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THE TRUTH…a Rare Commodity These Days!

Stocks are off to a rough start following disappointing results from Yahoo and Intel, Google was downgraded, and last night there was another major sell-off with stocks in Japan. Sell orders flooded the floor in Tokyo forcing the Nikkei lower by 3% with trading halted by an early close. As you might expect, CNBC reports the markets are overreacting and investors should not panic by selling their stocks. Wall Street is a perpetual selling machine that would have you invested in stocks at all times. According to the perpetual bulls, this is just another buying opportunity for tech stocks and financials. Just remember they really don’t care about you or your portfolio. They are more concerned about profits for themselves using your money! Mainstreamers on Wall Street will rarely tell you to buy gold and silver or mining/resource stocks to protect your assets.

Economic news today has the Labor Department reporting an unexpected decline in consumer prices with the Consumer Price Index falling for a second straight month. The headline CPI number fell 0.1% in December following a 0.6% decline in November. I would be very surprised to hear people say that their monthly bills are falling right along with the inflation data. This is a manipulated number by the government, so you can believe them or you can look at your monthly expenses and decide for yourself. The mainstream media is painting this to be a positive story because it means the Fed will back off the measured interest rate increases sooner rather than later.

The ABC/Washington Post consumer comfort index fell sharply last week to -13. The state of the economy and the buying climate both fell to -24 and personal finances fell four points to +8. This follows ten weeks of improvement in the comfort index. I believe it is more than a coincidence that consumer comfort was moving higher all the way through the Holiday Shopping Season…as oil was “managed” to stay under $60 a barrel so consumers would open their wallets to shop ‘till they drop! Some analysts suspect oil was covertly released from the strategic petroleum reserve during the shopping season, and now they need to top-off the tanks before the war with Iran begins. Covert releases from the SPR would be synonymous with central bank leases and sales of gold to keep the price down, thereby giving the dollar more credibility.

Gold and silver are selling lower today because of the muted inflation data. Bloomberg News reports as follows: “Gold Declines the Most in Almost Two Weeks as Inflation Concerns Subside.” The opening sentence to the article reads, “Gold in New York fell 1.5 percent, the most in almost two weeks, as U.S. consumer prices unexpectedly fell in December, eroding the precious metal's appeal as a hedge against inflation.”  Frankly, I’ve been expecting a short-term correction in the metals, but still see much higher prices later this year. The extent of the correction will depend mostly on geopolitical developments, especially with regard to Iran. Gold and silver are much more than a hedge against inflation…they are REAL MONEY! Fiat currencies around the globe are “funny-money” compared to the hard currencies of gold and silver. If you want currency protection, buy gold and silver. I will increase my exposure to precious metals stocks when it looks like this short-term correction has run its course.

The Truth about Iran

I have become incredibly frustrated watching the mainstream media report on the looming crisis of Iran’s nuclear developments. They are spinning the problem to be bigger than it really is, just as they did with Iraq. North Korea has had nukes for some time, yet we have kept them in check. By far the biggest threat to the USA is the proposed oil exchange in Iran that will trade oil for euros. Our boys in high command first use the dollar to control the world’s governments and financial markets, and if that doesn’t work they send in our military to do the dirty deeds!

The Iranian oil bourse is an enormous threat to U.S. global control. If you do the research, you will find that we attacked Saddam Hussein because he was selling oil for euros…our leaders believed they had to protect the dollar at all costs. I’m getting a bit heavy-handed in this Wrap-Up today because I am getting fed up with the lies of omission in the mainstream media. If you missed the article, “THE LOOMING FIAT CURRENCY TRAIN WRECK” by Rob Kirby in the Financial Sense University, Mr. Kirby opens with the opening salvo, “While the bulk of the Western World’s main stream media continues to make pronouncements about the price of both crude oil and gold continuing to rise as a result of Iran’s nuclear aspirations – they have completely and utterly ignored the stark, dark reality of the currency train wreck [that is empirically only beginning to unfold] right in front of our eyes.” It’s an excellent short essay that details the mathematics of the impact of Iran and Venezuela selling oil for euros.

Back to the Economy

The Mortgage Bankers Association said its application index rose 2.2% with the purchase index falling 3.0% and the refinance index higher by 9.9%. It looks like homeowners are paying off those nasty credit card bills with home equity loans. Thirty-year fixed rates fell one basis point to 6.07% and the average one-year adjustable rate fell three basis points to 5.39%.

