Bailouts for everyone!

Stock Markets rallied around the globe on news of the largest bailout in history... Hurray!


Hell, F&F got bailed out, why not the Big-3 next -- they only need $ 50 Billion...

Big Three auto makers prepare to lobby for as much as $50 billion in loans

DETROIT -- Ford Motor Co. Chief Executive Officer Alan Mulally said that more legislators are "in our corner" as the three U.S. auto makers prepare to lobby the government for as much as $50 billion in low-cost loans.

"I think last year was a real turning point," Mr. Mulally said following a speech in Dearborn, Mich., on Monday. "I think a lot of people [in Washington] believe in the industry."

Ford, along with General Motors Corp. and Chrysler LLC, are hoping to persuade the U.S. government to provide as much as $50 billion in low-cost loans as slumping sales in the U.S. market eat into profitability. A bill signed into law last year authorized loans of as much as $25 billion to help car makers and suppliers retool plants to produce new, highly fuel-efficient vehicles.

"I absolutely don't think it's a bailout," Mr. Mulally said. "I think it will be a loan at lower interest rates with the caveat to pay it back. It is written for $25 billion but there are a lot of people who believe that more would help speed the transition," he said.


Once the Big-3 are taken care of, Paulson might want to start taking a look at the FDIC, because once WaMu goes kaput, they too will need a fresh cash infusion

WaMu replaces CEO, signs agreement with regulator

Washington Mutual Inc. replaced its chief executive on Monday as the nation's largest thrift tries to find a new leader to guide it through the housing crisis.

The lender also said it signed an agreement with its main regulator, the Office of Thrift Supervision, which requires it to provide an updated business plan and forecasts for results, asset quality, capital and the performance of business segments.

Kerry Killinger, who was CEO of WaMu from 1990, will be replaced by Alan Fishman, the company said.

"Like everyone else in the business, WaMu is facing very significant pressures," Fishman said during a conference call Monday.

WaMu shares have slumped on its exposure to the housing market and risky mortgages, and questions have arisen about its capitalization and further losses. It has cut thousands of workers and slashed its dividend. Through Friday's close, WaMu shares were down about 88% over the previous year.

Credit quality may deteriorate and that could mean WaMu needs to raise more capital, the analysts said. The company could probably raise $1 billion to $3 billion of capital from TPG, the private-equity firm that already owns a big stake. It could also raise that amount by selling some bank branches, they explained.

"If it needs more than that, it could have a tougher time finding it," they warned. "In that case, we could not rule out a regulatory intervention."

The memorandum of understanding WaMu signed with the OTS may be the first intrusion into its affairs by regulators. If the company's condition worsens, the OTS can restrict WaMu's business operations, as it did with another thrift, Downey Financial on Friday, the analysts said.


While you have the checkbook open, may as well write a check for the PBGC too, as they will soon need it

PBGC Panned for Risky Investment Plan

America's pensions could be in safer hands. The Pension Benefit Guaranty Corp., the government agency that backs the retirement benefits for more than 40 million Americans, is about to take a step to make overly risky investments, according to the Government Accountability Office. And it suggests that the PBGC move may be a dangerous path to easing its own debts.

The congressional watchdog says that the PBGC has $68 billion in assets, but that its $14 billion deficit places it on the GAO's "high-risk" list of federal programs. The pension insurer used to limit its investments in equities to a range of 15 to 25 percent of its holdings, but announced plans to lift that rule in 2008.

The agency's investment targets now include 40 percent fixed-income, 39 percent equities, 10 percent real estate and private equity, 6 percent alternative equities, and 5 percent alternative fixed-income. The PBGC has about $55 billion to invest under the new investment policy.

"While the new investment policy aims to reduce PBGC's $14 billion deficit by investing in assets with a greater expected return, we found that the new allocation will likely also carry more risk than acknowledged by PBGC's analysis," according to the GAO.


Additionally, the state of California is not looking too good - could you spare some chump change (~ $15B) ?

States pay price for binge in spending

State and local government spending has been rising three times as fast as revenue amid warnings from governors that their finances are nearing crisis stage.

As many Americans face stagnant wages, high gas prices and job uncertainty, new government figures show that state and local governments boosted spending 7.8% in the second quarter compared with 2007 while revenue rose 2.5%. Government is on a hiring binge, too, even as private-sector jobs disappear.

In a move to curb spending, California Gov. Arnold Schwarzenegger took sweeping action Thursday to pressure the Legislature to pass an overdue budget. He signed an order laying off up to 22,000 part-time and temporary state workers and cutting the pay of 200,000 others to the minimum wage of $6.55 per hour. The state is on track to spend $15 billion more than it will take in during the next year.

