Tuesday, July 13, 2010

Harry Schultz on the Power Elite, Free Markets, the Internet and Why Gold Is Going Much Higher

The Daily Bell is pleased to present an exclusive interview with Harry D. Schultz (Caricature left).

Introduction: Chevalier Harry D. Schultz, KHC, KM, KCPR, KCSA, KCSS, has written scores of books and is considered a founder of the investment newsletter business. Based in Monaco, and now in his 80s, he has been producing his newsletter, The International Harry Schultz Letter (HSL), for over 45 years. During his 65 years of publishing, Harry has lived in 17 different countries and published his work in many of them. He is truly an international man whose shoulders have rubbed with some of the top political, business and social figures of our time. He prides himself of being stridently anti-communist and anti-socialist. According to the international edition of the Guinness Book of World Records from 1981-2003, Harry Schultz was the highest paid investment consultant in the world fetching anywhere from US$3500 to US$4500 dollars per hour. Mr. Schultz is quoted – even emulated – on a regular basis in various financial books, articles and in interviews including other newsletters. The book, 'Moneychangers' by Lewis Dorsey is based upon Harry Schultz. Knighted five times, Harry is a man for all seasons and a true citizen of the world.

Daily Bell: This interview will review material that you've gone over in your books, but we hope you will answer the questions nonetheless as some in our audience are not aware of your works or point of view. A good place to begin would be to ask how did you get interested in finance in the first place?

Harry Schultz: I have a love affair with cause-and-effect. The financial world is probably the nearest you can come to discovering the answers to both cause-and-effect. And that leads on to how to benefit from that knowledge.

Daily Bell: When did you adopt a free-market orientation?

Harry Schultz: From my earliest ages, I produced a newspaper, via typewriter, then mimeograph, for my mother, then the neighborhood, then the family, then the school & college. I then bought real newspapers, of small size of course, but the principles were nearly the same as for big ones. Running newspapers brings you into close contact with all elements of society. (more)

Large Speculators Cut Bets Short Euro by 47%

CFTC data released Friday July 9th showed IMM currency speculators decreased their bets short the US dollar for a fourth week in a row. According to Reuters News, the value of the net long US dollar position declined by 59.7% from $9.5 billion to$3.82 billion. The Cash US dollar Index at its peak of 88.70 on June 7th was up over 19% since the sovereign debt concerns began to enter the global currency markets in late November 2009. Since then we have seen a 5.64% correction of this year's "Flight to Quality" rally in the US dollar. (more)

Worse Than Wall Street How shaky European banks could tip the world back into recession.

Europe’s leaders have a simple explanation for the current financial crisis on their continent: greedy Wall Street hedge funds caused it. Rapacious investors made wild bets on Greek debt, the argument goes, which drove up borrowing costs and made the crisis seem even worse than it was. That bad behavior pummeled the euro. To hear EU leaders tell it, they have since fought off the barbarians with a $1 trillion bailout, saved the euro, and even ensured “peace on the continent,” as French President Nicolas Sarkozy boasted.

But Europe’s problems are far from over. Just hours after the bailout, the euro continued its slide, falling from $1.28 per euro to $1.19, before clawing its way back to $1.26. More worrying, European banks have cut back on their lending to each other—just as they did during the 2008 financial crisis—and are dependent on some $900 billion in emergency financing from the European Central Bank. Conditions in Europe today look a lot like those at the start of America’s subprime troubles in 2007, warned a recent Bank for International Settlements report. (more)

Suttmeier: Dow Flirting With Plunge of Nearly 25 Percent

The Dow Jones industrial average is poised to plunge nearly 25 percent, said Richard Suttmeier, chief market strategist at ValuEngine.com.

He has been predicting that the Dow will reach 8,500 since March 10 and is still holding onto that forecast. Suttmeier told Yahoo Finance TechTicker that he believes the market could decline even further.

If the market continues to dip, the Dow could drop to 7,800, but wind up at 10,560 in the second half of 2010, he added. The Dow recently traded at about 10,190 and a drop to 7,800 would be a fall of more than 23 percent from its current level.

Suttmeier said he is “not looking for an immediate move to 8,500” and predicts there could be “trading opportunities from both sides of the equation.” (more)

Traxis Partners’ Biggs Unloads About Half Its Stock Holdings

By: Dan Weil

Barton Biggs, who manages $1.4 billion for hedge fund Traxis Partners, dumped about 50 percent of its stock investments in recent days.

He told Bloomberg he’s worried that the economy will fall back as governments around the world withdraw their stimulus too early

On June 29, before Biggs’ sales, bullish stock bets accounted for about 70 percent of the fund’s portfolio.

