Wednesday, August 18, 2010
The recent chaos that erupted when 30,000 people waited hours in the Atlanta, Georgia heat to receive applications for subsidized housing is a mere symptom of a worsening national problem.
The housing market appears to be on a never-ending downward spiral, with the much-discussed "recovery" always around the next corner.
The reasons that such a recovery is impossible at the moment should be obvious: millions of people do not have jobs; millions of others work only part time; millions more work fulltime but make very little money; and additional millions fear losing their jobs.
Under these circumstances, there can be no recovery in the housing market, which will continue to contribute to the broader depression-like economy in the U.S.
Interestingly, an op-ed article in The New York Times, entitled The 30 year Prison, actually took these realities into account when analyzing the housing crisis. The 30 year mortgage is the cornerstone of the residential housing market, which allowed millions of Americans to become homeowners. (more)
Hinde Capital in London today published a wonderful warning against investing in the gold exchange-traded fund GLD and the silver exchange-traded fund SLV, echoing and elaborating on the concerns raised about those ETFs by the report published in May by Solari Investment Advisory Services LLC, the firm founded by GATA Board of Directors member Catherine Austin Fitts. (The Solari report, "GLD and SLV: Disclosure in the Precious Metals Puzzle Palace," can be found at the Solari Internet site here: http://solari.com/archive/Precious_Metals_Puzzle_Palace/.)
The Hinde Capital report, "Precious Metal ETFs Alchemy: GLD -- the New CDO [Collateralized Debt Obligation] in Disguise?," asserts of the gold and silver ETFs:
"-- ETFs should not be owned by serious professional investors.
"-- ETFs offer none of the benefits of physical bullion ownership.
"-- ETFs are no cheaper than owning physical allocated bullion stored and insured in secure vaults.
"-- ETFs are not as secure as owning physical allocated bullion either via a bullion fund or an allocated bullion account.
"-- ETFs provide no returns above the bullion price, only the likelihood of tracking at a discount or potentially failing to track the bullion price at all.
"-- ETFs do not provide 24-hour liquidity, unlike the bullion market itself.
"-- It is evident that gold with multiple owners has entered into unallocated and more importantly allocated accounts. We see it as highly likely that encumbered or leased gold could thus be in ETF products."
The Hinde Capital report also notes the likely conflict of interest of the precious metal ETF custodians, HSBC and JPMorganChase, which are also the big shorts in the gold and silver market.
In essence, the Hinde Capital report concludes that the gold and silver ETFs are part of the fractional-reserve gold and silver banking schemes to suppress precious metals prices. "Every time you purchase a paper gold derivative," the Hinde Capital report concludes, "you are aiding the suppression of the gold price. Why? The proliferation of paper gold products creates the illusion of more supply than there is physical bullion, at the prevailing price."
You can find the report at the Hinde Capital Internet site here:Click Here!
The United States by every measure is hanging on by a thread to its First World status. Saddled by debt, engaged in wars on multiple fronts with a rising police state at home, declining economic productivity, and wild currency fluctuations all threaten America's future.
The general designations of the ranking system for world status date back to the 1950s, and have included countries at various stages of economic development. Since the Cold War, the definition has come to be synonymous with repressive countries where a wealthy class of ruling elites segment society into the haves and have-nots, many times capitalizing on the conditions that follow an economic crisis or war.
While much of the world is still mired in poverty, the reduced cost of innovative tools such as computing and connectivity ironically puts traditional Third World countries at the forefront of a new lean-and-mean economy that is based on ideas of empowerment for the disenfranchised. For better or worse, the world is leveling due to Globalism. However, America and other over-leveraged countries face this re-balancing of the globe at a time when they have dwindling resources. We can speculate about who and what is to blame for America's fantastic fall, but for the purposes of this article we shall focus on the obvious signs that the United States is beginning to resemble a Third World country. (more)
The legendary investor's Soros Fund Management – which has approximately $25bn (£16bn) under management – reduced its equity investments by 42pc to $5.1bn by the end of June, down from $8.8bn at the end of March. The asset allocation decisions were made during a period in which the Standard & Poor's 500 index – the broadest US equity index – fell 12pc
The fact that Mr Soros – best known as the man reputed to have made $1bn by "breaking the Bank of England" during the 1992 fiscal crisis – has decided to make such a concerted shift out of equities will send a clear message to other investors.