May want to keep a few blank taxpayer checks available for hedge funds too - if you haven't noticed already, they are having a tough time these days

Hedge funds deliver worst returns in decade

Hedge funds, which often promise to make money in all markets, are delivering their worst returns in a decade, according to new data released on Monday.

In the first eight months of the year, the average hedge fund lost 4.83 percent, according to data from Chicago-based hedge fund tracking firm Hedge Fund Research. In 1998, when hedge fund Long Term Capital Management collapsed, the average fund was off 5.5 percent, HFR said.

As fund managers find it ever more difficult to find a trend, more are posting heavy losses that are prompting clients to ask for their money back, several investors said.


Lastly, because it's getting close to dinner time, what about the CDS market - will you please bail them out too?

Fannie, Freddie Seizure Triggers Credit-Default Swaps

The government seizure of Fannie Mae and Freddie Mac triggered what may be the biggest settlement of credit-default swaps in the market's decade-long history.

The International Swaps and Derivatives Association will set rules by which parties to credit-default swap trades can demand payment on the net amount covered by the contracts, according to a statement today.

According to an ISDA memo yesterday obtained by Bloomberg News, 13 Wall Street firms agreed unanimously that the government takeover of the biggest U.S. mortgage-finance companies qualified as a so-called credit event on contracts covering more than $1.4 trillion in Fannie and Freddie debt.

``The market is not experienced at settling a credit event for a name of this size, so it is a bit of an unknown,'' said Sarah Percy-Dove, the head of credit research at Colonial First State Global Asset Management in Sydney.


Closing:

Will a line in the sand eventually be drawn, or will taxpayer bailouts be available for everyone?

Wife is calling - time for dinner

Best Regards

Randy

DOW -- Trouble Ahead?

Last Dec/Jan the major US equity markets experienced significant sell offs, and the Dow nearly plunged through 11,600, but support was found, and for the next couple of months the DOW hovered slightly above the 12,000 range... Then came the month of March 08, when Bear Stearns was imploding and bad news started to pour in from every angle.

At that time, I knew the situation was grave and opined that the Plunge Protection Team (PPT) was wide awake at night, trying to find a solution -- otherwise the last leg of confidence in their "Goldilocks" economic charade would fail.

Here's my Sunday Evening, March 16th, 2008 post: Tumultuous Week Ahead

Lo and Behold, within hours of that post, opening markets around the globe began to tumble -- causing the PPT to panic and come out fighting (on a Sunday night)... With their big cannons and guns ablazing, it was announced the Fed would immediately:

Modify the Discount Window -- On March 16, 2008, the Fed further extended the term for borrowing to 90 days, and further reduced the spread to the target federal funds rate to 25 basis points.

Open the Primary Dealer Credit Facility -- The establishment of the PDCF was announced on March 16, 2008. The Board determined that unusual and exigent circumstances existed in financial markets, including a severe lack of liquidity that threatened to impair the functioning of a broad range of markets, and announced that the PDCF will be in place for at least six months and may be extended as conditions warrant.

These two new unparallelled additions would immediately join two other unprecedented actions taken earlier in the year:

- The Term Auction Facility (TAF) in Dec 07
- The Term Securities Lending Facility (TSLF) on March 11, 08

Within days, easy liquidity created through these four new monetary spigots started to calm markets, and as increasing gains were made many shills began to pronounce: "The Credit Crisis is Over".

Well, here we in June 08 and things aren't looking so well again...

With recent reports of:

- The biggest jobless increase in over two decades
- The largest housing bust since the Great Depression
- Oil/gas at an all-time high
- Contagion spreading across the banking sector (significant losses ahead)
- Recent MBIA and AMBAC downgrades

Last Friday's 400 point drop in the DOW should have been a wake-up call.

Let's look at a chart of the DOW:

Note: I'm not a chartist, but I do have a lot of common sense and believe that anyone can relate to/understand what I'm about to say.

Looking at the chart above, last Friday the DOW closed at 12,209. On the assumption more bad news will follow in the days/weeks ahead, where can one expect to see the next level of downside support and will we eventually break through it?

If you follow the chart over to March 2007, you will see that 11,939 is the next downside support level. If we break through there, it's quite likely we will also test the following downside support level-- found in Jan 08 at 11,634. Now, this 11,700-11,600 level will provide very strong downside resistance and the PPT will fight tooth and nail to prevent failure, but if we DO break through it -- look out below as automated sell signals kick in from around the Globe—potentially creating a selling panic/free-fall.

From there it's a 1,000 point drop to the next downside support level -- July 2006 @ 10,683.

