US Bond Default imminent? 2008-06-21

Sunday 21st September 2008 6:24 pm: US Bond Default imminent?

Well, no emergency measures came this weekend from the Fed or the Bank of England, since they need to rest after spending most of last week on last weekend's emergency measures! Note that the emergency last week lasted from the previous Friday to the next Thursday, almost one full week.

The post-bailout stock market rally then came on Friday, thereby postponing the collapse for at least ... one more day.

Dow Jones Industrial Average Technical Chart ^DJI XC0009694206 Yahoo! Finance UK


and
FTSE 100 Technical Chart ^FTSE GB0001383545 Yahoo! Finance UK



In fact, the rally was pathetic, because all those rule changes barely manged to erase the losses of the previous 4 days in the week, let alone all those in the previous weeks and months! What rules can they change to save them next week?


Thanks to Yahoo! for providing us all with indispensible charts. Clicking the links above will take you to the 5-day chart, current to the day you are looking! The above charts are what was displayed this weekend and will be gone by Monday 22/9/2008. So might the banking system.

The newspapers and TV have trumpeted Friday's rally as a positive record event, failing to mention that it happened only because many of the rules of share trading and banking have been changed overnight. It is basically a large short-covering rally, since much of short selling has been banned altogether on a huge number of (financial) stocks in a bold fascistic move that Hitler or Mussolini would have been proud of. (Actually, I don't think that Hitler would have been proud of such a move. He certainly would have had something to say about a bunch of bankers running the Fatherland!) It is at times like these that we need to take a breath and compare last week's events to other momentous ones in history.

At any rate, we witnessed the end of free markets in the Western world last week. They were already highly manipulated anyway by a fascist/socialist alliance of government, central banks and some highly favoured private banking corporations. Now at least that truth is more or less out in the open. It is done for private gain in the boom and the socialisation of losses in the breakdown (i.e. the bankers gain in the good times, then the taxpayer pays for any losses). Isn't that fascism? Please someone tell me if it isn't.

I feel it in my bones that the USA will default on its sovereign debt and may do so soon. Perhaps the pre-inauguration period may be a suitable time to do this. So to my list of 10 items in the previous post I might add:

11. USA receives a credit downgrade and/or defaults on its sovereign Treasury debt, with all the consequences that it entails.

See the excellent charts by Clive Maund at these two links:
US TREASURY BONDS - major reversal believed imminent...
and
THE BAILOUT PLAN - what does it mean? - especially for gold and T Bonds...
I just love those Dojis candlesticks!
Introduction to Candlesticks - StockCharts.com

I also saw Rick Ackerman's commentary about Friday's rally. He doesn't think much of it at all:
614-Point Rally A Patent Fraud (with a telling chart)
and
Why Mega-Bailout Is Destined to Fail

Since the US financial system is so incestous, it is unlikely that anyone inside the USA will downgrade US debt until it has already defaulted, either through (1) Outright failure to pay default or (2) Hyperinflation and currency devaluation Zimbabwe style.

To think that Zimbabwe knocked 10 zeros off all its banknotes! The highest value banknote was 100 billion Zimbabwe $ (which would buy a loaf of bread or thereabouts) and that became 10Z$.

Bringing this to reality would mean that, if you were a BILLIONAIRE and you stored your money under the mattress for the last 5 years, you would have come out with 10 cents!

Maybe you could buy a stick of chewing gun with that.

I was actually thinking of outright US default (i.e. 'can't pay, won't pay') as the outcome. I am not sure that the convenient way will occur.

The best situation for the USA is to have very high inflation to allow it to make a gradual default on the debt. The next best is to have outright hyperinflation with no actual formal default (i.e. debts technically paid but in extremely depreciated dollars) and the worst humiliating case would be actual default, the failure to pay interest on bonds issued. This could happen if there is a run of US bonds and the yield (interest rate) spikes very high. A run of US bonds could collapse the currency too and result in default and then hyperinflation due to the consequent US$ devaluation, which would be the famous double whammy.

No-one would want the interest on the debt then, because the US$ would be worthless anyway and no-one would want to receive US dollars at all, in exchange for anything. That is the time that some oil exporters might demand gold payment from America for oil and we might all find out at last how much gold, if any, is actually in Fort Knox - or whether it has all been leased out to suppress the gold price to give the impression of a strong US dollar in the last decade or so, as GATA bravely claims.

If the US were to issue a new currency to pay for its oil imports, a full audit of US treasury gold would surely be demanded by its creditors.

Systemic bank collapse -> Dictatorship? 2008-09-19

Conclusions from this week's disastrous financial events mentioned in the previous post:

In the end, what conclusion can we draw from all of this?