Bond prices are flat to slightly lower today as money comes out of stocks and traders await the release of the Federal Reserve’s Beige Book on the state of the economy. The tug-o-war in bonds has money moving into Treasuries with the growing concern over the flat yield curve which depicts a slowing economy, but bond prices could easily be pressured lower with the huge supply that will hit the markets in the coming months. The U.S. Treasury is expected to borrow a record $171 billion in the first quarter this year. This is $27 billion more than the first quarter last year, an increase of 19% year over year. This was brought to my attention by a contributor to LeMetropoleCafe as follows:

“I have some startling numbers on the Federal debt and a likely consequence of the rapidly approaching debt ceiling. During the 1st fiscal quarter of 2006 (October 1 – December 31, 2005) the Federal Debt increased $237.7 billion. This is an average of $79.3 billion per month, and projects to $951 billion for the year. The Treasury expects an increase in the debt of $171 billion for the January 1 –March 31 quarter. The debt is currently $8,160 billion and the debt ceiling is $8,184 billion. This only leaves a margin of $24 billion at this time. Sorry I’m taking so many numbers to get to the point. Last year the debt increases in billions were: January = $11, Feb = $83, March = $39, April = $3. Notice the huge spike in February. This is from Government refund checks for all the people who file early because they are expecting a refund. As of today, the Treasury can not afford those refunds.”

“Congress has said they are not going to consider raising the debt ceiling until March. March is too late. Many people seriously need those refunds for heating bills and Christmas credit card bills along with all the other costs which are skyrocketing. This is a recipe for a public relations disaster for the government and could result in major financial fallout. Let’s see what Congress does.” Regards,
-Bryant

Have you ever wondered how it is that the President is able to write executive orders that work to circumvent the Constitution? The short answer is simple…the USA is bankrupt! We live in a constant state of “national emergency” wherein our Presidents believe they have the right to set up dictatorial powers for the executive office. This all goes back to FDR in 1933 that imposed the War Powers Act for a state of economic emergency, not a military emergency. Don’t take my word for it; you can begin your homework with all the details found at a very interesting website called the Library of Halexandria. This link will take you directly to the bankruptcy of the USA, executive orders and where martial law comes into play.

Frankly folks, I am a bit concerned I am losing my objectivity for analyzing the macro picture in the financial markets. I’m no rocket scientist in finances or the economy; I just report on things I have learned in seeking to find TRUTH in all the propaganda we hear from the mainstream press. I received an e-mail many weeks ago when someone read my Wrap-Up and commented that I was pessimistic about where stocks and the dollar are headed. He said I’ve been predicting an economic/financial crisis for at least a year now, but the dollar and stocks just keep going higher.

After much thought I responded to the e-mail by saying, “I simply don’t understand how the powers that be can keep juggling the enormous global imbalances in the financial markets…most notably unbridled U.S. consumption via continued increases in debt. Since when can a person or entity borrow their way to prosperity?

The answer is quite complex and has to do with the U.S. dollar acting as the sole reserve currency for the world. Global trade is denominated in U.S. dollars, but there are some very powerful forces that would like to change the way business is done around the world. The first group that comes to mind is the Shanghai Cooperation Organization with members such as Russia, China, Iran, India and loosely with Venezuela and others. A year ago our Congressmen were getting heavy handed with China to revalue the yuan, but lately you don’t hear much about it. They wanted to impose a 27.5% import tariff on all Chinese goods and now they are silent, along with Treasury Secretary Snow saying China doesn’t manipulate their currency. I wonder what China had to say behind the scenes to Mr. Snow?

I still believe stocks and the dollar will tumble unless the Feds step in and monetize U.S. assets that are dumped by foreigners. That’s probably the reason the Fed will stop reporting the M-3 money supply in March. Get ready for “Helicopter Ben” to take the reins of the Federal Reserve in a couple weeks.

Closing Numbers

The markets are bleeding red ink today, but no meltdown in the stock markets. The Dow Industrials closed 41 points lower at 10,854, the NASDAQ Composite dropped 23 points to 2,279 and the S&P 500 fell five points to close at 1,277. For more detail on critical technical levels for the major stock indices please see Ike Iossif’s Wrap-Up posted yesterday.

Gold came off $10.20 to close at $544.10 and silver corrected $0.20 lower to finish the session at $8.86. Look for buying opportunities in the metals and corresponding mining shares. The same can be said for energy stocks as the situation in Nigeria and Iran won’t go away any time soon; look for buying opportunities in the energy sector.

The volatility in fiat currencies should continue to grow as geopolitical tensions increase. The dollar opened lower, but crawled back to breakeven by the end of the day. The best performing currencies today were yen, euros and Swiss francs. Grains and meats were all lower across the board. Crude closed flat, but unleaded gas, natural gas and heating oil gave back some of yesterday’s gains.

Tomorrow we get data on initial jobless claims, housing starts and the Philadelphia Fed Manufacturing Index. I didn’t cover the release of the Fed’s Beige Book, but basically they are saying all is well in La-La Land! If you are a seeker of TRUTH in the financial markets, don’t listen to the mainstream media…the message discipline from our “lapdog” press can be sickening at times. If you are a seeker of truth in all areas of life, there is only one place you are GUARANTEED TRUTH, go to God’s inerrant Word…His Holy Bible!!

Have a Great Evening!

Mike Hartman

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