Closing:

I don't expect to open in a free-fall tomorrow or the next day, but want you to be aware that we're only 300 points from breaking through key downside support levels. Once that happens (which I'm sure it will in the coming weeks) the next support level @ 11,700-11,600 becomes very vulnerable -- and if that one doesn't hold, expect all hell to break loose as the last leg of propped-up confidence in our economy gives way to unknown panic/crisis.

With that said, and expecting more bad news to roll in each and every day, I feel quite confident in stating that both of these downside support levels will eventually be broken (this year), but the real question ultimately relates to timing and the PPT -- What else do they have up their sleeves? No one yet knows, but expect a fight.

Best Regards

Randy

Economicrot.blogspot.com

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The Non-Energy Crisis--Lindsey Williams

Excellent, Fantastic, almost unbelievable late-2006 presentation that I urge everyone to watch.

In summary: Lindsey was a an ordained Baptist minister in Alaska during the energy crisis of the 70's and was present in several "Top Level meetings" when the largest oil field ever discovered in North America was celebrated (Gull Island Oil Field)-- only to become "Classified" the next day and never tapped/put to use.... Why? To control oil supplies and establish a dollar pricing agreement w/OPEC -- so they would recycle those dollars, and buy our national debt. He who controls oil and oil pricing, controls the world.

Iraq (World's 2nd largest oil reserves) was a setup because they wouldn't accept US Dollar standard and Iran (3rd largest reserves)will be next.

There are multiple parts to this series and I highly suggest you watch them all, but I've posted up the main ones so you can get a taste.

Part 1
Part 2
Part 3


Non-Energy Crisis Part 4




Non-Energy Crisis Part 5




Non-Energy Crisis Part 6




Non-Energy Crisis Part 7




Non-Energy Crisis Part 8

Prepare for the Collapse of the US Dollar

Lindsey Williams, author of the 'Energy Non Crisis' explains how the US Dollar Crisis is upon us via the World Bankers choice of using Oil as the US Dollar's backing.

Prepare for the collapse of the Dollar



Suggest you watch the prior set of Lindsey William videos for a better understanding of what he's talking about here.

Is the Credit Crunch Over?

The recent stock market & dollar rally, coupled with the massive commodity/metals sell-off, has led many to believe that the Fed & Plunge Protection Team (PPT) were able to sucessfully restore liquid credit markets and the turmoil is now over.


My Thoughts:

Aside from unprecedented/wide-scale PPT market manipulation, and a mere slowing of the credit implosion helped by new Fed lending apparatuses, nothing has been resolved. Homes are still foreclosing in record numbers, legislators are now calling for new regulations to prevent future “similar” banking/credit issues, lending standards are getting tighter, financial institutions still have no market (aside from the Fed monetization window) for their gargantuan off-balance sheet/tier-III toxic waste piles, and American consumers (trying to cope with huge inflation waves, combined with a collapsing wealth-effect brought about by falling home values and lack of available “new” credit) are starting to pull back on discretionary spending. Note: 70% of the US economy is consumer spending

Bottom line: Recent sentiment change created by Financial Wizard market manipulation is all smoke and mirrors – the PPT is trying to re-establish faith and trust in markets (and a currency) that are ready to implode.


What manipulation am I talking about?

Let’s look at the recent precious metals sell-off: Gold and Silver took their worst beating in years during the recent commodities smack-down. How in the world could these metals get crushed so badly when dealers are overwhelmed with orders and can’t get or keep enough products on their shelves?

Must see this link (and pictures below) to understand what I’m talking about: Silver Shortage: 19 dealers reported "Sold Out"

Bullion Direct

Kitco

Additionally, I received this message via email from APMX just yesterday:

Due to the OVERWHELMING demand for precious metals, our online ordering system has been unable to keep up with our customers’ needs. We have had to disable the APMEX ordering system to allow us ample time to upgrade our site to accommodate the increased demand. We apologize for this temporary problem. In the mean time, we will be accepting telephone orders for the following items only as we have them available:1 ounce Gold American Eagles1 ounce Gold Canadian Maple Leafs1 Ounce Gold Krugerrands100 oz Silver BarsMisc Generic .999 Fine Silver90% Coin SilverDuring this time, we will have a minimum order of $5,000. We regret we have had to make this drastic change to our ordering process and rest assured, we are working expeditiously to correct the problem. As soon as we have our new site up and running, we will notify you via e-mail when you can again place orders online.

Or how about this one:

High Demand for 2008 Silver Maple Leafs: The Royal Canadian Mint has found itself unable to fully meet the unprecedented demand for silver Maple Leaf coins with its current supply, and has temporarily suspended shipments. This situation is temporary until more of this fine bullion product can be struck and shipped. Because many of our customers want to purchase this product at today's prices, Northwest Territorial Mint will accept orders now for shipment when the product becomes available, which we expect will exceed 30 days. If the wait for product proves too lengthy, we reserve the right to substitute a similar silver product.

