International Forecaster Weekly

Markets Continue to be Subject to Manipulations and False Information

Plunge Protection Team behind USDX big one day uptick, real numbers are bad for unemployment, inflation, credit, corporate earnings, and fiat currencies, but markets going up in the face of all this bad news, manipulations to return with a vengeance, European Union stability doubtful, stock firms back Obama, many states face massive budget shortfalls, real estate could fall for five more years

Bob Chapman | August 9, 2008

In what can only be described as the most obnoxious market manipulations of all time, the elitists have pulled out all the stops to give the stock markets their final "hurrah", while simultaneously producing the greatest precious metals and resource share bargains you could have possibly hoped for.  Let 8/8/08 stand as a testament to the unmitigated gall and flagrant manipulation of markets by the President's Working Group on Financial Markets, known as the PPT, whose existence and 24/7 illegal intervention in every market on the planet, though unacknowledged by the Fed and our government, has now been confirmed beyond any reasonable doubt.  Let history show that the blatant cheating and insider trading made possible by Reagan's Executive Order 12631, issued 3/18/88, which has now been pushed to the outer limits of market tolerance, stand as a testimony against the current Administration when the testimony from the trials and recriminations is adduced during the Very Large Depression to come, as an outraged America seeks vengeance for the financial thievery, devastation and deceitfulness wrought by the Illuminati's perpetration of the greatest financial criminality in the history of mankind.

    How else can you describe a 1.285 rise in the USDX leading contract in one day from 74.725 to 76.010?  How else do you describe gold and silver lease rates which have gone from already ridiculous levels that were a little above or below zero percent to massively negative rates of minus 2.3% to minus 3% in one day for all gold and silver lease rates regardless of the length of term (check it out on the Kitco web site if you, like us, find that hard to believe)?  How do you describe an almost $5 per barrel decrease in the price of oil on the same day as all these other manipulations occurred, while the Dow climbs over 300 points in the face of losses from both Fannie and Freddie, which account for more than 50% of all residential mortgages in the US, that are triple the market's expectations?  And was not gold $120 an ounce higher, and silver almost $4 an ounce higher, only 3 weeks ago?  What has changed all of a sudden?  Are we to believe that the price of oil is the be all and end all to financial markets?  Is not oil still way north of $100 per barrel?  Is there not a worsening credit crunch?  Is there not a rapidly declining real estate market transpiring as we write this article, evidencing a decline, which shows no end in sight?  Is not unemployment, even officially, at extremely high levels?  Is not M3 still in the 16% to 18% range, thus continuing to lock in hyperinflation for years to come?  Is not inflation running rampant worldwide?  Is not US consumer spending experiencing negative growth when inflation is factored in?  Are not corporate earnings abysmal?  Are we not in a recession?  Are losses from financial institutions in the trillions of dollars still not being hidden from sight by use of bogus "creative accounting" methods blessed by our corrupt regulators?  Is there not a war in progress in the Georgian province of South Ossetia that could break out into World War IV, while the potential for hostilities around the world remain extremely high?  We recoil in disgust at the heavy-handed manipulations being wrought by the Illuminist cartel to save the traitorous incumbents in Congress from getting a firm boot applied to their derrieres in November.

    Why should gold go down if the dollar goes up?  If the dollar goes up substantially, that means the euro is going down substantially, so gold should be exploding in the Euro Zone.  If anything, a weaker euro should be more supportive of gold than a weaker dollar as there are just as many euros out there as there are dollars now, and because the people of Europe are far more attuned to the uses and purposes of precious metals than are their US counterparts.  We sure hope the people in the Euro Zone loaded up on precious metals, which are now skyrocketing in their currency as the euro has gone from 1.60 dollars to 1.50 dollars in rather rapid succession.  All fiat currencies will continue to lose against gold, including the dollar, so it is time to load up on the bargains you have been so graciously gifted with by your evil government and the Wall Street fraudsters!!!  The Euro Zone is now in recession, and the ECB has just joined the Fed in a state of sublime irrelevancy and impotency as they now occupy the same box that the Fed is in and cannot get out of.  The next rate moves from the ECB and the Fed will be down, after a period of no change.  Real rates, on the other hand, will continue to move up as bank failures and rampant defaults on all nature of debt continue to grow geometrically.  Oil, as we have said in the past, was being used as a counterweight against precious metals and we continually recommended shorting it to protect metals positions.  Those who followed our advice are making a fortune.  Obviously, many did not follow our advice, and now we see the open interest in gold futures drop to 376,797 contracts as a result.  The specs just can't leave the casino alone, and continue to play against the unfavorable odds established by the owners of the casino, who are still the commercials, because the physical buying we have recommended has not happened like it should.  Physical is the way to go, and sufficient physical buying will lead to shortages and a change of ownership in the paper casinos from the commercials to the specs.  When, we ask, will this concept be grasped by the specs, who do not even hedge their positions with sufficient paper shorts, thus leading to their continual capitulations?  Many specs are running out of time as their losses from toxic waste weigh on their existence, and yet they continue to allow the commercials to beat the snots out of them in this fashion. How stupid, and how unnecessary.

