The trouble with our times is that the future is not what it used to be. –Paul Valery 1871-1945
We were taught in business school to approach a problem first by carefully identifying the problem. Running with an impatient solution for the wrong problem often exaggerates it. The Federal Reserve, U.S. Treasury and their counterparts in other nations throughout the world, for the most part, seek to fix an old, broken paradigm with outdated answers.
This is a new world, constructed by Alan Greenspan & Company to prevent the smaller pain of recession. By recklessly cutting interest rates in this decade and tossing free money so to speak, Sir Alan delayed a recession turning it into a global depression. Thowing monetary gasoline on a systemic fiscal conflagration is burning down the entire economic world. Darker days lie ahead. This will be beyond dire. Today's Greater Depression is underway and is just beginning. If this is a Grand Super Cycle event, it's the worst in 300 years. We think it is exactly a Super Grand Crash.
Extending Bailout Credit To Broken Banks And Businesses Throws Good Money After Bad Prolonging The Agony
Here are some clues that when taken individually might not seem that important. When viewed collectively, the impression is one of unbridled fear for what lies ahead.
1. Unemployment is finally recognized as being out of control. Without a doubt, when discovering the true jobless numbers, there is no question this cycle could be negative beyond historic records. We suggest the US national jobless is near 16% closing in on 20%. The worst of the 1930's was 25%. Parts of the rustbelt Midwest will post 35% to 40% unemployed. And, this does not adjust for those working in underemployment situations.
2. Key European political leaders are frightened and calling for a combined global effort to combat our current fiscal crisis with new monetary policy. Underneath this talk, we see hints of The USA is to blame and they better get their act together or else. The or else could impose a new fiscal backlash detrimental to America's economic well being. Sadly, these band aid answers promote socialism and distort any remnants of capitalism and free enterprise. This is a wrong answer for the wrong problem.
3. China, a larger holder of huge USA assets including dollars, T-Bills, notes and bonds is installing a full court press to extricate themselves from massive liability and exposure. Their primary effort is to exit these holdings without turning over the global system and wrecking what they are still holding today. Key indicators and markets in China are all going bad simultaneously; with a vengeance- exports, manufacturing, labor, sales, mining, utilities.
4. Over 73,000 US retailers failed or, announced failure in 2008-2009. This is just the first salvo. When Walmart, Sam's Club and Costco indicate pain, we know it's going to get worse. A larger question for this year is, who files bankruptcy and who cuts back the largest numbers of stores to remain viable? Empties are stacking up quickly in our local big mall. The mom's and pop's led the failure parade with some of our local strip malls being 100% empty.
5. Now that the USA election is over, our new political regime is backpedaling on tax promises. Obama wants to keep the expiring estate tax and is certain to knock-off Bush's standing tax cuts. New higher taxes will inevitably appear from our viewpoint. Again, we get the wrong answer for the wrong problem.
6. While they haven't approved it yet, our new political leaders are determined to save the UAW by keeping them intact from any additional Big Three cutbacks. It was nearly certain the auto companies would seek more relief from unions under TARP rules. Now, the new administration is said to be moving to protect the UAW from any further cuts. Of course, this is payback time for election support.
7. In our view, if the UAW's benefit programs are held sacrosanct, Big Three auto management cannot compete with budgets so out of whack. This is why we think they take what bailout money they can while it is available, and follow later on with chapter 11 bankruptcy filings. This enables them to shed the union obligations, move overseas and push remaining legacy liabilities upon the US Government. Adios three to four million auto jobs.
The largest looming expenditure disaster by our new administration will be Free Health Care For All in a new and expanded national care health plan. This will outspend the stunningly expensive and already fiscally disastrous Medicare Plan for USA elderly. With so many unemployed and without health insurance, the new administration has the perfect open door to implement this cost-immeasurable health plan.
8. Obama asked Bush to immediately seek the balance of those TARP Funds from Congress. The request will trigger a 15-day period when Congress can vote to deny the release, and it comes as Obama's aides draft plans for broadening the program beyond the Bush administration's focus on buying stakes in banks. The changes, being coordinated with the Democratic majority in Congress, are likely to include a new initiative to stem mortgage foreclosures…some analysts also advocate removing assets from banks' balance sheets and making further injections of capital into financial companies.- Holly Rosenkrantz, Bloomberg.com (Editor: socialism-communism at its finest-remove bank assets!!!).
9. The degree of economically related global violence and other incidents continues to escalate. The problem is particularly growing swiftly in China, Greece, France, in several Middle Eastern countries and of course it's wide-open in Israel and Gaza. Russia is headed into a breakdown with declining currency, higher domestic prices, and a major national haircut from gas and oil prices. Russia has danced further toward a smash than most understand.
10. French President Nicolas Sarkozy said at a conference last week, With globalization we expected competition and abundance, and in the end we got scarcity, debt, speculation and dumping. Our personal disappointment here was the idea that Mr. Sarkozy was friendly toward capitalism hoping to expand his nations' trade and economy. Instead, he got slammed with the New York Bankster drama, putting an end, we think, toward that freedom of business trend in France.
