Charts to ponder

Dollar - Severely Overbought Condition

OIL - Severely Oversold Condition

Gold - Severely Oversold Condition

DOW - Slightly Oversold but look at recent PPO Downturn - Going Lower

Oil expectations 2008-09?

Back in June, I told you about Lindsey Williams - who was an ordained Baptist minister in Alaska during the energy crisis of the 70's. Lindsey 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 OPEC would recycle those dollars, and buy our national debt and establish US Dollay Hegemony, as the country who controls oil and oil pricing, controls the world.

Here's a link to the videos and post: The Non-Energy Crisis--Lindsey Williams

For those of you unaware, recently (due to subject sensitivities) Mr. Williams' life was threatened and he was forced to shut down his web-site and stop selling his books and CDs.

Well, I just ran across a new article over at Silverbear Cafe that picks up where the videos above left off.

The Energy Non-Crisis (Bob Chapman).

Key extracts below, but I highly urge you to read the entire article.

At the urging of Dr. Stanley Monteith of Radio Liberty, Lindsey called back the same oil executive who had warned him about the danger he would be in if he continued to disseminate certain information - to ask if in fact there was any information that he could in fact convey to the public without upsetting the powers that be. The oil executive, who Mr. Williams had known for years, gave Mr. Williams some startling revelations which he could safely reveal to the general public. As you know, the Illuminati are arrogant enough to reveal some of their plans because they believe there is nothing we can do about it.

Basically, Mr. Williams was told that over the next twelve months, from mid-2008 to mid-2009:

(1) news of super giant oil fields, ready to produce, would be announced for two locations, in the Northern Slopes of Russia and in Indonesia, which oil fields would together contain more oil reserves than the entire Middle East;

(2) that this news would drive oil prices down to $50/barrel;

(3) that OPEC countries, especially in the Middle East, would be bankrupted by this price decrease;

(4) that this would cause the financing of our foreign trade and current account deficits through purchases of treasury paper by foreign nations with their surplus oil profits to collapse, leading to the collapse of the dollar;

(5) that the collapse of the dollar would cause unprecedented financial strife and turmoil in the US, and that it would take many years for the US to recover from this financial debacle;

(6) that they (big oil) support John McCain for President; and

(7) that US domestic oil reserves would never be tapped, and that any legislation which might allow domestic reserves to be tapped would not be allowed to pass, leaving the US dependent on foreign oil forever.

Interesting indeed...

Randy

The U.S. recession, the dollar, oil and IRAN

From Paris, Max Keiser, journalist and broadcaster speaks to Afshin Rattansi in Tehran.

Mr. Keiser absolutely nails the real issue that no one in America is talking about!

Could it be that the news we receive through our corporate owned media system is being controlled (not allowed to talk about this subject)? Hmmm...

China Vs The U.S. - The Battle For Oil

China's sky-rocketing growth and shortage of sufficient resources is forcing China to set its sights outside its borders in a frantic search for oil, but the major oil-producing countries are kept off-limits by the United States, forcing China to do business with the rogue states, African dictatorships, Iran and former Russian states - to get the oil they desperately need. Featuring field encounters, archival footage, news reports and maps to outline the latest threat in world geopolitics.

Part 1


Part 2


Part 3


Part 4


Part 5

Videos of Interest

The global "Credit Crisis" is back: Stephen Long, ABC Lateline covers ongoing problems and longer term impacts -- a short video: watch to the end.




Economic Consequences of Attacking Iran




Wake Up, Peons




Ross Perot is back! Launches Public Information Website

The American people must wake up and face the reality that promises made in the past will soon bankrupt this nation.

"The economic crisis facing America today is far greater than anything since the Great Depression," said Perot. "Our federal government continues to spend us deeper into debt. The American people must get directly involved and demand an end to deficit spending. Perotcharts.com

IRAN has Bush over a Barrel

If you follow this blog regularly, you know I've been talking about IRAN for a couple of years now, and I've been predicting that we'll probably start dropping bombs before the end of Bush's tenure in office.

Why do I feel this way? Well, it's complicated, but I'll try to keep the explanation simple:

The US Dollar has been the World's reserve currency since the end of WWII. This reserve status was seriously threatened in 1971, when Nixon removed the Dollar/Gold peg and changed the dollar from a "commodity" to a "Fiat" currency.