    Professionals should short the Dow if it its crosses 12,000, increasing their in-the-money, long-term puts geometrically as the PPT continues the manipulated rise in stock markets to save incumbent scum.  And the current bargains in precious metals, which are causing jewelers around the world to drool and salivate, should be glommed like there is no tomorrow, with the emphasis being placed on physical purchasing and possession.  The window of opportunity should prove to be a short one.  Instead of leasing precious metals for purposes of immediate resale like the idiot bullion banks who will eventually get caught with their pants down, why not lease and hold precious metals long term, enjoy the brand new 2.5% to 3% payment from the central banks, which they will now pay you to relieve them of their bullion, and then make a fortune as gold and silver rocket skyward this fall and next spring?  What a freaking deal!!!

 How do the stock markets go up in the face of such bad news?  Ask the PPT, who took the yen down to the tune of 2.5 yen per dollar this week to suck in the stupid carry traders, who irreverently bounced the euro down from 1.6 dollars to 1.5 dollars, and who gave the repo pool a maniacal workout as the Fed continued to float the insolvent fraudsters with a half a trillion of manipulative largesse to prevent them from drowning. Ah, fascism at its best.  Too bad our trade deficit will now reverse its trend and accelerate upward as a result of the dollar appreciating so rapidly against the euro.  Just keep adding to our trade deficits with the ludicrous dollar manipulations, and soon the dollar will reverse again, weakening against the euro.

 Manipulations only work short-term until the imbalances they cause come back with a vengeance.  Be ready for this eventuality with your precious metals positions, which can now be increased magnificently by virtue of the unbelievable bargains that blatant, corrupt government intervention has bestowed upon you.  Wait until more banks fail, the fraudsters are forced to mark to market, and the GSE's Fannie and Freddie continue their implosion.  Down will go the mighty dollar as treasuries are created out of thin air and immediately monetized by a Fed that has blown its general collateral in exchange for toxic waste so you can pay for it through the stealth tax of resulting hyperinflation.

We are headed into global social, political, economic and financial disintegration and our Wall Street banking and Washington alliance are only interested in saving their own skins. The political elite is about to find out that the financial elite is no longer able to fend off the inevitability of overall collapse. The elitists have again destroyed the global economy, as they have so frequently over the past 1,000 years, in their insane quest for one-world government. This time in their corruption and greed they have gone too far and they are confronted with failure. They have again destroyed the very system that allows them to remain in power.

The same is true in Europe. The same group of Illuminists without a solution. A Europe saddled with a European Union that no longer represents the people and which only represents the privileged few. A Union without a Constitution that has been stymied by little Ireland, which is again leading the march to save civilization. A Union that contains a Eurozone, that in the next several years will breakup and disintegrate. Europe is 1348 all over again. The collapse of the Lombard System will be replaced with the collapse of the European Central Bank and the euro zone.

Europeans have lost their will to break out of their death spiral. The Illuminist power structure is too strong, but their strength against the people is not as strong and entrenched in America. If you can believe it, unilateral arrogance is worse in Europe than it is in the US. The Lisbon Treaty is an example. The Union needs unanimous consent but that was not achieved due to rejection by Ireland. In spite of that the creators of the monstrosity said they would have the Treaty anyway irrespective of its defeat. As you can see, there is no law. The law is what the Illuminists say it is.

Europe will soon be as bankrupt financially as the US is. Freezing the mountains of debt on both continents isn’t going to make it go away. Both will do this via a nationalization process. Government is allowed to control almost everything in a scene reminiscent of Germany and Italy in the 1930s. All these elitists are parasites living off the host, the people. Sucking them dry of the wealth they’ve created.

