY ACROSS THE LAND AND EATING ONIONS APLENTY TO SOUR ITS MILK.  Pray tell, Oh Elected and Appointed and Anointed Ones, what about the Trillions of Dollars of Taxpayer Funds that have been used to buy utter garbage pieces of paper off the nation's banks, GSE's, auto companies, and insurance companies????  Wouldn't it be more productive at this time, although not as politically expedient, to go after the perpetrators of the Greenspan/Congressional/GSE/Wall Street Heist of American Savings from 2000 to 2008???

This is one reason that the S.E.C. finally decided to file suit against Goldman-Sachs.  To show the American Sheeple that they are finally on the job, and that the sniveling perpetrators of the greatest transfer of wealth from public to private hands in the history of the planet will have their comeuppance even if it takes another decade to extract restitution from their greedy, self-serving hands.  This may be a way for those in power to attempt to stay in power and out of the hands of the lynch mob.  Go after the bad guys as long as they themselves don't look in the mirror, and show the swelling throngs of angry Americans that they do have a modicum of a brain and can figure this out all by themselves.   Some form of Glass-Stegeall will be reinstated, once again firewalling usually-more-prudent commercial lending operations from Wild West, highly-leveraged, speculative trading and investment banking, this is a no-brainer.  Should I send a memo to Chris Dodd??  I want his healthcare plan in return.  "If I only had a brain" said the scarecrow in the Wizard of Oz.

Oh, and Billy Boy Clinton:  Hoping you would have found a distant golf course and had left the nation free of your self-serving blather by now, but some egos need to be fed almost daily I can see.  Please do not display your contempt for the American people by comparing Tea Party participants to those who planned and executed the Oklahoma City Bombing.  JUSTIFIABLY heated rhetoric by a wronged populace does not lead to horrific acts against mankind.  Nor, it is hoped, does infidelity and sexual promiscuity lead to insanity, Mr. Clinton, but you may be a special case.  He who wallowed in the gutter and committed perjury, disgracing the Office of President in the process, has a very hard time taking the high ground and preaching to the masses about prudent behavior and civic duty.  Stick to humanitarian efforts, Billy, and leave moral questions to those who have a moral compass.  I am sure Hillary would agree with me on this.

Digressing again, must be a sign of age.  But the floodgates of litigation and prosecution are finally open to go after the true perpetuators of the Financial Crisis of 2008.  Granted, American borrowers who committed to mortgages way over their heads and with killer variable & balloon terms are co-conspirators, but we cannot fire them.  Just took for those in power to get their butts in a ringer with the American people to realize that going after The Really Bad Guys would not only be a diversion from a failed economy and financial system, but also a semblance of doing what they are being paid for.  While the Icelandic volcano belches skyward tons and tons of silica and pumice, the smoldering fire of the fiscal insolvency of our nation provides a shocking parallel image.  As in the Goldman Sachs case, where there is smoke ...... there is fire.  Other nations will now go after American investment banks and insurance companies for their fraudulent actions against the people and institutions of their native lands; it has been the Central Banks and Treasuries of most developed countries around the world that have had to ante up $Trillions of Bail-out and Stimulus monies to try to counter this Greatest Financial Fraud of All-Time.  This S.E.C. case may truly be a Black Swan event in facilitating the recovery of at least a few $100 Billion of lost public funds.  I am not naive enough after six decades of being on this planet to think that campaign contribution money will not flow from Wall Street to try to dampen the flames that have sprung to life in Washington, but in the end, politicians will seek increased funding from the labor unions and other politically sympathetic groups to attempt to fill any shortfalls caused by the financial firms' legal bills.  In fact, the financial firms may have indeed become political pariahs that no party wants to show collusion with going forward, and the die may truly be cast to at least send some of the shysters in the mortgage, insurance, and derivative trading rooms around the country to an office behind bars where most "common" criminals end up.  "TOO BIG TO JAIL" may become a phrase that is only partially true in American today.  One can only dream.

But the financial markets will not recover from this seismic event.  As it becomes more and more politically expedient for politicians trying to hang onto their jobs (all the way to the White House!) to go after Wall Street in the interests of the little guy on the street ( HA! ), the prospects for the U.S. financial industry will dim in the months and years ahead.  As manufacturing has been reduced to a shell of its former self in this country, the financial industry has more than taken up the slack.  Just look at the composition of the S&P 500 today versus in 1980.  Litigation is a non-productive undertaking for any private enterprise, and where reputation is not sullied, the fiscal coffers needed for operations, bonuses, and dividends will be.  At some point, the earnings reports of any and all American companies will come into the crosshairs of a crusading political class bent on self-preservation, and Wall Street is doomed to a severe resumption of the Great Bear Market of 2000 without fail.  However, as of this past Friday, this SuperBear is already starting to spew forth ash upon overly-optimistic/unrealistic investors.  We are just seeing the opening tremor and smoke column in this new episode.  The retirement hopes of many Americans are about to go up in smoke.  Stocks and even bonds will offer no shelter from the financial storm ready to erupt upon the landscape.  (Please mail my Pulitzer Prize to the address below along with a big fat check in Swiss Francs only!!!  I do rush to the mailbox every day expecting my own Personal Bail-out Check, PBC, but I guess the ever-so-efficient Post Office has just waylaid it!!! )

Why would a Bullion Sage spend so much time on political and financial market events? Because they have very direct influences on the fundamentals for precious metals ownership.  For example, the record spending by the U.S. Government since November of 2008 has created Trillions and Trillions of freshly printed U.S. Dollars that eventually will prove to be highly inflationary.  While the collapse of $100's of Trillions of debt obligations around the world is initially deflationary, the reactions of sovereign states to attempt to avert depression by monetarizing debt and printing money will continue for years to come, debasing every currency that exists today.  Per Bernanke's schooling at Princeton regarding the Great Depression:  INFLATE, INFLATE IN ORDER TO NOT DEFLATE.  That is his credo, and that is what we can expect from Government going forward. 

Not to mention those in power spending money we do not have as a nation to BUY VOTES.