11. Mr. Putin had a great game going as he was busy scooping up energy and gas spoils while reinforcing his political realm for an official comeback. Of course he was never out of power; just in name only. Now, however, we see something far worse for our new president to manage-unbridled Russian energy adventures. Next comes the world war for energy dictatorship with Putin in the lead. The recent natural gas Ukraine dust-up is only a beginning.
With so much of the volatile Middle East, parts of Africa and South America all overly reliant on production of natural gas and oil, we suspect new energy fights and dramas come to the fore testing the mettle of Obama. Reckless, new adventures by Iran, Russia, Venezuela and Nigeria put world energy stability basically up for grabs and out of control. Will our new administration hang-on? What is the USA's energy role in the middle of wide-spread desperation and escalating violence throughout the world?
Wall Street extended last week's slide Monday as falling commodity prices dragged energy stocks lower and reinforced fears a slowing economy will further erode corporate profits.-Sara Lepro, Yahoo Finance (Editor: This back-sliding is only temporary. Higher energy prices return faster than most expect. With our projected hyperinflation, energy costs speed up to a normal ($70 to $100 per barrel) and then go abnormally higher.
Global energy providers had their national energy revenue chopped in half or worse. Further, this economic shocker slammed these nations coincident with the new global depression. As we reported and frequently warned in previous issues of Trader Tracks; trade and currency wars would erupt in a wave of protectionism. This is exactly what is happening. Economic peace is unraveling.
Energy providers had a brief taste of monetary extravaganza when crude oil nearly slammed into $150 per barrel. What they did not understand was the crazy rally was instigated (and permitted by) some trading rule changes promulgated by the notorious-infamous Enron Boyz. Enron changed the rules years ago to design their own little trading nest operating to the exclusion of normal rules. Enron's first little game was to manipulate California's electricity prices to their advantage.
After Enron was smashed, that old rule change remained in place and those Enron energy trading games were picked-up by the hedgies going long only producing towering gas and oil prices for sensational profits.
When Lehman bit the dust last fall (apparently allowed to fail) lots of outliers and Black Swans came flying in with a pack of short selling vultures. They not only wrecked the credit markets but slammed oil and gas prices into the dirt.
This was pure trading greed and had little to do with supply and demand. However, what this preposterous trading event did not address is the fundamental shortage of crude oil and natural gas supplies that exists and consistently fails to meet market demands in normal business cycles.
Crude oil and natural gas remain in fundamental deficit. Higher prices and shortages shall return again in our view. This will take some time as current reserves are out of kilter and must be burned-off (used-up) before the next long only trading excitement arrives.
Our very wise and most always right Northern Advisor told me months ago the final winner in this disruptive mess will be the nation holding an iron grip on energy and energy facilities. The weak and going weaker US Dollar may or may not disappear. A new currency can always be designed and implemented. But, the controller-holder of energy domination ultimately wins with most of the rest smashed into oblivion by fiat money and other specious paper.
Once again, as during the cold war, the two larger energy players will be Russia's Putin and the USA. Putin is already spending gazillions on a new war machine even as his economy tanks. He could care less about domestic problems as long they do not interfere with his longer view of world domination using energy as the primary tool.
We are openly worried about our new youngster president being able to deal with Mr. Putin. Much as we would prefer otherwise, we suggest Putin is now in the driver's seat for the time being. Cross your fingers and hope that Obama can hit the ground running and deal with this most formidable obstacle of all.
Meanwhile, the credit crisis deepens, the financial industry sinks further under water, and other primary parts of international credit and finance visit crash city. We suspect 2009 will be a 1929 re-run times ten. Individuals must help themselves and stay increasingly skeptical of most news. Pay down debts, hunker down for years of recession, squirrel away cash, gold and silver. No one is going to find any humor in what lies ahead.
Survivors And Those Who Win Buy Gold And Silver
We think the secret to getting through this is to hunker down, eliminate debts, keep a low profile, trade in gold and silver shares during this first quarter along with futures, and then adjust in April when stocks sell off. Gold topped out near $850 years ago right near our price today. We forecast 80% of the gold upside is still ahead in these markets. Silver is behind gold for now but will catch-up. They never trade like twins most of the time. We think the worst silver could do is $50; but expect much higher prices.
We look forward with anticipation to some great fun in these markets. If you are not in position now-hurry-up and get it done. The door is open for all the shares markets including our precious metals. Futures traders in gold and silver have been trading this past week in large size. It seems the new trend is established and our long awaited rallies are underway.
In Trader Tracks, we provide weekly guidance and extra e-mail alerts to report our best new trades and offer suggestions for trade management. Visit our website at webeatthestreet.com on our spectacular futures and commodities trading record.
Whatever you do, make a concerted effort to stay with our trend and hang onto your core holdings of favorite shares, cash, and coins. Physical gold should never be sold or, traded but rather accumulated steadily on a monthly savings plan.
Recent news says you cannot find any coins or, others. We see delays and back-orders but some dealers have goods in hand right now. Go shopping. Should you have difficulty buying physical metals, we suggest placing an order and being patient. Big traders are always ready to buy the dips and normally never sell their gold and silver. You would be amazed how quickly your physical gold and silver will accumulate using this strategy.
Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information.