Economic collapse is sweeping across the world, the result of the mortgage crisis’s in America, Britain, Spain, Ireland and Denmark. The only thing keeping the central banks in the US, the European Central Bank, the Bank of England and the Bank of Canada is unlimited creation of money and credit.

As a result, residential building has fallen 60% in the US and 47% in Britain since housing prices peaked. We expect a 75% decrease will be needed and substantially lower prices before inventory even begins to be cleared in any meaningful way. We might add that in both countries commercial real estate has fallen 20% as well, in what is a semi-frozen market unable to find financing. In Spain, the largest real estate developer has gone bankrupt. There are 700,000 homes that cannot be sold. In Denmark, Roskilds Bank is on the verge of bankruptcy due to bad mortgage loans, only to be kept from failing by the Danish National Bank. The government has 47 banks on its hot watch list.

All the above banking systems are insolvent. Europe is visibly descending into severe recession much faster than the US. This time the merchant bankers are going down with the ship and they are well aware of that fact. That is why they are desperately scrambling to keep the system afloat. This is why we have the wars and occupations we have. They are created as a cover to divert public attention away from economic and financial problems. That is why it was easy for us to predict the false flag episode 9/11, and the invasions and occupations of Iraq and Afghanistan. It is all there in history. All you have to do is read it.

A major effort has been underway for some time to oust Rep. Charles Rangel (D-NY) as Chairman of the House Ways & Means Committee for opposing the hedge fund and private equity industries, especially his legislation that would have taxed the earnings of managers of these “locust funds” at the income tax rate of 35%, instead of the capital gains rate of 15% that they currently enjoy. Rangel’s legislation passed in the House by 233-189, but was blocked in the Senate. The private-equity lobby’s poster-boy in Congress is Rep. Eric Cantor (R-VA) who has promised to destroy Rangel by exposing him in penny-anti scandals. Cantor won’t get to first-base on Rangel. This illustrates how Wall Street tries to control Congress to do their bidding.

The MBA purchase applications index rose 1.8% in the week ended 8/01/08 versus minus 7.8% the prior week. The refi index was plus 4.4% versus minus 22.9%. The 30-year fixed rate mortgage fell 5 bps to 6.41%.

Richard Syron, CEO of Freddie Mac told investors that house prices will fall by up to 20% nationally and the current mortgage crisis is about half-way over.

Morgan Stanley, the second biggest securities firm, told thousands of clients this week that they won’t be allowed to withdraw money on their home-equity credit lines, due to falling property prices.

Ninety percent of all home equity debt is worth zero and in some instances home equity loans are twice their book capital.

Option ARMs are now experiencing up to a 48% default rate and this segment of resets have just begun and go out over the next five years. This loan program was used very heavily in affluent areas because of affordability and negative amortization. This is the most toxic program of the four with up to 80% of borrowers making the minimum monthly payment and incurring negative capitalization. With house prices off over 30% in former hot areas, particularly California, most homes have negative equity and that means massive default and foreclosures.

Citibank may be forced to buy back about $8 billion in auction-rate securities and be fined as much as $100 million under a settlement with state and federal regulators over claims it improperly saddled customers with untradable bonds.

If this happens it will set a precedent for settlement with other companies, such as UBS, which have been named in civil complaints. This is the tip of an iceberg.

Rumors reach us that Treasury Secretary Paulson is using the Social Security excess each month to manipulate markets.

No matter what the Treasury does this problem is systemic and all remedies won’t work and are dollar bearish.

The top five contributors for Barak Obama are, Goldman Sachs $628,000; the University of California $523,000; JP Morgan Chase $398,000; Citigroup $394,000 and UBS $378,000. You can see where Obama’s interests will lie. We will soon give Mr. McCain equal time.

The ABC/Washington Post survey of consumer confidence fell 2 points last week to minus 49 from minus 47.
Treasury notes fell for the third day in a row before the government sold $17 billion in the largest auction since 2003. The yield on the 10’s rose 4 bps to 4.06%. The bid-to-cover was 2.33, anything over 2 is good.
The US Treasury has hired Morgan Stanley to provide advice on the future of Fannie Mae and Freddie Mac. The Treasury is evaluating how and whether to use its authority over the two. Congress has provided $800 billion to bail out the two bankrupts. They can purchase equity in the pair or lend to them.

As we predicted three years ago, GM, Ford and Chrysler are headed for failure. This destruction began in 1980 as they began to offshore production to the third world. Their destruction was well planned in order to denude America of important industries and good jobs. Just last week S&P again cut the credit ratings of GM and Ford. How long will it take? Probably three years and it probably would be under Chapter 11 rather than Chapter 7 liquidation. That means the shareholders and bondholders loose it all. That is why we are short GM.

