” Do not participate in the unfruitful deeds of darkness, but instead even expose them,” Ephesians 5: 11
Greenspan Eggs On World War IV: China Versus US
Some more blows in the ongoing World War IV, known as the War on Terror to the masses. WW IV was always about the perception of the US (and the Anglosphere in general) that the growing economies of China, and to a lesser extent India, posed a threat to access to world resources. The War on Terror was simply a pretext to establish bases from which WW IV could proceed at a more comfortable pace.
Thus Alan Greenspan’s recent piece in the Wall Street Journal, blaming Asia, especially China, for the US housing bubble:
“The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005. That decline in long-term interest rates across a wide spectrum of countries statistically explains, and is the most likely major cause of, real-estate capitalization rates that declined and converged across the globe, resulting in the global housing price bubble…”
Read this along with remarks by Tim Geithner in the Obama administration that China was manipulating the yuan to help its exports ( a sentiment also voiced by Obama during the elections).
That’s the perspective from which the little fracas (actually it’s the biggest fracas between China and the US since 2001) in the South China Sea should be seen. The USNS Impeccable – a civilian ship under Navy control – was apparently conducting surveillance in what it claims was international waters (where US doctrine insists on international freedom to move) but within the 200 mile zone in which Chinese economic control obtains. Chinese vessels came within 25 feet of the US ship which sprayed them with water, and then left.
This week China will also be unveiling plans for an increase of 15% in its defense spending, including expansion of its naval capacity.
No Shortage of Gold and Silver Coins, Says Rogers
From a Feb. 2 2009 interview of financial guru Jim Rogers with Warren Bevan:
Jim Rogers:
“Well I don’t know why anybody would pay that kind of premium. What happened was all the dealers went and bought huge silver supplies back when silver was at $20 and now their stuck and they don’t want to take a loss and so they are telling people they don’t have coins.
I promise you sir if you offer $25 for silver coins you’d get all you wanted. There is no shortage. It’s just that the shortage is because the dealers bought huge inventories that they don’t want to sell at a loss. So I think it’s happening, dealers are just refusing to buy them.
They’re there, I don’t think we are running out of silver coins my god, there are millions and millions of silver coins, it’s the dealers are stuck. And to some extent the same is with gold as well…..”
More evidence in an interview with Jim Rogers that you should be careful paying high prices for silver or gold coins when the spot price is lower. Rogers doesn’t see any silver shortage, only unwillingness to sell by dealers who bought at high prices, who hope for those prices to come around again (which in turn stimulates the newsletters to boost the prices). He thinks that’s partly true of gold as well, though gold acts much more like a currency.
Actual jewelry demand at these levels is flat (and Indian jewelry demand is a major driver of it) – this being the seasonal low of that demand. .ETF inflows have also been relatively smaller compared to the early part of the year.(Correction: Recent news says that ETF flows have reached an all-time high, so I figure the discrepancy is due to the divergence between the absolute numbers – all time high – and the volume – which I recall reading had tapered off…will post further on this).
This doesn’t mean that gold’s fundamentals aren’t good. It just means that you should be careful when and how you buy it so you don’t get eaten alive by market manipulation. Fear is driving a lot of the buying right now. Not inflationary fears per se but panic over the economy and the market…and that sentiment can turn sharply. Rogers feels that energy and commodities are better places to buy now since the prices are down. I can’t say I disagree.
* Another interesting point in the interview is the mention of drug money laundered through government banks – which, as I’ve said before, is really where the banking story is.
Bernie’s Web: Madoff Fraud Hits $64.8b, Includes Family, Say Prosecutors
Turns out that Bernie Madoff’s fraud took clients for more than what investigators originally claimed – $50 billion. Latest count is $64.8 billion and it’s not clear that that’s the end. (Correction: I read that wrong. $64.8 is the figure alleged by prosecutors. Others say the statements are inflated and the actual losses might be less).
The new reports show things to be different from the picture the media originally gave us.
Now it looks as if Madoff didn’t promise just middling returns of 7-10% to everyone (which would imply that the scheme was believable and not on its face suspect). The truth is he lured many people with promises of an incredible 46.5% returns that he claimed he generated through a technique called “split strike conversion” – a technique that was demonstrably incapable of providing such returns consistently. In other words, fund managers, investors and regulators who had been doing their due diligence, would have known without difficulty that he was lyng through his teeth.