OK, if there is such a supply shortage, why did PM prices crash this last week?

It was a PPT manipulated paper smack-down (through engineered margin call selling of futures, options, etc – to fry the longs, destroy prices and signal an end to the commodity boom) that has changed none of the underlying precious metals supply/demand/inflation-hedge/flight-to safety fundamentals.

But it did provide a great buying opportunity – could be a very good time to back up the truck and load up w/physical…

Take a look at who is taking advantage of this smack-down:

Asia jewellers on buying spree as price sinks-- It probably won’t be too long before PM prices regain their footing..

Jewellers across Asia rushed to buy gold on Thursday after prices tumbled more than $100 an ounce since spiking to a record above $1,000 an ounce this week, pushing up premiums in key bullion trading centres. Gold fell more than 2 percent to hit a 1-month low of $920.30 an ounce as funds sold bullion after pushing up the price to a lifetime high of $1,030.80 on Monday.


Superb comment from a reader at a PM blog I routinely visit -- summarizes the situation perfectly: Somebody took advantage of a short trading week to slam PMs - on options expiration week (saving the shorts' shorts!) - and by the same token make a "double-top" appear out of the blue - to signal "an end to the commodities bull" and "an end to the bearish dollar" - based on NO REAL PHYSICAL TRADING - just "PAPER"...

With our manipulation discussion out of the way, what about the credit crisis being resolved?

Bloomberg Today:

Goldman, Lehman Rating Outlook Cut to Negative by S&P (Update3)

March 21 (Bloomberg) -- Goldman Sachs Group Inc., the biggest U.S. securities firm, and smaller rival Lehman Brothers Holdings Inc. had their credit-rating outlook cut to negative by Standard & Poor's, which said Wall Street banks' profits may fall as much as 30 percent in the coming year.

``Our current expectation is that net revenue could decline'' at least 20 percent for independent securities firms, S&P said in a statement today.

Or this one:

Big U.S. finance company faces credit crisis, and shares fall

The crisis in the credit markets is threatening to engulf one of the largest commercial finance companies in the United States.

The CIT Group, a century-old company that lends money to small businesses and midsize corporations, drew on $7.3 billion of emergency bank credit lines on Thursday, causing its shares and bonds to plummet.

CIT, whose businesses range from making student loans to financing purchases of airplanes and railroad cars, announced that it would try to sell some assets or businesses to raise cash and repay its debts. Analysts said the tightening credit squeeze could drive the entire company into the arms of a bidder.

The developments at CIT suggest that the credit troubles that felled Bear Stearns this week continue to spread, despite efforts by the Federal Reserve to encourage banks to lend to other financial companies.

Another:

Credit crisis puts vise grip on leveraged companies

There are 93 US companies at risk of defaulting on $53 billion in debts, a new report shows, marking a 50 percent jump since last June, when the credit crisis started. Many of these debt-laden companies were involved in giant leveraged buyouts.

Standard & Poor’s ‘‘weakest links’’ report is forecasting that 75 US companies will default on their debts in the next 12 months. Of the 93 companies at risk, more than half were involved in takeovers by big-name private equity firms, including Boston’s Thomas H. Lee Partners, Bain Capital, and J.W. Childs Associates.

The sectors worst hit are media and entertainment, and consumer and retail. Many of the names are familiar to consumers, like Uno Restaurant Holdings Corp., the Boston-based pizza restaurant group; Linens ‘n Things Inc., the home goods chain; and Univision Communications Inc., the Spanish-language television and radio company.

‘‘This is just the beginning,’’ said Diane Vazza, managing director and head of Global Fixed Income Research at Standard and Poor’s in New York. For companies struggling with debt payments, she said, ‘‘There’s no way in a slowing economy, potentially a recessionary economy, to grow out of that.’’

I could go on with additional links to illustrate the depths of this credit crisis, but I think you get the point—the recent smoke and mirrors caused by PPT market manipulation has solved nothing. Our banking system is still insolvent and the fed is pumping money into a bottomless pit.

BOTTOM LINE: A one or two day turn around for stocks and commodities means little.

NOTHING, absolutely nothing regarding underlying fundamentals has changed from last week, except the titanic has taken on a bit more water, and the captain is desperately trying to reassure us by saying -- "it's only a small leak and lifeboats (PM's) won't be needed."

Go ahead and trust the captain -- but at your own peril...

OK, my doom and gloom is out of the way -- how about some closing funnies?

Regards and happy easter to all!

