October 24, 2008
There is a lot of talk about how bad the world economy and especially the US economy could get. The word recession is pretty commonplace now and several “experts” are using the word depression (aka the dirty 30’s).
My experience and reading indicate that depression follows hyper inflation and that inflation rate would be far above 10% annually. It can be argued that the real inflation rate is, and has been, over 10% for some time now. Only The United States Bureau of Labor Statistics (BLS) has calculated a lower rate – somewhere above 5%. Well, it is Zgartz’s humble opinion that the BLS will have to report an inflation number based soley on real prices and not on estimates of what some things are worth because they work more efficiently than a previous model.
One of my favorite writers is Christopher Galakoutis. He recently provided the following opinion and I believe he is correct. Zgartz thanks Christopher and you can thank him too by visiting his domain at www.murkymarkets.com
Deflation Scare the Perfect Camouflage
By Christopher G Galakoutis
Oct 17 2008 3:30PM
It is said the market can sniff out prospective problems and price itself accordingly. If so, then someone needs to get this dog some nasal spray, lickedy-split!
The deflation scare currently hovering over the entire market, particularly in the metals and commodities sectors, has been brutal. But the key question today is whether this “scare” will evolve into a genuine deflation threat to the US and the world?
Inflation and deflation are monetary phenomenons. Monetary inflation occurs when the supply of money increases faster than the supply of goods and services. This is different from the concept of price inflation, which, depending on several variables that may impact inputs along a given production chain, can cause an increase in the price level for certain goods and services at any given time. Otherwise said, monetary inflation causes price inflation, but a price rise isn’t always a result of monetary inflation.
With monetary deflation you have the opposite effect, in that it relates to a contraction in the money supply. If the supply of money contracts while the supply of goods and services either remains constant, increases, or contracts at a slower rate, then that can lead to price deflation. Otherwise said, a contraction in the supply of money will in most cases cause asset prices to fall, but falling asset prices are not always the result of a monetary deflation (the oil price can rise if the supply of oil is falling at a faster rate than a money supply contraction, for instance).
What we have today is falling asset prices in, specifically, real estate and stocks, and a rise in the value of the US dollar. This has led many to wrongfully conclude that we are not only experiencing a deflation scare, but that a depression brought on by a deflationary collapse is imminent.
I don’t see it that way. Stocks and real estate are collapsing because the US was on a debt binge for many years. Given that real estate purchases are mainly financed by debt, and that many have used margin in stock portfolios, as well as, in the cases of hedge funds and others, dangerously high levels of leverage, the deleveraging that was forced upon the market following the collapse of debt instruments tied to bad loans is what is causing the dramatic declines in these asset prices today.
In a fiat money world with governments controlling the money printing presses you can be sure those governments will do everything in their power to fight off depressions. Anyone who continues to doubt this must have been living under a rock the past couple of months.
With much of the world holding the same toxic instruments and in similar, but not as horrific shape as the US, the ability of the US Treasury to tap its foreign creditors and borrow its way, to the tune of trillions, out of this mess has been severely impacted. On the domestic front, the savings rate is approximately zero, and increasing levels of unemployment will cause tax receipts to collapse. The only alternative will be the printing of money.
The US is the world’s greatest debtor. Money printing will bring on monetary inflation, which will wipe out those debts, savings, as well as the US dollar. That is the real scare that markets today, as well as foreign creditors, should be pricing in. It is only a matter of time. To borrow a line from the classic film ‘The Usual Suspects’: The greatest trick the Devil ever pulled was convincing the world he didn’t exist.
Christopher G. Galakoutis
CMI Ventures LLC
Westport, CT, USA
October 7, 2008
World’s Biggest Casino Expands
In an effort to let us make a lot of money and/or hedge our bets, the CME is getting a new game ready for the casino - aka CME Group.
Soon we will be able to take the losses that presently have to be absorbed by bankers.
Good luck traders!
News Release Issued: October 7, 2008 9:07 AM EDT
CME Group and Citadel to Launch the First Integrated Credit Default Swaps
Trading Platform and Central Counterparty Facility, Linked to CME Clearing
Joint Venture will Facilitate Clearing for Existing Swap Contracts within 30
Days
CHICAGO, Oct. 7 /PRNewswire-FirstCall/ — CME Group, the world’s largest and
most diverse derivatives exchange, and Citadel Investment Group, L.L.C., a
leading alternative investment and technology firm, today announced they have
executed a non-binding term sheet to launch a joint venture company within 30
days, which will be the first electronic trading platform that is fully
integrated with a central counterparty clearing facility for Credit Default
Swaps (CDS). CME Clearing, the world’s largest derivatives clearing house,
will be the central counterparty for this solution.