“I can change my mind very quickly,” he said. “I’m not wildly bearish, but I don’t want to have a lot of risk at this point. I just want to have less exposure at a time like this.” (more)

MarketsHub:Will Earnings Give Stocks Another Boost

Historian warns of sudden collapse of American ‘empire’

Harvard professor and prolific author Niall Ferguson opened the 2010 Aspen Ideas Festival Monday with a stark warning about the increasing prospect of the American “empire” suddenly collapsing due to the country’s rising debt level.

“I think this is a problem that is going to go live really soon,” Ferguson said. “In that sense, I mean within the next two years. Because the whole thing, fiscally and other ways, is very near the edge of chaos. And we’ve seen already in Greece what happens when the bond market loses faith in your fiscal policy.”

Ferguson said empires — such as the former Soviet Union and the Roman empire — can collapse quite quickly and the tipping point is often when the cost of servicing an empire’s debt is larger than the cost of its defense budget.

“That has not been the case I think at any point in U.S. history,” Ferguson said. “It will be the case in the next five years.” (more)

Double Stock Dips & Double Silver Tops

You read a lot recently about "double dip" and it does not refer to two scoops of ice cream, or to the Jerry Seinfeld episode when George takes a large tortilla chip, dips it into a bowl of dip, bites into it and dips it into the bowl again, much to the utter disgust of the person standing next to him.

Yes, the financial meltdown has brought all kinds of new words into our lexicon.

The double dipping you have been reading about refers to recession -- a double-dip recession, with a W shape on the chart. It is a recession followed by a short-lived recovery, followed by another recession.

We are half way into the year and it is a good time to ask ourselves if we are in fact facing another "double-dip" recession? And if so, what are the implications for precious metals?

There is certainly enough fear and angst on the subject if you read the financial pages. The word "fear" led the front-page headlines of The Wall Street Journal at least twice last week. (more)

Crisis Awaits World’s Banks as Trillions Come Due

The sovereign debt crisis would seem to create worry enough for European banks, but there is another gathering threat that has not garnered as much notice: the trillions of dollars in short-term borrowing that institutions around the world must repay or roll over in the next two years.

The European Central Bank, the Bank of England and the International Monetary Fund have all recently warned of a looming crunch, especially in Europe, where banks have enough trouble raising money as it is.

Their concern is that banks hungry for refinancing will compete with governments — which also must roll over huge sums — for the bond market’s favor. As a result, credit for business and consumers could become more costly and scarce, with unpleasant consequences for economic growth.

“There is a cliff we are racing toward — it’s huge,” said Richard Barwell, an economist at Royal Bank of Scotland and formerly a senior economist at the Bank of England, Britain’s central bank. “No one seems to be talking about it that much.” But, he added, “it’s of first-order importance for lending and output.” (more)

China Cuts Rare Earth Export Quota 72%, May Spark Trade Dispute With U.S.

China, the world’s largest rare- earths producer, cut export quotas for the minerals needed to make hybrid cars and televisions by 72 percent for the second half, raising the possibility of a trade dispute with the U.S.

Shipments will be capped at 7,976 metric tons, down from 28,417 tons for the same period a year ago, according to data from the Ministry of Commerce yesterday.

Rising production of hybrid cars and music players such as Toyota Motor Corp.’s Prius and Apple Inc.’s iPod have driven up demand for rare earths even as China cut the quotas to shore up prices and ensure domestic supplies. The U.S. is looking at building a trade case on the restrictions, industry representatives said last month.

“The rare earths industry officials have realized that, after many years of continued growth in exports, the industry didn’t receive due profit returns,” Liu Aisheng, director of the Chinese Society of Rare Earth, said in an interview by phone from Beijing. “They adjusted the policy to ensure that the resources are optimally utilized.” (more)

This Week’s Economic Calendar

This is a fairly busy week for economic news, although most of it may be overshadowed by the start of quarterly earnings season. Highlights include an extensive amount of data coming out of China Wednesday night, plus US retail sales on Wednesday and a series of US industrial and regional data on Thursday.

North America:

Major economic data releases scheduled for this week include:

Tuesday July 13 – Canada and US trade balances; US monthly budget
Wednesday July 14 – US retail sales, business inventories, FOMC meeting minutes
Thursday July 15 – Canada auto sales, manufacturing sales; US production prices, jobless claims, Empire manufacturing survey, industrial production, Philadelphia Fed
Friday July 16 – Canada leading indicator; US consumer prices, international capital flows, U of Michigan confidence
Monday July 19 – Canada international capital flows

Asia Pacific:

Monday July 12 – Australia NAB business conditions; Japan industrial production, consumer confidence
Tuesday July 13 – Australia Westpac consumer confidence
Wednesday July 14 – China GDP, retail sales, producer prices, consumer prices, industrial production, Japan BoJ interest rate decision
Thursday July 15 – none
Sunday July 18 – none


Tuesday July 13 – UK consumer prices, Germany ZEW economic sentiment survey
Wednesday July 14 – UK jobless claims
Thursday July 15 – none
Friday July 16 – none
Monday July 19 – none

Chart of the Day