1. The entire US/UK financial system is broke, busted, caput.
2. The rescues and manipulations of this last week are quite extreme and they attest to the above.
3. The true state of affairs is being hidden from public view to prevent a panic and runs on all major banks in the Western world.
4. The Fed and the Bank of England know this and the current rescues have been to conceal the truth long enough to reach the upcoming US election (if there is one) before the collapse happens.
5. The collapse is likely to be timed after the presidential election (if there is one) and before the inauguration of the next president (if there is one).
6. During this time, the current leaders will take emergency powers before any handover that may take place.
7. Whoever is in the White House by 20 January 2009 will have dictatorial powers and...
8. We will be in the midst of a second Great Depression by 20 January 2009.
9. The collapse could actually happen sooner because the wheels have already fallen off the wagon.
10. I would not be that surprised if the 2008 US election is postponed, perhaps indefinitely and there could be a fascist dictatorship by year end.

Broken banking system + market manipulations 2008-09-19

Friday 19th September 2008 7:21 pm:
Broken banking system plus market manipulations.
To say that they 'cannot be allowed to fail' defines that they are above the law!

The past week has been a most eventful one in the financial markets, the most eventful since The Great Depression.

1. Lehman Brothers is busted and in Chapter 11 'Bankruptcy Protection'
2. Merrill Lynch had a 'shotgun wedding' takeover by Bank of America.
3. AIG had an 84bn$ rescue from the Federal Reserve courtesy of the unconsulted taxpayer.
4. Lloyds TSB High Street UK Bank bought of HBOS, another UK High Street bank.
5. The USA and UK have banned short selling of stocks, at least the stocks of favoured corporations, i.e. the banks and investment houses.
6. The regulators in the USA raised the margin requirements to punitive levels in gold and silver, to discourage people from investing in gold and silver.

It is a cornucopia of market manipulations and fascistic alliances designed to protect the banking elite at the expense of the public and against anyone who is an ultimate creditor of these organisations (or the equally busted US or UK governments).

Introducing these rules that have not been in force since the 1930s Depression, if ever, has bought some time (a little) by rallying the markets temporarily.

The authorities have ignored the fact that some investment banks have previously made billions by short selling industrial companies and commodities over the past century. Now those very culprits are being protected from astute investors who are betting that these institutions are already bankrupt in all but name. Short selling is a pricing mechsnism. Why should it be banned now? Some investment banks have previously indulged in 'naked short selling' which has always been illegal - but the regulatory authorities turned a blind eye. Some small and middle-sized but strategically important industrial companies have allegedly been more or less financially destroyed by these 'investment' practices - but the law was never enforced upon investment banks profiting from this practice.

They were and are above the law and cannot be allowed to fail. To say that they 'cannot be allowed to fail' defines that they are above the law, i.e. the law is made specifically for their benefit and against the interests of citizens and against the interests of entrepreneurs everywhere.

This is the absolute proof of the fascist business and government model rampant in the USA and the UK. They are now able to be defined correctly as fascist regimes and not democracies, free republics or anything else. Of course, the Iraq war and the immoral occupation of that country was already enough evidence of that. Qui bono?

These most recent actions in the markets have been purely to buy time for a Wall Street rally to enable one last chance for the insiders (and outsiders) to sell those banking stocks, so the elite can move their money away from a system that is almost certainly going to fail systemically very soon. Short selling is banned but selling isn't, so astute investors can liquidate their holdings of banking stocks and walk away. That is unlikely to be banned by law, at least not yet!

It is possible that some of the banks have been short selling their competitors to force them into mergers at extremely disounted prices and the new law was enacted to prevent this kind of vulture behaviour and monopoly formation. That would be the more innocent explanation but it doesn't change the details of the corruption that has gone on and the illiquidity and likely insolvency of the banking system that seems to be getting more exposed for all to see.

So why raise margin requirements on gold and silver now, when gold is still well below its March 2008 high of $1030? There is no innocent explanation for that. It is sheer government and central bank market manipulation to protect the SHORT SELLERS in the precious metals at the same time that no-one is allowed to short sell banking stocks. WHAT IRONY!

As economics expert Jim Sinclair of multi-decade experience implores us to protect ourselves, so we should, by being as far out of the financial system as we can possibly be and removing as many intermediaries between ourselves and our assets as possible. Preferably to remove all intermediaries, which means direct ownership of physical assets that cannot be lost by bankruptcy of financial institutions. This involves coming out of Babylon, as spoken of in Revelation Chapters 17 and 18. The fall of our financial Babylon is at hand. Those two books in the Holy Bible should be read by everyone, religious and athiest, including Richard Dawkins, because they described incredibly accurately 1900 years ago, what is happening today. Our modern Babylon is the Dollar Standard System of banking, usury and theft as practiced by Britain's and America's ruling classes.

