THE SECRET RESCUE
John Tyler
CEO: infognome.com & Co-editor trader007.com
May 10, 2004

"Fortune Favors the Informed"

To watchers of the financial markets, we are seeing a sequence of events unfold before our eyes that rivals “The Great Escape” of World War II.

There are no good guys and bad guys in this story, but the global finance markets are sitting on the brink of contagion, with few being aware of it. This crisis is being skillfully manipulated by some big undercover players however, and this brief essay will try and tie together what has been happening and tell the  story of what been rumbling in the back ground.

We start the story with a summary of the present situation with its present apparent contradictions.

• Gold down
• Oil up
• $US up
• Other currencies down
• Equity markets falling
• Bond markets dropping

Gold

Gold Bulls all over the world are slinking off …ourselves included! But are we worried bulls?  Definitely not!

A crucial resistance has been broached, so the likelihood of a longer term correction is high, despite what the bond markets are yelling at us ( see below) The major gold trend is still up, however the intermediate is down. This can last for months.

Any panic sell off of gold is a superb opportunity to accumulate stocks and bullion for the long term. We are already toying in a retracement zone. I wouldn’t like to see the price go below $335, but I’m not looking to gold for salvation!

Gold has had a lot of hopes pinned to it, and these pinpricks are bleeding. Gold has a dual nature: it is both commodity and a monetary equivalent, just like a currency. It is being sold on both counts- as a commodity like aluminum and copper, and as a currency like anything non $US.

Gold is just a minor player in the whole scenario, and is showing collateral damage.

OIL

The continued rise in the price of oil ( Chart 3) should have come as no surprise as we warned of this last year. At this time several writers replied and said that the fundamentals didn’t support this view. They were correct, but the charts, even at that time, were telling us otherwise. The first hint of this came as we saw massive backwardation in the futures markets, followed by suggestive price patterns and extension of the seasonal rally.

The surprise is the persistent and anomalous rise in the $US (Chart 4), despite fundamentals that suggest it should be falling. We are only getting a doctored picture of the situation in the Middle East and Iraq war. The casualty situation is horrendous, but covered under the cloak of darkness to military hospitals in Germany. Saudi reserves may not be available as accounted for.

We suspect that this oil price/ $US anomaly, is due to Fed and its close ally in manipulation, the BIS, acting in concert to try and limit the effect of the rise in the oil price. Can you imagine what the effect of another 20% fall in the $US would mean to the oil price? It would be a genuine oil shock which would reverberate around the world causing a major global crash.

To see how this is being averted, we need to take a look at the role of the world’s most powerful financial body, the Banks of International settlements, or BIS.

The Bank of International Settlements

This is the bank that Maynard Keynes amongst others, was keen on preserving, despite its role in laundering holocaust money and bank rolling the nazi war effort. After a number of years of acting as a functionary by greasing the cogs of interbank transfers around the globe, it has emerged as the most powerful force in financial history.

It was established in 1930 under the Hague Agreements as an international organization governed by international law with the privileges and immunities necessary for the performance of its functions.

It unceremoniously ousted its private shareholders, and after an acrimonious court case, is now fully owned by members of the G7.

The BIS is committed to “social stability” rather than free market economics, as indicated in this publicly available statement:

“The Bank’s activities are focused on the following two areas: 

The BIS assists central banks and other financial authorities in their efforts to promote greater monetary and financial stability. This assistance takes two forms:

Direct contributions to international cooperation;

Services to committees established by central bank Governors over the course of the past decades, and support to a number of other groupings with secretariats at the BIS.

It acts as a bank, almost exclusively for central banks, providing services related to their financial operations. Trustee and collateral agency functions are also part of these services.

In fact it can do anything that is necessary to provide financial stability, and we have its footprints before us now. It can buy and sell gold , currency and bonds, and through its members, has absolute power in the financial system. Big Al Greenspan is on the board of course, but most of this club’s members are European.

It has its own pet “institute of financial stability” with the following statement:

“Financial stability is crucial for sustained economic growth and can not be achieved without strong financial systems. Weak financial systems can destabilize local economies, making them more vulnerable to external shocks, and may threaten global financial markets.”

CURRENCIES

The Yen is dropping off its perch (Chart 1), as expected with rising oil prices. However it does suit the Japanese to re- invigorate their export sect. Toshihiko Fukui, of Tokyo, is on the board of the BIS.

Short term rates are being held down while many bond holders are scrambling for the exits. We can see a head and shoulders pattern developing in both the day and weekly charts (Chart 2), suggesting that a substantial fall in bond prices is around the corner.

Warning note: Cash should be kept at call or in short term instruments.

Conclusion

I could continue to show you charts of where it appears the Grand Fairy Godmother of Finance has waived her wand. She can raise a currency from the dead as with the $US, or push a golden commodity down.

She is not a bad fairy, just a hard working one. It’s hard to expect rational outcomes with such magic being dispelled, but we certainly need it.

Inflationary expectations remain low as echoed by the Exchange Traded Fund “TIP”. A rise in the oil price is inflationary. Is the BIS’ magic powerful enough to prevent this?

THE SECRET RESCUE PART II
And The New Respectability of the BIS
May 11, 2004

© 2004 John Tyler
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