Now, this isn’t the first time this angle of the story has been reported, but it’s the first time the media has been willing to admit that Madoff’s scheme was an outrageous, flagrant fraud that went on for decades under the noses of the very people now writing the stories about it in righteous indignation (the New York Post, in this case). Regulators were told repeatedly by reliable people that Madoff was running a Ponzi scheme. Where were they?
Why do I bring all this up? To lay to rest the idea that more regulation (presumably by the same bunch of corrupt, incompetent, treacherous hacks in DC and New York) is going to help things.
More interesting details from the Post article:
* Contrary to early reports, the Madoff family and an inner circle of Madoff friends seem to be deeply involved with money laundered through “an English bank.”
* Wife Ruth is now “an object of investigation.”
* It seems that low-level employees were hired to create the appearance of a trading operation, with money even being moved from New York to Europe and back to bolster that impression (shades of Enron’s Potemkin office).
In Trading, Go Against the Crowd…
Betting against crowd sentiment is usually a reliable trading method. Which is why I’ve expressed some reservations about the incessant trashing of the dollar.
Not that I don’t agree with the fundamental analysis behind it. The dollar, like all currencies, is toast if central banks around the world embark on a massive reflationary scheme, such as looks to be in the works. But…and this is the million dollar but…because the ultimate direction of a policy is clear, it does not mean that the proximate (near-term) developments by which that policy unfolds are going to be unidirectional.
Meaning, just ‘cos the buck’s going to hell doesn’t mean it’s going to hell in a straight line.
Things zig. And they zag. That’s the way the US Government operates and it’s also the way nature does.
There are no straight lines in nature. They only look straight because we’re time-and-space-bound creatures.
Everything moves in curves…and cycles….and waves…..
A wave up is followed by one down. You can’t always tell the size or the timing but you can tell the sequence.
So when the dollar went through 72 on the most popular index of the dollar (it was over 120 at it’s height in the 1990s), I waited things out. Since then, the dollar – in fits and starts – has pushed upward with considerable strength (in light of its rotten fundamentals).
Likewise, despite the gold community rah-rahing about precious metals prices, I expressed some doubts about its immediate prospects and in a Feb. 23 post (Gold Double Top?) cited a post suggesting that gold was putting in a double-top in the mid-term (for a couple of weeks to months) .
The thrust upward just didn’t seem as strong as everyone said it was.
My proprietary trading signal?
A complex multidimensional formula based on fractal theory that took me several years of advanced training in mass psycho-dynamics, linguistic structural analysis, and advanced organizational observation theory, all of which told me:
WJCPG-IT(/3)5
When Jim Cramer Pumps Gold – It’s Time To Take Five
(Check out this video of Cramer saying not to worry about Bear Stearns).
And, wouldn’t you know, this morning I see that the spot price has fallen below $900….
(And it’s closed below $900…)
Bohemian Hermeticism and Dissidence in the Velvet Revolution
“J.C. Could you please tell us briefly the great alchemical myth of the founding of Prague by the pagan princess prophetess, Libuse and her ploughman husband, Premysl?
L.A. This is very significant. Libuse is the Czech version of the Delphic Sibyl. She was a virgin ruler of the people here perhaps more than twelve hundred years ago. They were not satisfied with a woman ruler and demanded a king. From her fortress presumed now to be at Vysehrad she went into a trance. She ordered her soldiers to follow her white horse through the forest to the future king. The horse led the soldiers to the ploughman, Premysl. They presented him with fine clothes and an invitation to become king. He set free his oxen who disappeared into the earth or according to other versions ascended into the sky. Then he placed his ploughman’s staff into the ground and it immediately took root, blossomed and flowered. According to some versions at the time he was approached he was using his iron plough blade as a table for his lunch. All of these items have Hermetic import. He went on to become a great ruler. The country blossomed and flowered.
I personally went to the place where this happened. During a rain storm I used my screw driver to dig up some sacred mud. As I dug, my screw driver became mysteriously deformed. I got some mud and made a cup which for me embodies the sacredness of the Holy Grail.