Standing here in pollen-laden Virginia on this fine Spring day, the Sage can feel the tremors welling beneath the earth's fractured and tortured surface.  Another eruption is mounting, and this will be in the prices of Gold and Silver.  There is just too much uncertainty around and no alternatives for investors for this not to be the case.  The precious metals may be in the process of decoupling from the fate of the financial markets as we move forward since eager buyers emerge at each dip to take up as much physical Gold and Silver as they can carry away.  The seminal event has occurred for Phase II of the 2008 Financial Crisis to begin.  Thank you S.E.C.  Thank you political hacks.  We may even forgive you for Madoff by the time gold hits $3,500 per ounce and silver soars to $130.  As the plume of deadly ash begins to subside in Iceland, a new column is forming over New York City.  In 10 years time, NYC will no longer be the leading financial center for the world.  Hong Kong or even Dubai will take their rightful places at the top of the pile.  American financial institutions will be discredited around the world even more so than they are today; these Philistines had their chance, now they have sold their own futures down a rathole. 

Hard times are here to stay:  The "economic recovery" is illusionary and the "financial system recovery" is another giant fraud upon the populace who just bought the stocks and bonds of these failed but bailed-out entities in the second act of the Financial Industry Bail-Out.  The molten magma of bad debts still reside upon the books of American institutions and the Federal Reserve!!!  The magma cap is building with venting fissures spewing forth smoke as in  the United States Securities and Exchange Commission versus Goldman-Sachs, April 16, 2010.

Buy precious metals insurance while you still can at a price you can still afford.  Self-serving as B.B. Clinton, I admit, but I speak the truth.  And I have a decades-long track record to prove it, just see the archives within.

The Sage of Wexford,
private Space Capsule in tow.  Who needs NASA when you can speak Russian or Chinese???


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May 19, 2010:  This Is The Strangest Investment Landscape The Sage Has Ever Seen.


Before I start regurgitating bullet points on this month's topic, The Land of Strange Investing, I just want readers to know that I have been investing for over 35 years now.  Whether I have been wildly successful is only to be known to me, God, and the IRS, so we won't get bogged down in accolades ( or criminations ) about the Sage's prowess ( or incompetence ), but suffice it to say that I could retire today and still get three square meals per day with a roof over my head and pay fully for my own healthcare, normal or catastrophic.  I do not want or expect the Government to take care of me in my sunset years, I have planned for zero Social Security payments within my global retirement planning; if means testing is aggressively applied in the not-so-distant future, that is close to what I will receive.  I have been a saver all of my life and have never been one to take very expensive vacations or spend money on "luxury" items, owning vehicles for at least 10 years and often 20 years since they are a depreciating asset.  I now intend to pay cash, i.e., devaluing Dollars, for not only minor, everyday purchases, but for all major ones as well.  The Monkey of Debt has been totally off of my back since early 2008 and I never intend to borrow another plug nickel as long as I live, God willing.  But before you nominate The Sage for canonization, let me get to the task at hand where I may offend many traditional investors out there:

1.  THERE IS NO SAFETY IN CASH OR TREASURY BILLS.

No liquid investment can pay you zero interest and be considered "safe".  There is always issuer risk, and today, there are very, very few issuers of money market or short-term debt instruments that  a.) compensate you for the current rate of purchasing power devaluation, some 6% plus per annum in the Real World per Shadow Statistics, OR that b.) have a balance sheet and cashflow stream that warrants paying you nothing for holding your money within their shaky vaults.  In most cases, you are probably better off taking your liquid funds out of the banking system within the United States since the majority of banks and institutions are technically bankrupt (not speaking morally here!) AND PLACING THE HARD CURRENCY FOR EMERGENCIES UNDER A BIG ROCK IN THE BACKYARD.  Some $10,000 to $20,000 in hard cash, devaluing garbage U.S. Dollars if you will, should serve the dual purposes of liquidity and for emergencies for most American investors.  If you are a high-roller, then hire a backhoe for the hole in the backyard.  But it makes no sense in this environment BEGGING FOR YIELD AND PLACING YOUR AFTER-TAX SAVINGS AT RISK of institutional failure and closure without DUE COMPENSATION FOR RISK.  A bank holiday is coming that will make the majority of your funds unavailable for as long as 90-days, so be prepared as Richard Russell and the Boy Scouts of America would say!

This "Cash Is Trash" revelation by The Sage is precipitated by the panicked actions of our past and present Federal Reserve Chairmen, Sir Greenspan and "Helicopter" Bernanke.  At some point, I really, really want to see a 300,000 strong mob of Senior Citizens descend upon the Federal Reserve Bank in Washington and DEMAND JUST COMPENSATION FOR THE LOSS OF EARNINGS THEY HAVE SUFFERED ON THEIR REPORTEDLY "CONSERVATIVE" MONEY MARKET AND C.D. HOLDINGS OVER THE LAST DECADE UNDER IRRESPONSIBLY LOOSE MONETARY POLICIES BY THESE INACCURATE ECONOMIC FORECASTERS.  Conservative savers in this country have not only been forced to bail out the Banks, the GSE's, Government Motors, AIG, and Wall Street investment banks such as Goldman and JP Morgan as mere taxpayers who have been forced to assume the worthless liabilities in the Trillions of Dollars from these failed entities, but they have gotten the double kick-in-the-teeth of getting zero return on their liquid assets, i.e., money, for well over a decade now.  And their inflation-adjusted returns were negative even before the collapse of rates in late 2008. 

To further add insult to injury, the U.S. Central Bank has also been guilty of forcing these very same conservative-by-necessity retirees back into the stock market prior to the 2008 Collapse and now again prior to the 2010 Collapse unfolding before our tired eyes.  THE CRIME OF THESE TWO CENTRAL BANKERS THAT WILL BE WRITTEN ABOUT FOR MANY CENTURIES YONDER IS THAT THEY HAVE FORCED THE VERY AMERICANS LEAST ABLE TO RECOVER FROM DEVASTATING LOSSES INTO VERY RISKY MARKETS THAT ARE POISED PERFECTLY FOR SUCH WEALTH-CRUSHING LOSSES.  And you bond investors out there, even in the shortest "AAA" maturities you can find, are in for one very unpleasant surprise before the year is out.  If the bonds lose 8% of market value in a year, what does a 4% annual yield do for you???!!! 