ZgartZ says Las Vegas tables will likely offer better odds!
September 29, 2008
What a day!
What a day! Fat cat politicians took a knockout blow delivered by representatives who listened to the public.
And “Main Street” won a big one. Gasoline down 10%. Soft commodities down also. That’s what matters to “Main Street”.
Sure, some of them have mutual funds and other types of investments but mainly they buy and consume.
The investments like Wamu, Merrill etc would still be worth something if politicians were not involved. The idiot politicians should have hired someone from Japan to tell them what NOT to do.
So on with the blame game, while investments get destroyed and then Bernanke fires up the B52 to drop loads of money everywhere.
Meanwhile, fill up with cheap gas and enjoy it while you can!
Inflation is not dead as long as the USA doesn’t have a real central bank and only a printing press.
Perhaps you should circulate my “X” Event article to your friends.
September 22, 2008
Here are a couple of quotes from pastor Allan Mitchell’s sermon at South Venice Baptist Church, Venice, Florida on September 21.
“We all sit down to a banquet of consequences.” and “The present sets up the future.”
He wasn’t preaching about the financial morass caused by greedy bankers in the USA and the wrangling going on in Washington on how to solve it, but these quotes sure hit the nail on the head.
At least that’s how ZgartZ sees it.
September 21, 2008
INSANITY
Einstein is quoted as saying: “Insanity is doing the same thing over and over again and expecting a different result.”
Check out the actions of the US Administration and the SEC last week and their attempt to calm the turmoil in the financial markets. How many times do they think they can try “smoke and mirrors” solutions and get a different outcome?
Without gold and silver in their equation for stability, they are for sure insane! Instead they ridicule and depress the precious metals prices and expect a lasting solution. Or do they? Perhaps it’s better to have crisis after crisis in order to take away their citizens freedom by making them pawns in the game of financial survival.
If you think I’m insane then read the SEC press releases which I have placed below and which I copied from the www.Scottrade.com website.
Here they are:
Sept. 18 - The SEC has halted short-selling in 799 financial stocks, effective immediately. For further information and a list of the stocks, go to http://www.sec.gov/rules/other/2008/34-58592.pdf.
Sept. 17 - If you are a customer who sells short, this notice is to inform you that an emergency order was recently issued by the Securities and Exchange Commission (SEC) regarding short sale transactions. Customers who sell short are now subject to potential buy-in on settlement date and any time thereafter without prior notification from the broker dealer, if the broker dealer cannot borrow or lend the security being shorted. http://www.sec.gov/rules/other/2008/34-58572.pdf
Are the new regulations temporary? (Seems the one rule expires a few days before the US Presidential election. Hmmm!) Can you determine who’s who? Will there be more?
Why do politicians fear gold and silver? It is because otherwise they could not buy your votes with fiat money and inflation. At least that’s what ZgartZ thinks.
If you can buy physical gold or silver, why would you wait?
September 18, 2008
ZgartZ thinks you should read Howard’s complete report. There’s a wealth of information here!
Sep 16 2008 10:57AM
Why Wall Street Hates Gold and Silver??
(Excerpted from Chapter 12 of How to Prosper During the Coming Bad Years in the 21st Century.)
Wall Street ignored gold and silver during most of the 1970’s hyper-profitable bull market. They were either outright hostile, or acted as though the metals didn’t even exist. I got no respect, even though the first edition of my book sold 2.6-million copies and was near or at the top of The New York Times best-seller list in both hard and soft cover for two years, and I was all over the media; Wall street Week, Oprah twice, Regis and Kathy Lee three times, etc, etc. They were usually hostile also. Wall Street paid little attention to gold until it reached about $650, far too late for them to have much of a chance for their clients to make money.
Why the hostility? Partly because they believed their own rhetoric! Historically, because rising gold always means falling stocks or a troubled world, and they made most of their commissions in the stock market, they had to remain bullish on stocks, and bearish on gold. Their bullish stock-market recommendation was necessary because investors wouldn’t buy stocks if their advisors were dubious about the market’s future. They sneered at the inflation fears of us gold and silver fans, and derisively called gold investors “gold bugs.” Most of the young whippersnappers who now control Wall Street were in diapers 25 to 30 years ago during the last gold bull market so they haven’t experienced rising gold and inflation. Consequently, another gold bull market is inconceivable to them.
