The advisor's goal is to provide gold and silver bullion investors with market commentary when significant developments warrant updates. 
 

November 15, 2008:  Money, Money, Everywhere, And Not A Drop To Lend (or Borrow!).


When I was growing up in the 1950's and 1960's, and people did live in those Ancient Times, one of the funniest things that high-schoolers used to do was stop their jalopy on hopefully a deserted road or intersection, all get out and run around it frantically several times waving their arms wildly above their heads, screaming and yelling, to only jump back in, no seating assignments being honored, laughing gleefully.  This came to be known as a Chinese Fire Drill in the vernacular.  Not particularly flattering to the Chinese sense of organization and efficiency, but few products came from China in those days except for those little umbrellas that went in exotic mixed drinks.  This is how I now view the efforts by Officialdom to prevent the global financial system and economies from rapidly sinking into dysfunction, collapse, and depression. 

Oh, I know I am the ever-cheerful one in the ezine writing world, but I think little can be done that will effectively prevent a multi-year depression from gracing our shores.  American resolve, ingenuity, stick-to-it-ness, and hard work sound great from a political podium or a Steinbeck novel, but the proponents of these admirable traits make the assumption that the American being elevated in the annals of human history has two plug nickels in his or her pockets to rub together.  When any country is technically bankrupt as the U.S. is right now, it is virtually impossible to avoid a lowered standard of living as "assets" formerly known as "debt" implode all around us.  We are at the beginning of a severe Adjustment Period in U.S. History.  Those leaders that have the guts to tell it like it is may not get re-elected because they made their constituents cry, but they will do the most good in preventing Americans from repeating imprudent behaviors that got them into this historic soup in the first place.  Spending what one does not have at the moment immediately comes to mind.  Americans are destined to become savers again, kicking and screaming to the piggy bank.

Americans do not need soothing platitudes from their officials and leaders right now, they need a little Reality Check in the way of the hard facts about what they should be doing to help them survive the very hard times that we are currently in and will be in for some time to come.  Government cannot be all things to all people and all legal entities at all times; Say that phrase twenty times a day for the next 10 years and you will have your head in the right place to even begin to keep your noggin above the murky financial waters ahead.  The U.S. Government is not the U.S. Auto Industry and if we end up with one efficient, consumer-oriented automobile company in this country so be it.  Both Labor and Management at the Big Three have received excessive compensation packages for decades in relation to their competitors and the often-mediocre products Detroit has produced.  Invest in new technology or die is all a part of Capitalism, why should American citizens be asked to provide financing or guarantees when the Big Three failed to do so for years now.

We are sliding down the slippery slope of throwing Taxpayer Dollars at a laundry list of industries and companies that are touted as "TOO BIG TO FAIL".   Kind of like the alcoholic reaching for that one last drink.   There is not enough Tea in China (to stick with our Oriental analogies for the moment) to prevent this Tens of Trillions of Dollars Debt Collapse from occurring around the globe.  The U.S. Government, the Treasury, and the Federal Reserve cannot create enough "money" fast enough and apply it forcefully to the areas where most needed fast enough to prevent the collapse that is well under way.  Most American consumers are not creditworthy borrowers at this time, many teetering on the financial edge after years of over-spending (at the encouragement of certain monetary officials, I might add!) and most U.S. financial institutions are in no position to expand their balance sheets with new loans.  Money, money everywhere but not a drop to .....................................

The sun will come out tomorrow, but it will be shining upon a much different world that will be morphing before your eyes each and every day.  And it will be a world where the United States is not the leading financial center of the world.  And eventually the U.S. Dollar will not be the Reserve Currency for international transactions, our major trading partners, soon to be stung in the Trillions of Dollars of U.S.-centric losses, will see to that.

In a cracked nutshell, here is what Fearless Leader Sage sees in the immediate future for Americans:

1.  Precipitous Decline in Economy Activity:  

For those new to class, this is also dubbed a "RECESSION" by all economic definitions, forget the two quarters in a row hogwash, we have had declining activity now for over 8x quarters if the Bureau of Labored Statistics' GDP Deflator had reflected Man-On-The-Street Realty of annual price inflation upwards of 8% in just about in every good and service we Americans employ.  When year-to-year auto sales decline by 35% to 45%, you basically have an economy falling off a cliff.  In 2009, I expect economic activity in the Real World, not the B.L.S. world of fudged statistics, to show a 3% to 5% or greater decline in GDP by summertime.  Retail sales just had their worst month-to-month drop in recorded history, so don't go wild this Christmas to cover all of the flooring around the tree.

Retrenchment is a good thing because the sooner Americans get their balance sheets rebuilt with more cash and less debt, the sooner they will be able to spend at a responsible level to get our economy going forward again.  However, the propensity to spend in the U.S. of A. will never be as high as it has in the past 50 years, partially due to financing costs that will not return to their below inflation levels as instigated by the Federal Reserve.  And Americans are going to learn to live with less gadgets, recreational toys, and expensive getaways than in the past also.  There will be many bankruptcies in the years ahead, at all levels, private, business, and government ( Caleeefornia probably at the top of the list on the latter!)  Higher and higher unemployment in this country will eventually lead to some forms of civil unrest, which will be about the time we throw most of the bums out in Washington.


2.  Housing Prices Will Not Recover For Another Decade:

From 2001 to late 2005, U.S. housing prices increased some 70% in many areas of the country, while the economy was lucky to log in 5% annual non-inflation- adjusted growth.  So in that 5-year period, nominal home price increases historically would have given us a 27.6% cumulative housing gain, when in fact, excess credit creation and lax lending standards gave us an additional 42% speculative gain that is not fully reversed in today's, 2008 home prices.  Since the current retrenching of paid prices is only at about the 20% level nationwide, we have at least another 20% price decline to eliminate this housing price bubble's effect.  Note that this simplistic analysis is predicated on future economic growth being zero, when it in fact will be negative for several years to come.  So the severe recession we are currently in will do nothing to stop home price erosion, but will act to aggravate the situation even more than the 20% further decline outlined here.  Buy real estate only as a roof over your head or for recreational purposes, not for your retirement nestegg; using home equity as an ATM account is also a thing of the past, since only the very top tier of American homeowners will be offered this form of lending, home equity or second mortgage, and I don't think the terms or rates will be particularly attractive either.


3.  Commodities, Including Gold and Silver, Will Recover In Price:

This one will be tough to comprehend in a world economy basically falling off an economic cliff, but it all depends on what currency through which you are viewing the world.  Since we are currently stuck with the Dollar for now ( a currency backed in some measure by Gold is in our future, I am certain now), rest assured that the some $4 Trillion that Uncle Sam in all his persona's has throw at the Debt and Credit Collapse problems to date guarantee a severe devaluation in the Currency of the Realm.

Exploding Supply of Dollars with waning global Demand.  It has been written that the recent surge in the value of the Dollar from the 72 precipice to the 88 level in about 2 month's time is really another effect from massive de-leveraging in the global financial system; highly-leveraged carry trade and derivative positions, in order to be closed out to generate plug-the-dike cash, entail buying back U.S. Treasuries which in turn require U.S. Dollars.  In effect, the rapid closing out of Treasury "short" positions in these exotic trades had nothing to do about the international attractiveness of the embedded "real" interest rate, sovereign default risk, or long-term currency prospects of the issuer, the United States.  So this temporary, rather artificial, demand for U.S. Treasuries is destined to reverse itself in the months ahead as the U.S. Government creates Dollar deposits around the world in the Trillions of Dollars.  Not to mention a 2009 Fiscal Deficit that will be in the $800 plus Billion range, if not in excess of $1 Trillion the way money is being throw at every problem.  Won't you like to have the Bottomless Federal Checkbook, kind of like the Bottomless Coffee Cup at diners in days of yore!

So when the Dollar goes back to the 72 level on the Dollar Index as it inevitably will since there is nothing sound about the U.S. Dollar today, this 18% devaluation closer to global purchasing parity will increase the gold price from the depressed level of $750 today to over $900 without any change in gold demand.  Another Simplistic Analysis by the Sage (SAS), but quite instructive as to how all commodities will come roaring back in Dollar Terms with the assumption of flat demand.  Now I am not at all convinced that commodity demand is going to fall off a cliff like Starbucks Coffees have here in the States, since world population growth is still cooking along at 1% to 2% per annum.  Assuming of course, that the Newly Nastier Soviets (NNS) don't divert a meteorite passing by the planet with a nuclear inter-spacial missile that I personally know Putin has been working on; aiming the darn thing has been his problem to date with one test firing targeting his countryside Dacha by mistake.  This sustainable growth will be best exemplified in the Asian regions of the world were financial wizardry was not bought into as it has been in Europe and the United States.  Commodity demand in India, China, and Southeast Asia will be just fine in the immediate years ahead, even flat demand would buoy overall global demand for virtually all commodities.  And many production operations have been closed this year due to the collapse in prices, a supply spigot not quickly turned back on.

Why in the world have Gold and Silver been whacked to a inch of their lives when the Global Financial System is collapsing?  Not to mention an accelerated loss of confidence in the banking system and the stability/buying power of all currencies.  Once again we turn to that bastion of fair and accurate price realization and efficient clearing mechanism known as the Comex/Nymex and discover that those Lamborghini driving hedge fund managers and commodity index fund operators have had massive redemptions and margin calls that required cash and not long positions in precious metals.  So the de-leveraging process claims another asset class besides Dollar Shorts/ Oil Longs, and many rallies in both Gold and Silver since August have been met with increased selling even as physical product becomes as hard to find as an Honest Politician.  Makes no sense does it that the physical market for an asset can be tight as a drum while the futures/paper market on commodity exchanges shows severe price erosion??!!!  Ah, thank you C.F.T.C. and all associated regulators who will be put under European or E.C.U. control as of Monday morning in punishment for allowing financial/paper positions to exist that are 10 to 20 times greater than the ability of the exchange and its participants to deliver the underlying commodity upon demand. 

Keep buying the physical metals, stay away from paper surrogates and leverage in all forms, since the more Gold and Silver product that comes off the market with staying power, the sooner this perverse control of daily prices will cease to be manipulated by the Comex/Nymex and other distant exchanges.  The prospect of a massive Comex default, as in "FAILURE TO DELIVER", increases by the day which can only bring widespread public outcry, scrutiny, and reform to this dysfunctional exchange.  Americans need to take back their markets out of the hands of those who operate them only for the benefit of a moneyed few.


4.  U.S. Interest Rates Are Going Higher in 2009:

Now I know that Helicopter Ben is now hinting at Fed Funds at less than 1%, but there is about to be a bursting of the Bond Market Bubble.  Jim Rogers and other proven sages have stated that U.S. Treasuries are overpriced which implicitly means that their yields are grossly understated in relation to the fundamentals of the U.S. economy, U.S. creditworthiness, U.S. Dollar prospects, and competitive real interest rates on a global scale.  The Sage forecasts, as he has in the past to no avail in shaping the financial landscape or being right about higher rates to this point, that all but the shortest of U.S. paper is going to yield from 6% to 8% by the end of 2009.  Always good to forecast a range of yields, you may actually hit one in a 200 basis point spread, and a broad time window for it happening.  This will not help the U.S. real estate market, whether residential or commercial, and it will increase borrowing costs to the now non-creditworthy U.S. consumer at a time when lenders are looking the other way ....... to rebuilding their balance sheets by investing in Treasuries or Swiss Notes or Gold instead of pushing more credit into a pipeline that has sprung historic leaks via defaults, foreclosures, and delinquencies.  Pushing on a string easily describes what Officialdom is doing in flooding the system with U.S. credits.