We have a contagion-style, Euroland-sponsored SOVEREIGN DEBT COLLAPSE in progress with highly inflationary responses from Sovereign Treasuries and Central Banks that are of such $Trillion magnitudes that "sterilization of the newly created money" being poured into the banking systems around the globe IS IMPOSSIBLE TO ACHIEVE WITHOUT SPILLOVER INTO THE DOMESTIC ECONOMIES.  Can you say higher inflation in Euroland and beyond as far as the eye can see???  The European Union, the IMF, and the United States Federal Reserve have had to step up to the plate with Quantitative Easing, Freshly Printed Money in order to maintain any active-bid market in the bonds of the domino-effect failing countries in Europe and elsewhere such as Eastern Europe and maybe even Russia; EU money men say the funds internal to the EU will come from available funds, but all central banks involved have lost the moral high ground and resorted to endless money creation regardless of public statements.  Oh, and My Fellow Increasingly Angry Americans, the Dollar Swap Facility that the Helicopter Fed is re-opening for European banks will sell Dollars for Euros at a time when the Euro has yet to find a bottom in the currency markets!!!  Parity once again with the U.S. Dollar is not unlikely, so how many $Billions of losses will American citizens absorb to help bail out Socialist Europe???!!!  Doesn't it make you feel all warm and fuzzy and internationally benevolent as an American Taxpayer that you will end up with the losses on the Dollar/Euro translations during these generous transactions???!!!  Maybe we will get a free case of Greek ouzo for our efforts.  Each citizen of the Land will need their own bottle in this environment.

Once again on a global basis, the costs of private failures are being transferred to the balance sheets of the public sector, AND THE FAILURES OF PROLIFERATE SOVEREIGN STATES ARE BEING TRANSFERRED ACROSS BORDERS TO MORE SOLVENT SOVEREIGN STATES, the latter being driven into parallel insolvency in the process.  Wonder if the CDC has a vaccine for this virus???

As an aside, I am certain at this point that the Euro will fail as a currency, bringing the European Union down with it.  I had written often about the poor prospects of this experiment in unified monetary and fiscal policy years ago when the Euro was in its infancy, and am now convinced that when PIIGS are running loose at a gala for European states ....... that the unsullied participants are going to get sullied.  GERMANY, YOU WILL BE BETTER OFF GOING BACK TO THE DEUTSCHEMARK THAN ASSUMING THE UNPAID DEBTS OF THE GREEKS AND THOSE THAT FOLLOW ON THEIR HEELS INTO INSOLVENCY AND BANKRUPTCY!  Pay the price now of getting out of the Euro Noose or pay a much bigger tab in the future that will ruin Germany as the economic powerhouse of Europe.  Where is your nationalistic pride when it counts??? 

So think more than twice about where you are parking your liquid funds.  Can a third party hold the asset in a safer manner at a less than 1/2 Percent Annual Yield than you can in a 4-star rated safe deposit box or literal hole-in-the-wall or hole-in-the ground???


2.  AMERICANS ARE STILL CHASING STOCKS FOR RETURNS EVEN AFTER THE LOST DECADE.

You must be painfully aware by now that Investment Advisors, Brokers, Financial Planners, and Investment Bankers cannot make money unless they have you invested in financial securities, that is their meal ticket and their theater of operations.  Whether this persistent, nagging, droid-like drone of propaganda that YOU MUST BE INVESTED IN STOCKS TO SURVIVE is in your best interests or THEIRS, I will let you be the judge when you compare your 401k statement or similar from 2000 to the one you just received.  Be it known, and I have said this several times for those of you not paying attention, STOCKS VIA THE S&P 500 PAID A NEGATIVE 9% INCLUDING DIVIDENDS FROM 2000 THROUGH 2009, HENCE THE MONIKER OF THE "LOST DECADE".  While the TV series of similar name has been wildly popular, I have never fully understood it or liked all of the unwashed, grimy actors appearing in it, the "lost decade for stocks" has been a disaster for the retirement hopes and plans of millions of Baby Boomers.  If you continue to behave like Pavlov's dog and salivate over "potential returns" that will never return, you will stay fully invested in stocks over the next year to your financial detriment.  If you make a 5% return during this near-term period, I will mail you a WalMart greeter's apron BECAUSE YOU WILL STILL NOT BE IN A POSITION TO RETIRE UNTIL YOU ARE 93.  Which is a better bet?  A 5% potential return in a stock market selling at 22 times GROSSLY FUDGED EARNINGS in a cash-strapped-consumer-driven or fearful-of-job-loss-consumer-driven economy with an insolvent banking system and a bankrupt Federal Government OR the breath-taking experience of taking another 50% loss on the 50% of capital you have left from the Year 2000???  HINT:  THIS IS NOT A TRICK QUESTION.

Please do a Google on Richard Russell and glean some dewdrops of wisdom from an 80-year old legend who has been around the block more times than most of you have been to the grocery store.  Mr. Russell so duly notes that we are on the threshold of a continuation of the SuperCycle Bear Market that began in March, 2000.  We have had two spectacular Bear Market Rallies to date, one in March, 2003 and then again, one in March, 2009.  Ah, beware The Ides of March!  This last counter-trend, against the primary trend ( DOWN, DOWN, DOWN!!! ), rally was purportedly cut off at the knees by visions of Greeks fighting Spartans in riot gear on international television.  That is, civil unrest when the Government check is not found in the dependent citizens' mailboxes.  Frankly, in a grossly over-valued market propelled by no-returns-on-cash, financial media hype gorging on advertising conflicts of interest!, and fear of missing-the-return-train, the real prospect of a double-dip Great Recession may have more to do with the current and near-term fainting spell in STOCKS than even a revelation that Joe Biden was kidnapped by aliens when he was in the Senate ( but they let him go because he confused the heck out of them ).

IT IS A HOOT THAT INVESTORS RUSH INTO THE "SAFETY" OF TREASURIES AND CORPORATE BONDS ON THE BIG DOWN DAYS IN THE STOCK MARKET, TODAY AND TOMORROW BEING JUST TWO OF MANY TO COME.  (This dewdrop was written on the 18th, but due to the time differential for European readers ..... I put the 19th on the title!)  What safety is there for compromised issuers of endless credit with nary the means to pay all interest much less all principal by the Year 2015???!!!***$$$###.  Let's see:  yields get bid down, bond prices get bid up as investors flee stocks.  Enter stage right, THEN THE OPPOSITE OCCURS WHEN GLOBAL BOND INVESTORS SEE THE EMPEROR HAS NO CLOTHES TO SERVICE TENS OF TRILLIONS OF DOLLARS AND EURO'S OF NEW DEBT ISSUED IN THE LAST 12-MONTHS ALONE!!!  PRINTING MONEY TO SOLVE A DEBT COLLAPSE NEVER HAS BEEN A SOLUTION TO THIS HISTORICALLY RECURRING PROBLEM AND IT NEVER WILL BE.  So buy the bonds to run "safely" from stocks, but fasten your seatbelts for a very bumpy ride as the credit markets react to the sovereign-debt-collapse realities of 2010 and beyond.

