Peak Dollar
Thursday, 31. July 2008, 05:18:03
Introduction
The US Dollar has likely peaked out today as oil rose and stocks topped out as the EUR/JPY, a barometer of the yen carry trade, turned lower on falling global currencies.
Oil rose in mid day trading, putting an end to the rise in stocks
In mid day trading oil, USO, rose; it's chart shows a 4% rise on the day.
Stocks may have topped out; the following charts show the stocks are at strong resistance; we could be 'at the start' of a fall lower.
VTI, Overall stock market, shows a lollipop hanging man candlestick.
IWM, $RUT, Russell 2000, a questioning doji.
DIA, $INDU, Dow, a lollipop
SPY, $SPX, S&P, a lollipop.
QQQQ, NASDAQ, an abandoned baby or shooting star candlestick on July 17, 2008 in a consolidation pattern; economic nature abhors consolidation patterns and takes action to resolve them; in as much as we are still in a bear market; the direction for the NASDAQ is down.
US Steel, X, settled at 50 day moving average. It and Cummings, CMI, have been influenced lately by the price of the US Dollar.
The fuel for yesterday's and today's rally came from the Jeannine Aversa, Associated Press, report of another $75 billion of TAF liquidity assistance from the Federal Reserve to the banks.
A number of stocks and ETFs are manifesting a south sea investment mania at the end of the age of fiat wealth: these include NSC, FSLR, SPW, CLF, GHM, CSGP, AVP, and XBI.
FISV, Fiserv Inc, a best of breed software provider to the banking industry, whose stock is listed on the NASDAQ. FISV manifested a doji at $49.63, indicating a stand off between the bulls and the bears; it closed above 50 day moving average; this could be as good as it gets for this company.
Here is the Yahoo Finance 5 day chart of FISV showing the rise in price due to a good earnings report; and the mid-day "pull down" due to the rise in price of oil.
My investment maxim is simple: in a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength. Today's strength in FISV represents a short selling opportunity.
FISV is the canary in the NASDAQ trading coal mine, warning investors to pull out. It is a "trading proxy" for the NASDAQ -- it trades as the Nasdaq trades; thus FISV serves as the Nasdaq's trading signal.
FISV is at the edge of a massive head and shoulders pattern as seen in this MSN.com chart that goes back to 49.84 on October 23, 2006.
Yet an even better short selling opportunity exist in selling the financial sector, IYF, which manifested a high rise doji, at 50 day support.
I agree with Mike Mish Sheldon's and Mike Whitney's assertion that a number of financial organizations are insolvent.
Here are charts for just a few of the insolvent; notice the sell off in these high dividend paying stocks on May 1, 2008. One can see that investors sold and went long commodity indexed funds and ETFs, such as the CRB commodities, RJI, oil, USO, and gold, GLD, which zoomed higher on that very day.
Regions Financial, RF
Wachovia Bank, WB
Washington Mutual, WM
Citigroup, C,
Lehman Brothers, LEH
Merrill Lynch, MER,
These charts tell me that capitialism died May 1, 2008; and how fitting for World Revolution Day, which is an Illuminati Holiday.
The charts of those banks and investment bankers, and knowing that these organizations have level two assets and level three assets written to fantasy, and may have assets kept off balance sheets in SIVs and SPEs, relates to me that financialization, that is securitization, is done and over. Lehman Brothers and Merrill Lynch are likely going to go out of business soon.
The 'age of financialized prosperity' that came via the use of the yen carry trade and the repeal of the Glass Steagall Act by President Clinton signing the 'Gramm-Leach-Bliley Act', authored by Phil Gramm and Jim Leach, is now over. The 'age of foreclosure crisis' and 'the age of financial disinvestment and instability' has commenced.
The Proshares 200% inverse of the financial sector, SKF, is now at the region of oversold and is ready for a rebound higher.
The BRICS, EEB, a long favored destination of yen carry traders gapped open higher and continued higher throughout the day; it jumped higher from its 'precipice of disaster' -- it had been trading at the very edge of a massive head and shoulders pattern; today's rise is only temporary.