The US-Saudi Arabian Joint Commission on Economic Cooperation of 1974 restored waning confidence in the dollar by mandating that OPEC sell its oil for US Dollars ONLY. Any country who needed oil now needed to earn or borrow dollars to pay for their oil -- creating a huge worldwide demand for the US dollar and any excess dollars eventually got recycled back to the US.



For many years, this excess dollar recycling created a boon for America and these Petrodollars were used by our banking system to create new credit/debt -- helping our economy to grow.

If there were no good reasons for other countries to buy all those American dollars, the dollar would decline in value until the US economy could no longer afford to import goods from abroad.

Additionally, this excess foreign savings that America has grown used to would also dry up—putting us in quite the predicament.

The deal with OPEC however, means other countries have no choice but to buy all those excess American dollars, which props up the value of the dollar and allows the American "import economy" to go on year after year.

Effectively, America's main export is US dollars, and it is absolutely imperative to preserve a captive market for those dollars among oil-consuming countries -- the continued viability of the US economy depends on it. Americans today can still afford to consume because the economy is inundated with cheap imports, but a continued falling dollar will significantly raise the prices of imported goods and our cost of living.

For three decades, America has reaped the benefits of trading our printed dollars (created from nothing) for oil, but as our trade deficits continued to grow beyond comprehension and foreign policy blunders created new enemies, things started to change.

IRAN's Oil Bourse and refusal to take US Dollars for Oil

For decades, most worldwide oil trading took place on the New York Mercantile Exchange (NYMEX) and the London-based International Petroleum Exchange (IPE). This monopoly has recently come under threat.

In Feb 2008, IRAN opened its own oil Bourse (oil trading platform -- similar to NYMEX & IPE) and then refused to accept dollars for their Oil. (Note: Russia has taken similar steps recently and their new Bourse now trades oil for the ruble).

Theses new monetary threats are seriously jeopardizing the artificial "dollar-for-oil" prop and if the threat is not eliminated soon, the status of the US dollar as the world's reserve currency could be called to question.



Recap: Oil replaced gold in the mid 70's as the underlying peg for the USD and until Iran's recent actions all oil transactions around the globe had to be made in USD's. For three decades, oil provided the foundation for the World's reserve currency, but that foundation is starting to crack...


Shifting gears a bit

Though I disagree with Time author Robert Baer's assertion (that Bush can't attack IRAN) made in the article below, Mr. Baer has several very good points that I think everyone needs to think about.

How Iran Has Bush Over a Barrel

If wasn't clear before it should be now: the Bush Administration can't afford to attack Iran. With gas already at $4 a gallon and rising almost every day, Iran figuratively and literally has the United States over a barrel. As much as the Administration is tempted, it is not about to test Iran's promise to "explode" the Middle East if it is attacked.

The Iranians haven't been shy about making clear what's at stake. If the U.S. or Israel so much as drops a bomb on one of its reactors or its military training camps, Iran will shut down Gulf oil exports by launching a barrage of Chinese Silkworm missiles on tankers in the Strait of Hormuz and Arab oil facilities. In the worst case scenario, seventeen million barrels of oil would come off world markets.

One oil speculator told me that oil would hit $200 a barrel within minutes. But Iran's official news agency, Fars, puts it at $300 a barrel. I asked him if Iran is right, what does that mean?

"Four-dollar-a-gallon of gasoline only reflects $100 oil because the refiners' margins are squeezed," he said. "At $300, you have $12 a gallon of gasoline and riots in Newark, Los Angeles, Harlem, Oakland, Cleveland, Detroit, Dallas."

In either case, whether at $200 or $300, Bush does not want to be the President who leaves the White House on a mule-drawn cart. But Iran's blackmail is not just about oil. The Iranians truly believe they have us hostage in Iraq — our supply lines, the acquiescence of the Shi'a in the occupation. It would all change in an instant, though, especially if we were to borrow Iraq to attack Iran. The way Fars put it: "In Iraq, fighters would rise up in solidarity with each other and begin ... making the Tet Offensive in 1968 Vietnam."

If this all sounds very alarming, Iran meant it to, and it seems to be working. On Tuesday Bush was talking about the prospect of new sanctions rather than attacking.

