International Forecaster Weekly

Big Players Get Out Of Risk And In To Gold

Who will be the buyers of US bonds? Questionable Fed policy to keep economy afloat, liquidity drain to keep pressure on gold and silver, George Soros putting his money in gold companies, upheaval in currency markets, TARP was to pay out the people responsible, difficulties for small and mid-sized banks.

Bob Chapman | February 27, 2010

We ask, who on earth will now buy our bonds as our multi-trillion dollar Obama-ordained deficits run America into a state of bankruptcy?  Certainly not the Chinese, who are no longer buying our "worthless paper."  They are now buying Canadian bonds and gold.  Certainly not the Russians, because they know exactly where the dollar and America are headed (i.e. where Russia was not too long ago - in total collapse).  Certainly not the US lapdog Japan, at least not since the Obama administration and the largely US government-owned car companies orchestrated a wildly exaggerated attack on Japanese auto quality.  And certainly not the Middle East, who are already swimming in treasuries and who want to start their own currency so they can finally break the dollar pegs that are driving them into inflationary hell.  Who does that leave then, you might ask?

We'll tell you who that leaves.  The Fed, panic-stricken stock investors and the US public, that's who!  The Fed will continue to feed money to foreign banks via currency swaps, this time in secret, and will continue to feed leveraged funds into secret Fed-supported off-shore hedge funds to invest in treasuries and agencies.   Then you will see the PPT plunge the stock markets periodically to push money out of those markets into US treasuries.  The problem there is, that although investors may buy short-term treasuries because they can't think of anything else on the spot, they are going to be looking for other venues, like gold, silver and commodities, both because the US economy and dollar are going to be looking rather sickly, and because rising interest rates due to an increase in perceived risks is going to destroy bond values.  They will hold the bonds while the blood-letting is ongoing to take advantage of the increase in bond prices, but then they are going to have to find another location for their assets in short order when that blood-letting stops, and that means gold and silver.  After the stock markets around the world have been bled down to whatever level the PPT is told to bring the markets down to by our shadow government, guess who's next?  That's right, the American people and their pensions, 401(k)'s and IRA's.   You will be offered the option to buy an annuity from an insurance company, who will fund it's obligations under that annuity, with, well, you guessed it, US treasury bonds.  After the government gets its foot in the door with voluntary annuities, you can be sure that mandatory annuities are next.  The only problem with these proposed annuities, beside abysmal rates of return, is that after the US government goes bankrupt, the US treasuries will be worthless and the insurance companies will be unable to deliver on their annuities, leading them into bankruptcy and further government takeover, and leaving you with a big goose egg for retirement income.   That is where we are headed unless you take action to stop them.   

Deflationary forces that would ostensibly be unleashed by the Fed's feigned plan for a liquidity drain (a drain which will be very temporary, we can assure you, if it is executed at all, as it is probably just a ruse, for now, to keep pressure on gold and silver) will not materialize unless the Illuminati finally realize that they are going to have the derrieres of their henchmen-miscreants booted out of Congress in November, in which case they may attempt to cause major financial and social mayhem in a move calculated to delay elections.

You can also count on the Plunge Protection Team to execute a big-time yellow fever hit on world stock markets through manipulation and negative media coverage sometime before the November elections (not to be confused with the current small-time yellow fever hit on the stock markets that we have just experienced) where they will attempt in vain to slow down gold and silver by causing margin calls and other liquidity issues while at the same time providing the much anticipated stock market correction.  The depth and timing of the hit, or series of hits, may depend on how the Illuminati view the outcome of November elections, which are looking more and more unfavorable as news of their evil plans to implement an Orwellian one-world police state, by destroying the current world economic, political and social systems, spreads like wildfire around the globe.  Watch out when Buck-Busting Ben and Tiny Tim Geithner stop buying treasuries and agencies in March (at least officially, but you can bet they will still be buying them clandestinely through third parties)!  The stock market victims are going to be next in line to become big US treasury bidders!  After that, the insurance companies will become the next big US treasury bidders - with your pension money - to fund their bogus retirement annuities!