Randy

Nefarious Market Manipulation

As I wrote in my Sunday post: Tumultuous Week Ahead, the Plunge Protection Team (PPT) certainly has been busy.

Yesterday, the team bailed out/monetized Bear Stearns debts with $30 Billion of public money (and I'm sure we'll see plenty more where that came from).

Today, not to be outdone by the previous day’s activities, the nefarious market manipulators (PPT) pulled out all stops and their orchestrated manipulation operation was synched up perfectly to the FOMC announcement -- and was so extreme/blatant (across all spectrums), that I nearly fell ill from disgust.

Specific Examples of their Manipulation:

FOMC Rate announcement took place today at 2:15PM EST and the cut was 75bp.

To anyone with a working brain, the results of a significant rate cut like this should be dollar negative and gold positive (right?) Well look at the charts below—especially after the FOMC announcement

US DOLLAR INDEX CHART—Note the Dollar’s increase after 2:15 PM

SPOT GOLD—Note the fall in gold price after 2:15 PM (down > $20)



How about the DOW sell-off immediately after the 2:15 announcement (investors were disappointed with a 75bp cut—they expected 1%) and the PPT rescue, and huge rally later in the day?


S&P Chart below is nearly identical to the DOW above


We have a “free market" economy/society?

Come on, cut us a break — We may act like sheep sometimes, but we're not stupid, and your manipulation operation was obvious to anyone with a heartbeat.


I guess the NY Times was spot on with their article yesterday:


Fed Acts to Rescue Financial Markets. (Snippets below)

The New York Fed, which runs the Fed’s daily market operation and has long been the Federal Reserve’s primary channel for dealing with Wall Street...

In a potentially even bigger move, the Federal Reserve also announced its biggest commitment yet to lend money to struggling investment banks. The central bank said its new lending program would make money available to the 20 large investment banks that serve as “primary dealers” and trade Treasury securities directly with the Fed.

Much like a $200 billion loan program the Fed announced last Tuesday, this program will essentially allow the government to hold as collateral a wide variety of investments that include hard-to-sell securities backed by mortgages (My 2 cents--Worthless Toxic Waste). But Fed officials told reporters on Sunday night that the new program would have no limit on the amount of money that can be borrowed. (Did he just say “NO LIMIT”???)

“The Federal Reserve, in close consultation with the Treasury, is working to promote liquid, well-functioning financial markets, which are essential for economic growth,” he said. “These steps will provide financial institutions with greater assurance of access to funds.”

I guess the next question is: Will their incessant nefarious manipulation schemes work? Will they be able to re-instill confidence and liquid, well-functioning financial markets?

My thoughts are: They will not fix a thing, but will merely prolong the inevitable agony...

But for today, Bernanke's Prayers were answered...

Please post up your thoughts/comments on the issue.

best regards
Randy

A Few videos on the dollar--for your education/enjoyment

Billionaire Jim Rogers Flees The Coming Collapse




The inevitable collapse of the dollar




Death of the U.S. Dollar




Ditching the Doomed Dollar




Ron Paul on Cavuto: Fed's $200 Billion Injection--a sign of desperation




Jim Rogers on CNBC: ABOLISH THE FEDERAL RESERVE and Bernanke




America: Freedom to Fascism

Precarious Economic Conditions & Gold

The Dow Industrials and S&P 500 have dropped ~ 14% since the October 07 top. The S&P has started this year worse than ever, and the drastic plunge over the past three days is the sharpest since 2002.

We’re now six months into the greatest credit crunch of the modern era. Defaults on mortgages, have skyrocketed as individuals find it more advantageous to mail the house keys back to the lender rather than make sharply higher reset payments they can’t afford.

It’s not just the borrowers who are suffering. It’s also the banks, pension funds, life insurance companies and individual investors who bought toxic mortgages, repackaged as complex securities from Wall Street investment banks.

But the roller coaster ride of bank and financial system losses has merely just begun:

Insurer Of Bonds Loses Top Rating

Ambac Financial Group, the nation's second largest insurer of bonds, lost its precious AAA rating from Fitch Ratings on Friday over concerns that the company no longer had enough capital to guarantee billions of dollars in debt now imperiled by the subprime mortgage crisis.

The move to downgrade Ambac to a rating of AA could further roil financial markets, increasing pressure on Wall Street banks that hold this bad debt and making it even more costly for local governments to raise money for public projects.

This could spark a substantial sell-off by institutional investors such as pension funds that can only invest in top-rate securities, causing their value to drop. That in turn would prompt even more selling. As the securities become less valuable, Wall Street firms could be forced to write down billions of dollars on their balance sheets, restating how much their holdings of these securities are worth. The banks, which have already suffered staggering losses, have relied heavily on bond insurance to reduce their exposure to subprime mortgage debt and other complicated securities linked to these loans.