Which leaves Israel. Are the Israelis, who have a lot more on their minds than the price of gas in the United States, going to launch a pre-emptive attack? One hard and fast rule in the Middle East is never rule out Israel's readiness to turn the table over. But an Israeli hawk on Iran, with close ties to Israel's Ministry of Defense, told me to forget about it. "There's not a chance Israel will do anything. Maybe there's a window after the American elections and the new President but even that's doubtful. Washington does not have the stomach for another war."

Israel cannot attack or contain Iran on its own; it needs the full military might of the United States behind it. So in the meantime Israel can only huff and puff, hoping new sanctions on Iran will do the trick.

Closing:

I certainly hope Bush/Cheney aren't stupid enough to wage war with IRAN, but the recent resignation of CENTCOM Commander Admiral William Fallon -- over Iran policy -- really makes one wonder what the heck they are up to.

Once again, take a good look at the Strait of Hormuz below and realize that nearly 40% of the worlds oil passes through it and right by IRAN. What would happen to the price and supply of oil IF war were to happen?

Regards

Randy

Your Petrodollars at work

While most countries are suffering from high oil prices, they are also fuelling one of the biggest transfers of wealth in history. For the oil and gas producing state of Qatar, the cost of filling up a car has not changed at all. Al Jazeera's correspondent, Dan Nolan, reports on the changing face of the country due to higher prices for oil and gas on the world market.

Qatar rides the oil boom

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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Goldilocks Economy - News Roundup

U.S. stocks rose the most in almost two months today, led by energy companies and retailers. I imaging the following issues weren't taken into consideration:

U.S. Mortgage Delinquencies, Foreclosures at Record

June 5 (Bloomberg) -- The number of Americans in danger of losing their homes to foreclosure rose to the highest in at least three decades during the first quarter as borrowers who fell behind on payments were unable to sell their homes.

The total inventory of homes in foreclosure increased to 2.47 percent and the delinquency rate, loans with one or more payments overdue, grew to 6.35 percent. All were the highest in a series that goes back to 1979, the Washington-based trade group said.

Equity in Americans’ homes falls to historic low

The equity Americans have in their most important asset — their homes — has dropped to its lowest level since the end of World War II.

Homeowners’ portion of equity slipped to 46.2 percent in the first quarter from a revised 47.5 percent in the previous quarter. That was the fifth quarter in a row below the 50 percent mark, the Federal Reserve said Thursday.

The total dollar value of equity also fell for the fourth straight quarter to $9.12 trillion from $9.52 trillion in the fourth quarter, while Americans’ total mortgage debt rose to $10.6 trillion from $10.53 trillion.

Experts expect equity to decline further as falling home prices erode the value of Americans’ largest asset, dragging more homeowners “upside down” on their mortgages.

At the end of March, nearly 8.5 million homeowners had negative or no equity in their homes, representing more than 16 percent of all homeowners with a mortgage, according to Moody’s Economy.com Chief Economist Mark Zandi. By June 2009, he estimates that will increase to 12.2 million, or almost one out of every four homeowners with a mortgage.

MBIA, Ambac, $1 Trillion of Debt, Lose S&P AAA Rating (Update3)

June 5 (Bloomberg) -- MBIA Inc. and Ambac Financial Group Inc., the world's largest bond insurers, had their AAA financial strength rankings cut by Standard & Poor's, taking with them the ratings on more than $1 trillion of securities they guaranteed.

The ratings were lowered two levels to AA, New York-based S&P said in a statement today. S&P said it would keep the ratings under review pending ``clarification of ultimate potential losses as well as future business prospects, the outcome of strategic business decisions, and potential regulatory developments.''

UBS Plans to Close Its Municipal Bond Business

UBS said Thursday it would close its municipal bond business after failing to find a buyer for what was the third-largest underwriter of American state and local government debt last year.

“UBS explored a number of alternatives to exit the institutional municipals business and determined that because of the complexities of selling the business in the current market and limited market capacity for a business of this size, a sale of the business was unlikely in the near term,” the company said in a statement.

Richmond Federal Reserve Bank President Jeffrey Lacker Says Fed Loans to Wall Street Risk More Crises

June 5 (Bloomberg) -- Richmond Federal Reserve Bank President Jeffrey Lacker, challenging Chairman Ben S. Bernanke's unprecedented actions to stem a financial panic, warned that lending to securities firms raises the risk of future tumult.