We also want to give our Almighty God full credit for helping to turn the tide of opinion against the Illuminati, as we have seen His mighty hand at work, exposing the horrendous truth for all to see in some of the most perfectly-timed and humorous untoward events we have ever witnessed, events that have helped to unravel the evil plans of the would-be masters-of-the-universe.  The following are some examples of what we believe is God at work:

First, we watched as Meredith Whitney exposed the toxic underbelly of Citicorp's subprime derivatives, putting a premature end to what would otherwise have been an ongoing act of piracy as Illuminist banks continued to rape, pillage and burn derivative investors around the world.  Many of the legacy banks were caught with their hands in the cookie jar while others were left holding the bags of toxic waste they had yet to unload on some unsuspecting institutional investor dupe.  They had planned to melt the system down, but only when they were ready to do so.  Because the system melted down prematurely, the meltdown was soon out of control (like a financial Chernobyl) and the elitists were in a state of desperation, running around like rats on a sinking ship, threatening martial law and financial Armageddon if they did not get their bailouts. Then they bailed out only the Illuminist legacy institutions, cutting them sweetheart deals and flooding them with an orgy of liquidity to save their hides, while letting the non-anointed institutions and the US public fail, in an orgy of crony capitalism which was exposed in the IF and other alternative media.  This exposure of Illuminist corruption turned the tide of public thought against the Fed leading to the bill to have the evil Fed audited, and also soured the US public against the Fed's henchmen bankers and politicians.

The recent correction in the stock market and in the gold and silver markets was just a preliminary move to tamp down gold and silver until the Fed presumably stops buying treasury and agency paper.  The real trouble may start once the threatened liquidity drain by the Fed is commenced some time in March.  Very poor performance by the financial sector, disappointing levels of consumer spending, the downturn in the real estate market that will occur as the tax credit nears expiration and the elevation of interest rates as the Fed pulls back on its quantitative easing and interference in the bond market, ever growing numbers of real estate foreclosures (both new ones and the ones the bankster-gangsters have put on the back burner to stop the deterioration of their balance sheets) and the ongoing bank failures that will occur due to massive loan defaults across the debt spectrum, together with problems in Europe, China and Japan, will all be used by the media to lead the way down.  This tanking of the stock markets will be used, unsuccessfully, as a substitute for Fed monetization.  In the end, the Fed will still have to monetize, especially if the American public puts the kibosh on the pension takeover.  No one else wants our bonds anymore.  So the Fed will have to monetize, or the entire bond market and financial system will collapse.  Also remember that the Illuminist institutions are using dark pools to dump dollar-denominated paper and to pick up gold and silver bullion, shares and derivatives on the sly.  They will leave you holding the bag.  The train is once again leaving the station.  Make sure you are on it.

Any pension fund that does not diversify into gold and silver bullion and their related blue chip shares is a betrayer of their beneficiaries' trust and is either grossly or criminally negligent.  You won't have to wait for the lawsuits.  You will just suddenly disappear off the face of the earth when the people who trusted you find out that they are going to starve to death because of your negligence and malfeasance.  A word to the wise is sufficient.

George Soros has picked up a large position in the gold ETF GLD.  Since he of all people has to know that they have leased most of their gold out, we wonder if the Illuminists have not told him to take the lead roll in covering up its gold shortage until they are ready to take the system down.

We also note the big sell-off in Asia that was orchestrated this past Friday which initially supported the dollar as usual raising the dollar to well above 81 on the USDX.  Then suddenly, the dollar rally collapsed and the dollar finished only slightly higher.  Could it be that this dollar strength was generated so that Goldman and JP Morgan could sell their long positions into the strength?  The dollar rally has peaked, as evidenced by the decline in USDX open interest, which peaked at 72,572 contracts on 2/3/10, and which has been declining ever since.  As of this past Thursday, the open interest for the USDX stood at 58,496.  Since open interest did not decline on Friday or Monday, could it be that they reversed their long positions and went short?  It is still difficult to tell, but we'll monitor the situation.

Note also that China has been talking about allowing the yuan to rise against the dollar.  If so, we would suggest that you short Walmart.  This plays into the desire of the Chinese to have the yuan become the leading reserve currency, or to have a more prominent place in the coming basket of currencies, and would be a boon to the dollar, and now the euro, carry trades, allowing connected institutions to borrow dollars or euros and use them to buy yuan or yuan-denominated assets.  It would be the perfect arbitrage, and would help move big investors out of dollars and euros into the yuan.