Disinvestment is coming to stocks world wide, and especially the BRICS, since Bank of Japan, interest rate differential funding resides strongly still in these stocks. Now that currencies are turning lower, and profits have peaked out as per report of David Rosenberg of Merrill Lynch who relates that EPS To See 35% Correction, PDF report, Peak Corporate Profits, if you will, all stocks will be turning lower.
The Brics, EEB, rose strongly today on Brazil's rise, and on basic material stocks such as oil producers, coal producers, metal and mining manufacturing, and steel manufacturers rising.
Sohu.com, SOHU, had fallen, but questioned its fall as the BRICs rose.
The gold stocks, GDX, fell commensurate with gold's fall.
A run on the US Treasury bonds is underway
The interest rate on the $30 Year US government bond, $TYX, hesitated in its move higher; as the US Treasuries, TLT, moved marginally higher; the chart of the government bonds shows what may be an abandoned baby candlestick in trading on July 28, 2008. The chart of TLT clearly indicates that a sell off is underway in response to the Federal Reserve's move to extend liquidity and capital to Freddie Mac, FRE and Fannie Mae.
A commercial lending crisis is now full blown
Aggregate debt, AGG, has fallen sharply lower from a pennant formation where an abandoned baby candlestick formed in July 28th's trading. Credit has gotten a definite marketplace writedown; being able to secure a commercial loan is virtually impossible; the credit crisis has morphed into credit gridlock, where many companies now are unable to refinance their debt as it comes mature and are declaring bankruptcy with increasing frequency.
And to add to the current gridlock Jesse reports a tsunami of junk bond debt is coming.
The world currencies are now in the process of falling lower as 'Peak Currencies' occurred on July 25, 2008
EUR/JPY, FXE:FXY, the barometer of the yen carry trade, fell as currencies sold off in early morning trading
The commodity currencies for the most part fell, confirming the investment principle of 'Peak Currencies' of July 25, 2008, and a new downward direction for the world currencies.
DBV, the world currency ETF, manifested a bearish engulfing, hanging man candlestick to fall through both 50 day moving average, and 200 day moving average; the latter crossing over the former today is a bear cross, and the 'nail in the coffin' for currency wealth: no currency can now maintain wealth -- all are falling lower in a death spiral lower together with the US dollar leading the way down.
FXE, The Euro fell, it is now a 'failed currency'.
FXY, The yen rose, but may not continue to do so; it could continue to fall lower with other currencies in their new found downward direction. In this scenario, the Euro would fall faster than the yen.
FXA, The Australian dollar fell drastically -- to the former mid-June level in response to the National Australia Bank announcement that it is writing off 55% of its home loan portfolio value to reflect current real estate reality. ActionForex shows the unraveling of interest rate differential investing in their chart of the Aussie in AUD/USD Daily Outlook; the Australian Dollar had just made a 25 year high.
FXS, Swiss Krona rose from a sharp sell off yesterday.
With the rise again in the price of oil, 'Peak Dollar' has definitely been attained.
The dollar, $USD, traded unchanged at 73.33, manifesting a questioning doji, showing the standoff between bulls and bears.
USD/JPY closed down at 107.98.
The fall of EUR/JPY, FXE:FXY, means an unwinding of the yen carry trade is underway; and that the world has passed through 'Peak Liquidity'
Jesse in report Bank Credit and Money Supply Growth shows a downturn in the "growth" of Bank Credit, and MZM, M2 and M3. This documents the twin spigots used to generate fiat wealth in stocks and bonds have been turned off; these being the easy credit of the US Central Bank in TAF, TSFL and PDCF facilities, as well as the Bank of Japan, 0.5% interest loans.
The turning off of liquidity is seen in the daily chart of the barometer of the yen carry trade, that is EUR/JPY, FXE:FXY, where this metric recently turned down to 1.670, then bounced back up to an all time high in short sell covering, then fell lower to 1.690, and then back up to 1.701; before manifesting massively bearish engulfing yesterday, and falling lower today to 1.694.