Do you think Goldman-Sachs or JP Morgan Chase are net long or net short stocks right now?  These trading powerhouses did not have a single day of net trading losses in the first quarter of 2010, a new world record.  Since they can borrow limitless sums at zero percent interest from the Federal Reserve and YOU, SAPPY AMERICAN TAXPAYER, they can leverage themselves until the cows come home at virtually no cost to carry.  THANK YOU VERY MUCH, YOU MOST GENEROUS AND THOUGHTFUL CITIZENS OF THE UNITED STATES.  Your generosity will allow the Wall Streeters to put a shiny token in your beggar's tin can the next time they pass you on Main Street as the second phase of the Greater DEpression gripes this land once again.  And all of the circuit breakers on the downside, a 10% daily limit is being proposed now for large cap stocks and ETF's, will not stop market makers from pulling bids or not answering the phone until the threshold is hit during a precipitous decline.  This is what happened on Black Monday in October, 1987 and this is what happened on May 6th when we had a 1000 point intra-day swoon on the Dow.  Bear markets are usually death by a thousands cuts.  You do not have to have 10% down days for the majority of investors to realize what the new trend of the market is.  When stocks can't rally on supposedly good economic news, GET OUT AND STAY OUT.  I have been primarily out of stocks since 1999 and have the gains to prove it.  Being out of stocks and bonds over the last decade was probably the best investment move I ever made.  Being in Gold and Silver since 1997 was the second best move ( if not the best! ).  First Rule of Investing:  DON'T LOSE BIG CHUNKS OF MONEY (unless you have a Goldman Bonus Plan!).



 

SO HOW MUCH MONEY HAVE YOU STOCK MARKET INVESTORS MADE COMPARED TO WHAT YOU COULD HAVE MADE MORE SAFELY INVESTED IN GOLD ( OR SILVER ) SINCE YEAR 2000????????????????  Nominally the DOW is "only" 28% below its all-time high, but priced in Gold, it is literally sucking eggs!!!  GOT GOLD?




2.  AMERICANS ARE BASICALLY IGNORANT OF GOLD AND SILVER.

Even after 300% gains in both precious metals since the end of Year 2000, most American investors have never invested in gold or silver in an investment quantity of say $10,000 to $20,000.  They have dabbled here and there, but few have accumulated a nest-egg of gold or silver that would carry them through a Currency or Debt Collapse as we have now.  They may have a 401k in stocks worth say $300,000, but they have not felt compelled to venture forth into this alternative investment area.  TIME AND CIRCUMSTANCE WILL GREATLY CHANGE THIS FACT.  The mainstream media, who we can blame for being complicit in many of today's problems, to include who is in the White House, usually have more advertisers in financial security products than tangible asset products such as gold and silver.  Hence, coverage is less frequent and complete regarding the progress of the precious metals over stocks and bonds.  I have spent weeks upon weeks writing this newsletter for the last 11 years and adding informative pages to my websites, but I think a sky-writer may be next, flying over Manhattan.  If you build it, they will come.  I have built it, and they have come, but I am still surprised by some of the very basic questions I am asked almost on a daily basis.  I will try to be more patient.

I think Americans react best during crises.  I think we are such a comfortable society, being blessed with many luxuries in life made available by a very high standard of living, that we tend to sink into a groove, such as stocks come heck or high water.  Investors could basically throw a dollar at a dart board from 1981 through 1999, and hit winners in stocks without even leaving their armchairs.  Stock investing became an exercise that just required a mouse click.  But eventually along comes the Black Swan, such as in October of 2008, that jolts the public into acting in a non-traditional manner to a non-traditional situation.  WCM had record bullion sales in 2008, probably 60% of the total sales crammed within the last 4 months of the year.  It was a crazy time.  I got exhausted just talking on the phone and writing tickets.  Some bullion traders started taking tranquilizers to calm themselves down during the day.  I fully expect that kind of frenzy to occur again this year as we head into summer.  As the stock market re-enters the Bear Market it never really left, Necessity will once again become The Mother of Invention.  American investors will have very, very few choices besides Gold and Silver to protect their wealth and provide refuge for the Billions of Dollars of proceeds from stock sales.  They will stick with bonds for awhile, but eventually the pain threshold will be too high to stay in bonds as humongous sovereign debt sales in the $100's of Billions from Global Bail-Outs crowd and overpower the supply of available investment funds.  Smoke and Mirrors will be employed in these upcoming auctions and placements, but investors are quite savvy today at Governments that attempt to put lipstick on PIIGS.

Do your homework.  Study the hundreds of years of human history that are replete with instances of financial, economic, and government collapse.  We are at one of those points today.  In fact, we are in our third year of the Greater Depression that will last at least another decade.  Place your bet on the roulette wheel of 5% Stock Market Returns or on the relative, historically-proven safety of Gold and Silver during times of upheaval and unrest, of Currency Debasement, and of Debt Collapse.  Gold is setting new record prices in every currency on the planet in 2010, to include the U.S. Dollar.  WHAT DOES THIS TELL YOU?!  These currencies will prove to be not worth the paper they are printed on AND THEY CAN BE PRINTED IN ENDLESS QUANTITIES TO SAVE THE BACON OF THE FRIENDS OF THE ELITE IN POWER. Silver will eventually play catch-up to Gold with new record highs.  How come Gold is going up on days that the Dollar advances upward??  Because the world has woken up to the fact that Gold is the Currency of Last Resort.  It is stable and valued above all paper currencies that have crashed and burned many, many times throughout history from one country to another.  Eventually, we will have the GOLDollar as our new American currency.

While highly-leveraged speculators such as unregulated hedge funds continue to whack Gold and Silver on an interim basis as the stock market comes unglued ( due to the necessity to get liquid and cover margin calls aside from blind computerized trading algorithms ), the demand for physical gold in Europe and in Southeast Asia will keep a floor under the metals going forward.  Use these artificial pullbacks to accumulate more precious metals.  All markets are volatile these days with nanosecond computer trading, so just get used to it, but have a plan.  I invariably buy either Gold or Silver just before a pullback, but I have been buying for so long that my average costs per ounce are relatively low versus today's prices.  This will be your position also in the months and years ahead.  We are going much higher in both metals as the currencies of the world fail to hold value and fail to hold the confidence of investors and Main Street citizens.  THIS LOSS OF CONFIDENCE CANNOT BE REGAINED ANY TIME SOON.


The Sage of Wexford, packing the Ark with two of everything except Central Bankers and politicians.


