International Forecaster Weekly

A Bear Market Is Where Angels Fear To Tread

Red Herrings abound in NYC and DC, final death throes of big banks to come soon, Madoff was just a front man, Watch for the fake stock rally, Get rid of the criminals who destroyed our financial markets, Fed buying up debt and  is  becoming the new ATM for Wall Street, Contractions still seen in the market, AIG still making millionaires. We go deeper into the financial black hole.

Bob Chapman | March 21, 2009

There are red herrings galore.  They are the Illuminists' favorite fish.  We never have to worry about the red herring becoming an endangered species because their are enough of them inhabiting the New York, NY and Washington, D.C. areas to repopulate the oceans should that become necessary.

The so-called Citigroup "profitability," which failed to take into account hundreds of billions of unrealized losses suffered from various asset-based derivatives that are being hidden via bogus mark-to-model "creative accounting" methods, with the blessing of our regulators we might add, not to mention the trillions that will be lost on credit default swaps and interest rate swaps when those thermonuclear devices ignite and send Citigroup into its final death throes, and also not to mention the fact that Illuminist-controlled Citigroup was given a nearly $50 billion freebie from the sheople taxpayer sucker-dupes, is one of the largest of the red herrings being bandied about by the fane-stream media, and especially because it was used as an excuse to ignite stock market rallies around the world.  This red herring whopper was used to give the PPT the cover or rationale it needed to manipulate markets upward when they should be going down in flames based on horrendous financial news that is only getting worse.  Gee, do you think that if we could show a profit after being given a $50 billion handout from taxpayers, that we could help ignite a stock market rally?  How utterly ridiculous.  The current rally in stocks is like a siren song, luring people back into the market so they can be dashed on the rocks once again later when the rally fizzles and they suffer losses anew.  This classic bear market rally is a place where even angels should fear to tread, so we suggest you just keep accumulating precious metals stocks while they are kept artificially low.  Only insiders know when the current rally will be allowed to fizzle, so unless you are an insider, you will get burned and become a crispy critter.  Anyone who participates in this bogus rally is empowering the Illuminists, and is making their game much easier, and more profitable, to play.

 Another red herring is the Madoff case, where the SEC will now focus on confiscating the assets of Ruth Madoff, Bernard Madoff's wife, whose fortune numbers in the tens of millions, when tens of billions remain hidden in off-shore funds in Israel and who knows where else.  We can assure you that the books were obscured to show major losses to make it look like the money vanished in the financial death march we are now experiencing, when in reality a large portion of those so-called "losses" of fund assets are just a cover for the money that went missing and that has been squirreled away into off-shore funds.  Those so-called "losses" are just another red herring.  In fact, the whole Madoff scam is a red herring including the guilty plea.  They want to make it look like he is owning up to his criminal acts, but the real truth is that no one wants Bernie the Brigand to sing like a canary on the witness stand.  Then they would have to "suicide" him to stop him from telling you about all the Madoff friends and family members, SEC regulators and other high government officials who are profiting handsomely from the so-called Ponzi scheme, which is really a shell game where you are supposed to try to pick the shell under which the pilfered funds are located.   Don't worry, you'll guess wrong, because the reality is that the pilfered funds were slipped off the table while the shells were being scrambled and all the shells are now empty.  Cries from scam victims who are demanding explanations about the regulatory failure that allowed this shell game to go on for decades will fall on deaf ears.   Do these people really expect SEC officials to out themselves? Remember, Madoff is just a front man.  He could not have pulled this shell game off for two decades by himself.  The whole Illuminist financial community is in on this one.  The Madoff funds are really a giant financial black hole with wormholes leading into Illuminist pockets.  Now we hear the victims will get some tax breaks.  This is just another red herring that is meant to shut them up so they won't press on toward the truth.  We wonder if Uncle Bernie will soon join the likes of Saddam Hussein, Timothy McVeigh and Kenneth Lay as people who are likely to fit into the "officially dead but really alive" category.  At least we know he won't join Bin Laden in the "officially alive but really dead" category.  On second thought, we can't really rule that out.  As the saying goes: "Dead men tell no tales."  He could become the next central (and dead) character for a remake of "Weekend at Bernie's."

Another play on the Citigroup red herring scheme to provide a "rational" explanation and basis for igniting a false stock market rally is the upturn in the new construction industry, which is of course being spear-headed by an up-tick in the construction of apartment buildings.  After all, this only makes sense, as you have to create living quarters to house all the people being thrown out of their homes via foreclosures.  This just goes to show you that there is a silver lining behind every cloud.  But to use this as a reason for a major stock market rally?  Come on.  The Illuminists probably hope this will alleviate the embarrassing "tent cities" that are cropping up across the country.  Of course, many in the ever-growing ranks of unemployed people cannot afford an apartment, much less a house, so the "tent cities" will continue.  The new construction industry has sunk very low, and it will go even lower before it finally moves up across the board.  Don't forget, due to money created out of nothing to fund inane bailouts of criminal institutions not only in the US, but around the world, as well as a high risk business atmosphere caused by business failures of non-Illuminist companies who are starved of credit by the same large Illuminist banks being bailed out by taxpayers, will ignite hyperinflation and risk re-evaluation that will produce double-digit interest rates.  These rates will be throwbacks to the rates in effect during the early 1980's, and will devastatingly crush the real estate and building industries.  Most major builders will go under when the dastardly, double-digit-disaster finally becomes manifest, and the Much Greater Depression goes into full gear.

