Thoughts on Markets

Friday, September 05, 2008

Intervention is the Name of Game

Both silver and gold are showing signs of life today and have moved a bit higher. Neither is off to the races, but the move is encouraging. Maybe the intervention has lessened a bit. I bet that has not and will raise its ugly head again. Will the boyz try to stop the fall rally? I would not put it past them.

The intervention and the shortage of small coins and bars indicates that more folks are beginning to climb aboard the precious metals train. The physical metals should be a high priority in our investing for today. That is, if you can find and afford them.

The, above, is Jim Rogers commodity index which is worth following. There is massive infrastructure building in Asia, particularly, in China and India. Both of these countries have seen massive movement of their large populations toward urban areas. This has placed a great overload on roads, bridges, mass transportation, and all utilities. There are significant amounts of funds being used to relieve the shortages. Thus, it would seem that commodities, though presently depressed by intervention, will remain in a bull market. The current orchestrated "correction" should remain only temporarily. The bull market is still in tact over time. The market will reveal this as time passes.

The following is from

"President Yushchenko 'coup' claim

The shock waves from the Russian invasion of Georgia sparked a new crisis in Ukraine yesterday as the pro-Western Orange coalition fell apart in acrimony.

President Yushchenko accused his former ally, the Prime Minister Yuliya Tymoshenko, of forging a pro-Russian alliance to curtail his powers, claiming that a coup was under way a day before Dick Cheney, the US Vice-President, was due to visit Kiev, the Ukrainian capital."

The unrest in the Ukraine is escalating and may well be the source of more international concern. There is a growing distrust between Russia and the U. S. Actually, between Russia and the West, particularly, America. We must be aware of this new "Cold War," in spite of the lack of coverage by the mass media. This will have a great impact upon our finances as it continues and grows.

And this is from Sprott Management Analyst August 2008 report entitled Phony Express:

"If an unsuspecting investor didn’t know any better, he would be inclined to believe that a new trend has taken hold in the financial markets during the months of July and August. The “winning trade” now seems to be to go long financials and short commodities. Although this trade certainly would have made money over the short time period just mentioned, we would continue to posit that this trade is wrong over the longer term. Investors are having the wool pulled over their eyes courtesy of the Phony Express – outside forces that are trying to orchestrate the markets to instill a false sense of optimism. Although the evidence may be circumstantial, the motive and the means are quite clear. As the old saying goes, if it walks like a duck and quacks like a duck, then it is a duck.

Call us conspiracy theorists if you will, but we cannot help but see the visible hand of
government in the machinations of this latest phony market rally. There is certainly nothing in the fundamentals that has changed over these two months to indicate that the malaise in the financial sector is nearing an end. Quite the contrary, the financials are as sick as ever and things are only getting worse. To claim that the financials have bottomed is, we believe, to ignore the obvious. In a recent note to clients, Richard Bernstein, chief investment strategist of Merrill Lynch, wrote that the credit crisis is “broad, deep, and global” and “far from over” for financial companies. He further wrote: “Investors are significantly underestimating [our emphasis] both the scope and the extent of the credit bubble and the consequences of its subsequent deflation” and that “the problems are not confined to large institutions that are overexposed to U.S. subprime loans.” He further opined that stocks are unlikely to rebound soon, adding: “We are skeptical that trying to bottom-fish will prove profitable.”

This from Chuck Butler in today's Daily Pfennig:
"You can't have it both ways... You can't say, the U.S. is outperforming the rest of the world, and there won't be an collateral global growth because of it.

But, I don't believe it... Which would mean the dollar buying is all being done with smoke and mirrors... And that leads me to my latest conspiracy theory... If you don't like it when I go into these conspiracy theories, just skip ahead to the paragraph that starts with a *...

Let's go back to mid-July... The euro has hit $1.60 again and there's just not a lot of love going around for the dollar. And the reasons for that lack of love are numerous. One, BIG reason, is the debt problem... But that's one that a lot of people feel we can deal with (yeah, right, and I'm a young Bruce Willis!) So, let's put the debt on the back burner for this one... What the markets are feeling (in July) is the weight of the world on their shoulders, because of the rot on the vine with financial institutions...

Then, almost miraculously the dollar got up from its death bed... And the weight was lifted, but by whom, and why? Well... We found out just last week that it was a coordinated intervention by the Central Banks of the U.S., Japan, and Eurozone to prop up the dollar. And once the dollar buying got up some momentum, the Big Boy Brokerages were all touting the return of the greenback! But why did the U.S. feel it needed to intervene? OK, here's what I think...

"The Boys" saw the list of banks and brokerages on the "dead man walking" roster... And they saw the dollar circling the bowl... If the you know what hit the fan with financial institutions, it could have, no wait, it would have, sent the dollar down the drain, and who knows, it could have been the end of the greenback as we know it. So, they intervened to prop up the dollar in "preparation" of what was to come, which would allow it to begin its decline from a higher level.

That's my story and I'm sticking to it! It's like last fall when the Fed started cutting interest rates... They knew there was going to be hell to pay, and they wanted as much liquidity in the markets as possible... Did interest rates really need to be cut at that time other than to provide breathing room for the Fed's buddies on Wall Street? I don't think so, Tim! But, I knew the Fed's thinking on that, and I immediately called for a series of rate cuts, that the media or the markets didn't see coming... But I did... And I think I see the conspiracy thought here clear as day...."

These folks are in the know and I believe that their revelations about the intervention are accurate. It is true as has been stated before: "We no longer have markets only intervention."

And this is from one of my favorite newsletters:

According to the Pentagon's 2008 “Base Structure Report” (its annual unclassified
inventory of the real estate it owns or leases around the world), the US maintains 761 active military “sites” in foreign countries. The United States has 510,927 military service personnel deployed in 151 foreign countries.
- Bill Buckler,, September 1, 2008

To me, this sounds like an empire. However, it is an empire which has overextended and can no longer be financed. We're broke! There is little doubt that the Federal Reserve and Federal Government will use all means at their disposal to remedy the situation in the only way they know -- the dollar will be inflated and we will be greeted with higher prices for virtually everything and stable or lower incomes.

Folks, it is wonderful to serve and rest in the Sovereign God of all. Without the comfort He provides to His people in the Bible and by the in working of the Holy Spirit in our lives, we would be fearful at all times. We can be still and know the He is God. There are obligations which He covenantally places upon us, but He helps us to keep up our responsibilities and gives us grace to persevere in peace when others are panicking. Praise be to King Jesus!

Best to each, Doug


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