The world has passed though 'Peak Wealth' and Kondratieff Winter has commenced.
Gold gapped lower on opening as the currencies sold off; it recovered some on oil's rise; gold will become the sole means of preserving wealth
The 5 day Yahoo Finance chart show that gold had gapped lower on opening; it recovered some on oil's rise, climbed but closed down on the day.
Gold, GLD, today fell through a consolidation pennant; but its price today at 89.50 is above a previous pennant price of 87 on June 23, when yen carry traders sold stock to invest in gold: thus gold is still technically in break out since July 23.
The chart of gold relative to US stocks, GLD:VTI, shows that an investment demand for gold, that began in late 2007 is still strong and underway; the investment demand for gold will grow stronger as one, investors sell their deflating stocks, bonds, and currencies to invest in gold to preserve wealth; and two as world conflict is increasing.
Gold, $GOLD, closed at $906, clearly still in breakout since July 23, 2008.
The neoliberal Milton Friedman principle of floating currencies has met its Waterloo demise, with gold rising as the defacto international currency.
Gold and gold alone will emerge as the sole means of garnering and accumulating wealth. Oil's volatility means it cannot be a reliable source of long term investment for the common investor.
The fall of the dollar means the Liquidation Thesis must be applied
Now that the US Dollar is going to fall, the 'Liquidation Thesis' as an economic principle will be applied simply as a matter of 'economic nature'.
The 'Liquidation Thesis' holds that government services and payments, service sector jobs, public and private debt of all types, and unfunded retiree benefits are going to be liquidated, that is done away with. This is especially the case given that the projected real US Federal Government deficit for next year is $789 billion.
The US Federal government will not be able to pay $3,000 a month, double occupancy, to provide for seniors in assisted living facilities such as those owned by LTC Properties, LTC, whose stock has risen in an ascending wedge from August 2007, with the most recent rise going straight up for four weeks on falling volume as shareholders wait for the dividend. Its recent rise is a 'freak of economic nature'; and economic nature has a way of dealing with its freaks.
Here is Elaine Meinel Supkis chart of Total Credit Market Debt from the article Big Brother TV Cardboard House Nearly Collapses that was the fuel for 'the age of financialized prosperity'; the recent increase came via the Bank of Japan, Phil Gramm, Alan Greenspan and Ben Bernanke. Ms Supkis remarks: "Note that the ratio of lending to GDP gets much worse during depressions. A good ratio is when we were solvent from 1950-1970. Instead of maintaining this solvency, we chose to do what the big empires did in 1914: overspend military and social budgets for half a century. The deterioration between the GDP ratios and debt is double the mess during the Great Depression! This is very significant. Our growth in capital has lagged far, far behind our borrowing. This is why Bernanke was chosen to be our Fed chief: to supposedly deal with the looming confirmation that we are entering a depression. His solution is to shovel all our excess dollars into the central banks of our dire trade rivals who are destroying our industrial base. Thus, he is expected to restart the previous status quo which is leading us into quadrupling the red ink side of our ledger books".
And she adds: "In other words, we are a trillion in debt to credit cards. In good times, one can ignore this sort of bad lending situations. But in bad times, it doubles the pain. When people go bankrupt, if the credit card guys hammer them for fees and funds as well as the mortgage lenders demand they get something, too, we end up with fiscal slavery. People can't pay off their obligations or get new loans. If they do get new loans and are allowed to merrily default on old ones, they will make this worse and worse as no one takes anything very seriously".
And relates: "Why worry about how much you are being lent if you can run off and start all over again without breaking stride? People who are defaulting on excess lending are certain they will be extended credit in the future. This is a foolish notion. So long as the world needs the US to sop up all excess manufacturing at a high profit margin, we will be allowed this fatal boon. But when we can't perform this function, we go down, hard."
Yes, Ms. Supkis, we indeed are going to go down hard because the 'Liquidation Thesis' is going to be applied most severely.
We have passed into 'the age of financial disinvestment and instability' and also into 'the age of state corporate rule'.