The total upheaval in the currency markets that would be wrought by any dollar devaluation would rock the quivering mountain of growing trade imbalances and mal-investments to the core, and unleash a financial, political and social cataclysm that will bring the whole world financial system down as already boiling civil unrest and revolution around the globe bubble and overflow from their roiling cauldrons.  The BRIC nations will be destabilized along with the US, Canada, Japan, the Middle East and most of Western Europe.  Eastern Europe has already gone under. The European Union will be DOA after it is bludgeoned into a bloody pulp by the consequences of the dollar devaluation, which will send its many financially borderline nations over the edge, including the UK, Ireland, Italy, Portugal, Spain and Greece, just for starters. This will lead to a new worldwide meeting of bankers to strike a new accord, perhaps leading to a basket of currencies to be used in international trade as a world reserve currency that would be backed by perhaps 15% gold.  Or perhaps out of fear of the potential impact on the Quadrillion Dollar Derivative Death Star which a dollar devaluation might detonate, and also out of fear for their own lives, the bankers will have their meeting first and devalue all the currencies at the same time in the hope that they could avoid out-of-control financial upheaval and keep risk and interest rates from skyrocketing too much.  Either way they will fail.  In any case, the dollar would then be officially dead as the world's leading reserve currency.  Then we will move on to the next stage in the Illuminist evolution of a one world government, a one world economy and a one world currency.  The next step of the elitists might be to establish a system of regional currencies, followed by an attempt to boil things down to one currency.  Or they may just go for the gusto, and risk moving to a single world currency in one death-defying, risk-filled shot.

The dollar devaluation event, whether coordinated with the devaluation of other currencies or not, will mark the end of any bear market rallies in stocks, will end the US treasury bond rallies which have been spurred by the Fed's near zero interest rate policy as risk elevates and interest rates rise, and will begin the final descent into financial hell for the derivative markets as well.  As the credit default swaps and interest rate swaps that comprise the Quadrillion Dollar Derivative Death Star go out of kilter as interest rates explode, the QDDDS will implode and go supernova and banks will start dropping like flies around the world as virtually all real estate markets crash and burn, with the result that gold and silver will be unleashed and allowed to run up to their true values as investors flee stocks and bonds in search of the only real money the world has ever known - gold and silver.  Gold and silver producer shares will also rise in meteoric fashion after the initial onslaught is over as they separate from all the other bloodied shares and prepare for launch.  The producer shares are where the spectacular, legendary gains will be made just as occurred during the 1975-1980 rally.  Any and all commodities will rocket to new levels as everyone tries to unload paper trash for real assets.  

You, the US and European public, must run the prices of gold, silver and other commodities up now to take cheap pricing away from the various Illuminist factions around the world who will be dumping all their dollar-denominated paper assets through the dozens of existing dark pools of liquidity behind your backs and outside the purview of market regulators who are as useless as tits on a bull in any case because they were established to cover up and whitewash felonious market manipulations, not to protect the investing public.  This will also put pressure on nations like China and Russia who know they must add thousands of tons of gold bullion to their coffers or face total financial annihilation and social upheaval.  You, the serfs, must rise up and beat the Illuminati to the punch now, knowing that they will be dumping all their dollar-denominated assets between now and the time for the big takedown, which will most likely happen in late 2010 or early 2011.  Dark pools Project Turquoise and Baikal were established at breakneck speed to open up the escape hatch for the European Illuminists to dump their euro-denominated assets outside the view of regulators and the investing public, so they would not be outdone by their US counterparts who already had dozens of dark pools to choose from for the unregulated, secret dumping of US dollar-denominated assets.  Neither the euro or the dollar are going to fare very well when the dollar devaluation unleashes the financial forces that will ultimately pulverize both developed and undeveloped nations with almost equal enthusiasm.  The winners will be those who get gold, silver, oil and other commodities on the cheap before their prices explode.