Amazingly, this entire scenario ties together all so well the moment that de-leveraging by Treasury Shorts has run its course (Sage guesses via Waterford Crystal Ball on December 9, 2008 at 2:13 pm) and the demand for Dollars begins its Devaluation Journey anew, with aplomb and alacrity.  Also known as a Waterfall Decline.  The Dollar reverse will be swift as global investors rush to get out of the burning theater and the bond market mayhem will be stupendous.  The Bond Vigilantes of yore are about to come back onto the world stage:  Soaring inflation, soaring U.S. money creation, a severely compromised U.S. Balance Sheet, U.S. Repayment via Devaluation Policies, and all of the elements that set U.S. Treasury and Corporate Bond yields for about 200 years are then going to come back in vogue again.  Since the U.S. will have lost its appetite for conspicuous consumption due to holes in its pockets with the linings turned inside out, there will not be the need for Supreme Exporter China, for example, to launder so many U.S. Dollars brought ashore by this lopsided trading.  The demand for U.S. Treasuries precipitated by $700 Billion per annum Trade Deficits is going to wane due to a severe decline in export volumes to the States AND A DESIRE BY ALL SOVEREIGN GOVERNMENTS WITH A PULSE TO DIVERSIFY OUT OF THE U.S. DOLLAR.  As a Banana Republic Nation from the Weimar Germany mold, the United States' sovereign debt is about to experience its first buyers' strike in recent history.  And the repercussions for domestic U.S. interest rates will exacerbate the lack of demand from U.S. consumers who will have lost their ability and appetite to borrow and spend like the good old days.  Actually, make that the Too Good To Be True Days.

You can rest assured that if history is any guide, and me thinks it still is even in the New Millennium, that many of the world's largest holders of Dollars and U.S. Treasuries will turn to Gold and eventually Silver to diversify their international reserve positions with something of tangible worth.  An asset that cannot be devalued by governmental edict or policy or whim.  All currencies are going to be greatly compromised as to holding value and buying power in the years ahead.  Only a select cadre of Tangible Assets will maintain and preserve buying power in the decade ahead and possibly the one after that one.  Not a sales pitch, but a reflection of my predicted reality over many prior forecasts.


AuAgAuAgAuAgAuAgAuAgAuAgAuAgAuAgAuAgAuAgAuAgAuAg


HAPPY THANKSGIVING, AND GOD BLESS THE MEN AND WOMEN IN OUR ARMED SERVICES THAT ALLOW FREEDOM TO RING HERE IN THE UNITED STATES AND AROUND THE WORLD.  While our plates may not be as full as in prior years here at home, we have not suffered a civilian loss due to terrorism since 9/11/01.  Servicemen and servicewomen don't make Foreign Policy, they just see that it is implemented at the least cost to human life possible.  Try judging our enemies by that standard.



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December 29, 2008:  Welcome To The United States of BANANAS.


It is with some disgust and amazement that I wrap up 2008 with my final missive to the Enlightened Ones, Bullion Market Insights Readers.  Not sure how much longer I will undertake this exercise of ranting and raving upon the electronic pixel-waves, since those in power never seem to heed my advice and they continue to dig a hole for future American generations of such depth that these yet-to-be-born debtors will not have a chance of repaying.  It is only proper that I and many other small businessmen in this country today work 60- and 70-hour weeks so that multi-millionaire Auto Executives, Money Center Bankers, Insurance Executives, and Businesses A Thru Z can have their decades of inept decisions PAPERED OVER BY U.S. TAXPAYERS' EVENTUAL OBLIGATIONS TO PAY THE TAB.  I will try to keep this short, since I have year-end tax accounting to attend to, and as a patriotic American, it is my duty to send as much moola to Washington in order to keep the subsidies, guarantees, and outright bailouts a-going.  I feel so good inside when I write those quarterly tax payments, knowing that I am doing my part to keep one of the most gargantuan Ponzi Schemes in the history of the universe going.  THE PRINTING OF TRILLIONS UPON TRILLIONS OF FRESHLY MINTED U.S. OBLIGATIONS, REGARDLESS OF WHAT FORM THEY TAKE, IS INDEED A PONZI SCHEME OF THE FIRST ORDER.  Bernard Madoff move over, you is a piker compared to what the U.S. Treasury, Federal Reserve, and Congress can concoct in a Washington-minute to flood the world with newly printed U.S. Obligations. 

A little light bulb went off in the graying noggin of the Sage over the weekend.  I have had most of my liquid "cash equivalent" funds in a respected and conservative All-Treasury Money Market fund, but when I saw that the fund was paying a niggardly 1/2 of One Percent and the management was taking 1/2 of One Percent per annum in fees, I had to pause for at least a few minutes.  Since Government Officials are guaranteeing every bank deposit accepted by a U.S. institution (or they will be before Inauguration Day), what is the real difference between a $250,000 insured deposit account, regardless of form, and a Treasury Bill.  Maybe I am falling into a trap here, one possibly intended by Bernanke when he promised to pay investors absolutely ZILCH FOR TREASURY BILLS as a return on their money, to get the economy back on its feet, of course!!!  Personally, I think I should be paid something for buying this evolving junk called Treasuries, since the issuer has entered technical bankruptcy with the recent issuance of some $8 to $11 Trillion in additional U.S. Indebtedness in the last 6 months.  Although the world seems to think otherwise for the moment and are willing to accept below inflation yields from the U.S. close to the zippo level, one really has to begin to question the credit rating of the United States and its desire AND ability to pay all current and future financial obligations to its paper holders.

Let's face it folks, the United States is just printing unprecedented sums of money to attempt to avoid the inevitable failure of the global financial system and an economic retracement that world inhabitants have not seen since the Great Depression.  I am of the belief we are in the early stages of the Greater Depression, at least for the proliferate and irresponsible United States of Banana's.  (Now I don't want nasty emails from banana growers, since I can't eat this particular potassium-rich fruit, they give me indigestion, so there!)  No disrespect intended, just a reality check here!  As I have told everyone fortunate enough to read THIS FRICKING FREE EZINE FOR OVER A DECADE NOW, the Loss of Confidence in any system or institution or political entity is a monumental roadblock to stability and normalcy.  That is where we are now, and that is where we are going to be for a good length of time, try at least a decade to get full confidence back, if then.  This country will not be the same place to work and live in the years ahead, get that concept firmly planted in your noggins also.  We have squandered our own and our offspring's' futures, and we are destined to slip down the ladder of Standards of Living since history shows the Collapsed Debtor has to do without many things to get his or her house back in order.  Think of Charles Dickens' Times.  We are at the Gates of Debtors' Prison in the classical sense, and it is going to be a real stinky place to be stuck in for many years to come.

Since I am digressing here, let me say this about the Change Candidate Barrack Obama getting anointed on January 20th:  LOTS OF LUCK, FELLA.  Since you are bringing in Clinton Admin II, I am hard pressed to see the foundations for change that we can expect from your Enlightened Administration, but I will give you the benefit of the doubt that old bureaucrats can sometimes come up with new, productive ideas.  The best analogy I can apply to President-elect Obama is the Captain of the Titanic, who has just been piped aboard ship with stupendous fanfare and not insignificant expense to the bankrupt nation.   As the new Leader of the Free World steps aboard, he notices that the ship is listing at 20 degrees starboard, there is a giant iceberg called the Debt Collapse stuck to the bow of the listing vessel, and two major compartments below deck called Solvency and Creditworthiness have already been flooded with icy/briny fluid.  If I were Mr. Obama, I would head directly for the lifeboats and forego any ceremonial entry into the wheelhouse.  Since the traditional honeymoon period with the public and the press will be unduly shortened in his case, a coattail of putridly corrupt Illinois politics has guaranteed that, he might as well don a bright orange life vest from the get go.  Almost feel sorry for the guy.  No matter how magnificently he waves his arms above his head for rescue during his Administration, he may be the very Captain that the rescuers will never see because someone hocked the helicopters or sent them over to Treasury or Ben Bernanke.  He is doomed to failure no matter what he does since no President in the history of this once-great country can run the economy or the financial system.  They often try, but have always failed badly since it is the realm of the citizens of the land to fulfill those tasks, not someone remotely tucked away in Washington, most of whom never even operated a lemonade stand, much less one at a profit.

Since we still have Freedom of Speech, I thought I would get that one out before the Black Boots start marching.

Back to the "where do I park my cash" discussion.  Go to the following link at BankRate.com:  http://www.bankrate.com/brm/safesound/ss_home.asp and type in your present or prospective bank's name in the search box and make an executive decision since you are better qualified to do so than most Overpaid Executives (OE's).  If the institution does not rank a 4 or a 5 star rating from this free service, think about finding one that does when it comes to parking large sums of cash, $50,000 and above to the insured limit, whatever that may be on a given day.  Then get a whopping 3% to 4% on your money in the newly-discovered SOLVENT BANK, hard to say if that beats the rate of current inflation which is in temporary decline, but sure beats a 1/2 of One Percent Treasury Bill that has only more freshly-printed Treasuries behind it.  I know, I know, I am like a political candidate doing a 180 degree turn here, but now that the U.S. Government is bankrupt and soon to be increasingly insolvent as investors begin to awake to our Junk Bond or BANANA REPUBLIC status I feel:  I NEED TO BE PAID A HIGHER YIELD TO BUY COMPROMISED PAPER WHETHER IT BE GENERAL MOTORS, AIG, OR THE U.S. GOVERNMENT.  We have fallen off the highest-credit pedestal and won't be able to crawl back up any time soon.  Keep C.D.'s short to 6-months to 1-year if you decide to go that route since the Sage is of the learned conviction that we will have higher interest rates forced down our recessionary throats by our international creditors who are waking up by the hour to the realities of compromised U.S. Debt in never-ending issuance.  Worst case that I can think of right this minute:  THE BANK STILLS FAILS DUE TO BOOK COOKING AND YOU GET PAID BY THE GOVERNMENT WITH LOUSY 10-YEAR TREASURIES, YIKES.  Kind of a Chase 22 system right now.

Got to start wrapping it up here since I might have a higher tax rate this year:  The conditions for higher and higher Gold and Silver prices have rarely been so favorable.  Hardly any other investment choices make sense right now, and eventually all of the additional money creation in the United States will have an upward effect upon U.S. inflation:  Way too much money chasing a reduced quantity of goods and services shrunk by the accelerating recession.  There can always be monetary-induced inflation during a recessionary period, just ask Jimmy Carter about it.  The de-leveraging of the hedge fund and commodity index fund crowd has just about run its course with these highly-leveraged funds no longer able to find cheap lines of credit for their high-risk plays (cash and carry, a welcome DE-LEVERAGING), with massive redemptions by loss-scarred investors, and by outright closures of funds due to all of the above.  I am quite hopeful that increasingly global prices for both Gold and Silver will be set by more rational and accurate pricing mechanisms than the Comex/Nymex, an eventuality that is increasingly likely as the U.S. fades as the center of the financial / price-setting world.  Demand for the precious metals, not sure about the economically sensitive Platinum Group, will continue to grow in 2009 as Americans sell stocks and bonds and cash, and even more retirement funds transfer into Precious Metals I.R.A.'s.  This movement of retirement money, badly beaten in the traditional financial asset arenas, will add $100's of Millions to the already $Billions finding their way into both Gold and Silver.  American investors are still in the panic mode, and the economy and financial system will not get better in 2009 (fourth quarter recovery my arss), only worse in my humble opinion regardless of the $Trillions thrown at the problem by Officialdom.  We will have increased volatility in both Gold and Silver, but little to prevent gold from shooting past $1,250 per ounce sometime in the coming year and silver from shooting upwards of $27 per ounce before falling spectacularly back to the upper teens; could be almost a double for Silver in 2009, my professional guess, nothing else (the Sage has been remarkably correct in his decade of forecasts, but most of the predicted outcomes are really quite depressing!!!).  Fasten your seat belts, comrades (might as well start using old Commie phrases these days since we are heading for some form of Socialism before the people rebel, Gandhi style, not Castro style).  WELCOME TO THE UNITED STATES OF BANANAS.  NO GOVERNMENT CAN BE ALL THINGS TO ALL PEOPLE ALL OF THE TIMES, PERIOD, WITHOUT THE COLLAPSE OF THE INSTITUTION OF GOVERNMENT ITSELF.