Gone are Soros's investments in Petrobras, Brazil's oil giant, with investments in bellwether stocks such as Wal-Mart, JP Morgan Chase and Pfizer drastically reduced, cut by 99pc, 97pc and 95pc respectively.
Of those equities that do remain, the fund's holding in a gold exchange traded fund constitutes his largest investment, some 13pc of the equity portfolio, worth $638m. (more)
Ideas were not in short supply, but some ideas were more common than others. More than a few speakers spoke well of gold and oil. Most had dim views of the economy and the stock market. And there were at least a handful whose best ideas hailed from some emerging market.
A couple of my favorite ideas came from investors based in Dubai and Moscow. Whole markets rarely go on sale, but here we have two examples of stock markets trading for about 6 times earnings.
Peter Cooper is our man in Dubai, as you may remember, and a friend of mine. From his perch in Dubai, he writes an interesting investing newsletter called ArabianMoney. He is also a self-made millionaire who made it in the Middle East. He sold out near the top. But now, Peter says Dubai is a buy again. In fact, Peter says, the whole United Arab Emirates is a buy. (more)
Over the past couple of months the long-term borrowing costs for the US treasury have been pushing down again, concurrent with increased pessimism about the economy and when the US will emerge from recession/slow growth. In the past few days, the prices of 10 and 30 year treasury bonds have positively surged. At the same time, equity markets have remained fairly stable. What does the divergence between treasury yields and equity prices say about the near future of our economy? One possibility is that the market is now anticipating and pricing in quantitative easing from the Federal Reserve – and so prices of both equities and bonds are rising. Another possibility is that expectations of future inflation are falling, which would lower bond rates, all else equal. A final possibility is that the bond market is signaling another leg down in the economy, and that equity markets are behind the curve. (more)
“From now on, depressions will be scientifically created.” — Congressman Charles A. Lindbergh Sr. , 1913
Everyone loves money. Even people like myself who abhor the abuse of money and commerce, who understand the fraudulent nature of the system we live in, still work hard and save so that we might attain a sense of stability within that system. Many people see money as a focal point to their existence. But is it really money that they are after, or is it something else entirely? In truth, money represents ‘security’ in the minds of the masses. Money affords us the ability to survive, and the more of it we have, the safer we all feel. Because we subconsciously associate the extension of our very life with the variable health of the economic structure in which we live, we tend to become unwitting devotees to its continued existence, even if it is corrupt and condemned to failure. We gullibly deny the system or the currency that supports it is doomed to the contrary of all evidence because, even though it has beaten us bloody, we have never known anything else.
In light of this entrenched way of perceiving things, especially in the U.S., it is difficult enough to convince some people that the economy is in fact not providing the security they desire, but is actually destroying their future completely. To explain to them that this is deliberate, that the economy is designed to self-destruct, that is another prospect altogether. (more)
Everyone is underestimating the U.S. economy, says Morgan Stanley analyst Stephen Hull, which perfectly positions the dollar for a huge comeback.
“We are constructive on the dollar because we think that the bad economic news is already reflected in the price,” Hull wrote in a note to investors. “Despite the soft patch in Q2 we expect the economy to rebound in Q3 and to grow by 3.5 percent.”
Hull points to easing financial conditions such as plunging mortgage rates and rising stock prices after the tightening that accompanied the European sovereign crisis, gradually firming domestic demand and income as evidence of his position.
In addition, Hull notes, personal savings rates have been boosted during the last two years, suggesting that consumers have rebuilt their balance sheets to some degree so they could spend more of their income in the second half. (more)