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June 15, 2010:  TEETERING ON THE EDGE OF THE PRECIPICE.


The Average Joe on Main Street seems to be fairly clueless about the severity of the situation we earthlings are currently embroiled within.  I guess mere faith in Government's ability to paper over all of the financial system holes along with those in a still-suffering U.S. economy will carry them through the worst of the black period just ahead.  This is what Government wants them to believe.  If you surrender more of your inalienable freedoms and more of your increasingly scarce cash through taxation, Big Brother will be there to take care of you.  We have seen this reliance on Government Generosity fail miserably throughout history, and the present example will prove to have been one of the worst failed attempts to rectify a corrupted financial and imbalanced economic system that is now beyond conventional repair.  We literally need to allow the current macro-systems to fail and then build new ones upon a greatly modified base.  These systems are in failure mode anyway, and all of the money being created out of thin air around the world will not keep the blossoming Loss of Confidence from gaining the upper hand and putting the global economy back into the second phase of the 2008 Financial System Collapse.  The dreaded Double Dip is just around the corner.   Efforts to date have only slightly delayed the inevitable end results of retracement and liquidation.   More disturbingly, these ill conceived and ill executed "efforts" have actually increased the severity of the Greater Depression Phase II Downturn we are currently entering since absolute debt levels are at unmanageable heights.

If the Stock Market is a forecasting machine, then the 1,000 point fainting spell on May 6th is just a precursor to the evaporation of bids on many risky assets around the world in a compressed timeframe.  Buyers disappear when the preservation of capital becomes more important than the potential return on capital.  WE ARE TRULY TEETERING ON THE EDGE OF THE PRECIPICE.

This is now my favorite chart from www.shadowstats.com where all of the number fudging regarding True GDP Growth and the True Inflation Adjuster is correctly eliminated to show that we have not left the official Fall of 2007 Recession by any stretch of the imagination, BUT ARE STILL TRYING TO GET TO THE ZERO GROWTH LINE, much less the 2% plus growth bandied about by Officialdom.  Hence the ever-so-popular expression:  "WHAT RECOVERY?".  It is my humble supposition that while THE NEGATIVE GROWTH OF THE ECONOMY HAS BEEN LESSENING, THE U.S. ECONOMY IS STILL NOT GROWING AND NOT LIKELY TO DO SO IN THE QUARTERS AHEAD. 
 

In fact, the Sage forecasts that both lines will turn abruptly downward once again in the months ahead, JUST AS THE U.S. ECONOMY DID STARTING AS EARLY AS JANUARY, 2004 after a similar False Start from the Dotcom 2000 Recession.  Please realize that I get no joy in making dire predictions.  I am just giving you one-heck-of-a-free Head Up so you can take actions that will help to preserve your financial well-being.  I have done that for a decade now on these electronic pages, and old-time readers know how well I have served them!

Higher taxes and fees emanating from the Enlightened Ones in Washington will see to greatly compromised economic activity and decline, BUT RETAIL DEMAND FOR VIRTUALLY ANY CONSUMER GOOD, SOFT OR DURABLE IS JUST NOT THERE.  Why???

ONE REASON:  Consumers see riots in the streets of Greece, soon to be followed by Spain and then the U.K., and he or she worries about similar outbreaks coming to our own American shores.  And let's not leave out Hungary in the mix.  The very notion that any country or government can tighten the spending spigot at a point in history that just saw the greatest flood of "free" money ever, most of it to miscreant financiers, is preposterous at best and ludicrous at worst.  It will be all lip-service for Greece and the other PIIGletS, not to mention a U.K. and United States that are on a run-away spending train with calls to throw more coal in the boiler and with no engineer manning the brakes.  It is all sad, sad, sad political theater, folks.  Kind of like appointing a debt commission that will come up with the Holy Grail to Fiscal Responsibility AT THE END OF THE YEAR.  This allows those presently in power in the U.S.A. to try to crank out as much spending as possible while they still have their parking spaces on Capitol Hill.  The Euro and the European Union are on the road to failure, but the governmental & financial failure coming to a neighborhood near you is going to be of even greater magnitude and portend even greater personal suffering for the indigenous populace, we Americans.  The Prez's weekend brainchild of throwing $50 Billion at the States to keep some 33 of them from going belly up over the summer should send cold chills down your spine even in 90 degree weather.  If the economy is recovering, why are the conditions within the States getting worse by the day?

ANOTHER REASON THAT WE ARE HEADED DOWNWARD BOTH ECONOMICALLY AND FINANCIALLY IS THE MERE FACT THAT ALL OF THE MONEY CREATED DURING THE LAST 20 MONTHS HAS YET TO FILTER INTO THE ECONOMY OR TO REPAIR THE BALANCE SHEETS OF THE VAST MAJORITY OF U.S. FINANCIAL INSTITUTIONS.  Please peruse the graphic below:
 

Is it any wonder that the Federal Reserve stopped producing the M3 statistic, just before it began to explode with Greenspan's Easy Money Flood from 2006 onward, then Ben Bernanke's acquiescence until early 2008?  Meager Fed tightening occurred under Princeton Ben, but it was monetary lip-service with little effect on the wild financial shenanigans promulgated by Wall Street around the world.  First the tsunami wave of virtually free money with very high utilization in the Financial Economy ( Wall Street ) to AN UTTER COLLAPSE OF THE BROADEST MEASURE OF U.S. MONEY SUPPLY.  If we are truly watching money supply shrink by some 6% annually at this junction, THERE IS NO WAY UNDER HEAVEN THAT THE U.S. ECONOMY CAN GROW UNDER SUCH A SEVERE LIQUIDITY CONTRACTION.  Expansion need growth in monetary balances, normally through a spurt in borrowing, to even exist and that ingredient is sorely missing from the U.S. economy in June of 2010.

The Federal Reserve and Treasury have lost control of the situation, YET they could never control the utilization of the EXCESS funds created in the first place.  They can create the money, but they cannot put it to productive use.   Consumers are paying down debt, banks are not lending, and cash is being hoarded since only Gold and Silver offer the prospects of positive returns in the years ahead, CERTAINLY NOT TREASURY SECURITIES, JUST ASK PIMCO'S BILL GROSS.  Not to mention the disappearance of debt instruments due to small business, corporate, bank, and consumer bankruptcies which shrinks even the most fudged of balance sheets even after the abandonment of Mark-To-Market accounting standards; debts in total default must be recorded at zero balance and a write-off to income, sorry Banksters, no FASB cop-outs here.  A debt collapse of over $30 Trillion in 2008 through 2009 cannot be stymied by the creation of $3 Trillion in new money during the same period.  The math just does not work.