Studying Psycho-ceramics
One of the funniest things that ever happened to me illustrates the skepticism of mainstream media types regarding gold and silver. In 1978 I was on a national promotion tour for the first edition of my book when I found myself in Detroit, rushing to a TV station for a scheduled interview on a big morning show. I barely got there in time when the host turned to the camera and said, “Today we’re going to study psycho-ceramics, and with us today is a crackpot from California.” And the interview went downhill from there; with his biggest argument being that silver was an impractical investment for most people, unless you were very rich.
One year later I found myself in the same studio, same host, promoting the mass paperback of my book. But this time, when the light went on, he said, “Today we have with us one of America’s most brilliant financial advisors,” and the interview was terrific from then.
After the show, I reminded him of what he had said before, and asked him what had changed his mind. He very sheepishly said, “I read your book and bought silver from a local coin dealer, and tripled my money since you were here last.” So the media is not always infallible, even though they are usually wrong.
Inside Wall Street
Wall Street is a culture, as well as a financial institution.
Most of the young brokers who are the big producers on Wall Street are human beings, subject to all the errors of habit and behavior and peer pressure that plague all of us. They are surrounded by “group-think.” They make tons of money on the status quo. I have visited firms on Wall Street with big trading rooms full of twenty-something men and women whose annual income is measured in the millions – all on commissions on stock sales.
Few big Wall Street firms sell bullion (right off hand I can’t think of any) so it is only money out of their pockets if hot-shot brokers tell their clients to sell some stock and put the money into bullion or coins. Maturity and client concern are scarce commodities on Wall Street.
They are congenitally bullish on stocks, because that’s where their bread is buttered.
Financial Shows
Many of you listen to or watch financial shows, populated with people who are typical examples of main-stream Wall Street financial thinking.
If your broker’s opinion is important to you, you may be uncomfortable here. If you aren’t a maverick, you had better become one, and be quiet about it. You will have to leave the herd, and for a while, Merrill Lynch’s herd is all on Wall Street.
Terrorism and Other Things
Let’s consider just a few possible scenarios.
Panama and the Dollar
When we negotiated away the Panama Canal to Torrijos, the Panamanian Dictator, our chief negotiator was Sol Linowitz, a member of the board of Chemical Bank in New York. He was appointed for one day less than six months, so his appointment would not be subject to Congressional approval, and sure enough, the giveaway deal was signed one day before Linowitz’s term was up.
One key part of Linowitz’s banker-inspired mission was that the Canal Zone would be a “Free-banking Zone,” not subject to regulations or oversight. Even before the deal was signed, bank buildings were going up all over the Zone. Every multi-national bank was there, and it appears that they moved many of their international money systems there, with no oversight or regulation. Who determines their safety or vulnerability? No one!
If terrorist hackers were to hack into those computers and infect them with a destructive virus, the entire dollar-based monetary system would disappear in a nanosecond. In that case, for all practical purposes, the only spendable money left would be gold or silver coins or barter.
And what if they were able to sneak a nuke onto a ship and detonate it in the canal? It’s already bad enough that the Chinese are in control of the ports on both ends of the canal. Imagine the chaos with the banks obliterated and commerce fatally crippled.
These and innumerable other scenarios may seem beyond the edges of credibility, but I dare you to say they are not possible.
This is not a forecast, only a speculation about a possible worst-case, we-hope-not scenario.
The Hyperinflation Scenario
What if monetary inflation rose as a result of soaring demands on government with the soaring deficits, and the subsequent inevitable consumer inflation broke out into a real hyperinflation, with the modern money machine running night and day, like Germany during the 1920s. This would make money increasingly worthless and the precious metals increasingly precious. History tells us that this has happened over and over again, and we are repeating most of the same deadly mistakes.
Let’s pretend we are transported into a future where America is devastated by hyperinflation, and see what it looks like
The world will be in terrible trouble, and the prosperity and comfort that now surround you will be in tatters. You will be surrounded by people struggling to survive, let alone to prosper, as in the 1930s. That’s what happened in Germany after the hyperinflation of the deutschmark, and the general suffering was the fertile ground which gave birth to Adolph Hitler, dictator. If you have prospered by holding gold and silver, you can buy a lot of safety and security.
These are only a few of the possibilities.
The Best Case
Even if we wipe out or neutralize al Qaeda and the currency system hangs together, monetary inflation has already been cooked into the economic cake by the Federal Reserve and industry, and so is the silver supply/demand situation. Even in this “best-case” situation, you will make a bundle on this monetary-inflation-sensitive investment, even in a still-orderly world.
