International Forecaster Weekly

Dollar Losses Hit the Cosmos

Recent rally has negative effects, metals probably suppressed, liquidity drained away, waves of bad news yet to come for the markets, Bear market set to come out of hibernation soon enough

Bob Chapman | April 19, 2008

Earnings reports from the financial sector are starting to sound like excerpts from Carl Sagan's "Cosmos" series, except that the "billions and billions" being referred to are not stars, but dollar losses on financial statements.  Nevertheless, as oil and gasoline set new all time highs of $116.97 and $3.445, respectively, and as riots spread throughout the world because food prices are spiraling out of control, having doubled in the past three years according to World Bank President, Robert Zoellick, we get more "irrational exuberance" as general stock markets rally.  But is this really irrationality, or is this the end product of massive, rampaging manipulation?  Since the pros all know where things are really headed (i.e. around the financial toilet bowl culminating in a giant "swirly" aka depression), certainly the latter reason is the obvious choice.

Once again, the yen was used, along with blunt gold and silver suppression, media propaganda and various lukewarm earnings reports from the only corporations which are still holding their own, those being the multinational companies profiting from globalization, free trade, off-shoring, outsourcing, slave labor and dollar weakness, to create another week of manipulation madness, a week which culminated in Friday's cartel-orchestrated "puff the fluff" extravaganza for general stock markets and "hatchet job" on precious metals.  Now we know why the week before last there were no central bank sales.  The little darlings were saving it for Friday's warping of all financial markets, especially those used to trade gold and silver.  Short-term lease rates are still very low for both gold and silver, so leasing was a part of the direct metals suppression picture also.

The real culprit behind the rally in general stocks was, as usual, the schizophrenic yen, which of course suddenly decided (was ordered) to take on its super-wimpy personality.  

This provided the carry-traders with the liquidity necessary to fund a new adventure into equities and out of bonds while the metals were being pounded to make sure that the liquidity stayed out of precious metals and remained almost exclusively in equities.  As usual, this was timed for the day after protective derivatives for April expired so the cartel would get less resistance from hedgies watching over their protective derivatives.  Meanwhile the media put out the idea that traders are starting to sense that the worst is behind us and that it's now time to move onward and upward.  The release of liquidity for the carry traders, and the consequent general stock rally funded by that liquidity, was used to confirm this patently false fane-stream media spin in order to lure the public and non-insider, institutional investors back in as bullish sheople-dupes to be carved up by the "Butchers of Wall Street" in the Manhattan Slaughterhouse like the sheep and cattle they are.  Don't think for yourself, go with the herd.  Be a lemming and run over the cliff with rest of the morons.  It's time for more rape, pillage and slaughter at the hands of the lusty, voracious Vikings aka cartel insiders.  Quite clearly, treasuries had reached the saturation point, so the elitists determined it was time to move back into equities to earn some more filthy lucre by continuing to fleece the sheople.

To show you how ludicrous this rally was and how false the stated reasons were for its development, let's take a look at the yen versus the dollar and the euro over the past week.  Last week Thursday, when the most active gold contract (June) broke 940, the Illuminati had a collective myocardial infarction and dosed the markets with a liquidity drain by strengthening the yen the day subsequent (Friday the 11th at about 10:15 am EDT) to 100.675 yen per dollar and to 159.46 yen per euro.  In Asian early morning trading on the 11th at about 1:35 am EDT, the yen had stood at 102.160 and 161.121, respectively.  This pretty much explained the big crash on April 11 as the yen moved in a single trading day up about 1.5 yen again both the dollar and the euro.  That left the Dow at 12,325.42 and left spot gold at 923.85 when the day previous it had climbed to as high as 939.70.

