International Forecaster Weekly

Wall of Worries

when markets must climb the wall of worries, setting up suckers to hold the bag, metals cut up worthless paper, credit default swaps now skyrocketing, a witches brew of economy killing debacles, SEC watching Bear Stearns, ruining the reputation of America

Bob Chapman | May 31, 2008

Everything the cartel does is geared into keeping both professional and private investors out of precious metals.  The so-called "wall of worry" which any given market is said to climb, is nothing more than a false, fraudulent front of disinformation which is created by elitist insiders on Wall Street, in our government and in corporate America, in order to scare people out of any market from which the elitists wish to profit.  They want you to keep out until they have bought in cheaply.  After they have glutted themselves, the wall of worry is removed and the public dupes are let in on "the coming huge rally" in whatever, all as promoted by our "beloved" fane-stream media.   The market is then run up by the sheople-dupes to a blow-off top, and then the inside players bail out with as much stealth as they can muster, booking monumental profits while the public sucker-dupes crash and burn and are essentially left holding the bag as they are advised by the fane-stream media to follow Charles Schwab's mantra that "we're in it for the long term." (Barf)   We have news for you -you're in it for the long greased pole that the elitists will be shoving up your collective derrieres after they have glommed their pirate booty.  Yes indeed, you're "in it for the long pole."

  The "wall of worry" for precious metals is no different and is a product of the cartel's overall creative efforts at suppression of the monetary metals.  Gold suppression is JOB ONE at the Fed, and the Fed uses its vast powers, in conjunction with the powers given to the PPT by Reagan's Executive Order (and we might add in conjunction with powers that go way beyond the mandate called for in that Executive Order), to create the wall of worry for precious metals.  They do this not only because precious metals continually embarrass the value and integrity of their "worthless paper" which some prefer to call Federal Reserve notes (printed by a Ponzi-scheming, privately owned Fed and backed by the full faith and credit of a bankrupt US Treasury), but also because they are attempting to alleviate what is one of their greatest causes for angst.  The fear we have just alluded to is the cartel's fear that due to their complete bungling and ineptitude, gold and silver will explode before they can bail out of the general stock and bond markets through dark pools of liquidity that would hide their bailout from the public patsies.  They want to plow those proceeds into commodities and real, tangible assets, with gold and silver high on their list.  And when they buy, they want to get in cheap.

The problem is, that in their unmitigated greed and lust for power, as well as their paranoia about political fallout which they feel must be avoided at all costs (costs which include the destruction of our economy), they have destroyed our nation's real estate market, thereby destroying themselves in the process as all real estate-backed securities are in the process of being taken to the cleaners.  And that is just the tip of the iceberg as other debts such as credit cards and car loans start to implode along with our economy which in turn has been destroyed by free trade, globalization, off-shoring, outsourcing and illegal immigration.  Credit default swaps are now skyrocketing for many of the brokers and other financial institutions, indicating some very bad things to come, not the least of which are bank failures caused by the real estate debacle and the credit-crunch.  In order to save themselves, the Illuminists had to lower rates, thus destroying the dollar and sending gold to new all-time highs.  And in order to maintain oil backing for the dollar, they had to create more wars for profit to keep leaders from other countries from trading oil in currencies other than the dollar; wars that have greatly supported gold as a safe-haven.  Meanwhile a $596 trillion time bomb of derivatives awaits the pressing of its detonator button through a combination of all the above.  Gold is going to go inter-dimensional when that ticking time bomb finally detonates.  Ah, the tangled webs we weave when we practice to deceive!

If you think it is safe to get back into the financial waters for stocks and bonds, we suggest you watch the original movie, "Jaws," using the waters patrolled by the great white shark as your metaphor.  Already the stock markets have plummeted, and the bond markets are now under pressure as massive losses create higher rates of interest through accelerating risk reassessment.  The great white shark of hyperinflation waits under the deep, dark waters of financial profligacy, fiscal mismanagement, monetary imbecility, unfair trade with its attendant currency manipulations and rampant, rampaging fraud from top to bottom, with the bursting of the real estate bubble being a perfect example of this witches brew of economy-killing debacles.  Da-da, da-da...da-da, da-da...da-da, da-da...

Gold and silver have now completed their rollover as of Friday and immediately the monetary metals began their recovery, bursting from 870 to 889 with a close at 888, a number which Asians find propitious in their obsession with 8's.  We have to cut large specs some slack due to this rollover as they cannot all liquidate at the same time, so some downward pressure can be expected when you throw in massive cartel efforts to suppress and destroy the monetary metals.  They have a big rally planned, so you better stay tuned and take your position.  It does not matter what level you make your rollover at if you plan on pushing past 1000 again.  You make back all your losses and then some in that event, and we can assure you that the specs have no intention of passing up on a chance to make gargantuan profits and take back ground lost in the rollover.  Precious metals have the wind at their backs, while stocks, bonds and treasuries face a hurricane west wind.