The latest red herring is the focus on the AIG bonuses for their bonehead executives, who we are told are "experts" that must be compensated with large bonuses to retain them.  We say, get rid of these criminals who have destroyed our financial markets with totally naked insurance policies called credit default swaps and let's hire some people from the insurance industry who really understand the business and did not get involved in these financial weapons of mass destruction.  But this is really not the issue.  The $165 million in bonuses is less than one tenth of one percent of the massive bailout money from taxpayers which has been funneled through this financial black hole to Goldman Sachs, JP Morgan, Merrill Lynch and a whole host of foreign banks like Deutsche Bank.  The salaries and bonuses of scores of Illuminist institutions around the world are being funded via AIG bailout money, yet all we hear about are the miniscule AIG bonuses.  If our corrupt, bought-and-paid-for Congress would focus as much attention on accountability for the 180 billion of AIG bailout money as it has on the 165 million if AIG bonus money, then we might be getting somewhere.

The ETF's for gold and silver are yet another red herring.  These funnels to the miscreant institutions that are a part of the gold cartel were set up to trap investment capital from lazy hard money investors who can't be bothered to take delivery.  This not only takes pressure of the CRIMEX precious metal inventories, it provides the CRIMEX with a ready source of gold and silver which these ETF's are leasing back to the CRIMEX.  When the prices of metals start to climb, down go the lease rates, out goes the gold and silver via ETF leases to bullion banks and the CRIMEX, and, to boot, the ETF shares are naked shorted to keep the prices in the physical market in line with the futures market.  The ETF's are also a red herring to divert money from precious metal resource companies.  The ETF's help to subdue rallies in precious metals by keeping these resource stocks from confirming the gains in gold and silver.  Also, once the Big Sting Two, currently in progress, is completed, the artificially low prices for resource stocks, which have plummeted due to their neglect by the hard money community who are funding the ETF's instead, will enable the corrupt Illuminist companies of the gold cartel to scarf them up for pennies on the dollar, thus giving the gold cartel control of not only gold and silver above ground, but below ground as well.  This failure to remove physical gold and silver from Illuminist inventories is why recent rallies have no legs and keep petering out. Gold and silver will continue to struggle, and will be allowed only token rallies, until the bond market collapses and gold and silver become the only remaining safe haven.  Then, the miscreants in the gold cartel will suddenly become gold bugs themselves.  But as we have said, the delay in the rise of precious metals is allowing a lot more people to get in at lower prices than would otherwise be possible, and this is good for the good guys.  That is why the bad guys have been cutting off precious metal supplies from mints around the world.  They are afraid that the serfs will become too powerful by virtue of their precious metal holdings.  

The Federal Reserve on Wednesday stunned investors by announcing plans to buy $300bn of US government debt, rocking the bond market and the dollar.

In a further display of aggression, the Fed also said it was more than doubling its purchases of securities issued by housing giants Fannie Mae and Freddie Mac to $1,450bn in a bid to bring down mortgage rates and support the housing market.

The yield on 10-year US Treasuries plummeted 50 basis points to 2.50 per cent, although the yield on 30-year US bonds rose because it was excluded from the programme. Equities bounced with big gains in troubled banks such as Citigroup and Bank of America, but the dollar fell.

Even though the Fannie and Freddie purchases are much larger in size, it was the plan to buy Treasuries that caught investors by surprise. The last time the Fed attempted to bring down yields on long-term securities was during the ill-fated Operation Twist in the 1960s.

The Fed said it would buy longer term Treasury securities with maturities of two to 10 years. The US central bank said its intention was to “help improve conditions in private credit markets” – and by implication, not to help the government finance its mounting deficits, although it will have that effect.

With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy.

To do so, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

Fed Chairman Ben Bernanke and his colleagues wrapped a two-day meeting by leaving a key short-term bank lending rate at a record low of between zero and 0.25 percent. Economists predict the Fed will hold the rate in that zone for the rest of this year and for most — if not all — of next year.

The decision to hold rates near zero was widely expected. But the Fed's plan to buy government bonds and the sheer amount — $1.2 trillion — of the extra money to be pumped into the U.S. economy was a surprise.

"The Fed is clearly ready, willing and able to be the ATM for the credit markets," said Terry Connelly, dean of Golden Gate University's Ageno School of Business in San Francisco.

Wall Street was buoyed. The Dow Jones industrial average, which had been down earlier in the day, rose 90.88, or 1.2 percent, to 7,486.58. Broader indicators also gained.

And government bond prices soared. Heralding a coming drop in mortgage rates, the yield on the benchmark 10-year Treasury note dropped to 2.50 percent from 3.01 percent — the biggest daily drop in percentage points since 1981.

Manufacturing in the Philadelphia region shrank in March for the 15th time in the last 16 months as orders and employment weakened.

The Federal Reserve Bank of Philadelphia’s general economic index improved to minus 35 in March from minus 41.3 a month earlier, the bank said today.

Negative numbers signal contraction.

Manufacturers are scaling back production and reducing expenses as the global economy sinks. Clogged credit markets forced the Federal Reserve yesterday to announce $1.1 trillion in additional initiatives, including buying Treasury securities, in a bid to revive economic growth.

At least 73 employees of AIG's Financial Products unit -- the London-based division of the insurance giant that sold the high-risk derivatives blamed for the company's near-collapse -- got bonuses of at least $1million out of the $165 million pot of bonuses that was recently revealed, New York Attorney General Andrew Cuomo said moments ago.

Cuomo subpoenaed AIG yesterday for details of the bonuses. AIG has received $173 billion in government bailout money to stay in business.

According to Cuomo, 11 of the AIG employees who received bonuses are no longer with the company, obviating the concept of the "retention bonus."

Also, $42 million of the $165 million in bonuses was given to 10 AIG employees, Cuomo said.

"Again, these payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG," Cuomo writes. "Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout. Something is deeply wrong with this outcome."