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January 19, 2009:  STRANGE TIMES INDEED.

Now I know I am living on an alien planet when I hear that the Home of Hollywood, a.k.a., Caleeefornia, is now going to issue I.O.U.'s for any State Income Tax Refunds that it's formerly-trusting citizens are now owed.  As a sign of patriotism, would every overpaid/under-skilled Hollywood Actor and Actress please donate their last obscene lucre from their obscenity-filled, sexually explicit, and lamely-written attempt at entertainment to the coffers in Sacramento!  Yikes, and you thought the Sage was smoking some of Bill Clinton's Oxford party favors when he tells you that depositors in the future whose Sad-Sack Bank fails ( and the F.D.I.C. is already technically bankrupt! ), will be paid with Uncle Sam I.O.U.'s, also known as Treasury Notes and Bonds.  Forget Treasury Bills that mature in a year or less, it will be a minimum of 3- to 5-year maturity Government Toilet Paper (aka, "Treasury Notes") that trusting depositors will eventually be saddled with instead of hard, grossly-devalued cash.  Since cash or its equivalents will have flooded the system in excess of another $7 Trillion by the end of Obama's Single Term ( the Captain of the Titanic did not go back out to sea again, did he?!!! ), the Dollar will be so compromised by then that the Government will not be able to pass it on to its citizens OR TO THE CITIZENRY OF THE WORLD AS A STORE OF VALUE.  Here is a tree limb breaker, "By 2015, U.S. Treasury interest rates will be in excess of 15%".  So just paying the interest on all of the outstanding U.S. Obligations will siphon off what cash the Government will have received each year in a still-depressionary U.S. of A. without even attempting to pay cash for disappearing bank deposits, i.e., bank failures.  The Ultimate Ponzi Scheme is the U.S. Dollar and U.S. Government Obligations ......... not an unpatriotic observation, but a true financial analyst's observation after 35 years of battle-tested experience.

IF THE MONETARY BASE HAS DOUBLED IN A MATTER OF MONTHS, GDP IS IMPLODING AT PROBABLY NEGATIVE 6% RIGHT NOW, WHAT DOES THAT MEAN FOR THE VELOCITY OR TURNOVER OF MONEY ........  HOW ABOUT CRATERING!!!  Cash balances are being hoarded by all who can obtain them, especially the very, very sick U.S. banks.  And some still say there is no DEFLATION in the system yet?????????????????????????????????

Since we are on the Weimar Germany path on steroids, the eventual devaluation of the U.S. Dollar is now a certainty, a prognosis that the Sage has been making for over a decade now.  Please send all appreciative contributions to "Statue for The Sage" to 1600 Pennsylvania Avenue so the new occupant there can see how a grateful Nation really rewards its most accomplished servants.  One lesson that life has taught me is that respect and admiration are earned with actual deeds of accomplishments, not high-minded and flowery oratory and Hollywood fanfare.  So far, since I am from Missouri, to coin a phrase, Mr. Obama is all hat and no cattle (George W. asked me to use that phrase since he is truly homesick at this point).  The easy part is now over, Mr. Obama:  Getting elected against a party whose current President possessed low media-popularity was not like climbing Everest.  Now the really tough part begins, GOVERNING.  And governing a country that is financially bankrupt, not to mention with grave shortcoming in the INTEGRITY AND MORALITY CATEGORIES ALSO.  At least the next 4 years will be mildly entertaining as the Sage hires unemployed Wall Street exec's to help him dig very deep foxholes for Gold and Silver storage around the world.  We are all now supposed to "take responsibility" according to our new leader.  Shucks, I was taught that that behavior was to begin no later than age 18!  If that catchy phrase really means, "You will be taking more responsibility for your fellow Americans' screw-ups by mailing bigger checks to Washington", watch out, money will leave this country or never get here as fast as the New Guy changes his mind (hence, the "Change" ticket!).  The depression will be deeper and longer if Obama increases tax rates on the true entrepreneurs of this country who really create the majority of new jobs, good times and bad.  Just ask the Ghost of F.D.R.  When the cart grinds to a halt because one of the wheels has fallen off, you do not shoot the horse pulling it.  Patent Pending.

Ah, the Media won't have George Bush to blame everything on, at least not after the first 6 months of the "Change" Presidency.  All of the finger-pointers will only have themselves in the mirror each and every morning, because if you is the one still standing when the music stops, YOU IS IT.  What goes around, comes around.  And the American Media, diehard liberal bent if there ever was one, will turn on its young like a starving Polar Bear, once access is restricted to the Prez even though the White House will now have an open-door policy to the general public.  We will see how long the Secret Service goes along with that high-minded idea, especially when a bearded, olive-skinned tourist, sweating heavily under an oversized winter coat, goes dashing into the open White House foyer yelling, "Praise Allah, Praise Allah".  Naiveté and inexperience always have a way of showing themselves in any newly-elected official, this one will be no different, except that the stakes are extraordinarily high for Americans that this guy get it right out of the starting gate.  Too bad he does not have an MBA in Finance from Harvard instead of a law degree; look at what all of the former lawyers in Congress have done to us over the last 30 years!!!

Keep buying the Precious Metals even as we do the roller-coaster ride in here before the Comex shorts/hedge funds and Government sponsored bullion banks are finally overwhelmed by good old physical demand.  No market manipulation ploy has ever succeeded in setting global prices in the face of historic systemic, currency, and government failures, especially of the Epic Proportions we have seen and will see going forward.  The world will become the clearing exchange for setting Gold and Silver prices in the years ahead, not the soon-to-be-discredited U.S. Nymex/Comex.  American prestige will wane in the years ahead on a scale that will make George Bush's foreign policies appear Universally Justified in the eyes of the world with the proper perspective of aged, not-immediate history.

AND THE CENTER OF THE QUAKE WILL HAVE BEEN AT WALL AND BROAD, NOT 1600 PENNSYLVANIA AVENUE.  Once again, I will repeat myself:  U.S. FINANCIAL INSTITUTION FRAUD AND GREED WILL DO MORE TO ERODE THE WORLD'S OPINION OF AMERICA THAN ANY ACTION BY THE OUTGOING PRESIDENT OF THE UNITED STATES, George W. Bush, over the last 8 years.  I will bet you $13 Trillion that this prognostication will come true.  

KEEP BUYING THE PRECIOUS METALS, not only so the Sage can retire very comfortably in Norway (Iceland did not have any trees to block the cold, icy wind AND THEIR FINANCIAL SYSTEM HAS IMPLODED, yikes!), but so that you will not be caught in the Mother of All Currency Devaluations, the Death of the Dollar.  Gold and Silver are the Anti-Dollars, they cannot be debased as our American currency is being by the day.  Sure, foreigners, as unimaginative as some Senators, still mistakenly feel the Dollar is the safest bet on the planet, even if it pays you nothing to combat the future surge in inflation and the true risk of U.S. Government default via a myriad of devious means such as printing money and guaranteeing everything with a pulse.  I just got a Government Guarantee that my lawnmower would start with only one pull, backed by the New Government Insurance Agency (NGIA), A.I.G.  The current Dollar Buoyancy is temporary my friends.  Misguided "Flight To Safety" where you ipso facto pay the Government the privilege of holding paper that will provide 70% of today's buying power in as little as 5 years time.  And that may be optimistic.  I refuse to buy any more Treasury Bills that are only paying 1/2% or less interest.  The image of George Washington might as well be replaced by the Emperor of Zimbabwe, what's his name.  And the Pyramid with the Eye replaced by a grove of Banana Trees.  Not a joking matter, but we might as well find some humor in our predicament since I have run out of Kleenex wiping my eyes so often. 

Hard to tell when we will complete the DEFLATION STAGE we are currently in, but a trip to the grocery store, or the pharmacy, or the health/home/auto/life insurance agent, or the tax office still shows plenty of price increases in our otherwise deflating system.  WE ARE IN THE EARLY STAGES OF A DEFLATIONARY DEPRESSION.  Since the disastrous effects of the U.S. Government's flooding of the financial system with liquidity and guarantees have not taken hold yet in the form of Dollar Devaluation and Hyper-Inflation, we can say with confidence (since there is none present anywhere else, an ingredient that you cannot print!) that the INFLATION STAGE has some time to develop and manifest itself.  With the 5% decline in U.S. GDP that the Sage forecast late last year already here, this is going to be a dozy of an economic decline.  Staggering American Debt Loads, Fear of Unemployment or Under-Employment, Bankrupt States & Municipalities, Financial System Failure, none of these are ingredients for economic expansion, but readily reinforce the downward spiral in our current economic contraction. 

THE GOVERNMENT CANNOT REINSTATE CONFIDENCE MERELY BY THE WORDS OF A SILKY SMOOTH ORATOR.  It takes years and years to regain confidence in failed systems, and that is the horizon we should all brace ourselves for.  Keep discretionary spending modest, don't buy that fabulous land deal just yet because it is going to get even more "fabulous" in price, and do your homework on any financial institution or insurance company that you intend to keep doing business with.  Use readily available sources on the internet, such as the following link to CONTINUALLY, EVERY QUARTER, GET A CURRENT RATING ON CURRENT AND PROSPECTIVE FINANCIAL INSTITUTIONS:  http://www.bankrate.com/brm/safesound/ss_home.asp

STRANGE TIMES INDEED.  The Sage is not at all proud that his most dire forecasts made within these pages over the past decade are being exceeded by factors of 4x to 6x in magnitude of severity.  I may be the Edgar Allen Poe of Finance and Economics, but I was not pessimistic enough for what is unfolding. Prepare for the Worst, Hope for the Best.  Get out of Dollars, Get into Tangibles.  Leave that four-lettered word, B-O-N-D, totally alone, it is not what it used to be as to credit quality and interest rate risk is huge right now.

Irreverently Yours,


Pappa Bear Print


The Sage of Wexford,

working on a national holiday to do his part for the economy and "take responsibility"; can't say I appreciate being lectured to by a "newbie".

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February 21, 2009:  Outright PANIC Building, Could Be Precious Metals Price Spike Ahead.


Since the Sage is so sick and tired of pounding out this Ezine every month for not one rotten Dollar, he has chosen to do it on his trusty laptop so that when his hands cramp up, he can abandon the task prematurely and leave all of you free-loaders in a lurch; us Seniors get grumpy very easily and actually vindictive to boot.  New clients and some old seem to ask the same Big Picture questions each and every day, so I am not sure many people are actually reading this dribble or at least retaining its contents.  I can not retire in splendor in Norway during the trading day if I divert time and energy into educating the masses, esp. when I have already done so aplenty with Bullion Market Insights for the last decade.