ANOTHER SOBERING CHART WHICH SHOWS THAT THE OBAMA "RECOVERY" LIKELY PEAKED IN THE THIRD QUARTER OF 2009 WHEN BAIL-OUT AND AUTO/HOME STIMULUS MONEY WAS FLOWING LIKE WINE.  In the past, every time, without exception, that this index had passed the negative 24 level on the way down, the U.S. was either already in recession or entering a recession.  Can you say, "Double Dip" and that is not plain vanilla ice cream either!!!

AND ONE MORE CHART OF DETERIORATING ECONOMIC PROSPECTS FOR THE WORLD, NOT JUST THE TERMINALLY INDEBTED UNITED STATES:


 

As my nimble little fingers fly across the keyboard, the Wall Street gamers, Goldman and Morgan (GoldMorgan?) are desperately trying to get the S&P 500 above its 200-day moving average now sitting in the 1115 region ( whoopee, it closed at 1115.23, think I know of what I speak???!!! ).  Let's get the Sheeple to think that the worst is behind us and that the 2009 Bull is back after only a mild correction.  The only "bull" that is back is that which is emanating from the mouths of the vested crowd on Wall Street, whose very livelihoods depend on Joe Citizen buying stocks with both hands and with wild abandon devoid of fundamental considerations like the charts above.  You see, trading volumes go way down in bear markets, primarily because the retail investor stays away, having been burned one too many times in the recent past, not to mention the wife chasing him around the house with a rolling pin for having squandered their nest-eggs and retirement dreams.  This means that institutional investors only have themselves to play against on the computer, so margins shrink and mega-bonuses are more difficult to come by.  Retail investors are much more emotional than an aluminum black box. 


 

But by all means chase this suckers' rally with what principal you have left from the Lost Decade in Stocks ( 2000 through 2009 ).  There are some great graphs on the web comparing price action in stocks over the last two years to the 1929 through 1933 period.  I suggest you check them out.  I do not know with certainty where the stock market level will be in a year, but the very expanded gut that has produced 100's of thousands of Dollars in tangible asset gains over the last 10 years is telling me that the S&P will be closer to 800 next summer than 1200 or beyond.  The March 2009 low of 666 will be handily taken out at some point.  An S&P at 500 is certainly not out of the question, a 55% decline of sickening and impoverishing proportions from today.  No economic recovery, no growth in corporate earnings, bing bang boom.  The stock market is hardly cheap today at some 22 times projected Earnings, when history has shown time and again that the bear is seldom put back into hibernation before the market P.E. gets to 10 or less.  The odds are greatly against stock investors ..... this the 15th day of June, 2010.  But the financial media whose advertisers depend on herd behavior to feather their nests will not be telling you this fact any time soon.

So much for the casino called Wall Street.  Get ready for more shoes to start falling from the Sovereign Debt Collapse so readily initiated by Greece.  Moody's downgrade of Greece to Junk Bond Status on Monday is just the beginning of the second round of instability to be created by the European Debt Collapse.  Spain will come to the fore with stop-gate financing / emergency funding needs before this weekend.  The European Central Bank takes a page from the Ben Bernanke playbook and rolls out the printing press to solve all insolvency issues, corporate, private or governmental.  Spreads on Sovereign Debt are increasing in a trend that will make it harder and more expensive for compromised Treasuries around the globe to sell their limitless quantities of progressively more shaky paper.  The European Union is at the forefront of this growing panic, with the United Kingdom and the United States being preened to perform Acts Two and Three.

With Gold setting new highs in all major currencies around the globe, it does not take a PHD to figure out what asset class is sought after in times of overt currency devaluation AND GRAVE UNCERTAINTY.  The faith in any currency, particularly the Euro and eventually the U.S. Dollar, is eroding quickly, regardless of any recent  misguided "flight to safety" phenomena, WHILE gold demand in the first region to be affected, Europe, is off the charts.  Gold demand in these here United States will be off the charts before the snow flies, the conditions around the world almost guarantee it.  Get ready for bullion shortages a la Late 2008 and higher premiums all around.  Have been there, done that!

While summer has traditionally been a muted period for Precious Metals price activity, I do not think this will be a typical summer for both Gold and Silver.  There are so many exogenous events that are teeming below the surface, ready to explode, as we enter summer, that seasonality will be hard pressed to exert an influence on one of the few asset classes that has not been severely compromised over the last 20 years.  Money tends to follow trends.  Hey, that rhymes!  Please put one depressionary dime in my tin cup.

Market timing is the practice of usually unsuccessful investors.  Trend investors have seldom not been rewarded over time, even if they have to weather the expected periods of price retracement and consolidation.  Gold and Silver have been ignoring the direction of the U.S. Dollar on a daily basis, going up on Dollar "up" days; this is another sign that we have entered a new phase of the Precious Metals Bull Market that started some 10 years ago.  These precious metals are now viewed around the world as currencies in their own rights.  They are also beginning to ignore the fortunes of the stock market on a daily basis, and this resumption of the negative correlation of Gold and Silver to the financial markets is an absolute sign of inherent strength originating from quickening physical demand.  These are all daily price behaviors that have not been in force for several years now, and show the loss of confidence Ben Bernanke finally admits to regarding the financial markets.  Can it really be true that Bernanke does not fully understand why Gold is going up ( as he prints money with both feet )???!!!  We truly have Liars of the First Order at the helm of the Ship of State!

TEETERING ON THE EDGE OF THE PRECIPICE.  Toss the Paper, grab the Gold.

The Sage of Wexford, who has been buying Gold since 1997, a little early but never too late as the world as we know it comes unglued.  Not the Ultimate Pessimist, but the Ultimate Realist as the last decade has proven.  Better to be right than popular, not running for office.  Okay, I HEARD THOSE SIGHS OF RELIEF OUT THERE!

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July 16, 2010:  Capping A High-Pressure Well Is Only A Temporary Fix.