If all else fails, you still can count on Social Security, Medicare and the prescription-drug program to trigger a flood of trillions of dollars of “money printing” and the subsequent monetary inflation, followed as night follows day with soaring price inflation. As it becomes obvious to the public that these programs are plummeting into insolvency, the consumer inflation rate and gold and silver will soar.
When the dire facts become obvious, Congress will start desperately searching for solutions, but which ones?
Will they raise taxes and watch FICA soar and taxpayers revolt? Very little, if any! Will they cut benefits or raise the Social Security retirement age? Maybe a little bit, but not much. Will they dig in their heels and memorialize the current dysfunctional system by simply printing money? You bet! This will lay the groundwork for more ruinous inflation, and soaring gold and silver.
In this best case (the most likely – I think, I hope?), we will at least see rising inflation and an inflationary recession (which is already written in cement), and gold and silver and the metals and their mining stocks will go up – perhaps five to ten times, perhaps a lot more.
There is no best-case – or worst-case – scenario in which I can conceive of gold and silver being losers. You can mortgage the kids and bet the farm!
By Howard Ruff
The Ruff Times
*****
Howard J. Ruff, the legendary author and financial advisor, has re-edited and re-issued his 1978 mega best seller, How to Prosper During the Coming Bad Years, still the biggest-selling financial book in history, with 2.6 million copies in print. He is founder and editor of The Ruff Times Financial Newsletter. This is an article from The Ruff Times of September 12, 2008.
The newsletter is much more comprehensive and deals with a broad spectrum of middle-class financial issues and includes an Investment Menu from which you can build your portfolio. (You can learn about it here). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world. His new book is now in book stores or at www.rufftimes.com.
September 17, 2008
The AIG You May Not Know
ZgartZ subscribes to the CME press releases. Why, because this is where most opportunities exist for commodity or currency manipulation. I’m surprised to see AIG was holding agricultural contracts. Wouldn’t it make more sense for that company to hold financial contracts?
Note also that this release speaks to “a portion of AIG’s open positions”. I guess there’s more that we are not supposed to know about?
News Release Issued: September 16, 2008 9:01 PM EDT
CME Group Issues Order Concerning AIG Block Trades
CHICAGO, Sept. 16 /PRNewswire-FirstCall/ — CME Group, the world’s largest
and most diverse derivatives exchange, has issued the following statement:
“CME Group took an emergency action today to facilitate the reduction of the
positions of American International Group, Inc. (AIG) and its subsidiaries
and to protect the orderly functioning of the market. The agreed-upon order
permits the limited execution of block trades by AIG in certain CME and CBOT
commodity futures products, including Soybeans, Soybean Oil, Corn, Wheat,
Live Cattle and Lean Hogs, for the purpose of liquidating a portion of AIG’s
open positions. A block trade is a privately negotiated transaction between
eligible contract participants that is executed outside of the public auction
market. The order is effective through Wednesday, September 17, 2008.”
September 17, 2008
Higher Commodity Prices! The bottom is in.
ZgartZ is not an expert with a staff of analysts so I have to rely on experience and instinct. The opinions of media talking heads has to be taken with a grain of salt as very few of them pointed out the financial mess that exists today.
In my opinion the unwinding of hedge funds was engineered by central banks cooperating with the US Federal Reserve Bank (note: it is not a central bank but an “old boys” corporation owned by dealer banks). This was done to boost the US dollar as it was about to fall off of its support cliff. That caused gold, silver, oil and other physical commodities to collapse because they are priced in $US.
Now we see that the Emperor has no clothes and wears fiat paper to disguise his structure. In fact, his fiat clothing is starting to wear thin and soon the world will see him completely as he is … broke and pleading for life support.
So put these factors into your computer models and try to assess the future of commodity prices:
- Real experts like Boone Pickens (oil) and the CEO’s of Barrick and Goldcorp (gold) are all predicting much higher prices. See www.seekingalpha.com.
- The US Federal Reserve has stated that they would sooner create “stop gap” money than lower interest rates. Ha! When you are already at the bottom how much lower can you go? And what good would it do when inflation is running near 5%?
- Two publishers of the Farmers’ Almanac predict a Horrendous Winter. They are right more often than they are wrong so get set for record demand and prices for heating oil and natural gas. This will bring a government “stop gap” measure resulting in a higher Federal deficit than currently predicted.
- Today, September 17, the housing statistics for August were released. New starts dropped again (17 year low) and new building permits also dropped (8.2%). Resale figures released earlier this month showed a flat trend but unmentioned was that of the re-sales about 35% were foreclosure sales. This brings to mind that the regional and community banks are going through a washout of their lending base.