The age of 'investment prosperity is over' and the age of 'financial disinvestment and instability', and the age of 'state corporate rule' are rising.
One might ask, "How is state corporate rule rising"?
The leaders have announced two 'framework agreements': the Security and Prosperity Partnership of North America, the SPP, and the Declaration of EU US 2008. These give them authority to address events that threaten economic stability, and which provide for economic competitiveness. The leaders have appointed councils, working groups and stakeholders, who work in global government principles and policies of security and prosperity.
The US has told Iran it must either cooperate or face a confrontation by August 2, 2008; their cooperation is unlikely as Iran's President says the 'Big powers' are going down according to George Jahn, Associated Press Writer.
The US and the EU is likely to carry out a military strike to eliminate the security threat poised by Iran's nuclear ambitions. Either this will result in a systemic risk event, or a systemic risk event will arise from some other source, where one may not have full and immediate access to one's wealth, to invest in gold at that time.
August 2nd, falls on Saturday of this week. This means that if a militiary strike is carried out, most will not have access to their monies and will not be able to effect any trading until Monday August 4, 2008. Should a military strike be carried out, it reasonable to believe that the US dollar would immediately fall; and stocks, bonds, municipal bond funds, money market accounts, would gap open lower on Monday; and that gold and oil would gap open higher -- awesomely higher.
Investment Application
Despite today's financial rally 2% higher, the banks and investment bankers are really insolvent.
Their rally today, presents an excellent opportunity to short the financials with the Proshares 200% inverse of the financial sector, SKF, which fell 4% to a double bottom of 119; it could easily fall some more; yet given my investment maxim: "In a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength". Thus the dip in SKF is to be bought.
As mentioned above, because of the systemic risk potential of military risk with Iran, where one may not have access to one's monies, my investment recommendation remains unchanged: I recommend that one invest in gold by close of Friday of this week with a diversified investment in gold at BullionVault.com, GoldMoney.com, and in a gold ETF such as GLD.
Suggested Reading
How to keep your investments safe
The US Dollar has likely peaked out today as oil rose and stocks topped out as the EUR/JPY, a barometer of the yen carry trade, turned lower on falling global currencies.
Oil rose in mid day trading, putting an end to the rise in stocks
In mid day trading oil, USO, rose; it's chart shows a 4% rise on the day.
Stocks may have topped out; the following charts show the stocks are at strong resistance; we could be 'at the start' of a fall lower.
VTI, Overall stock market, shows a lollipop hanging man candlestick.
IWM, $RUT, Russell 2000, a questioning doji.
DIA, $INDU, Dow, a lollipop
SPY, $SPX, S&P, a lollipop.
QQQQ, NASDAQ, an abandoned baby or shooting star candlestick on July 17, 2008 in a consolidation pattern; economic nature abhors consolidation patterns and takes action to resolve them; in as much as we are still in a bear market; the direction for the NASDAQ is down.
US Steel, X, settled at 50 day moving average. It and Cummings, CMI, have been influenced lately by the price of the US Dollar.
The fuel for yesterday's and today's rally came from the Jeannine Aversa, Associated Press, report of another $75 billion of TAF liquidity assistance from the Federal Reserve to the banks.
A number of stocks and ETFs are manifesting a south sea investment mania at the end of the age of fiat wealth: these include NSC, FSLR, SPW, CLF, GHM, CSGP, AVP, and XBI.
FISV, Fiserv Inc, a best of breed software provider to the banking industry, whose stock is listed on the NASDAQ. FISV manifested a doji at $49.63, indicating a stand off between the bulls and the bears; it closed above 50 day moving average; this could be as good as it gets for this company.
Here is the Yahoo Finance 5 day chart of FISV showing the rise in price due to a good earnings report; and the mid-day "pull down" due to the rise in price of oil.
My investment maxim is simple: in a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength. Today's strength in FISV represents a short selling opportunity.
FISV is the canary in the NASDAQ trading coal mine, warning investors to pull out. It is a "trading proxy" for the NASDAQ -- it trades as the Nasdaq trades; thus FISV serves as the Nasdaq's trading signal.