Before I provide the world with more superb dewdrops of wisdom on this page, I want to address the current situation of supply and demand in both Gold and Silver.  Demand is off the charts, based on my conversations with suppliers and refiners (and WCM's own daily volumes), but Supply is once again becoming tight as to what is theoretically "on-the-shelf" and the days/weeks needed to ship an order that is paid for today.  WCM and most other PM Dealers are some 7 days to 3 weeks out on Gold products and Silver, at least the very fine Ag products we sell from Academy Corporation, are now going out to 4 to 5 weeks to first ship date.  I am convinced that any PM Dealer that tells you that this or that item is "on-the-shelf", he is only telling you half of the story:  What is physically on the shelf in his warehouse does exist, but was spoken for weeks ago and is ready to ship to satisfy backlogged orders from early February.  GET USED TO BACKLOGS IN GOLD AND SILVER AND EVEN THE PLATINUM GROUP PRODUCTS, and don't call your bullion dealer every couple of days to make sure that he is still in the country or is busy packaging your shipment for transit.  Neither WCM nor any of its very financially secure suppliers are going to default on your order.  Since the word "default" is very fashionable these days, esp. in Washington, no businessman with an A+ rating from the Better Business Bureau, in business for 20 years this coming April without a single client complaint to any organization, and a trans-Atlantic blessing from the Pope in Rome, such as WCM, is going to fail to deliver.

Most of my suppliers have changed banking relationships to 4-star BankRate institutions since August of 2008, to include WCM, so we are actively assuring that every link in the chain remains as solid as humanly possible to determine.  A meteorite from Zenar could strike at any moment, but outside of that very remote possibility, JUST CHILL.  Shipment arrival dates to our warehouses slip all the time; some drivers have drinking problems, others are hard of hearing to understand the onboard GPS directions, and Mother Nature can be very nasty sometimes, I will not mention her gender to avoid all of the subsequently nasty emails.  I have very conscientious people working with me at my suppliers; anyone who is a foot-dragger eventually gets the gate in one fashion or the other.  We only get repeat business if we put a smile on your face in the end, even if you have fits of crying and anxiety in the interim.  WORRY ABOUT THE GOVERNMENT AND YOUR RETIREMENT AND YOUR STANDARD OF LIVING.  DON'T WORRY ABOUT WCM and its Suppliers.  

Based on the selling I am seeing in the stock and bond markets, and the tone of callers to WCM where I can sense the sweat on their brows over the phone, PANIC IS BEGINNING TO SEEP INTO THE AIR OF INVESTMENT LAND.  So the stock market exceeded the November, 2008 lows, whoopee.  Since the Sage has virtually no financial securities to speak of (less than $3000 that he is waiting to unload!) and is proud of this fact, having begun his securities housecleaning back in March of last year, I may not be the most sympathetic ear to wails of 30% to 40% retirement portfolio vaporizations as I guess I should be.  Many have lost more, esp. those who entrusted $Billions to such financial snakes as Madoff, but now is the time for all decimated stock and bond investors to cut their losses and seek safe haven.  AND AFTER THIS BLOODY WEEK, THEY WILL BE DOING IT IN DROVES, I CAN ASSURE YOU.  Nothing motivates an investor more than visions of wearing a Walmart Welcomers outfit well into retirement, bagging groceries for crabby shoppers, or slinging wet rags at the local carwash.  And if the Mrs. gets into the motivational act, for you guys out there, the baseball bat or rolling pin dents in the side of the head are Stimulus Acts all unto themselves.

Oh, you could put your Millions into Swiss Francs and get an instant audit by the IRS, but it is becoming more and more apparent to PANICKED INVESTORS that there are only a very limited number of fundamentally sound investment choices today.  The Sage has even soured on Treasuries, since the issuer is increasingly BANKRUPT, INSOLVENT, AND DUPLICITOUS.  In my book at this point, since I do have to contend with inflation of at least 3% to 4% in real life, a NEAR-zero percent return from Treasuries just doesn't cut the mustard.  My local agricultural bank, Bank of Clarke County or USAA, since I am a military dependent of years past, are both 4-star rated institutions and I will religiously keep my lucre under $100k or $250k per account, whatever the FDIC Bailout Limit is of the moment.  (It is very easy to stay under these limits since I don't have the dough to exceed them anyway!)  Worst case in the very remote instance that my trusty institutions cough up a giant financial hairball:  I GET PAID IN TREASURY NOTES INSTEAD OF CASH TO SETTLE MY CLAIM.  So there you have it.  We avoid Treasuries to obtain more yield, and we end up with their Rotting Corpses anyway.  If the feeble-minded Sage can come up with the idea that there is something fundamentally wrong with the security of U.S. Treasuries today, then get ready for the smarter players out there to have come up with alternatives for cash/liquid balances many months ago.  A giant wad of Cash-Currency under the mattress or out in the backyard makes a world of sense also, for that very rainy day that may indeed come.

Did I mention that the World Gold Council has come up with declining Gold mine production in 2008 to cap a series of annual declining trends?!!!  Let's see:  1.) Less gold supply per annum coming out of Terra Firma, 2.) Retail and institutional gold demand doubling, tripling, and quadrupling over the last 12 months (as evidenced by shortages and backlogs to boot!),  AND WHAT DO YOU HAVE???  $1,250 Gold and $20 Silver as far as the eye can see.  WE ARE IN THE VORTEX OF PRECIOUS METALS DEMAND ON A DECLINING SUPPLY TREND. 

Even it the Bullion Banks, Treasury Exchange Stabilization Fund, Federal Reserve, and C.F.T.C. pulled out all the stops to whack the price of these two Millenniums-Old MONETARY METALS, the fix is in:  Prices are going to trend much, much higher for Gold and Silver, even if the cappers come in tomorrow to try to discourage the Anti-Dollar Buyers who are appearing on the scene in droves.  I think it will only take a minor event, not a Stimulus Bill signing on the wing of AirForce One or a Geitner Rescue Plan mumbling or discovery of Obama's Nigerian birth certificate, to ignite the fireworks I think are being built into the bullion markets as I type.  A PM pullback would be expected at this juncture, but the longer shot would be an accelerated move taking Gold to Jim Sinclair's $1,250 level and Silver upwards of $20 per ounce in a matter of weeks.  Now, this is not a marketing ploy for any one of your slackers out there who have yet to send the Sage a bottle of Cognac in appreciation for all of the straight and profitable talk you have received for the last decade.  I have plenty to do on Monday morning at the open already.  I am just saying that you have to ask the question:  What is more secure and fundamentally sound this minute?  A Dollar in a stinking U.S. financial institution, most of which are technically insolvent OR a Dollar in Gold or Silver which will never be insolvent or anyone else's liability???!!!###%%%@@@

FORGET THE MARKET TIMING.  Bank of America and CitiBank could have Federal Marshals as greeters on Monday afternoon and the dreaded NATIONALIZATION OF U.S. BANKS WILL HAVE BEGUN.  Only the biggest and most insolvent large money center and regional banks will be nationalized, the smaller deadbeats will be allowed to fail and be absorbed into larger, more solvent private institutions.  WE WILL HAVE A DUAL OWNERSHIP BANKING INDUSTRY:  PART GOVERNMENT OWNED AND PART PRIVATE.  Just don't own any of the stocks or bonds of the institutions that are destined for nationalization, as your financial interest will be flushed down the toilet, you Dirty Capitalist Pig ........ as the Commies used to utter.  The banking industry in the U.S. is in the process of being rationalized, that is, SHRUNK BACK TO A MANAGEABLE SIZE WITH AS MUCH TOXIC WASTE FLUSHED DOWN THE WRITE-OFF HOLE AS POSSIBLE.  Granted, the authorities will delay the massive $Trillions of write-offs for as long as possible and stretch them out over as long a period of time as possible, but the inevitable result will be a less influential and less expansive and fewer financial smorgasbord offerings U.S. banking industry.  The world is sure to applaud this result, I am sure. 

However, just as the Sage sees a potential for a Precious Metals price spike, there could equally be a Stock or Bond Market Waterfall Decline from here.  The 1929 Crash Bear Market saw several spectacular REFLEX RALLIES, but given the state of the financial system, a disastrous political system of "Change for Change's Sake", endless U.S. Obligation AND Dollar Printing, very tenuous investor psychology, outright disintermediation of settlement agents .......... I AM NOT CONVINCED THAT THE STOCK MARKET IS GOING TO GET A FOOTING IN HERE FOR ANY KIND OF MEANINGFUL RALLY.  And the U.S. Bond Market is likely in the throes of an early bear market of its own, with even more disastrous results for investors, not just at home, but around the world.  Markets have an uncanny ability to fool the majority of investors most of the time.

Maybe that is the event (or events) that breaks the gate of the corral with the panicked investors swarming out into the peaceful streets headed for the Gold Shops.  But the Sage's nose is picking up the sense of panic in the air.  This nose has been sniffing around for some 35 years now in Investment Land.

THE SMELL OF PANIC IS IN THE AIR.  A GOLD AND SILVER PRICE SPIKE COULD BE JUST AROUND THE CORNER.  "CURRENCIES OF LAST RESORT", "SAFE HAVENS", "ANTI-DOLLARS", "INFLATION HEDGES", take your pick of monikers.  In the end, these Monetary Metals will prove to be all of the above.

Okay, I am done for this month.  Please send your Swiss Franc donations to "Save The Planet", chaired by Al Gore who just flew in on AirForce Big Zero. 

Or you could thank the men and woman who make Saturdays a safe and free day in the States by sending a $10 contribution to the V.F.W. or  U.S.O.

Irreverently Yours,

The Sage of Wexford, paw-print stolen by TARP II official.



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March 21, 2009:  Sending Pampers Convoy To Washington and Federal Reserve.


Leave it to the Sage to be flippant during a time of national crisis.  What an irresponsible cad I am for suggesting that our Fearless Leaders need bladder control and not merely lobotomies.  If the Anointed One, B.O., can yuck it up on national television at an hour most serious wage earners are counting sheep, then I can be just as silly as The Sage of Wexford and I don't even get free meals at the White House.  Remember when I said there was Panic in the Air last month.  I really did not expect Ben Bernanke to panic so soon after having a cameo appearance on that left-leaning soap called 60 Minutes.  Although I do think the American press is getting more moderate these days as a footnote.  When no one will buy your slanted rags and you are filing or about to file for bankruptcy, you get religion real fast as to what side of the road your content should be driving on; that is, more in the middle of the road AND NOT ONLY IN THE LEFT-HAND LANE.

I received my Greenspan Decoder Ring this week and now know what the initials O-B-A-M-A really stand for.  Since one could never understand the Fed Speak of Greenspan, much less his Spare The Monetary Rod and Bankrupt The Nation Policies, I duly named the decoder ring in honor of him.  As I have said in the past, if Alan Greenspan were to be knighted today, the American Public would use the blade edge of the sword to do the tapping on either side of his swollen, but empty head.  Greenspan was too political a Fed Chairman, overly concerned about his Public Persona, and could not bring himself to pull the Punchbowl of Easy Money away from a nation addicted to Borrowing after the Dotcom Bubble in 2001.  Had the Teetering Debt, Accelerating Speculation, and Excessive Leveraging notions been tempered by a normal recession at that time, a partial cleansing of the system if you will, the excesses that existed in late 2007 that eventually imploded and are still imploding today in the Tens of Trillions of Dollars would never have reached such Gargantuan Heights.  They would likely have still existed, but not at the levels that today have caused both the financial system and economy of the U.S. to fail.  Sir Alan Greenspan was the most over-rated Federal Reserve Chairman this country has ever seen, and B.O. will end up being the most over-rated President we will have ever had the displeasure and fiscal implosion of knowing.  Barrack Obama is going to make Jimmy Carter look good, but, of course, with more "style".