It is believed that Libuse still sleeps under the hilltop fortress of Vysehrad and will awaken when Bohemia is in greatest danger. During the Velvet Revolution, on the 17th of November, 1989, thousands of students spontaneously assembled at Prague’s south end, upon Vysehrad’s temenos, the sacred precinct of Libuse. They lit candles and held an all night vigil as if to invoke her help. Then followed the miraculous bloodless revolution. The communists quit. The Russians went home. Democracy was restored.
J.C. Is this myth alive for the Czech youth today?
L.A. Consciously no it is not. But unconsciously this myth is a vital part of contemporary Czech culture. Its origins might only have emerged from the romanticism of the 19th century Czech National Revival. There are older versions of this myth. According to some the knights of St.Wenceslas sleep inside the sacred hollow mountain of Blanik or beneath the castle fortress of Melnik waiting to come to the aid of Bohemia in its hour of greatest need. Other versions have nothing to do with St.Wenceslas. This collective memory although not clear is yet alive and sleeps in the Czech landscape. The recent Czech Olympic Hockey victory is an aspect of this egregore of Wenceslas and his knights coming to the aid of Bohemia. For a moment his sleeping soldiers awoke to become the victorious Hockey players.
J.C. Is Vysehrad a sacred location even in spite of its doubtful historic authenticity as Libuse’s fortress?
L.A. Yes it is. I believe the actual site of her central fortress was Sarka, where we visited earlier today, just west of Prague. It is close to White Mountain and the Star Palace. Although barren the land here still resonates with a potent mystic charge.
J.C. Bohemians are often pictured as people who glory in cheap beer, free love and bad poetry. What does it mean to be a Bohemian Hermeticist?
L.A. There is a popular misconception of Bohemians as Gypsies. One frequently meets the image of the gypsy fortune tellers or occult magicians. Their life style is strange and very different from Czech Hermetic vision. The roots of Czech Bohemian Hermeticism emerge from Jan Hus and Komenski. It finds expression as Rosicrucian philosophy and general esoteric tradition for example the work of Jacob Boehme….”
A fascinating interview displaying the intersection of mysticism and dissidence during the Velvet Revolution. the non-violent sloughing off of communist rule in Czechoslovakia.
Mainstream Media Hints at Gold Suppression Scheme
“Bloomberg Television on Sunday interviewed Juerg Kiener of Swiss Asia Capital and Jonathan Barratt of Commodity Broking Services about gold, and elicited from them an acknowledgement that bank safety-deposit boxes might not provide such secure storage, the banks themselves possibly being insolvent; a doubt that the exchange-traded funds in gold have the gold they claim; and a complaint that the short position in silver is concentrated in only one or two banks.
That is, the word about the precious-metals price suppression scheme is steadily reaching investment professionals around the world…”
So say the intrepid folks at GATA, the gold anti-trust action committee.
UK Banks Now Owned By Government
The public’s portfolio
What the taxpayer owns
Northern Rock – 100% state owned
Bradford & Bingley – mortgage book worth £50 billion
Royal Bank of Scotland – 75% of voting shares
Lloyds Banking Group (including HBOS)– up to 77% of voting shares
HSBC, Barclays, Abbey National and Nationwide are the main high street institutions still in private hands
How yesterday’s Lloyds deal hands us the keys to British business
Both Lloyds and HBOS have been very acquisitive in private equity investment over the past decade, entering into partnerships which mean they part-own – or rather, we do – a string of household names.
They include: House of Fraser, department stores McCarthy & Stone, housebuilder HSS Hire, tool hire chain Vue, cinema chain Crest Nicholson, housebuilder Alternative Hotel Group MacDonald Hotels David Lloyd Leisure, fitness clubs American Golf, sports goods St Tropez, beauty products Robinia, specialist care homes Leasedrive Velo, car fleet hire Kidsunlimited, day nurseries British Salt, salt products producer Snell & Wilcox, broadcasting technology GVA Grimley, property consultant
Leave the Police State While You Can…
“Some time between 9/11 and now America became a police state. I cannot pinpoint the tipping point because the last several years are a blur of laws and policies that were passed so quickly and in such volume that no one could track them, let alone provide analysis. Even lawmakers didn’t read what they were passing. Moreover, I am not sure how to define “a police state” as opposedto a quasi one…so pinpointing is a term of accuracy that doesn’t apply. But, like pornography, I know a police state when I see it and I see everytime I glance State-side. And the collapse of the American dollar has not even occurred yet. When that happens — and it will be as swift as the mortgage collapse — the fear and panic generated could well allow/encourage the establishment of one of the worst totalitarian states the world has seen in a developed nation.