FISV is at the edge of a massive head and shoulders pattern as seen in this MSN.com chart that goes back to 49.84 on October 23, 2006.
Yet an even better short selling opportunity exist in selling the financial sector, IYF, which manifested a high rise doji, at 50 day support.
I agree with Mike Mish Sheldon's and Mike Whitney's assertion that a number of financial organizations are insolvent.
Here are charts for just a few of the insolvent; notice the sell off in these high dividend paying stocks on May 1, 2008. One can see that investors sold and went long commodity indexed funds and ETFs, such as the CRB commodities, RJI, oil, USO, and gold, GLD, which zoomed higher on that very day.
Regions Financial, RF
Wachovia Bank, WB
Washington Mutual, WM
Citigroup, C,
Lehman Brothers, LEH
Merrill Lynch, MER,
These charts tell me that capitialism died May 1, 2008; and how fitting for World Revolution Day, which is an Illuminati Holiday.
The charts of those banks and investment bankers, and knowing that these organizations have level two assets and level three assets written to fantasy, and may have assets kept off balance sheets in SIVs and SPEs, relates to me that financialization, that is securitization, is done and over. Lehman Brothers and Merrill Lynch are likely going to go out of business soon.
The 'age of financialized prosperity' that came via the use of the yen carry trade and the repeal of the Glass Steagall Act by President Clinton signing the 'Gramm-Leach-Bliley Act', authored by Phil Gramm and Jim Leach, is now over. The 'age of foreclosure crisis' and 'the age of financial disinvestment and instability' has commenced.
The Proshares 200% inverse of the financial sector, SKF, is now at the region of oversold and is ready for a rebound higher.
The BRICS, EEB, a long favored destination of yen carry traders gapped open higher and continued higher throughout the day; it jumped higher from its 'precipice of disaster' -- it had been trading at the very edge of a massive head and shoulders pattern; today's rise is only temporary.
Disinvestment is coming to stocks world wide, and especially the BRICS, since Bank of Japan, interest rate differential funding resides strongly still in these stocks. Now that currencies are turning lower, and profits have peaked out as per report of David Rosenberg of Merrill Lynch who relates that EPS To See 35% Correction, PDF report, Peak Corporate Profits, if you will, all stocks will be turning lower.
The Brics, EEB, rose strongly today on Brazil's rise, and on basic material stocks such as oil producers, coal producers, metal and mining manufacturing, and steel manufacturers rising.
Sohu.com, SOHU, had fallen, but questioned its fall as the BRICs rose.
The gold stocks, GDX, fell commensurate with gold's fall.
A run on the US Treasury bonds is underway
The interest rate on the $30 Year US government bond, $TYX, hesitated in its move higher; as the US Treasuries, TLT, moved marginally higher; the chart of the government bonds shows what may be an abandoned baby candlestick in trading on July 28, 2008. The chart of TLT clearly indicates that a sell off is underway in response to the Federal Reserve's move to extend liquidity and capital to Freddie Mac, FRE and Fannie Mae.
A commercial lending crisis is now full blown
Aggregate debt, AGG, has fallen sharply lower from a pennant formation where an abandoned baby candlestick formed in July 28th's trading. Credit has gotten a definite marketplace writedown; being able to secure a commercial loan is virtually impossible; the credit crisis has morphed into credit gridlock, where many companies now are unable to refinance their debt as it comes mature and are declaring bankruptcy with increasing frequency.
And to add to the current gridlock Jesse reports a tsunami of junk bond debt is coming.
The world currencies are now in the process of falling lower as 'Peak Currencies' occurred on July 25, 2008
EUR/JPY, FXE:FXY, the barometer of the yen carry trade, fell as currencies sold off in early morning trading
The commodity currencies for the most part fell, confirming the investment principle of 'Peak Currencies' of July 25, 2008, and a new downward direction for the world currencies.