"Everyone thinks they're looking at the cliff over Armageddon," said Ed Rombach, senior derivatives analyst at Thomson Financial. "If you think the write-downs have been bad so far, the next write-downs could be twice as big."

MBIA Next?

Insurance company MBIA Inc. (MBI) Friday said it found the move by Mood's Investors Service to review the company's ratings for a potential downgrade, surprising. Moody's initiated a review of the Aaa financial strength ratings of MBIA Insurance Corp. and its affiliates as well as the Aa2 ranting of MBIA's latest Surplus Notes.

The rating agency also contemplates a downward revision of the Aa3 ratings of the Junior obligations of MBIA Insurance and the senior debt of MBIA Inc. MBIA stock is currently trading nearly 23% below the previous close.

End of the Line for Monolines

Just a few days ago Merrill Lynch stunned Wall Street by reporting a net quarterly loss of nearly $10 Billion. It was the worst quarter in company history. This much was well reported.

What didn't get nearly the attention was the largest reason for Merrill's loss. This involves a little known company called ACA Capital and a financial model on the verge of collapse.

Financial institutions that trade in mortgage-backed securities very often buy insurance, in the same way you buy insurance for your car, to protect themselves in the event of a default by the mortgage borrowers.

The problem is that a tidal wave of mortgage defaults are sweeping the nation, creating so many losses that small bond insurers like ACA are getting swamped. As it stands, ACA is expected to go under any day now.

Of course this means that when the bond insurer goes bankrupt all the bonds that it had insured are no longer protected, hence they are riskier. In the world of bonds, price and risk are directly and inversely proportional. Merrill's bonds go down in value the closer ACA gets to bankruptcy. Thus the huge losses.

These downgrades mean a lot more losses are in the works for financial institutions. If all the bond insurers were to be downgraded, that would mean $200 Billion in losses for whoever holds debt that is insured by the monolines. If the monolines all go bankrupt then the losses would be much more.

To put that into perspective, total losses from the entire subprime credit cruch since August that have rocked the financial world and garnered headlines so far have only amounted to a little over $100 Billion.

That's right. The damage from the credit crunch that has worried so many people could triple in the coming weeks.And for these struggling bond insurers, bad news can lead to more bad news. An entire financial model is on the verge of collapsing.

Enter the Plunge Protection Team

Created by Ronald Reagan back in 1988 through executive order 12631, the Working Group on Financial Markets, also known as the Plunge Protection Team (PPT) was created to respond to events in the financial markets surrounding October 19, 1987 ('Black Monday').

The Current PPT group is made up of:

Treasury Secretary Paulson (Chairman of the PPT)

Ben Bernanke (Chairman of the Board, Federal Reserve System)

Christopher Cox (Chairman of the Securities and Exchange Commission)

Walter Lukken (Chairman of the Commodity Futures Trading Commission)

These four PPT Kingpins, with inputs/suggestions from their numerous advisors, are currently operating in panic mode and are attempting to gin up new ways to thrust new money into the falling markets and US economy. The present situation has become so precarious they are now routinely advising President Bush and were actually the “brains” behind recent calls for tax rebates -- meant to pump up consumer spending. In the meantime (tax rebates will take time), they are using government funds to pump money into the futures markets--in an attempt to "fry" the shorts and make the impression that big money is buying up the falling market. The hope is: if other traders see this, they will start following the big money higher (probably futile).

President Bush acts on PPT Advice:

President Bush yesterday grabbed the headlines with his "economic stimulus" proposal -- it may be a "tax break," or a "rebate check" of $800 to $1600, and/or allow businesses to deduct half the cost of new equipment purchases. The stimulus will be "direct and rapid," "provide a shot in the arm," "lift our economy," and "help the economy create 500,000 more jobs 'more or less' than it otherwise would." (Article Below)

Bush: Economy Need a Shot in the Arm

President Bush proposed a series of short-term tax cuts Friday that he said would provide a boost for the struggling U.S. economy.

Speaking at the White House, the president did not give details of his plan but said it would include tax breaks for businesses and individuals worth at least 1 percent of the nation's gross domestic product, or roughly $140 billion to $150 billion.

"By passing an effective growth package quickly we can provide a shot in the arm to keep a fundamentally strong economy healthy," said the president.

He said that his advisers believe the economy can keep growing, but that the risk of a downturn has convinced him to back a stimulus package.

"There are also times when swift and temporary actions can help ensure that inevitable market adjustments do not undermine the health of the broader economy," Bush said. "This is such a moment."