Weyerhaeuser is cutting 1,500 white-collar jobs in preparation for the coming depression. Headquartered in the Seattle area it follows the 4,700 layoffs at Washington Mutual this year. Present earnings are due in large part to oil and gas exploration on a tract of land it owns in Louisiana.

We would normally put this information under commodities, but because of recent predictions we will cover it in this section. Indonesia’s oil watchdog BPMIGAS says the country’s oil reserves could be exhausted in ten years time if no new reserves are found. New reserves don’t seem possible as issues such as cost of production, nationalism and taxes by local government inhibit exploration. Twenty-six blocks were offered last October and only four have been signed for. This doesn’t sound like a country, which is a net oil importer that has secret oil fields that will soon be unleashed on the world.

Twenty-nine states plus the District of Columbia are facing $48 billion in combined shortfalls in their budgets for fiscal 2009, which begins on 7/1/08 in most states. In a vast majority of states they cannot run a deficit or borrow to cover their operating expenditures. Raising taxes is a tough choice in this environment, so it will have to use reserves and cut spending. Reserves are not sufficient to weather a recession. The stars of the show that are in budget gap are California 21.3%, Arizona 17.8%, Nevada 13.5%, Rhode Island 12.6% and Florida 11%. The average is 9.7%. The cuts thus far have been in public health programs, programs for the elderly and disabled, K-12 education, colleges and universities and the overall state workforces.

It is obvious consumers have much less to spend and they are indebted as never before. In addition they have no savings.

Earnings estimates by the S&P are plus 40% in the third quarter and 60% in the fourth quarter. These are the same fraudsters that gave us AAA ratings on BBB CDOs and SIVs. In fact, they say results that were ok would have been ten percent better if financials were excluded. What a novel idea when financials make up 16.7% of their index. Can one really justify 40% and 60% growth in a recession – in a financial system that is collapsing? We see the opposite affect even with commodities off 30% as of late. Those commodity price increases will take a year to a year and a half to show up in finality in prices, and who says the manufacturers and marketers will lower prices? It will never happen. Inflation is part psychology and in part, an increase in money and credit. Second quarter and third quarter figures would have certainly been lower without the help of the neocon stimulus package. Worse yet, Washington disparately needs another stimulus rebate package for November. GDP is already negative and Washington and Wall Street are lying about it. We have already seen that in the first half figures.

Soon Americans and others will be asking how did this happen to us? It happened because Americans shifted from income to asset based savings. That caused consumer demand to hit 3.5% annually over a 14-year time span, from 1994 to 2007. That was the biggest buying binge in history. Income growth was 3.2% less inflation. Thus, without inflation Americans’ spending exceeded income while savings fell to a minus .05%.

This is part of the new syndrome. No boundaries, no accountability, no discipline and anything goes. American consumers no longer feel they have to save the old fashioned way. There are no rules anymore. Even outrageous lying is socially and politically acceptable. It has now become acceptable in business as well. The laxity of the regulators, and particularly by the Fed and the SEC, helped by endless money and credit that has led to monetary and spending madness.

House prices peaked in June 2005 not June 2006. At the peak net equity extraction from residential property soared to 9% of disposable personal income. That was 3% higher than five years earlier. Those funds were squandered as consumption reached 72%. This outcome created bubbles in property and credit as household sector indebtedness surged to 133% of disposable personal income, up 40% from debt loads of 90% ten years earlier. This has been now accompanied by an unprecedented credit crisis, which is worse now than it was a year ago. At the same time derivatives and structured products are in a slow process of de-leveraging. A consolidation is taking place in a still falling real estate market that could take five more years to complete. We are seeing a fall in lending with new stricter rules, the commercial paper market in asset-backed collateral has been falling for a year, mortgage-backed securities are frozen, municipal bond insurers are on the edge of insolvency and the municipal bond market is near frozen. What is extremely disturbing is that bankers, government employees and officers on Wall Street keep telling us the problems are 25% over, or 50% over, or 65% over and those are lies, and they know they are lies. This is deliberate disinformation. We are not in any second stage. We are still mired in the first phase and if the Fed hadn’t been supplying some $500 billion a month, the system would have collapsed by now. We read hundreds of reports daily and most are filled with self-serving garbage.