If you want to really see gold and silver go on a rampage, liquidate all your precious metal paper counterfeits such as ETF's, mint certificates and futures and use them to purchase and take possession of physical gold and silver bullion.  When the COMEX cupboards of gold and silver are empty, you have then purchased the casino and can gamble with impunity.  The bullion and collectable coins will skyrocket when volume takes them out of circulation.  That is what paper sources of gold and silver are all about, namely, to forestall the taking of precious metals off the table and out of circulation so these pools of paper gold and silver can be used against the very people who invested in them in the first place.  Be sure to take a goodly portion of your ETF liquidations and plow them into resource stocks.  ETF's are despicable, multipurpose elitist vehicles of metals suppression.  They create pools of gold and silver which can be sold and leased, and divert money away from more traditional vehicles like resource stocks.  Continuation of ETF investments is like spinning a revolver with five of six chambers loaded and then putting it to your head and pressing the trigger.  Why give the elitists a pool of gold, which is greater than many central banks possess so they can use it against you by leasing it out or selling it off.  Get in it for the long haul and stop taking profits and trading in and out.  Every time there is massive profit-taking, the cartel gets an undeserved breather, and of course they make any resulting downturn all the worse with their usual suppressive tactics.

Who would want futures, ETF's or mint certificates when the best leverage plays are in resource stocks.  A great junior will provide leverage that will outperform the futures market hands down without the risk of loss due to the passage of time.   You do not have to worry about running out of time when you own high quality resource stocks, but the time element is your main nemesis when you deal in futures.   We are puzzled and perplexed at the lack of interest in resource stocks, but can understand some of the reluctance because of the continual naked-shorting used by the cartel.  However, naked shorting is a two-edged sword, and if you catch the cartel off guard with a huge rally their shorts will get slaughtered and you will have a massive short-covering rally on your hands.

The yen was weakened this week to support general stock markets while gold and silver were under rollover pressure in the futures markets.  That is the only way stocks can go up, and now that the futures rollover is complete, any weakness in the yen will send carry traders into precious metals, as they are the only game in town right now.  Treasuries and bonds are under pressure due to inflation, the declining dollar and rising interest rates while stocks suffer the impact of an upcoming hyperinflationary recession and bad economic news across the board.  How anyone can have a positive attitude toward stocks with crude above 100 is beyond us.  The second quarter has been an absolute disaster and the earnings reports due out starting in July are going to be horrendous.  The stimulus has been completely negated by rising crude and food prices, not to mention the destruction of the real estate market, which has shut off the equity-extracting spigot.

The dollar rally has already petered out at 73, and the dollar will now get systematically destroyed as everyone begins to flee stocks, bonds and treasuries in favor of real assets, which has already ongoing for many months now since the credit-crunch took control over market sentiment.  Specs should consider buying some dollar longs on the next big dollar dip, and acquire a healthy portion of oil shorts to guard against a takedown of oil to hit the precious metals.  These should be in addition to your usual arsenal of protective derivatives.  As you can see, the turndown in oil prices coincided precisely with the rollover period for the metals so the commercial shorts could bail out at lower price levels.  Open interest has greatly declined because the commercials were cashing out and not rolling all the proceeds over, choosing instead to pocket some cash because they know a rally is on its way.  Note that the short positions of Goldman Sachs are at unusually low levels as well.  Those expecting summer doldrums to step in are going to get their heads handed to them.  The market has completely changed, with investment demand far outstripping jewelry demand in importance.  The destruction of financial markets is under way and is starting to accelerate as inflation and recession take their toll.  Patterns are going to be broken this year and gold and silver are going to start marching to their own drummer.  We expect massive rallies before the end of the year.  So take your positions in physical metals and resource stocks and wait for the fun to begin.  Such investments are the surest bet you will find during the current economic headwinds.

Energy and food prices are soaring. The housing market continues to collapse. Government revenue is falling, and taxes are rising. Airlines are jacking up fares and fees while reducing service. Banks are pulling credit lines. Auto companies are cutting production once again. Even investment bankers are losing their jobs.

The tendency is to see these as separate developments, each with its own causes and dynamic. Fundamentally, however, they are all part of the same story -- the story of the global economy purging itself of large and unsustainable imbalances that for a time allowed many Americans to think they were richer than they really were.

Most of us understand that an overabundance of cheap, easy credit created a housing bubble that artificially inflated the price of land and housing, produced too many homes and homeowners, and persuaded too many Americans to dip into their home equity to support a lifestyle their income could not sustain, As we reported in detail earlier, SEC officials said in a statement that they had been monitoring Bear Stearns’s financial situation on a daily basis in recent weeks, and had no cause for alarm earlier in the week. Bear’s holding company capital exceeded regulatory standards at the end of February, and information supplied by Bear Stearns to the SEC on Tuesday [March 12, 2008] showed the holding company had a “substantial capital cushion,” according to the SEC.