Federal Open Market Committee Rate Decision Due on 30 January 08

What should we expect? I think, due to recent market weakness, a 50bp cut is an absolute certainty while a 75bp cut is looking more probable by the day. My thoughts are: if we don’t see some market improvements soon, we may well see an emergency rate cut before the 30th, followed by another on Jan 30 – a total cut of 75bp or better.

So, what does all this mean for gold

Consolidation kicks in

Gold bounced from a one-week low on Friday after this week's climb to a record above $900 an ounce, but the market could consolidate before charging higher, fund managers and analysts said.

All eyes were on a U.S. Federal Reserve meeting on interest rates Jan. 29-30 after Chairman Ben Bernanke told a congressional committee more rate cuts might be required as the economic outlook worsened.

"Gold is consolidating after touching recent highs," said Christoph Eibl, head of trading at Tiberius Asset Management, noting that there had been some investor selling of gold held in exchange-traded funds (ETFs).

"ETF investors ... are holders rather than traders, therefore the recent drop has some strength," he said.

Gold's drop from the record high was partly driven by selling from investors and funds to cover margin calls from losses in stock markets amid fears of a recession in the United States.

Gold's investment appeal was intact owing to flight-to-quality demand on the back of turmoil in financial markets as a result of a mortgage-related crisis and worries about higher inflation.

"External factors such as higher inflation expectations, broader economic concerns, geopolitical tensions and Fed rate easing are likely to drive prices higher," Barclays Capital said in a report.

The World Melts for Gold

Gold-bug fever is spreading.

From China to the Middle East, new ways to invest in gold are rapidly popping up in developing countries. It's transforming the market for one of mankind's most venerable ways to sock away wealth.

The door is opening to a new class of investors who previously wouldn't have had access to gold futures and other tools. Their rush to invest has helped fuel soaring prices -- gold crossed $900 an ounce for a time in the past week, and there are some calls for $1,000 -- while adding volatile new dynamics to the market.

The democratization of gold speculation outside traditional Western financial centers has the potential to magnify the already strong appeal of gold as a hedge against global recession, inflation or just general uncertainty.

Gold rush" grabs Chinese as prices hit new high

The appeal of gold as an alternative investment is increasing in China as its price hits new highs and is forecast to keep rising in the mid to long term.

Stimulated by expectations of U.S. interest rate cuts and soaring global oil prices, gold reached an all-time high earlier this month. Citibank estimated its price is expected to hit 1,000 U.S. dollars an ounce this year.

The strong upward trend has attracted individual Chinese investors such as Yao Yun. The chief financial officer of a Shanghai-based foreign company bought 50,000 yuan (6,849 U.S. dollars) in gold bars and the price has risen by 12 yuan per gram in just half a month.

"I believe the price will keep rising," he said. "The stock market is too volatile, and the real estate sector is subjected to macro-control. Investing in gold is a good choice at this time."

In Caishikou Department Store, a popular physical gold dealer in Beijing, more than 100 people lined up to purchase bullion for the Lunar Year of the Mouse on Nov. 22, the first trading day of the products. More than 200 kilograms of the gold bars were sold within 1.5 hours. Moreover, the total subscription amounted to two tons.

Li Xiang, a manager of the department store, said sales of gold products surged more than 50 percent to 2.38 billion yuan in 2007.

China Gold Association statistics revealed that gold investors nationwide have exceeded 1 million. The number doesn't include speculators of gold futures, which made a strong debut in Shanghaion Jan. 9.

On that day, China gold futures contracts surged to the daily 10 percent limit minutes after trading started at 9 a.m. on the Shanghai Futures Exchange (SFE). More than 6,000 clients traded on the market.

Experts believe the China gold futures market will grow into a leading global market as it was launched at a time when international gold prices have repeatedly been hitting new highs. Global prices jumped more than 30 percent throughout last year, representing the biggest increase since 1979.

Russia’s gold and forex reserves reach all-time high

Russia’s gold and foreign currency reserves have increased by $11.5 billion (2.5 percent) over the past three weeks, to $477.7 billion. This is the highest level since records began.

Bottom Line w/regard to Gold:

Expect to possibly see some more short-term consolidation, but with future (significant) rate cuts in store and growing worldwide demand increasing, the long-term trend will be up, up, up.

Summary of this article:

Major problems are on the horizon, markets are reeling and the mainstream is finally catching on to what we've been predicting for quite some time. The Plunge Protection Team however is working overtime and with an oversold equities market, I expect to see a short-term bounce, but it will fail to ultimately recover or impress.

Additionally, the Fed is certain to cut rates big-time in the coming weeks, and Congress will approve some sort of stimulus plan next week (probably too little too late), but once the Monoline downgrades (w/more to come) start the chain reaction of downgrade/markdown dominoes, we will begin to hear the fat lady sing.