DBV, the world currency ETF, manifested a bearish engulfing, hanging man candlestick to fall through both 50 day moving average, and 200 day moving average; the latter crossing over the former today is a bear cross, and the 'nail in the coffin' for currency wealth: no currency can now maintain wealth -- all are falling lower in a death spiral lower together with the US dollar leading the way down.
FXE, The Euro fell, it is now a 'failed currency'.
FXY, The yen rose, but may not continue to do so; it could continue to fall lower with other currencies in their new found downward direction. In this scenario, the Euro would fall faster than the yen.
FXA, The Australian dollar fell drastically -- to the former mid-June level in response to the National Australia Bank announcement that it is writing off 55% of its home loan portfolio value to reflect current real estate reality. ActionForex shows the unraveling of interest rate differential investing in their chart of the Aussie in AUD/USD Daily Outlook; the Australian Dollar had just made a 25 year high.
FXS, Swiss Krona rose from a sharp sell off yesterday.
With the rise again in the price of oil, 'Peak Dollar' has definitely been attained.
The dollar, $USD, traded unchanged at 73.33, manifesting a questioning doji, showing the standoff between bulls and bears.
USD/JPY closed down at 107.98.
The fall of EUR/JPY, FXE:FXY, means an unwinding of the yen carry trade is underway; and that the world has passed through 'Peak Liquidity'
Jesse in report Bank Credit and Money Supply Growth shows a downturn in the "growth" of Bank Credit, and MZM, M2 and M3. This documents the twin spigots used to generate fiat wealth in stocks and bonds have been turned off; these being the easy credit of the US Central Bank in TAF, TSFL and PDCF facilities, as well as the Bank of Japan, 0.5% interest loans.
The turning off of liquidity is seen in the daily chart of the barometer of the yen carry trade, that is EUR/JPY, FXE:FXY, where this metric recently turned down to 1.670, then bounced back up to an all time high in short sell covering, then fell lower to 1.690, and then back up to 1.701; before manifesting massively bearish engulfing yesterday, and falling lower today to 1.694.
The world has passed though 'Peak Wealth' and Kondratieff Winter has commenced.
Gold gapped lower on opening as the currencies sold off; it recovered some on oil's rise; gold will become the sole means of preserving wealth
The 5 day Yahoo Finance chart show that gold had gapped lower on opening; it recovered some on oil's rise, climbed but closed down on the day.
Gold, GLD, today fell through a consolidation pennant; but its price today at 89.50 is above a previous pennant price of 87 on June 23, when yen carry traders sold stock to invest in gold: thus gold is still technically in break out since July 23.
The chart of gold relative to US stocks, GLD:VTI, shows that an investment demand for gold, that began in late 2007 is still strong and underway; the investment demand for gold will grow stronger as one, investors sell their deflating stocks, bonds, and currencies to invest in gold to preserve wealth; and two as world conflict is increasing.
Gold, $GOLD, closed at $906, clearly still in breakout since July 23, 2008.
The neoliberal Milton Friedman principle of floating currencies has met its Waterloo demise, with gold rising as the defacto international currency.
Gold and gold alone will emerge as the sole means of garnering and accumulating wealth. Oil's volatility means it cannot be a reliable source of long term investment for the common investor.
The fall of the dollar means the Liquidation Thesis must be applied
Now that the US Dollar is going to fall, the 'Liquidation Thesis' as an economic principle will be applied simply as a matter of 'economic nature'.
The 'Liquidation Thesis' holds that government services and payments, service sector jobs, public and private debt of all types, and unfunded retiree benefits are going to be liquidated, that is done away with. This is especially the case given that the projected real US Federal Government deficit for next year is $789 billion.
The US Federal government will not be able to pay $3,000 a month, double occupancy, to provide for seniors in assisted living facilities such as those owned by LTC Properties, LTC, whose stock has risen in an ascending wedge from August 2007, with the most recent rise going straight up for four weeks on falling volume as shareholders wait for the dividend. Its recent rise is a 'freak of economic nature'; and economic nature has a way of dealing with its freaks.