ONE BIG AWFUL MISTAKE, AMERICA.  You know the Sage has taken the high-and-mighty ground on occasion when chastising the nation for lack of good judgment, lack of personal fiscal prudence, lack of taste (Hollywood, esp.), lack of savings, and lastly, lack of foresight and planning.  I think we should re-write Mr. Obama's job description so he can forget about GOVERNING OR MANAGING OR LEADING, which he clearly has no propensity or skill-set for based on his "shovel-ready" actions over the last 100 days.  By Shovel-Ready" I mean that this neophyte to any aspect of governance is burying this country in debt and wasteful spending that has and will make George Bush look like Silas Marner when it is all over.  Post-Election Campaigning on the Road, Belated Twinges of Fiscal Responsibility, Flowery Rhetoric or Lofty Ideals Without Funding ( LIWF) do not heal a nation at the beginning of the greatest depression the world has ever seen.  Actions gleaned from years of managerial skill-building, financial/ economic decision-making, and real political consensus-building is what is needed in an American President today.  Barrack Obama does not have those skill sets and the United States cannot afford the time for him to develop them, ON THE JOB!  He is a neophyte to the world of true management and his utter lack of foreign policy experience is once again evidenced by this week's butt kissing of IRAN at a time that their terrorist and nuclear weaponry activities are as active as ever.  ( Of course the seated Iranian Head Cleric whose name is too long to pronounce has already angrily rejected the warmed-over Obama olive branch from the Campaign Trail, spit on it, and had 5,000 Republican Guardsmen goose-step all over it!  What a rookie! )  Will it take a shopping mall or high school athletic event bombing for him to even use the phrase, "War on Terror".  Ignoring a militant problem, disarming proven safeguards already in place, and offering conciliatory language to the nation's sworn and determined enemies will not make this country safe.  I do think we will be struck at home in the next several quarters, since the enemy now perceives that the United States is stepping down from its stance of zero tolerance for terrorists AND HAS LOST THE POLITICAL WILL AND FINANCIAL WHEREWITHAL TO STAY THE COURSE.  ENOUGH SAID, but I now fear for our physical safety amongst other damaging issues we squarely face today.

Poor Ben Bernanke.  No sooner does he appear on Sunday television than does he have to enter the disastrous realm of Quantitative Easing - a nation's central bank buying its own debt issuance, paying Peter to rob Paul, from the left pocket to the right pocket of the same, broke entity, the United States of Bananas.  Another $1.1 Trillion of newly printed money at the stroke of a keyboard entry.  Buying $300 Billion of longer-dated Treasuries and $750 Billion of Fannie's and Freddie's newly created garbage will do little to control longer-dated interest rates in the intermediate term.  Okay, in the short-term, he has pushed yields back down to 2.5%, below U.S. inflation once again, but there is some $6 Trillion of Treasuries out there today that will eventually have to be refunded.  Now that the United States has embarked on the Weimar Germany or Zimbabwe method of paying its bills, the Universe of U.S. Treasury Buyers is an increasingly shrinking one.  Yields will eventually have to be greatly increased to attract non-Federal Reserve buyers of our exploding debt.  The Sage got whipped out of his minor (lunch for Obama at Camp David) position that was short 30-year Treasuries, but that play will come back before the leaves fall off the trees in 2009.  I am also getting out of Treasury Bills since I believe one should be paid more than .07% for the real risk of holding U.S. paper today;  maybe not patriotic in this time of national need, but I do have higher taxes to pay to do my part to keep the economy going.  The U.S. Treasury cannot hit me from both ends since I do know how to use TurboTax:  Below inflation yields (Income Side of the Ledger) to be a part of the Spending Spree Party in Washington and then higher taxes with less services on the Expense Side of the ledger.  The Obama Double Whammy.

BEFORE THE PAMPERS GET DELIVERED BY LAID-OFF TRUCKERS, DON'T LOOK AT THEM CROSS-EYED OR YOU HAD BETTER DUCK, OH OVERPAID PUBLIC SERVANTS, I WOULD LIKE TO TELL OUR RULERS ONE SIMPLE FACT WHY PANICKED FEDERAL SPENDING AND PRINTING MONEY WILL NOT WORK TO STIMULATE THE ECONOMY: 

Now say after me, "THE LENDERS ARE STILL IN NO POSITION TO LEND SINCE THEY STILL DON'T KNOW IF THEY HAVE POSITIVE NET WORTHS WITH NON-MARKETABLE TOXIC DERIVATIVES STILL ON THE BOOKS IN THE TRILLIONS OF DOLLARS AND NOT WRITTEN OFF! ................. AND THE BORROWER'S ARE WANTING TO PAY DOWN DEBT, THEY ARE ALSO SCARED TO DEATH OF THE "CHANGELING ECONOMY", NOT TO MENTION BEING WITHOUT GOOD INCOME PROSPECTS/ JOB SECURITY TO SERVICE NEW/ ADDITIONAL DEBT!!! 

UNTIL CONFIDENCE IS RESTORED ( Barrack quit bad-mouthing the economy to get your Pork-Infested Spending Binges thru Congress! ) AND ECONOMIC PROSPECTS BRIGHTEN, NOT DARKEN BY THE HOUR, THERE AIN'T GOING TO BE A WHOLE HELL OF A LOT OF LENDING AND BORROWING EVEN IF YOU PAY THE AMERICAN CONSUMER TO BORROW THE MONEY A LA JAPAN WITH NEGATIVE NOMINAL INTEREST RATES.  ALL OF THESE EFFORTS TO INCREASE CREDIT CREATION IN THE FAILED U.S. FINANCIAL SYSTEM ARE A WASTE OF TIME AND MONEY AND AIR-TIME SINCE THE TWO PARTIES TO THE EQUATION ARE TOO FRICKING SCARED TO PLAY BALL!!!!!

China has made its displeasure with U.S. Banana Republic spending policies well known, but China is a nation of doers, not just flowery talkers.  China has been busy for some time now, as the Sage predicted years ago (contributions readily accepted in bullion format only!!!), buying up natural resources, gold, and tangible assets in an effort to jettison as many rotting U.S. Dollars as possible as quickly as possible.  While we have the Quasi-Governmental Entity called Goldman-Sachs and JP Morgan Chase whipping the gold and silver markets back and forth to their own intra-day enrichments, China along with Russia, Saudi Arabia, Dubai, Brazil and other enlightened Dollar Bag Holders have stealth campaigns to swap Devaluing Currency Reserves for both Gold and Silver.  I forecast that central banks would eventually become net buyers of gold on the world stage, and this is coming true in droves as all nations know that the Beggar Thy Neighbor Policy of Domestic Currency Debasement is in overdrive to attempt to save national economies and cheapen debt repayment.  Now the Dollar got its comeuppance after Helicopter Ben announced the Nuclear Monetary Option this week, and I fully expect the Dollar to continue to weaken going forward, in fits and starts, but much lower.  What will sustain this market devaluation will be more and more efforts, led by China and Russia, to create a New Global Reserve Currency ( N.G.R.C.'s, not Special Drawing Right's, S.D.R.'s per the IMF!!!).  This new reserve currency will actually be backed by some percentage of gold, silver, and other tangible, measurable resources.  This is the new Sage prediction for 2009.  And the action by a panicked U.S. Federal Reserve this week has accelerated the process of trading partners finding a medium of exchange outside of the Dollar realm to stabilize the global financial system.  We are no longer the guys in White Hats.  We are more guilty than any other nation in creating this Derivative Implosion and our day of reckoning in paying the price for outright fraud and technical default via American structured finance Ponzi Schemes is here.

THE SAGE WAS ALSO RIGHT IN HAVING FORECAST A SURGE IN GOLD AND SILVER PRICES LAST MONTH.  My experienced market nose can tell when panic is building in the air.  The Reinflate Genie Bottle is now wide open, in fact, broken on the steps of Monetary Prudence for all the world to see.  While capping operations by Goldman and JP Morgan, at the behest of U.S. authorities, will try to defend the $1000 level on gold and the $20 level on silver in the weeks ahead, we are going to blast through them.  A word to the wise:  Don't be too picky as to what form your Gold or Silver Bullion takes.  Buy what you can afford today since I am afraid backlogs are going to get past 2 weeks for most Gold products and 4 weeks for most Silver products again.  I hate backlogs also, they complicate my business in many respects, and I am a very bad babysitter at this stage in my life for any client that gets anxious after a few weeks. 

WE NOW INTERRUPT THIS RANTING FOR AN UNPAID PUBLIC ANNOUNCEMENT:

WE NOW HAVE GENERIC SILVER ROUNDS AT ABOUT $1.50 OVER SPOT SILVER, delivered pricing via FedEx Ground or Registered Mail, 3 weeks out to first ship date.  I have left about $5 Million in revenues on the table over the last 6 months by not having high-quality Silver Rounds, one ounce, to sell, BUT I have rectified that situation this week with careful selection of a private mint to produce the very attractive Indian CHIEF Silver Round.  FURTHERMORE, Academy Corporation, which I have an excellent 10-year plus business relationship with, is also going to produce Silver Rounds for WCM at about $1.85 over spot, delivered, but we are probably several weeks out to get dies made and ramp up production.  Will let you know when I can start locking prices for these Brand Name Rounds with the Academy Hallmark on the back of the .999+ pure Ag round and a modified, better-armed Seated Liberty design on the front.  Very excited about these new developments.  

Also coming in about a week is the long-awaited Academy TEN OUNCE GOLD BAR, .9999 Pure Gold, 24 karat, Plastic Sleeve Packaging with Assay Certificate priced at about 3.6% over Spot Gold.  Very competitive pricing for such a high-quality bullion product from a well-known U.S. refinery, Academy.  When there is unmet demand for gold or silver bullion products, enterprising Americans get going and add capacity to meet this surging demand.  Academy is an ISO-9000 accredited refiner and its silver bars, both 10 oz. and 100 oz., are approved by both Goldstar and Sterling-Trust for inclusion in Precious Metals I.R.A.'s, a total vote of confidence on Academy product quality.  We will work to get the new Ten Ounce Gold Bars by Academy approved also.


Until next time.  While I try to make light of the dire situation we are in, to make reading this missive more palpable, I am in no way encouraged by the actions taken in Washington and by the Federal Reserve over the last 100 days.  On the contrary, I am more concerned than ever about the fate of our Nation and our citizens'  wellbeing in the days, months, and years ahead.  Buy the best insurance you can find that is no one else's liability, GOLD AND SILVER.  No phony, conflicted rating agency is needed to rate these insurance products!!!

THE SAGE OF WEXFORD

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April 21, 2009:  Systemic Failures Abound.