- All support levels for the major stock indexes have been broken by heavy selling.
- Gold lease rates have skyrocketed over the past 10 days. No mention of this by mainstream media so there is a “cover-up” of some sort underway. Who is short or is the IMF behind a scheme to boost the $US? See www.kitco.com.
- The US Presidential election puts the functioning of government into a black hole. However, not before legislating another $50 billion consumer handout.
- Terrorist attacks have increased putting more strain on military expenditures. Further, these are happening in the oil producing regions.
- Russian stock and bond markets are closed by government order. Russia will likely dump $US to fund their own bailout.
Do we need more reasons to predict a lower $US and consequently higher commodity prices?
ZgartZ told you about the “X Event”. It may come more sooner than later!
You are on your own. I’m not an expert so make your own decisions.
September 9, 2008
ZgartZ says thanks to Howard Ruff for the good advice.
Howard Ruff -Two Cheers for Dave Ramsey
Almost every night when I’m driving in my car, I turn to local station KNRS and listen to Dave Ramsey’s financial advice. Why just two cheers? They are loud cheers indeed because he articulately teaches them how to get out of debt, and I agree whole-heartedly with that. In fact, I’ve devoted a lengthy chapter in my book, Safely Prosperous or Really Rich, to this subject. I explain why you need to get out of debt and how to go about it. I sound a loud “Huzzah!!” as I listen to the debt counsel he gives.
So why just two cheers?
What will they do with the money they now have that they don’t have to make debt payments? Ramsey’s approach is to put it into mutual funds, based on the historical fact that over many years the mutual funds have prospered. That happens to be true, although there are as many as 20 consecutive years when you would have either not made any money or made very little money with mutual funds because it tracks prices of the stock market.
We are in a period when all stock bets are off. I am now of the opinion that the stock market will go to hell in a basket for the next several years. I want my subscribers to invest their money in precious metals or their derivatives.
I like a few stock groups, including energy, uranium, and the institutions that support these companies, such as oil-production or service. But the stock market in general, as perceived by Wall Street and those who manage the mutual funds, is making a big mistake, especially the “growth funds” or their derivatives. They need to be in precious metals because the immediate future will see a runaway inflation, and you will make hundreds of times your money in the precious metals and you will lose most of your money in stocks and bonds.
Sure, over the long haul you may be okay, but it’s a long, long haul. So if you are going to take Dave’s advice and buy mutual funds, at least 15 percent of your portfolio should be in the precious metals or a gold mutual fund (like CEF to offset the inevitable losses on the rest of your portfolio.
So keep it up, Dave Ramsey. Your strategies work! You give excellent advice so people will call about their debts. I just wish I could convert you to the fact that the stock market and mutual funds are not the place for their money right now.
I’m working with my son, Larry, whose company, No More Mortgage, helps people get out of debt to make sure we are telling the people what to do with their money. I don’t think you have to convert your entire portfolio to gold and silver; 15 percent is enough to offset the loss you may have in the rest of your portfolio. If you are smart, you will have 80 to 90 percent in the precious metals. But if that is too big a leap for you, 15 percent will pay off as a hedge.
Howard J. Ruff, the legendary author and financial advisor, has re-edited and re-issued his 1978 mega best seller, How to Prosper During the Coming Bad Years, still the biggest-selling financial book in history, with 2.6 million copies in print. He is founder and editor of The Ruff Times Financial Newsletter. This is an article The Ruff Times of June 20, 2008. The newsletter is much more comprehensive and deals with a broad spectrum of middle-class financial issues and includes an Investment Menu from which you can build your portfolio. You can learn about it here). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world.
August 22, 2008
Our friend David Schectman at www.milesfranklin.comhas capsulised what we “hard asset” people knew would happen. Gold Eagles and Silver Eagles cannot be bought from the US Treasury even if you are an authorized dealer. Here is David’s comments today:
“May you live in interesting times! That is a curse I have been told, and my friends these are indeed interesting times. The laws of supply and demand are being rewritten right before our eyes! Gold and silver have fallen out of bed, usually indicative of a waning demand, and yet every major company in the country can’t keep gold and silver bullion in stock! The US Mint has shut down all sales of gold and silver eagles, for the 2nd time in 13 months (3rd time for silver). The resulting interruption in the supply chain coupled with strong interest from the hard money crowd has completely dried up the silver market and is now spilling over into the gold market. All of this is happening with little or no mainstream public particapation! ”
ZgartZ says “Buy Canadian”. 1oz gold Maple Leaf coins are a better deal anyway!
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