As of that date, the firm had more than $17 billion in cash and unencumbered liquid assets, the SEC said.

“Beginning on that day, however, and increasingly throughout the week, lenders and customers of Bear Stearns began to remove funds from the firm, despite its stable capital position. As a result, Bear Stearns’s excess liquidity rapidly eroded, the statement says.

Please note in the following Moody’s table that Bear Stearns’ “Total Illiquid Risk Assets” at 31% are far less than other ‘bulge-bracket brokers.’ Lehman is 197%; GS is 135%, Morgan is 109%, MER is 45%...

During the JP Morgan conference call on Bear, Bill Winters, Co-CEO of JP Morgan, said the following about Bear Stearns’ condition: “In fact what we've -- we were very pleasantly surprised to see that it was a very well run, tight operation with good risk controls and a risk discipline that was very similar to our own.”

If we were the SEC, we’d be issuing subpoenas like crazy to ascertain if Bears’ ‘run’ was a conspiracy. We’d check to see who shorted Bear stock, bought puts, CDS and other derivatives and cross check them against any party whose actions might have facilitated the run on Bear…Perhaps Bear Stearns stock rallied to 4.81 on the possibility of legal recourse. Yesterday’s WSJ: Bear Stearns Cos. plans to turn over documents to securities regulators showing that several financial giants, including Goldman Sachs Group Inc., Citadel Investment Group and Paulson & Co., slashed their exposure to the securities firm in the weeks before its collapse…

The SEC is expected to use the data to determine whether any trading activity was improperly coordinated in any way, constituted manipulation or otherwise contributed to Bear Stearns's collapse.

George Bush’s trip to the Middle East accomplished very little other than the fact he had to beg the Saudis for 300,000 more barrels of oil a day. We have a very dangerous 7 months left with this crew and anything can happen. Our biggest fear is he will start another war and there won’t be elections in November.

George Bush has been America’s worst president in history. He has prepared our country emotionally for the Federal Reserve’s collapse of our currency, bringing an end to the dollar’s reserve status. In our current credit crisis it’s save Wall Street and abandon the dollar. The question is has a secret deal been made to give away all of our assets to satisfy our debts?

George Bush has ruined our reputation with the assistance of Wall Street. More than 70% of foreigners despise our government and it’s blatant corruption, and its senseless barbaric wars. This is why on 5/16/08 the US didn’t attend the staple food summit in Lima, Peru. Virtually everyone else of any note was there. On the same day Brazil, Russia, India and China met in Russia to discuss forming a political alliance. The US wasn’t there either. You are witnessing the end of America as an imperial power. After Iraq and Afghanistan, with the exception of nuclear power, the US is a paper tiger. They have exhausted their war resources and they are bankrupt.

The NATO summit was another loser for George and the neocons, as Russian President Putin put George in his place.

Europe is making major commercial inroads into commercial trade with South America. It looks like the Monroe Doctrine is dead and so is a great deal of the influence the US once had in Latin America. Worse yet, last week the foundations for a South American Union was laid and it won’t be long before an EU-Latin American free trade pact will become reality. America is oblivious to what is going on. They are too busy watching the circus in Iraq and Afghanistan. After years of exploitation Latin America wants to dump the US and their arrogant demands, and their backing of every dictator in the hemisphere for the 150 years. It is called gunboat exploitation. America is in for a rude awakening.

What does a country do when they have a long-term commitment for $75 trillion or more? They cut spending and raise taxes. Our country is doing just the opposite. In the middle of a recession, production and consumption are falling and our leaders tell us there is little inflation and no recession. Guidance like that will lead to national suicide.

America’s debts are unpayable and America is bankrupt as is its financial system. Individuals owe more than they own, so it is only logical to assume that they will go under as well. They will lose their homes first, then their jobs, and then their vehicles and then they will become a menace to society. It could eventually be that the gun will again be the law of the land. We are about to embark into a land of chaos and no one wants to hear about it and few are willing to prepare for it. First comes the fear and then comes the rage. If government tries to enforce the Patriot Acts or starts dragging away what they call enemies of the state, terrorists, and to use our military against us, you can plan on revolution. If for no other reason than Americas have nothing left to lose. What does a nation do when the value of real estate falls $12 to $15 trillion? It has a depression of course. Americans cannot see this or do not want too, but foreigners can see clearly where America is headed and they do not want to be any part of it. That is why nations are now widening the distance from themselves and our Illuminist government. They know the American empire is dying. They know all the nasty things that America has threatened to do to other nations if they didn’t do what the US demanded are coming to an end. They are just waiting to tell the US to take a hike.