Alistair Darling, the UK Chancellor of the Exchequer (that is, Finance Minister) on television last night on the programe 'Newsnight' basically admitted that the takeover by Lloyds TSB (an already merged pairing of banks: Lloyds and TSB) of HBOS (Halifax Bank of Scotland - another company made up of two previously merged banks) broke the rules on Monopolies and mergers (known as anti-trust laws in the USA) but that the consequences of not allowing the merger at this time would have been 'very serious' for the financial system. Serious consequences would have followed and we all know what that means (Saddam certainly found out)!

What can you read from that? HBOS was broke and they were taken over at a fire sale price to conceal the fact that a major UK high street bank was bankrupt, perhaps? This entity wasn't Northern Rock. In years gone by, when I lived in Aberdeen in 1989, the Bank of Scotland used to issue its own currency notes in Scotland! It's not a piddling little ex-building society like Northern Rock was. HBOS was a major institution.

In the end, what conclusion can we draw from all of this? My conclusions are:

1. The entire US/UK financial system is broke, busted, caput.
2. The rescues and manipulations of this last week are quite extreme and they attest to the above.
3. The true state of affairs is being hidden from public view to prevent a panic and runs on all major banks in the Western world.
4. The Fed and the Bank of England know this and the current rescues have been to conceal the truth long enough to reach the upcoming US election (if there is one) before the collapse happens.
5. The collapse is likely to be timed after the presidential election (if there is one) and before the inauguration of the next president (if there is one).
6. During this time, the current leaders will take emergency powers before any handover that may take place.
7. Whoever is in the White House by 20 January 2009 will have dictatorial powers and...
8. We will be in the midst of a second Great Depression by 20 January 2009.
9. The collapse could actually happen sooner because the wheels have already fallen off the wagon.
10. I would not be that surprised if the 2008 US election is postponed, perhaps indefinitely and there could be a fascist dictatorship by year end.

Kitco shortage and bear commentaries! 2008-08-19

Tuesday 19th August 2008, 11:00 am: Kitco shortage and bear commentaries!

At the sametime as Kitco announces a shortage of all bullion products on their website, there goes their mouthpiece John Nadler again, talking gold down. This guy has to have an agenda. Is he short gold?

Gold is down a long way BUT it is still 20% up on a year ago. Nowhere does he mention this; he just pounds the bearish case as always.

As the Kitco front page says as of now,
"1yearchg +137.40 +20.94%"

They should get another gold analyst. I am sick of this guy. Why buy any gold when dealers have this kind of guy as an “analyst.” He is acting against the interests of those who buy gold from his company.

He has also totally failed to mention the shortage that has been announced on their site. There have been corrections before but not a shortage like this. However he mentions only the correction - it suits his bear case and not the shortage, which is a far rarer and more newsworthy event.

Proof of manipulation? 2008-08-16

Friday 16th August 2008, 11.01 pm: Proof of manipulation?

Some advocates of gold and silver investment have made much of the alleged lack of silver supply. Some bullion dealers ran out of finished product (1oz coins and small bars) but John Nadler of Kitco repeatedly stated that you could trip over piles of 1000-ounce bars in the vaults around the world.

Now tonight, this notice appeared on http://www.kitco.com/ - in red 'ink':

"IMPORTANT NEW NOTICE: Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products. Please note that you can continue to place orders and prices will be guaranteed; however, cancellation fees will still be applicable regardless of the length of the delay. Consequently once inventory is received there may also be delays in processing and shipping by our vaults."

This clearly states that there are shortages of ALL BULLION PRODUCTS with respect to real demand. (Or does it?) So why is the price of gold down 8% for the week at $786 and silver down a great big chunk at $12.70 at the end of this week?

Only one answer is possible: The price is set by the paper markets only. Nadler may have been correct when he previously stated that the 'clearing price' for real physical gold was $740 or not too far from there. Maybe the clearing price for physical gold is where we are now, at about $780: when reached, the vaults clear. Maybe they have? Or maybe not? Who knows in this world of fraud and illusion?

It also implies that the run up from $730 to $1020 was all paper speculation and 'froth' - including the buying of ETFs, futures, options, swaptions and all that nonsense. Perhaps the ETFs have little or nothing to do with the physical market after all? I'm sure that futures and options have little or nothing to do with the physical market. Does anyone ever take delivery? Can anyone ever take delivery?

Well, maybe today people have started to take delivery of these 'contracts' or maybe someone has just placed a real order for real metal.

The paper markets seem to be just a means for governments and finance houses to 'earn' commissions and/or short the market using someone else's property.

Imagine if you were short gold at $920 a couple of months ago and then saw it jump to $980 in a matter of days. Maybe you bailed out with a huge bankrupting loss, thinking that the price is going to $1200, only then to see the 'market plummet to $786 and your original (now closed) position hugely profitable. What irony. What a joke! Jim Sinclair of http://www.jsmineset.com/ has often said that using margin in gold is dangerous.