My apologies to the residents of the Gulf of Mexico in advance to making any reference to the disaster that has unfolded there over the last 84 days.  Obama showed his lack of business and economic acumen once again when he suspended deep-water drilling in the Gulf without first inspecting all relevant operations there to determine if he was using a nuclear bomb to swat a fly.  Of course, it is now painfully clear that his court-rejected moratorium will do more damage to the economies and social well-being of the Americans who depend on the Gulf for sustenance than the oil contaminating the Gulf, but hey, what do we expect from a guy who never even ran a lemonade stand at a profit.  Americans had better elect a President in 2012 that has a multi-decade record of business achievement or we will have Illegal Aliens on the Moon before we exit this Depression.  The Presidency is not a "learn-on-the-job' position.  The damage done by utter inexperience is far too damaging, and legislative monstrosities such as ObamaCare and now the Financial Reform Bill will take many years and $Billions of taxpayer money to repeal and amend.  I think Barack better quit using that "drive into a ditch" analogy anymore, since that is just where he and his Party have put the U.S.A. with ideological, socialist policies bent on wealth re-distribution and Big Brother knows best.  If He gives amnesty to some 12 million illegal aliens by Executive Order just prior to the November elections to further pander to the Latino Vote, there will be riots in the streets.  Expect social disorder to increase in the months ahead as the Misery Index hits new highs in this country as we become totally entangled in the Second Phase of the 2008 Financial Panic, also known as the Double Dip.

Enough on that inept Bozo.  When an electorate puts a Smooth Orator in the highest office of the land based primarily upon silky, feel-good rhetoric and little else, THEN YOU GET WHAT YOU VOTED FOR:  All hat and no cattle.

The Price Capping in Gold and Silver continue as the NY Bullion Banks, the Fed, and Treasury try desperately to keep U.S. Treasuries and the Dollar on the menu of domestic and foreign investors.  THIS MARKET MANIPULATION WILL NOT STAND BECAUSE WE LIVE IN A GLOBAL MARKET FOR GOLD AND SILVER AND THE INFLUENCE OF U.S. EXCHANGES IS WANING AS EMERGING TRADING CENTERS SUCH AS SHANGHAI, HONG KONG, MUMBAI, MOSCOW, AND DUBAI GAIN VOLUME AND PROMINENCE THAT THE U.S. NO LONGER DESERVES.  This correlation in daily Gold and Silver trading where the metals sink along with the fortunes of the U.S. stock market will not continue much longer.  The re-emergence of the European Sovereign Debt fiasco is just around the corner, if not the fiscal failure of some of the largest, most populated States in the United States.  The interest and principal payments as well as ongoing operational expenses of these over-committed governmental entities are like the oil spewing from the BP well.  They are legion and out of control.  YOU CAN CAP THE WELL WITH PAPER MACHE JUST SO LONG BEFORE THE DAILY PRESSURE OF HUMONGOUS FUNDING REQUIREMENTS BLOW THE LID OFF.  I fully expect another Black Swan event to land on U.S. investors' heads well before the Fall.  Short sellers in this Mega-Bull Market in Gold and Silver have lost Billions of Dollars along the way by underestimating the tenacity of the bulls and the necessity of scared global investors to continually take physical bullion out of the market, not settling for the very sad paper substitutes.  The short squeeze of the Millennium is just around the corner which will catch the majority of bullion short-sellers ............... well, SHORT.  While Morgan and Goldman have been very astute with their bullion trading to date, USING TAXPAYER MONEY TO BOOT AND FEDERAL RESERVE UNDERWRITING, they cannot react fast enough in such relatively "thin" markets to the exogenous event, the left-field Black Swan.  He who thinks he is smarter and quicker than the rest of the world can be caught with his shorts down.  Happens all the time.

The bullion banks may think they have unlimited funding with electronically created money from the New York Fed, but the effects of a Second Phase of Quantitative Easing on the Dollar's ongoing Devaluation and the ultimate cost to finance Treasuries will eventually constrain even this source of illicit funds.  Furthermore, litigation related to the financial instruments that led to the Financial Panic of 2008 is ballooning in numbers and dollar-value of claims against Wall Street participants.  Lawyers can smell class-action lawsuits like a bloodhound can smell a morsel of bacon.  It will eventually come to the light of day, with severe political consequences in a very charged political atmosphere, that the CFTC and the S.E.C. have abrogated their responsibilities to retail investors, i.e., citizens, i.e., voters, by permitting front running, excessive/ market manipulative positions, and Plunge Protection Team shenanigans.  We are at the forefront of a Populist Revolution in this country, stay tuned.  It will take the better part of a decade to set the Ship of State back on course, BUT AMERICANS ARE ABOUT TO TAKE BACK THEIR COUNTRY FROM THE SELF-SERVING CAREER POLITICIANS. Many trading days this summer have already seen a pronounced divergence in the price movements of the two very-dissimilar markets, stocks versus Gold/Silver.  In fact, on Dollar Strength Days, the Yellow Dog and the Poor Man's Gold have actually had strong advances, showing the world that the ancient currencies of Gold and Silver are back in favor over all those created by the fiat gestures of a Treasury or Central Bank.  While investors mistakenly rush into the Dollar and Treasuries during Panic Days, more and more of which are to come, that "misguided" trade is soon to find fewer and fewer buyers as Billions of Dollars pour into Gold and Silver.  Why?  Every other asset has been or is about to be discredited regarding the "risk-to-own" quotient that has been ignored up until now.  How can there be safety in a fiscally bankrupt country's currency or debt when the risk of default or currency collapse are renewed concerns and current yields don't even come close to compensating you for that risk.  20% Treasury yields are on the horizon, mark my Sage-like words.  Maybe after an outright Devaluation or Treasury Maturity Extension Decree along with a redemption freeze, but they are coming.  This Treasury Bond Bull has been shooting up with steroids for almost 25 years now, and his legs are very wobbly from the side effects of sovereign debt market instability, excess supply, interest rate risk, and default/devaluation risk.

As if to counter this inevitable rise in Treasury yields as global buyers wizen up to the realities of U.S. Bankruptcy, I read a very interesting perspective on the collapse of 10-Year Treasury Note yields below 3% just recently.  Although us bullion mavens are noted for our own versions of conspiracy theories, they revolve primarily around the efforts by Wall Street investment banks such as JP Morgan and Goldman-Sachs to keep gold and silver from reflecting the collapse of the global banking system, financial system, and sovereign debt markets via much higher bullion prices.  The very thought that the Obama Government wants stock investors out of stocks and into Treasuries to maintain liquidity in the Government Bond market and to maintain Robber Baron Yields that are well-below REAL inflation in the 7% to 9% range for us mortals IS QUITE A COMPELLING ARGUMENT.  Many analysts are now predicting a Second Phase of Quantitative Easing or Money Printing by the Fed to attempt, ONE MORE TIME FOR THE GIPPER!, to save the economy from falling over a cliff in the next several months.  How about an expansion of the Fed Balance Sheet to some $5 Trillion, whoopee!A look at the stats, massaged as they are coming out of Washington, and you get that sickly feeling in the pit of your stomach that economic activity is slowing precipitously once again now that we are in the hangover phase of the stimulus subsidy binge.  Geeze, Louise, I though all of those signs that the 2009 Stimulus Boondoggle had made to tout wasteful, ineffective programs would have convinced Americans increasingly on food stamps and waiting in line for unemployment benefits THAT THE SUPERHERO OBAMA HAD FLOWN TO THEIR RESCUE AND ALL WAS RIGHT WITH THE WORLD.  Poppycock.  This un-caped crusader of socialism and DON'T WORK OR LIFT A FINGER, WE WILL DO IT FOR YOU policies will be lucky to save himself politically when all is said and done.  Hate to say it, but Obama is making Jimmy Carter look good in retrospect.  At least Jimmy knew how to run a peanut farm successfully!