People who value their freedom and safety should leave…if possible. Having said this, I cannot fault those who stay to be near family and friends or a business that took a decade to establish. Nor can I blame anyone who says “Hell, no!” and draws a line against surrending their freedom on the soil of their birth. Hell, I have all those urges warring within me. But I don’t think it is wise to heed them. I think it is wise to GET OUT and fight for freedom from comparative safety. Get your assets out, get your family out, get your body out of the reach of the United States government. ….”
Wendy McElroy, “Leave the police state that is America” via Sunni Maravillosa
On the Brink: How Bad Is Bad?
From Karl Denninger:
- All pension funds, private and public, are done. If you are receiving one, you won’t be. If you think you will in the future, you won’t be. PBGC will fail as well. Pension funds will be forced to start eating their “seed corn” within the next 12 months and once that begins there is no way to recover.
. - All annuities will be defaulted to the state insurance protection (if any) on them. The state insurance funds will be bankrupted and unable to be replenished. Essentially, all annuities are toast. Expect zero, be ecstatic if you do better. All insurance companies with material exposure to these obligations will go bankrupt, without exception. Some of these firms are dangerously close to this happening right here and now; the rest will die within the next 6-12 months. If you have other insured interests with these firms, be prepared to pay a LOT more with a new company that can’t earn anything off investments, and if you have a claim in process at the time it happens, it won’t get paid. The probability of you getting “boned” on any transaction with an insurance company is extremely high – I rate this risk in excess of 90%.
. - The FDIC will be unable to cover bank failure obligations. They will attempt to do more of what they’re doing now (raising insurance rates and doing special assessments) but will fail; the current path has no chance of success. Congress will backstop them (because they must lest shotguns come out) with disastrous results. In short, FDIC backstops will take precedence even over Social Security and Medicare.
. - Government debt costs will ramp. This warning has already been issued and is being ignored by President Obama. When (not if) it happens debt-based Federal Funding will disappear. This leads to…
. - Tax receipts are cratering and will continue to. I expect total tax receipts to fall to under $1 trillion within the next 12 months. Combined with the impossibility of continued debt issue (rollover will only remain possible at the short duration Treasury has committed to over the last ten years if they cease new issue) a 66% cut in the Federal Budget will become necessary. This will require a complete repudiation of Social Security, Medicare and Medicaid, a 50% cut in the military budget and a 50% across-the-board cut in all other federal programs. That will likely get close.
. - Tax-deferred accounts will be seized to fund rollovers of Treasury debt at essentially zero coupon (interest). If you have a 401k, or what’s left of it, or an IRA, consider it locked up in Treasuries; it’s not yours any more. Count on this happening – it is essentially a certainty.
. - Any firm with debt outstanding is currently presumed dead as the street presumption is that they have lied in some way. Expect at least 20% of the S&P 500 to fail within 12 months as a consequence of the complete and total lockup of all credit markets which The Fed will be unable to unlock or backstop. This will in turn lead to…
. - The unemployed will have 5-10 million in direct layoffs added within the next 12 months. Collateral damage (suppliers, customers, etc) will add at least another 5-10 million workers to that, perhaps double that many. U-3 (official unemployment rate) will go beyond 15%, U-6 (broad form) will reach 30%.
. - Civil unrest will break out before the end of the year. The Military and Guard will be called up to try to stop it. They won’t be able to. Big cities are at risk of becoming a free-fire death zone. If you live in one, figure out how you can get out and live somewhere else if you detect signs that yours is starting to go “feral” – witness New Orleans after Katrina for how fast, and how bad, it can get.