We see a coming decline in the stock market since the legacy banks have had a chance to pay back their TARP funds while replenishing their working capital with new stock offerings at current ludicrously elevated stock prices.  That is what this bear market rally in stocks has really been all about.  The henchmen must be paid.  The Fed created trillions of dollars out of thin air to fuel this unprecedented stock market rally in the middle of an ongoing depression.  This was done so that between outrageous insider trading profits (all made possible courtesy of the PPT which pipes planned stock and bond manipulations to their Illuminist cronies around the globe) and stock re-capitalization offerings at outrageously elevated stock prices, the banks could unload their TARP money, and then, freed from TARP employee compensation limits, unload billions in profits in the form of undeserved and excessive salaries and bonuses to their henchmen.  This will of course occur as their shareholders are screwed with stock dilutions and the taxpayers who bailed them out are left without credit so they and their smaller fry banks and businesses can be destroyed and/or absorbed by the gargantuan, too-big-to-fail legacy banks and transnational conglomerates as we descend into the final phases of total fascism.

And bear in mind that the legacy banks are just as bankrupt now as they were at the beginning of the credit crisis.  They had no business paying back the TARP money.  They continue to hide their losses on false and fraudulent financial statements that utilize fantasy mark to model values for collateral, while they hide their foreclosures and loan losses, placing delinquent loans on the back burner for later exposure after everyone gloms their filthy lucre.  They are still going to go under in order to set the stage for a new world bank and world currency, but not until they skim off all the cream.  Always remember, corporate entities cannot enjoy profits, only real people can.

The final stage of this plan to get outrageous bonuses to henchmen has concluded with Citigroup and Wells Fargo bringing up the rear.  Now that their re-capitalization stock issues have been unloaded on the unsuspecting public to get the funds they need to escape the bonus-crunching TARP Plan, look out below.  The timing and extent of the decline is hard to predict, and will depend on many factors, especially the political situation.  But rest assured, trouble is coming.  Gold and silver are your only refuge.  

Note how few of the smaller fry have been able to pay back their TARP money.  That is because they were not privy to the PPT's insider trading information, and without the wildly outrageous profits from such criminal activity; they are unable to improve their financial position in order to attract capital.  They are being set up for destruction and absorption at pennies on the dollar.   

There is a reason that 702 American banks, nearly one in ten, were on the FDIC “problem list” as of the end of 2009. A large number of small and mid-sized banks are burdened with home and commercial mortgages that are in default and may even go into foreclosure.

New data from First American CoreLogic shows why the solution to the problem banks face is so difficult to find. Eleven million, three hundreds thousand homes had underwater mortgages as of the fourth quarter of last year. That number represent 24% of all residential homes loans in America.The mortgage numbers are much worse when homes with equity of less than 5% are included. First American reports that ”an additional 2.3 million mortgages were approaching negative equity at the end of last year, meaning they had less than five percent equity.” That means that three out of ten homes have virtually no financial value to their owners.

The pressure that the home value trouble puts on banks is clear. The aggregate dollar value of negative equity was $801 billion at the end of last year, up $55 billion from $746 billion in Q3 2009. People who believe there is no hope of their homes ever having any economic value are more likely to default on mortgages, especially in an environment where unemployed and under-employed people make up 17% of the total available workforce nationwide. Many homeowners are as concerned about their employment future as they are about the value of their houses.

Problem home loans are concentrated in the regions where real estate values have fallen the most–Arizona, Florida, Nevada, Michigan, and California.  First American says that “among the top five states, the average negative equity share was 42 percent, compared to 15 percent for the remaining 45 states.” In other words, the odds are relatively high that some of the home owners in those states will never sell their houses for more than the amount of their mortgages. That creates a vicious cycle in which high numbers of people with underwater loans default in the states where real estate values have dropped the most. There is no easy way to create a foundation under home prices.

The FDIC has closed 20 banks this year, Five of those were in the five states where mortgage equity problems are at their worst. The agency closed 15 banks in December. Of those, five were in Arizona, Florida, Nevada, Michigan, or California. The bank failure and mortgage failure problems area inextricably linked.

The First American numbers do not leave much hope for a home price rebound this year. It is too hard to sell a house with an underwater mortgage because the bank has to be paid the balance of the loan in cash at closing. Many people do not even try make home payments or cannot afford to under those circumstances.  The Mortgage Bankers Association reported that a record 15% of American mortgage holders are either in foreclosure or at least one payment behind.

The difficulties that face small and mid-sized banks, which ultimately are a problem for the FDIC, are to a large extent still a fallout of the deteriorating real estate sector. The underwater mortgage problem is still growing and that almost certainly means bank closings will be high again this year as well.