As an American for some 60 years now, I am so upset by what is going on in Washington, that I almost skipped doing this ezine this month in protest.  Let me send a newsflash to the Clueless Leaders in Washington:  THE TEA PARTIES THAT SPRANG UP AROUND THE COUNTRY ON TAX-DAY, APRIL 15TH, LAST WEEK ARE A SIGN OF VOTER DISCONTENT WITH WHAT HAS AND WHAT IS GOING ON IN WASHINGTON.  Spending Dollars that this country does not have and will never be able to pay back is not a popular concept with more and more Americans.  Any politician that ignores this grassroots movement will be voted out of office in the next election cycle.  Americans are that mad, and in sufficient numbers to sway the results of upcoming Congressional and State elections.  Right-wing extremists my arse.  These are patriotic Americans who are sick and tired of sending hard-earned money to Washington on a regular basis and watching it literally get pissed away in the most asinine spending plans and programs the world has ever seen.  Carbon Caps during an economic depression, WOW!  Only a Harvard grad with no managerial or financial or economic background could come up with that one!  Maybe we Tea Partiers should not worry so much about future generations' U.S. sovereign debt burdens since the United States is destined to default on its obligations in one fashion or the other.  The reality, though, is that those generations will "enjoy" a lower standard of living than their predecessors due to the Everest Mountain of Debt that Neophyte Obama and Crew are piling on the nation.  

I am sure also that we Americans are safer today now that all of our enemies know what we will and will not do to obtain critical information from captured ENEMY COMBATANTS (forbidden word?).  The War of Terror still exists, Mr. Obama, no matter how many terminology changes you institute to hope to will it away.  If and when America gets hit under your watch, kiss your approval ratings goodbye.  Please note that there were no field operatives at the CIA Pep Rally for the tail-between-his-legs Obama yesterday; seemed like most of the Admin and Clerical pools were emptied to pay homage to Clueless Leader; the despicable CIA field operatives how have dared to rough up some Barbarians in the past were updating their resumes to switch over to Homeland Security under the "gifted" leadership of Ms. Napolitano.  This lass never saw a returning veteran not disposed to blow up Federal Buildings, her breath of experience is so broad.  What a crew of miscreants.  And I thought Motley Crew was only a rock band!  Hollywood casting could not come up with a more deadly bunch of fumblers and bumblers destined to change the America we know into something we will not recognize and not want to be a part of.  The design and implementation of the Obama Agenda will guarantee that he is indeed a one-term President.

In a couple of months, the American people, caught in a deepening economic Depression, will blame virtually every politician in power.  The beginning of the end for the current gaggle of politicians in Washington began on April 15th, 2009.  Another Sage Forecast.  A politician cannot contribute mightily to wrecking the financial foundation of a nation with impunity.

THE UNITED STATES GOVERNMENT HAS FAILED THE AMERICAN PEOPLE, SYSTEMIC FAILURE NUMBER ONE.

Before I go to far into this month's tirade, let me just assure you that all of what I am about to speak is winding the Gold and Silver price spring tighter and tighter for the next leg of the Precious Metals Bull Market that will amaze and astound.  Certainly Fundamentally and increasingly Technically, the Gold and Silver markets are a powder keg of price appreciation waiting to be ignited.  Any time there is grave uncertainty for investors, and this is one of the gravest situations that the world has ever experienced due to the sheer magnitude of the Debt Collapse if nothing else, both Gold and Silver set new record highs as Safe Havens of First Resort.  Bullion buying at WCM has continued to set new records in 2009, as astute investors take advantage of Comex engineered price retracements.  I expect 2009 total volume to be some 2 to 3 times that of record year 2008.  I have strong buying on each and every price pullback.  Don't forget that we have been in a price consolidation since March of 2008, a more than ample time period to work off excesses in the bullion marketplace and pave the way for the next rocket ride higher.  I personally feel we are within days and weeks of that explosion.  Here are some more Systemic Failures that provide multiple fuses just waiting for another spark to ignite them.

THE UNITED STATES FEDERAL RESERVE HAS FAILED THE U.S. BANKING SYSTEM, SYSTEMIC FAILURE NUMBER TWO.

Anyone who has read this ezine for the last 9 to 10 years know what I think of Sir Alan Greenspan's tenure as Fed Chairman.  I will not bore myself with repeating his lack of Monetary Discipline which first contributed to the Dotcom Bubble, then the Real Estate Bubble, then the Derivative Bubble.  We now have another pure Academian, Unknighted Bernanke, who has embarked upon the Banana Republic practice of Quantitative Easing, the buying of U.S. Treasury Debt by the U.S. Federal Reserve.  We will label this episode in monetary infamy the Treasury Buy-In Bubble.  Granted, he may have been forced into this position by the Neophyte Administration's tripling of the annual Federal Deficit in a mere 90 days, but he is the official that history will look upon in placing key-player blame for the inevitable default of U.S. Treasuries.  $300 Billion is a nice round number to start with on Treasury Buy-Ins, but the number will grow I can assure you because the Trillions of Dollars needed to fund the Obama Pipe-Dream of something for everyone will require several $Trillions of Fed Buy-Ins before the jig is up.

A veritable buyers' strike has already emerged on both domestic and foreign purchases of U.S. Treasuries and GSE garbage since both Fannie and Freddie are also technically bankrupt, and Bernanke must buy $100's of Billions of their compromised paper also.  (Newsflash:  Freddie Mac CFO found dead of apparent suicide.  What does that tell you???)  With Dollar accumulations ebbing from such export giants as China, there is not the necessity or firepower to recycle this diminished pool of trade Dollars into U.S. Treasuries in the first place.  And debt buyers are no longer buying the AAA standing of the United States, especially with $9 Trillion of new paper coming down the pike DURING THE COURSE OF AN ECONOMIC DEPRESSION and a 10 to 20 basis point yield for the privilege.  As a consumer, would you say that inflation is zero in the United States right now???  Below inflation yields on a sub par issuer's debt is not a recipe for investors breaking down the doors to get more U.S. Treasuries.  But it is a recipe for investors piling into both Gold and Silver. 

The perverse strength in the U.S. Dollar since October of last year has more to do with deleveraging of overseas positions and repatriation of funds to reduce risk than any flight to safety.  The Flow of Funds shows that purchases of Dollars to buy Treasuries is not the mechanism supporting a Bankrupt Country's Currency at this moment in history.  The Dollar will not survive in its current form.  The bag holders of U.S. Dollars such as China are already working on a new, alternative Reserve Currency backed by gold, oil, silver, copper, etc.  Another Sage Forecast.

Don't get fooled by U.S. Government guarantees.  If an insurance company guarantees you a death benefit of $1 Million upon your demise and the insurance company is bankrupt for all intents and purposes, what is the value of that insurance policy????  A BIG FAT ZERO.  The U.S. Federal Reserve has gone from being the Lender of Last Resort to being the Lender of First Resort, ballooning its balance sheet in the process, doubling same within the last 6 months.  Allowing bankers to escape the pitchforks of the angry crowds by allowing them to retain their positions after years of incompetent lending, ridiculous risk-taking via derivatives, and excessive compensation during loss years in particular is but another example of how the Federal Reserve has failed the U.S. Banking System and its customers.  Bad behavior is no longer punished within the American Capitalist System.  Bad behavior, if not criminal wrongdoing, is now rewarded with taxpayer dollars with the risk of further failures within the U.S. Banking System being passed on to its customers, American taxpayers.

P.S.  You had better do your due diligence on any insurance company in this country and around the world you have involvement with via financial products!  Next shoe dropping.

THE UNITED STATES BANKING SYSTEM HAS FAILED, SYSTEMIC FAILURE NUMBER THREE.

The largest banks in the United States are insolvent and should be placed into bankruptcy along with General Motors and Chrysler.  If we have a free, capitalist system within a governmental democracy, all aspects being in question today based on Uncle Sam's panicked actions over the last 6 months, then regardless of size, an entity should be allowed to fail.  Could it be that political contributions and back-home constituencies have permanently clouded the pure economic thinking of the Clueless Leaders in Washington?  You bet ya.  But if you think that Bank of American, Citigroup, Wells Fargo, JP Morgan or any of the walking dead U.S. banks actually made a profit in First Quarter, 2009 under GAAP accounting standards, correctly applied, then Dow 12,000 is in your immediate future.  It is all smoke and mirrors with the forced change in Mark to Market rules from the FASB on the worthless OTC derivatives on banks' books not being written off to what they would fetch if any market for them existed at all!!!  The Japanese made the same mistake in fudging their banks' books for almost 20 years, and they have yet to recover from their 1989 Depression, much less avoid the one that started some 18 to 24 months ago.  Let the managers of the remaining, still solvent U.S. banks, regional and local entities, run the post-bankruptcy U.S. banking system, but politically we know this pure capitalistic process will never be allowed to happen.

Clueless Leader Obama, a man whose opinion of himself far exceeds reality, is in the process of sticking the American taxpayer one more time with a backdoor nationalization of the country's major banks.  Very bad idea in a bear market Mr. B.O. to convert Preferred Stock for Common Stock.  I know you studied law, but maybe a Cliff Notes crammer on Finance 101 will show you that many of these banks' common stocks without nary a dime of dividends is going pretty close to zero before the leaves fall off of the trees again.  Transparency my arse.  Since you shoved so much Pork down Americans' throats with your Obama Budget 2009, you are afraid to go back to the well (the taxpayer!) for more freshly printed Dollars.  So now the Administration of Record Transparency is going to go through the back door to effectively nationalize the largest, all insolvent, U.S. Banks.  Another lesson at leadership and governing to go into your next book, Barrack.  Writing books may be your forte, Oh Gifted One, since the topic is always so narrow, ABOUT YOURSELF, you are bound to have some first-hand knowledge of the subject.

As a credit creation mechanism the U.S. Banking System has failed.  The banks are sitting on most new deposits, whether Bail-Out or customer, in the hope they can weather the storm and not have to write off the Trillions of Dollars of toxic waste sitting on their books for all with a pulse to see.  The Government in all its wisdom can try to make U.S. banks lend to increasingly uncreditworthy borrowers in consumer or business personae but unless the Government has majority control of a bank, which they are in the process of trying to obtain, they cannot make the banks lend.  And the banks have proven to be very adroit at not letting the Government know where the original and subsequent TARP funds have gone, not a very difficult task with an increasingly incompetent Government that does not even read a $700 Billion spending bill before passage.  THE U.S. DEPRESSION OF 2008 WILL GUARANTEE THAT THE BANKS WILL FAIL TO MAKE CREDIT AVAILABLE TO THE AMERICAN ECONOMIC SYSTEM.  That brings the Sage to his next Systemic Failure:

THE UNITED STATES ECONOMIC SYSTEM HAS FAILED, SYSTEMIC FAILURE NUMBER FOUR.

Any economic system dependent upon the spendthrift behavior of its citizens to continue to grow without real income created in the process is bound to failure.  Americans have been borrowing to spend for decades, but the "Greenspan Recovery of 2002" was totally dependent upon home equity withdrawals in a super-heated residential real estate market that peaked in August of 2005.  The American Economic Model is broken since an economy that realizes 70% of its growth from consumer spending alone, most of it borrowed and thus leveraged, was bound to reach a point of the proverbial brick wall.  That wall came when the asset used to collateralize all of this incremental spending, generated not from income growth, but from debt growth, fell into a bear market the severity of which few nations have seen.  To imagine that the U.S. housing market had the potential to decline some 50% from its 2005 all-time highs to price levels below where the speculation began was not in the minds or thoughts of many Americans during the last 7 years.  There is no light at the end of the tunnel for American home prices.  Americans increasingly realize this as the foreclosure rate sets new records month after month in 2009.  Ten years to some form of stability is the Sage's best guess, but don't expect to see the old highs again in your lifetime unless you find the Fountain of Youth.  If you do, let me know.  I don't enjoy the aging process very much.