As an aside, these new rate cuts and stimulus plans will most certainly cause the dollar to plummet to new all-time lows, and consumer inflation (already running at > 12%--see blue line on chart below) will soar, causing gold to take off on another tremendous up-leg.

I took the liberty of borrowing this Gold spot price chart below from Axstone.

SMILE IF YOU OWN GOLD!

Regards

Randy

Financial Wizard Manipulation

I have to give some credit to our Global Financial/Wall-Street Wizards. Today’s engineered price drop in commodities (Oil, Gold, Silver, etc) was pretty impressive, and the fact that it was executed on a thin trading holiday (Veterans Day) was no mere coincidence, as it provided them with a tremendous amount of leverage.

Don’t be alarmed though. This sell off, engineered by Central Banks to strengthen the dollar vs. nearly every currency except the Yen, is temporary in nature, and was done to (1) take some trade pressure off countries with strengthening currencies (2) restore some confidence back into the dollar, (3) reduce the nearly vertical ascent in gold/oil prices and (4) bring some green signals back into the ailing US equities market... They absolutely had to do this, because FASB 157 is to take effect on Thursday, Nov. 15. These new FASB provisions will make it much harder for banks to avoid “mark-to-market” pricing on their level-3 (off balance) securities, triggering much larger financial write-offs and potentially exploding into a new financial panic…

From Barrons: “ RBC Capital Markets interest-rate strategist T.J. Marta says that additional write-downs are coming and adds the U.S. banking sector is "embarking on its third major crisis since the 1920s." He adds: "Not only have the 'go-go' days of structured products come to an inglorious end -- at least temporarily -- but vast swaths of the financial system lie in ruins,"

The Financial Wizards understand that this is coming and they absolutely have to try to shore up investor confidence in the U.S. system beforehand… Today was a compelling, yet futile attempt at their manipulative ways.

So how did they engineer this?

As you all know by now, the Dollar has been bleeding badly and has been setting new record lows against almost every currency daily—except for the Yen. The Japanese for years have been trying to keep their currency artificially low to (1) enhance trade and (2) supply the global system with an endless spigot of cheap money. The Yen Carry Trade has evolved (Yen borrowed at .5% and leveraged at high multiples to invest in other areas) and has provided nearly free money for all who wish to blow big beautiful bubbles.

As previously stated, the Yen was practically the only currency NOT strengthening in direct relationship to the falling dollar. Therefore, in order to strengthen the dollar against the currencies it was falling against, make the Yen stronger… Voila! The dollar strengthens… Additionally, this Yen-Dollar manipulation was being rigged while concurrently having OPEC work to bring down Oil Prices.

With regard to the Dollar, just look at what Central Banks are up against (Bloomberg snippets below)

Nov. 12 (Bloomberg) – “Central banks from Bogota to Mumbai are imposing foreign-exchange curbs to take control of their soaring currencies from traders dumping the dollar.”

``Central banks are struggling to find new ways to intervene against their currencies and some of the proposals simply can't work,'' said Mirza Baig, an analyst in Singapore at Deutsche Bank AG, the world's biggest currency trader. Some plans are ``truly bizarre,'' he wrote in a report.”

`More Violent Correction'” An index tracking the dollar against seven major trading partners dropped to 71.11 on Nov. 2, the lowest ever, a week after the Fed reduced its target rate for overnight loans between banks by a quarter-percentage point to an 18-month low of 4.5 percent.””

Stephen Jen, head of currency research at Morgan Stanley in London, said on Nov. 2 that the dollar's slide threatens to turn into a ``more violent correction'' that may require joint intervention by the U.S., European Union and Japan. The dollar will trade at $1.51 per euro by year-end, Jen said on Nov. 8.”`

`The weaker dollar causes central banks to look at foreign inflows differently,'' Robert Fullem, vice president of U.S. corporate-currency sales at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``The market is pushing the central banks into corners. I don't have faith in them. They may have to push the envelope further.''

So, where do we go from here?

I wouldn’t put much faith in the Financial Wizards, as they are putting a band-aid on a gaping wound where a tourniquet is required. Sure, they can help to slow the bleeding, but with over 400 billion in toxic waste to be written down soon, bleeding to death will be the final outcome.

Bottom line: don’t worry about the noise generated by our Financial Wizards today. Over the mid-long term, this will be regarded as merely a blip... The dollar, financials and many equities are going much, much lower while real assets (Gold, Silver, Oil, etc) are going much, much higher.


For all our soldiers who are still in harm’s way today, let us give thanks and say a prayer for their safe return.

Best regards and Happy Veteran’s Day to all!