The question is, at $786, should I sell any real gold that I bought at $300, before it might go back to $300?

Answers on a postcard please.

Targets met! What now, 1974? $550? 2008-08-11

Monday 11th August 2008. Targets met! What now? 1974? $550?

It's 9 years since the total eclipse of the Sun in England (where it rained, of course) on 11 August 1999. Today gold is being eclipsed and rained on in no uncertain terms, together with most of the commodities.

Did you read anywhere else of downside targets in the $840s from a Head and Shoulders pattern? Or were most or all the 'tout' commentators talking their books, telling you to buy at $880 despite this most obvious chart pattern, as obvious as it gets.

My downside target(s) of $861 and $844 have both been met and exceeded. In fact, the $844 target even allowed for more or less holding around the old all-time high of $850. However, the price plummeted from the $860s and sliced through this lower $844 target all the way to $820, without any pause around $850 at all. Even I didn't really expect that, although $844 is below the previous recent lows (the lowest at $846.40) and below the 21/1/1980 all time high ($850), which might suggest further breakdown(s). It might however also have indicated a possibility to abort the H&S in the $850s, but no such luck!

If we get a bounce at around $800, the chart will form a downtrend channel with two tops and two bottoms (see below).

I had thought the Point and Figure chart (see stockcharts link below) was looking a bit weak and stuttering in the uptrend. I see now that there is a descending triple bottom breakdown from 5 August 2008.

Note also the magnificent double top in the Gold:S&P500 ratio at the bottom of this weekly chart:
http://stockcharts.com/charts/gallery.html?%24gold


James Turk was on Jim Puplava's show some weeks ago, saying that 2008 resembles 1974 in many ways. He then came up with his targets for gold at $1500 spike in 2008 and ending the year at $1100-$1200. What he didn't mention was that 1974 was the start of an intermediate term 18+ month bear market when gold fell from $195 to $103 (not far off -50%). If this is 1974 again, get your flares out, put on the last Peter Gabriel Genesis double concept album from that year and wait for $550 gold!

Now, consider if the gold:S&P500 double top formation were to break down:.


The above is a log graph so I shall do the calculation geometrically (with ratios) and arithmetically (by differences) and use today's close of the S&P500 of 1305.32 to convert the gold:SPX ratio into a gold price target:

Geometric:
0.784/0.598=1.311 (measured move ratio)
0.598/1.311=0.456 gold:SPX target.
0.456*1305.32=$595.22 gold target
or
Arithmetic:
0.784-0.598=.0.186 (measured move amount)
0.598-0.186=0.412 gold:SPX target.
0.412*1305.32=$537.79 gold target -
WOW! That's the 45+% retracement like 1974-1976!

http://www.cbsnews.com/stories/2007/03/07/business/marketwatch/main2543127.shtml

"And I'm hovering like a fly, waiting for the windshield on the freeway ... "

Head & Shoulders breakdown for gold? 2008-08-01

Friday 1st August 2008: Head & Shoulders breakdown for gold?

Well, it sure looks like a Head and Shoulders pattern breakdown to me! Either that or so-called 'Technical Analysis' ('TA') is just aload of waving your hands about psychobabble nonsense, so that 'technicians' can sell subscriptions for worthless investment advice that is denied as being investment advice, (i.e. the kind that often comes with the typical disclaimer saying, "In no way is this investment advice ... we are not liable for any trading losses as a result of this advice that isn't advice ... BUY! No, SELL, SELL! No, BUY! Buy my newsletter! That will be $500 a year, thank you. Cheque, PayPal, Credit card or Bankwire are fine.")

See the excellent and free gold futures charts submitted by Dan Norcini (better than many of those from people who charge loads) at http://www.jsmineset.com/ - downloadable as Acrobat Reader .pdf files on most days. (The bigger writing on the snapshots below was added by me.)

A couple of days ago, prepare for swan dive:

One day ago, swan dive duly arriveth:




The daily spot gold '$GOLD' stockcharts chart looks slightly less alarming but is a neckline breakdown by any standards, on an intraday and closing basis:





If that ain't a head & shoulders, then there ain't no such thing as a Head and Shoulders, except for the shampoo of a similar name.

Of course, then the 'debate' will be: 'By how much?' 'When is a breakdown not a breakdown?' and all that similar nonsense that we always here when 'Technical Analysis' doesn't work and the expensive hired tealeaf readers get it wrong.

It's interesting that the $844 and $861 possible targets are near to two recent lows (support areas) in the above chart.

For development of this, see the current chart, constantly updated at http://stockcharts.com/charts/gallery.html?%24gold!

It will be interesting to see if this formation gets negated next week or if we do get a continuation of the breakdown to the $844-861 target and another chance for any interested buyers to purchase the yellow metal in the $850 area.