Many astute, enlightened economists and analysts, often from the Tangible Asset Realm, saw the writing on the wall for this Unbalanced American Economy.  Unfortunately, none of them were making economic decisions within the Government of the United States during the Greenspan Recovery.  Larry Summers has such a tainted past that any pronouncement he is likely to make about Emminent Recovery is going to be met with a thunderous sea of laughter.  America needs badly to be more of a producer of goods and services and less of a consumer of everything.  Economic and Financial Collapse will force this change of emphasis into reality.  Maybe, just maybe, we can export Green Technologies to the rest of the world in the decades ahead, but don't expect technologies that cost significantly more to produce and operate to hit the ground running during a very cost-conscious Economic Depression.  If you don't think we are in a depression, just keep an eye on the employment numbers, number of corporate bankruptcies, and year-to-year sales declines.

Lastly, 

THE U.S. DOLLAR RESERVE CURRENCY SYSTEM HAS FAILED, SYSTEMIC FAILURE NUMBER FIVE.  (That will be next month's topic, maybe, but you have heard much about it from the Sage since 1999)

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


The Sage is growing tired of spewing forth such revelations of failure, so he is going to wrap it up.  I am not exaggerating anything in this missive.  Having been in the business world for some 35 years, I can safely say that this is the most severe situation I have ever seen.  And to top it all off, we have a bunch of fools running this country who have effectively stepped on the Accelerator to Depression and Default with both feet in a country-busting spending binge.

It is not only your duty to protect what wealth you have left by converting bank deposits into Gold and Silver, but TO THROW THE BUMS OUT.  A third political party is likely to evolve in the months and years ahead.  God knows both the Donkeys and the Elephants have failed the American public for the last 40 years and WE SORELY NEED TRUE CHANGE TO SURVIVE AS A COUNTRY.  Not the warmed-over Socialism and Liberalism that a bankrupt country cannot afford but has been shoved down our parched throats over the last 90 days and before.

If you want to retire in a country that is truly a democracy overseeing a capitalistic economic system, YOU AND YOUR NEIGHBOR AND YOUR RELATIVES BETTER GET OFF YOUR BUTTS AND HELP TO GET THIS COUNTRY BACK ON TRACK.  It is our country, THE PEOPLE'S COUNTRY, not the overpaid, under-skilled politicians, the fraudulent bankers and Wall Streeters, or the Media that has an agenda of its own(and that is not the objective reporting of U.S. news).

YOU REAP WHAT YOU SOW.  Hard times are here and are going to persist for many years to come.  When the going gets tough, the tough get going.  SO GET GOING, AMERICA.

TARGET FOR GOLD NOW AT $3,500 AND FOR SILVER STILL AT $130.  No guarantees, I is not the U.S. Government, BUT WHAT DO YOU HAVE TO LOSE IN CONVERTING OUT OF PAPER AND DECAYING DOLLARS AND U.S. BANKS?!

P.S.  Bear Market Rally in stocks is just about toast, earnings are going to guarantee that one.


THE SAGE OF WEXFORD, pitchfork ready.



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May 8, 2009 SNIPPET:  AMERICANS DRINKING AT THE WALL STREET "KOOL-AID" TROUGH ONCE AGAIN!!!


Now we all would like to get filthy rich without even trying (don't tell Reich Furor Obama, please!), but God did not really put us on this planet to have a good time.  Trials and Tribulations is more of what Gold had in mind from my experience, but I can't really complain, life has been generally pretty good to little old Sage.  Before I begin to wax all philosophical here, my main intent being to scream out a warning of Category 6 to all stock and bond investors in this missive, so let's get right to it.

Now as a kid if you used to walk down a certain street in the neighborhood and a Big Bully used to whip the tar out of you so you barely crawled back home, would you frequent that street again and again unless you had a Marine patrol with you???  Of course not.  One thing we have learned about the process of learning over the years is that repetition usually beats some sense into us to avoid behavior and actions that have very bad results to our overall well-being.  Whether it be our physical selves or our financial selves.

NOW CONTRARY TO ALL ESTABLISHED BEHAVIORAL SCIENCE, ENTER THE AMERICAN INVESTOR OF THE NEW MILLENNIUM AND THE 20TH CENTURY. 

This is a two-legged, usually upright mammal that just can't seem to learn his or her lesson when it comes to a particular section of the financial neighborhood in New York City (Obama's fly-by was to get the Wall Streeters to jump from 20th story windows, but there is plenty of time for that yet!).  I is talking about Wall and Broad, also known as WALL STREET.

These Armani-suited bullies have cheated Investus Americanus, lied to Investus Americanus, falsified financial reports to Investus Americanus, sold overpriced securities to Investus Americanus, loss Trillions of Dollars of the life savings of Investus Americanus through incompetence, imprudence, and fraud, and then got Investus Americanus to drink the Kool-Aid again once these comatose sheep were convinced the all-clear claxon had sounded.  Wow!  Great work if you can get it.

The Sage is going to take Investus Americanus by the hand, sit her or him down, although he or she will be an "it" if they keep going back to the Kool-Aid Trough of Wall Street, and have a fatherly chat with both genders.  Now I know that you can't make a positive, inflation-adjusted return in CASH, MONEY MARKETS, TREASURIES, OR BANK C.D.'S right now with Shadow Statistics inflation pegged at the 6% to 7% real-world zone.  BUT, the inflation-adjusted returns have been decidedly negative in stocks over the last 10 years, period!!!  However, this lack of real returns in cash is what is driving Investus Americanus to venture back into that bad neighborhood of Wall and Broad to try to regain some of the money lost over the last decade in stocks.  There is a gambler psychology at work here also; never forget that you have to fight your own emotions in addition to the markets to be successful in investing over the long haul.  But the zero-percent plus yields provided in the supposedly safest cash investments, and little cash is 100% safe these days from one form of degradation or the other (below inflation yield, currency devaluation, outright default), has driven Investus Americanus to play out in the traffic once again on Wall and Broad.  The bullies will be more than glad to take American Investors' dough and leave their pockets empty again, history does repeat itself.

DOUBLE TOP IN STOCKS A BLIND MAN COULD SEE!!

Now the 200-day moving average of the S&P 500 is around 960 currently and if we get that far on this SUCKER'S RALLY, then we will have had a 44% move off the interim low of 666 (if God is trying to tell us something here it is pretty obvious!!!).
That percentage move in about 60 days is totally unprecedented and well exceeds the first reflex rally in stocks after the 1929 collapse.  To think that we are in a new bull market for stocks with the Government, economy, and financial system all collapsing in one form or the other is to drink the Wall Street Kool-Aid with a bit of LSD in it.  Brings you back to the Sixties, yes?!!

30-Year Bond Yields are now 4.26%, having come well off of the panic low of 2.56% of December 15, 2008, AND THEY ARE GOING MUCH HIGHER INVESTI AMERICANI!!!  Ben Bernanke and Timmy-Boy Geithner cannot control the long-end of the curve, even with Quantitative Easing of the Fed attempting to support prices and cap 30-year yields by buying up even Long-Term Treasuries that everyone else is losing an appetite for!!!  The yield curve starts at zero basically on 30-day Bills and goes to 4.25% in a graphic that tells the world that U.S. inflation is perceived and expected to be heading to the moon in the not-too-distant future.  That old Inflationary Expectations Premium Built into Longer-Dated Bond Maturities .........  you remember that Econ or Finance 101 concept, right Barrack?!!!

THE DISINFLATIONARY ERA OF U.S. ECONOMIC POLICIES IS OVER!!!

THE LONG-TERM TREND OF DECLINING LONG-TERM BOND YIELDS FOR U.S. DEBT IS OVER; IN A COUPLE OF MONTHS, THIS GRAPH WILL TELL THE STORY EVEN MORE TELLINGLY AS THE TRENDLINE IS SOUNDLY BROKEN WITH PERSISTENTLY RISING 30-YEAR TREASURY YIELDS.  WHEN THE TRENDLINE IS BROKEN, ALL HELL IS GOING TO BREAK LOOSE IN THE BOND MARKETS.

EQUITY BULL MARKETS DO NOT BEGIN AT THE BEGINNING OF AN INFLATIONARY CYCLE, BUT USUALLY AT THE END OF ONE AS IN 1981.  The mere fact that longer dated Treasuries are increasingly going to offer higher yields to investors is more than adequate competition for stocks (hold nose, inhale, and push "Buy" button to acquire the New Banana Republic's Debt!!!  NOT A RECOMMENDED ACTION HOWEVER because the word is out on the solvency and creditworthiness of the United States.).  This fact alone, that bond prices are cratering and yields are soaring on a percentage move basis (66% increase in 30-year Bond Yields in less than 5 months) ARE A DEATH KNELL FOR STOCKS AND THE CURRENT, RUNNING-OUT-OF-MOMENTUM 2009 SUPER BEAR MARKET RALLY.  The 200-day on the S&P 500 will turn stocks back around 960 on the index, if not before.  Sage Forecast #10,037, no charge.  (Just put a silver dollar in the tin cup on your way out.)

The Sage is through with fatherly advise on an asset class he can no longer value since virtually all financial reports are bogus and Corporate America's books are so cooked there is no basis for making an investment decision to buy via relying on traditional valuation measures.  How do you gauge the width of a chasm when the glasses you are wearing are horribly distorted?  See you in the valley below.

IF YOU THINK THE 19 LARGEST BANK IN THE UNITED STATES ONLY NEED $75 BILLION IN ADDITIONAL CAPITAL, BY ALL MEANS, ANTE UP TO THE BAR AND PROVIDE IT TO THEM!  And remember, Taxpayers, if your claim on repayment goes from Preferred Stock status to Common Stock status via TARP et. al., your claim can easily go to zero, just ask Washington Mutual stockholders.  You can't have Tens of $Trillion's on the books in Zombie Derivatives that no one wants to buy and only need $0.075 Trillion to become solvent again.  No Math degree required here.

Nothing goes straight down without some counter-trend rallies along the way.  The U.S. Financial System, Economy, Dollar, and Stock Market are no exceptions.  However, to be fooled to think that a collapse of the U.S. Financial System can be rectified in a matter of 6 to 9 months, is to ignore all lessons in human history about Panics, Collapses, and Depressions, the three horseman of modern economics.  Chancellor Chamberlain Obama didn't take one economics course in college, I want MoveOn.org to prove me wrong on this one.  If he did, he was sleeping in class.  (Psssss, Barrack: NEWSFLASH:  Alternative energy production means cost some 30% to 50% more to acquire than current fossil fuel production means AND $150 to $200 oil is needed to make them economically viable in day-to-day operation.  You slept through this class also.)

BUT DRINK THE KOOL-AID.  I WILL DANCE AT YOUR FUNERAL, INVESTUS AMERICANUS. 

Gold and Silver are in the process of putting in a new rally leg to $1,250 for Gold and easily $17.50 for Silver, if not $18.75 for the latter.  Premiums have temporarily come down in both Gold and Silver refined products, but don't expect this to last.  Mint and refinery capacities have been expanded over the last 6 months to attempt to meet demand, and now that some investors are drinking the Equity Kool-Aid again, physical bullion demand has softened somewhat just when prices are taking off on spot bullion.  Makes no sense, but the Comex is such a screwed up price discovery mechanism, little does make sense with physical bullion supply &  demand versus exchange-traded spot gold and silver anymore.  Once the stock market and the economy show the inevitable signs of renewed weakness going into mid- to late-summer, the physical bullion buyers will be back, setting all-new volume records.

Beat the rush and the extended backlogs to deliver, I have Academy 100 ounce silver bars, .9995 Purity, ready to go out the door in 2 to 3 days after payment to the refinery.  Silver is the big mover right now in my not-so-humble opinion.