Then came the next move up for gold as the yen was weakened again to support the sagging general stock markets, culminating in the move this Thursday by gold's most active futures contract (June) well past 950 to a high of 956.20 which sent the cartel reprobates reaching for their nitroglycerine tablets to keep their failing circulatory systems moving as they went into a collective shock.  The cartel became frustrated and terrified once again, in need of more market-crashing power for the huge upcoming precious metals rally but unable to produce it without sending gold and silver to the moon.  Their solution was to sell and lease gold and silver in huge quantities as the yen was weakened further to provide purchasing power and as bond prices were pressured downward to push money back into general stock markets.  The yen was greatly weakened by 11:30 am EDT this Friday to 104.561 yen per dollar and 164.441 yen per euro.  That is a 4 yen drop against both the dollar and the euro in one week.  Pressure was kept on gold and silver to force liquidity created by the much weaker yen and by the bond liquidations into equities instead of commodities.  RALLY MYSTERY SOLVED.  THE SOLUTION WAS QUITE ELEMENTARY MY DEAR WATSON.  IT HAD NOTHING TO DO WITH GOOGLE, CITIGROUP OR THE WORST BEING BEHIND US.  THE WORST IS YET TO COME, AND WE MEAN OVER AND OVER AND OVER AGAIN AS EACH SUCCESSIVE WAVE OF BAD NEWS EXCEEDS THE ONE PREVIOUS.

All this manipulation pushed the Dow up to 12,849.36, and brought spot gold down to 912.05 after it had traded as high as 952.95 the previous day.  Considering the Dow's recent closing low of 11,951.09 set on March 14, that leaves almost exactly 900 Dow points of market-crashing power before irreparable technical damage occurs.  And rest assured that because gold suppression is JOB ONE at the Fed, all the dopey bully boys who jump on the current bull wagon will be pulled by the cartel's Hell Horses over the edge of a steep cliff as a big crash is orchestrated by the cartel using its newly empowered super-yen which you can be certain will go sub-100 once again against the dollar as the Very Large Rally in precious metals gets underway in late April or early May.  The gold and silver rallies of the past few days have been a combination of consolidation, profit-taking and water-testing.  Open interest is still way down, so these rallies are just prelims and will stay subdued until the physical markets for gold and silver are set ablaze as sparks from the real rally cause some initial smoke and then grow into a raging inferno that will consume the cartel.  Then the open interest in gold and silver futures will climb as ownership of the casino changes hands.

Also note the continual Theatre Bizarre on the USDX.  All you ever see are upward spikes out of nowhere, followed by less rapid downward action to new lows.  The dollar is being totally manipulated and never rallies on its own merits, which are now nonexistent.  The spot USDX hit an all-time low of 70.698 on March 17, the same day that spot gold correspondingly hit an all-time high, so if it goes below 70.698, which it will in the not too distant future, look out below.  Gold and silver are about to set new records, so be sure to take advantage of the bargain that the cartel has so graciously provided you with.  The coming flight from treasury bonds into equities will take the dollar to new lows as the cartel attempts to inflate the stock markets for more useless market-crashing power, which will be completely neutralized with protective derivative positions of the hedgies.

The dollar will fall as treasuries are liquidated because much of the dollar liquidity from such liquidations will be pumped into other currencies to purchase and diversify into foreign equities that are less subject to dollar problems and problems with the US economy.  When the dollar dips in this fashion, this will get the metals rally going in earnest.  Then the general stock market crash will come as the yen is strengthened by the cartel to hit carry trader liquidity to force liquidation of metals positions.  The hedgies will be ready for this, having loaded up on protective derivatives ahead of time.  This will move money from equity liquidations back into treasury bonds and will support the dollar somewhat as traders flee foolishly back into these losers, but there is so little room left for prices in treasuries to appreciate that most of this money will go into precious metals and various commodities instead.  This will be especially true considering that even long-term rates on treasury bonds are now about a third of actual inflation, as opposed to official inflation, and this will make money markets and treasury bonds of all maturities far less appealing than the rallying commodities sector.

Another factor that everyone keeps passing over is that we now have the potential for a dollar carry trade.  If you are a large bank, just come on over to the US and get your 2.25% interbank or 2.5% discount window dollar-denominated loan, and use your loan proceeds to buy euros so you can get better-yielding German Bunds denominated in a currency that is appreciating against the dollar.  Or you can go for even higher rates in New Zealand or Australia using their dollars instead which are also bound to appreciate against the US dollar.  That is because the ECB, New Zealand and Australia are raising or maintaining their interest rates to fight inflation while the Fed lowers interest rates in the US to save their fellow bankers and Wall Street cronies while we become the next Weimar Republic.  What a super-bearish development that will be for the dollar.  Such a scenario, together with hyperinflation, is what will finally take the dollar down to fiat money hell and spark the final flight from treasuries and corporate bonds denominated in US dollars, thereby commencing the greatest bear market in US bonds of all time.