 

FOR THOSE OF YOU BUYING STOCKS STRICTLY ON THE TECHNICAL PATTERNS IN THE MARKET, THINK AGAIN!  EVENTUALLY THE FUNDAMENTALS TAKE HOLD NO MATTER HOW MUCH HELICOPTER MONEY BENNIE BOY THROWS INTO THE FINANCIAL SYSTEM.  TO DATE, BENNIE'S TRILLIONS OF DOLLARS HAVE NOT GONE INTO THE REAL ECONOMY WHERE YOU AND I LIVE!!!  PUSHING ON A STRING BECAUSE THE DEMAND FOR CREDIT IS JUST NOT THERE!  HOW COULD IT BE???  AMERICANS HAVE MORE CREDIT OUTSTANDING THAN THEY CAN HANDLE RIGHT NOW.  THIS WELL-RESPECTED "ECONOMIC HEALTH" INDEX HAS NOT BEEN THIS NEGATIVE EVER, EVEN AS THE GREATER DEPRESSION STARTED IN 2008/2007.


 

Few to no recoveries in the U.S. economy have occurred without a subsequent and significant expansion in revolving credit.  CAN YOU SAY:  "BIG ARSH HEADWIND", with 2010 and beyond seeing attempts at growth with persistent reductions in revolving credit blowing the other way.  Mark the Sage's words:  "No economic recovery has actually been experienced since the U.S. economy officially went into recession in Late 2007".  We have merely had reductions in the negative levels of GDP after adjustment for Real World Inflation north of 7%, but no positive GDP growth.  Hence, the collapse of tax revenues at the Federal, State, and Local levels are explained.



SO YOU HAVE A LAST CHANCE TO SELL STOCKS IN HERE, NOT BUY MORE YOU NINCOMPOOPS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

So throw the retirement plans of U.S. equity investors to the dogs ( the Yellow Dog? ) and make the Plunge Protection Team take a vacation in Arizona or on a Louisiana beach in an effort to make Equity Dollars seek the "safety" of Treasuries since the country needs the dough more than its citizens need the protection of principal ( and any hope of retiring above the poverty level! ).  They will take money wherever they can get it because the Chinese have just downgraded U.S. debt to AA with negative implications from its vaulted AAA status.  Wow!  Honesty from a credit rating agency, thought that went the way of the Dodo Bird!!!  And that rating is still way too generous for those in the know.  So get ready for the U.S. Stock Market to find new 2010 lows over the next several months.  666 on the S&P 500 will eventually be taken out with a vengeance.  UNCLE SAM NEEDS YOU.  He needs you investment money to stay reasonably solvent, he can't make Bernanke do all the heavy lifting; this frail Princetonite Academic knows he does not want to be blamed for the Dollar's Collapse or eventual Devaluation.  In an official devaluation of the U.S. Dollar, Gold will be revalued a good 100% over today's sub-$1200 level.  Some see an official devaluation a la our banana republic counterparts as an event coming sooner rather than later because the Second Phase of Quantitative Easing with have diminished market clearing effects AND PLENTY OF NEGATIVE CREDIT RISK AND INTEREST RATE RISK EFFECTS.  The jig is up on U.S. debt.  BUT JUST TO KEEP THINGS INTERESTING AND PUNITIVE FOR U.S. INVESTORS, Big Brother is going to gently assist in moving what little dough you got left from the 2000 and 2008 stock collapses over to U.S. "Save Me" Bonds.  Heck, Rosie The Riveter says it is the patriotic thing to do.  Second Downleg to Super Bear Continuum in Stocks is unfolding this very day.

Consider this very hot summer, The Summer of Precious Metals Accumulation.  That is exactly what is happening around the world, while Indians, Chinese, Singaporeans, Saudi's, etc., continue to buy in ever greater quantities and begin to take delivery of futures contracts in Gold and Silver instead of rolling the contracts over or liquidating them.  As you liquidate that second home on the Gulf Coast or most of your stock holdings or tell the mistress to go packing ( good luck on that one! ), WHEN YOU HAVE THE DOUGH .................... GO!  Gold and Silver are going to turn on a dime here, this is just a head fake to wash out the weak longs.  The smart money is buying with both hands and one foot.  And most of that smart money is overseas, unfortunately.  Central banks are net buyers again as they toss Dollars, Yen, Euros, Pounds, and whatever fiat is stinking up their balance sheets out the door in favor of Gold and clandestinely in favor of Silver.  All of this activity is under the radar, because these players know that they are the elephant in the room and even mention of their buying will bid up prices on them.  Hate to suggest that you act like an overseas Central Bank.  But buy all you can while there is still product on the shelf and 2-week or less lead-times on some bullion products.  Not a sales pitch, but once again very good advice as my clients have received over the last decade.  AND THAT CASH IN THE BANK EARNING A WHOPPING 0.50% ANNUAL INTEREST RATE???!!!***%%%@@@?  Another bank subsidy that may as well be in gold and silver where ounces are sold down the road to generate income; investors have relied on capital gains to fund income requirements during ridiculously low interest rate periods well before this; it is just a matter of what asset class has the best prospects for capital preservation and appreciation.  Cash for 3x months of expenses is needed for the Bank Holiday that will happen as sure as Senator Scott Brown of Taxachusetts ain't no trustworthy Conservative.  But money sitting idly in any U.S. Bank ain't as good as Gold!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!  Duh, bank deposits are also in U.S. Dollars.


 

DOGGEDLY, THE SAGE OF WEXFORD
NEVER GIVE UP AND NEVER LET THEM SEE YOU SWEAT OR CRINGE.



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