BUY PHYSICAL GOLD AND SILVER BULLION PRODUCTS WHILE THE PREMIUMS OVER MELT ARE TEMPORARILY LOWER.  If you are buying "securitized" versions of the precious metals, you should have your head examined.  Be the guardian of your own future, do not trust it to intermediaries.  Trust not what you cannot smell, touch, or kick.

Speaking of "trust", Wexford Capital Management has now been in business for over 20 years without a single client complaint to any private or governmental entity.  Match that record Wall & Broad!!!



THE SAGE OF WEXFORD, pitchfork and shovel ready.

A third political party is going to form in this country and take back control for the benefit of its citizens, not for the benefit of the huge political contributors such as Goldman-Sachs and JP Morgan-Chase and the Auto Unions.


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June 13, 2009:  United States Running At Warp Speed To Financial Ruin.


This missive ( or missile ) will be short, and not so sweet this month, since most of my free time these days is spent learning Norwegian for my retirement planning.  This country should be such a mess in 5 years time that I figure I might as well try on the internal problems of another country entirely when it is time to finally put the tired dogs up and sit back and vegetate like most of our governmental officials have mastered almost to an art form.  This is certainly not the great country that I was born into in 1949.  Technically, I was born in Germany, Nurnberg to be exact, not knowing as a new sprout that my life would see the financial collapse of the country I became a Naturalized Citizen of at age 11.  I had a choice between German and American citizenship at the time, and now almost wish I had left my options open.  My late father, an Army Major at the time, used to kid me that I was adopted from a German orphanage anyway, so I might as well stick with German citizenship.  Not really, but I am looking for various overseas escape routes on a regular basis.  I am still an ardent Patriot of this country and intend to do my part to construct a New America at some point, but I is old and creaky and need more quiet time at some point to stay sane with insanity all around.

Before I wax philosophical about the demise of my homeland, let me just put out some of my classic dewdrops of wisdom about various asset markets in the near and dear term.  The stock market is doomed, you knew I was going to say that, but since you pay the Big Bucks for this monthly epistle, I did not want to disappoint.  It is all about earnings on the S&P 500 which have had the biggest quarterly declines since recordkeeping began, and there is no way the Insolvent American Consumer is going to lift Corporate America up with newly financed discretionary spending at a time that After-Tax Savings are headed back to 8% and above.  THE AMERICAN CONSUMER IS TRYING TO REPAIR HIS OR HER BALANCE SHEET SINCE THE BALANCE SHEET OF THE UNITED STATES IS AKIN TO THAT OF A BANANA REPUBLIC.  Besides, the current P/E on the S&P 500 based on most likely Real Earnings for 2009, a new concept in financial reporting versus Operating Earnings that convolutedly include one-time write-offs and adjustments that reoccur quarter after quarter ( one-time??? ), hardly a traditional accounting principle, is some 212 times!  So buy stocks if you have money to burn, America.  Not only is the S&P 500 grossly, obscenely, pathetically overvalued at its 945 level today, but watch out, the Bond Vigilante's are back in town.  Meaning:  INTEREST RATES DURING A BUDDING DEPRESSION IN ECONOMIC ACTIVITY ARE GOING STEADILY UP TO SOME 4.6% ON THE 30-YEAR BOND AT THIS TIME THAT TRILLIONS OF DOLLARS IN NEW SUPPLY IS ANTICIPATED AS FAR AS THE EYE CAN SEE.  So you have exceptionally poor earnings prospects for S&P 500 companies at a time that other asset markets, such as commodities, oil, gold, silver, and remarkably stinko Bonds are offering some very tempting and fundamentally sound investment alternatives.  All "sound" that is except the Bonds that are a Giant Accident Waiting to Happen, especially U.S. Treasuries that are being created at WARP SPEED to fund the Daily Unfunded Obama Socialist Program ( DUOSoP ..... or is that DESPOT ), some even in people's back yards.  Eight Percent Long Bond by Christmas, you heard it here first.

Furthermore, companies are having very difficult times finding short-term financing for operations as the Commercial Paper market has remained frozen since the FALL OF 2008.  No one trusts the credit rating of anyone else these days since the Derivative Meltdown we have just experienced, Phase One Only, I can assure you, showed the Credit Rating Agencies to be absolute whores at prostituting AAA / Investment Grade ratings to companies with minefields of toxic assets on the books.  Poor analytical work or no analytical work with a Humongous Conflict of Interest in the rated companies paying fees to the Rating Agencies!!!  You know who the Toxic Minefield Companies are ( or you should if you are a stock investor!).  I WILL GIVE YOU A HINT ....... THE MOST INSOLVENT COMPANIES IN THE U.S. ARE STILL THE 19 LARGEST BANKS.  U.S. INSURANCE COMPANIES COME NEXT.  The U.S. Financial System is broken (and broke from a solvency standpoint if proper accounting of deadwood is performed)!   However, Praise Allah, the stock and bond markets are still sources of new lucre for cash-starved and negative equity U.S. companies and banks, since the Wall Street Spin Machine is still operating at full bore and Americans are still getting sucked into the carnival tents to the tune of organ grinding music.  The recent stock market rally may have been partially orchestrated by none other than Goldman-Sachs and JP Morgan-Chase, using TARP funds no less, to provide one last fleecing of the American Investor before the wheels fall of the cart.  Equity financing is the cheapest form of financing for any company, since you don't even have to pay dividends these days and pre-Bankruptcy you can watch it sink toward ZERO a la General Motors without any recourse for the Lender in Arms, the American Stock Investor.  Take a bow, American Investors, for throwing good money after bad into the bottomless pit which will be the re-financing of America's Financial Companies just before the next wave of Phase Two Derivative Implosions occur.  What "assets" could that entail?

So much for the World of American Finance, circa 2009.  Many hard asset analysts are forecasting weakness across the board of assets in the immediate months ahead, a repeat of the GET LIQUID AT ANY COST PANIC we saw in late summer 2008.  I am not of this opinion, however.  Their reasoning goes that Primary Bond Dealers for the U.S. Treasury are under so much pressure to absorb the $100 Billion of Newly Printed MONTHLY Money from Timmy and Benny that they are putting pressure on other asset markets by selling everything to come up with the dough to buy the next Upcoming Mega-Auction from the Treasury.  This may have happened to some degree last week, not to mention some Futures Market Chicanery from Goldman to buoy prices of Treasuries during the two-day auction.  But this type of Illiquidity in the U.S. Treasury Bond Market cannot have a lasting impact in all other asset markets for any length of time since we continue to have Global Markets in these other assets that are outside of the United States.  Plus, those of us with a pulse and half a brain know that a buyer's strike is already developing from such stalwart T-Bond fans as China, Russia, Brazil, Singapore, etc., and that it will eventually become impossible to sell this junk without much higher interest rates thrown in.  Efforts to obtain IMF Special Drawing Right Bonds are well underway, and this takes the most loyal Treasury buyers away from this endless supply stream, at least a full month's worth from what is proposed by China and Russia.  So any liquidity ( or illiquidity to be correct ) driven declines in the precious metals, which we once again saw last week me thinks, are strictly short-term in nature and basically just set Gold and Silver up for even more meteoric rises in the months ahead when the Comex AND BULLION DEALERS become overwhelmed with requests for physical delivery.  

I think talk of depository shortfalls in reported gold and silver, not to mention the real shortcomings of ETF's in this respect since their prospecti allow futures and options surrogates, is going to put the hurt on the Comex short-sellers like never before.  You can tell me you have 100 tonnes of Gold day in and day out, but when an audit by a government authority shows that you are woefully short, all Hell breaks loose in the physical bullion markets.  AND BY HELL, I MEAN "HELL" FOR THE SHORT-SELLERS WHEN INVESTORS DEMAND PHYSICAL METAL OVER ANY AND ALL PROMISES TO PROVIDE SAME.  Me thinks that HSBC may be the next entity to fail at a vault audit, but that is gut feeling so don't drive up to them in New York City and demand they load your bullion into your car trunk.  But I do think more audit failures of bullion depositories, in whatever form they take such as an ETF or say The Perth Mint, is going to initiate a sea change in investor thinking that physical in their own little hands is the only real bullion they can count on after Phase Four of the Derivative Meltdown has occurred.  I expect Phase Two is already in progress and will see the light of day before the 4th of July.  Once again, the Sage is using his 2,000 year-old Weegee board for these prognostications, but with such rookies at the wheel as we have in the United States today, earth-shattering surprises can come out of no-where.  AND WE HAVE DONE LITTLE TO CORRECT THE FUNDAMENTAL PROBLEMS OF THE FINANCIAL SYSTEM AND ECONOMY IN THE LAST 6 MONTHS, SO WHY WOULD ANYONE THINK WE HAVE TURNED A CORNER AT THIS JUNCTION AND ARE ON THE ROAD TO SALVATION?????????????

Never forget in the often confusing world of investing that confidence is key to the continuation of a trend and the marketability of an asset at progressively higher prices.  What has history taught us time and again as to what assets are worthy of perpetual trust, especially with respect to holding value in both inflationary and deflationary times?  You have entered the Twilight Zone and the signpost up ahead says:  $1,300 Gold and $23 Silver.  I am going to go out on a huge limb here today before I get back to my Berlitz Norwegian lessons and say that Silver has the capability to explode in the remaining months of 2009.  Not a sales pitch, but I think an exponential move in Silver is quite possible, one that will make the move off the late 2008 lows of say $9.80 per ounce to today's $15 look like a warm-up run.  There are so many things waiting to implode in the world as we know it and of a magnitude never before imagined that parabolic moves in precious metals will be the more tranquil of the occurrences.

As you are aware, I have not really fully developed the title of this month's piece, "United States Running At Warp Speed to Financial Ruin", but you only have to surf the internet news sites or listen to cable news to be convinced that we are on the road to perdition in this country.  I am seeking an organization of Constitutional Patriots with 100's of Thousands of Americans as card-carrying members who are willing to put their Federal taxes in escrow until our country comes to its senses regarding the committed and proposed Federal spending in the next decade in excess of $13 Trillion.  THE SEEDS OF A TAX REVOLT HAVE BEEN SOWN.  When I sent in my Quarterly Estimated Tax to Uncle Sam yesterday, a princely sum in excess of what I made in a year in 1976 with a newly printed MBA in Finance from Michigan, I wrote on the memo line, "OBAMA SLUSH FUND".  And on my Virginia payment I wrote, "DON'T TREAD ON ME".  I may have to ask you fine people out there to send me a cake with a file baked into it at some point, but I am going to go down swinging.  That is before I jump on that steamer to Norway.  All of us need a legacy to achieve immortality, right?


THE SAGE OF WEXFORD, pitchfork, garden hoe, and shovel ready.

Raise Hell, America.  Don't let your future and your childrens' and grandchildrens' futures be mortgaged into Third World Status by a Government Run Amuck.  It is your country, your Government, and your money.  If Congress provides guarantees behind the Endless State Debt of the Fruitcakes of the Pacific Coast, CALIFORNIA, then the seed of a Tax Revolt will sprout and spread its mighty tentacles across the land faster than you can say, "Jack and the Beanstalk".  They got to be kidding if they think I am going to go on the hook in the Tens of Billions of Dollars AND allow a State than never saw a spending program it couldn't live without for the last 30 years to continue to refuse to take fiscal steps such as cutbacks and reduced workweeks and layoffs to even attempt to get the ball rolling in the right direction.  The fiscally and financially responsible citizens of the United States are currently without a country.  Lock & Load.

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Regards,
The Sage