Here is Elaine Meinel Supkis chart of Total Credit Market Debt from the article Big Brother TV Cardboard House Nearly Collapses that was the fuel for 'the age of financialized prosperity'; the recent increase came via the Bank of Japan, Phil Gramm, Alan Greenspan and Ben Bernanke. Ms Supkis remarks: "Note that the ratio of lending to GDP gets much worse during depressions. A good ratio is when we were solvent from 1950-1970. Instead of maintaining this solvency, we chose to do what the big empires did in 1914: overspend military and social budgets for half a century. The deterioration between the GDP ratios and debt is double the mess during the Great Depression! This is very significant. Our growth in capital has lagged far, far behind our borrowing. This is why Bernanke was chosen to be our Fed chief: to supposedly deal with the looming confirmation that we are entering a depression. His solution is to shovel all our excess dollars into the central banks of our dire trade rivals who are destroying our industrial base. Thus, he is expected to restart the previous status quo which is leading us into quadrupling the red ink side of our ledger books".
And she adds: "In other words, we are a trillion in debt to credit cards. In good times, one can ignore this sort of bad lending situations. But in bad times, it doubles the pain. When people go bankrupt, if the credit card guys hammer them for fees and funds as well as the mortgage lenders demand they get something, too, we end up with fiscal slavery. People can't pay off their obligations or get new loans. If they do get new loans and are allowed to merrily default on old ones, they will make this worse and worse as no one takes anything very seriously".
And relates: "Why worry about how much you are being lent if you can run off and start all over again without breaking stride? People who are defaulting on excess lending are certain they will be extended credit in the future. This is a foolish notion. So long as the world needs the US to sop up all excess manufacturing at a high profit margin, we will be allowed this fatal boon. But when we can't perform this function, we go down, hard."
Yes, Ms. Supkis, we indeed are going to go down hard because the 'Liquidation Thesis' is going to be applied most severely.
We have passed into 'the age of financial disinvestment and instability' and also into 'the age of state corporate rule'.
The age of 'investment prosperity is over' and the age of 'financial disinvestment and instability', and the age of 'state corporate rule' are rising.
One might ask, "How is state corporate rule rising"?
The leaders have announced two 'framework agreements': the Security and Prosperity Partnership of North America, the SPP, and the Declaration of EU US 2008. These give them authority to address events that threaten economic stability, and which provide for economic competitiveness. The leaders have appointed councils, working groups and stakeholders, who work in global government principles and policies of security and prosperity.
The US has told Iran it must either cooperate or face a confrontation by August 2, 2008; their cooperation is unlikely as Iran's President says the 'Big powers' are going down according to George Jahn, Associated Press Writer.
The US and the EU is likely to carry out a military strike to eliminate the security threat poised by Iran's nuclear ambitions. Either this will result in a systemic risk event, or a systemic risk event will arise from some other source, where one may not have full and immediate access to one's wealth, to invest in gold at that time.
August 2nd, falls on Saturday of this week. This means that if a militiary strike is carried out, most will not have access to their monies and will not be able to effect any trading until Monday August 4, 2008. Should a military strike be carried out, it reasonable to believe that the US dollar would immediately fall; and stocks, bonds, municipal bond funds, money market accounts, would gap open lower on Monday; and that gold and oil would gap open higher -- awesomely higher.
Investment Application
Despite today's financial rally 2% higher, the banks and investment bankers are really insolvent.
Their rally today, presents an excellent opportunity to short the financials with the Proshares 200% inverse of the financial sector, SKF, which fell 4% to a double bottom of 119; it could easily fall some more; yet given my investment maxim: "In a bull market be a bull; in a bear market be a bear. In a bull market, one buys on dips; in a bear market, one sells into strength". Thus the dip in SKF is to be bought.
As mentioned above, because of the systemic risk potential of military risk with Iran, where one may not have access to one's monies, my investment recommendation remains unchanged: I recommend that one invest in gold by close of Friday of this week with a diversified investment in gold at BullionVault.com, GoldMoney.com, and in a gold ETF such as GLD.
Suggested Reading
How to keep your investments safe
WIDGETIZE