``The danger is that the effect of the recent credit extension on the incentives of financial-market participants might induce greater risk taking,'' Lacker said in a speech to the European Economics and Financial Centre in London. That ``in turn could give rise to more frequent crises,'' he said.

Lacker urged that the central bank now ``clearly'' set boundaries for its help to financial markets. In an interview yesterday on the themes of his speech, Lacker said even those new boundaries may not be believed by investors unless a financial firm fails ``in a costly way.''

The remarks are the strongest warning by an official about the consequences of the Fed's aid to securities dealers, the first lending to nonbanks since the Great Depression.

Federal Reserve Vice Chairman Donald Kohn Says Writedowns to Rise, Losses May Spread (Update3)

June 5 (Bloomberg) -- Federal Reserve officials expect some U.S. banks to report ``weak earnings'' and write down more assets while operating with insufficient reserves to cover bad loans, Vice Chairman Donald Kohn said.

The economic slump may increase problem loans for consumers, credit-card holders and corporations, Kohn testified today to the Senate Banking Committee. Banks ``must be prepared for the possibility'' that they may find it harder to borrow if financial-market turmoil continues or credit availability declines further, he said.

``We expect bank holding companies to continue to report weak earnings and further asset valuation writedowns,'' Kohn said during a hearing on the banking industry. Banks aren't increasing reserves enough to keep pace with losses, he said.

US banks fear $5 trillion balance impact

US banks fear accounting changes could impact lending as they force $5 trillion of assets back on to their balance sheets.

Analysts at Citigroup warn the planned tightening of accounting rules for off-balance sheet vehicles would force US banks to reconsider arrangements and could result in up to $5 trillion (₤2.5 trillion) of assets coming back on to their books.

‘We think it is very likely that these vehicles will come back on balance sheet.’ Birgit Specht, head of securitisation analysis at Citigroup, told Financial Times.

Ford Cutting Salaried Expenses By 15%; Delaying Merit Raises

DETROIT -(Dow Jones)- Ford Motor Co. (F) notified its U.S. salaried workers that it will trim expenses in its white-collar work force by 15% through layoffs, attrition and a hiring freeze on some open positions.

All moves, which will include trimming contract jobs, are slated to be completed by Aug. 1, Ford spokesman Mark Truby said Thursday. Truby also confirmed that merit raises for North American salaried workers, due to be paid in July, will be delayed until October. The auto maker will also suspend its U.S. tuition assistance program.

U.S. Auto Sales May Fall 1 Million in 2008, Ross Says (Update1)

June 5 (Bloomberg) -- U.S. auto sales may fall by 1 million vehicles this year and 350,000 more in 2009, said billionaire investor Wilbur Ross, who has been buying up suppliers of parts to the industry.

``The American consumer is tapped out and burned out,'' Ross said today in speech at the Ward's Auto Interior Show in Detroit. ``The pressure on consumers has been intensified by the loss of jobs and the high price of gas.''

Airlines Lose A Decade To Fuel

All airlines can do is cut, cut, cut. There is just no money left after dealing with increasingly rising fuel costs to continue at current levels.

"Based on a look at industry domestic capacity among legacy carriers, regional airlines, and low cost airlines, we expect 2009 domestic capacity will be in line with where it was in 1998 to 1999, essentially wiping out 10 years of growth for the legacy carriers," said McKenzie.

Summer airfares double, triple, quadruple

The law of supply and demand is kicking in for airline passengers this summer — and not in their favor.

Despite a string of price increases this year, demand for summer flights remains strong and the USA's big airlines are continuing to fill more than 80% of their seats.

This week, six Airlines (American, United, Delta, Northwest, Continental, US Airways) raised prices again for flights on many domestic routes where there's no non-stop competition from low-fare carriers. The result, says travel price guru Tom Parsons of BestFares.com, is that the cheapest tickets available on many routes in July are 100% to 300% higher than a year ago.

These are historic rates for fare increases, but even with that, airlines are failing to keep up with their rising fuel costs.

Americans' net worth took a dive in the first quarter

Yes, you have gotten poorer. And at an accelerated pace.

The net worth of U.S. households fell in the first quarter, the second straight decline, thanks to the double-whammy of sliding home values and the plunge in stock prices, the Federal Reserve said in a report today.

The central bank’s so-called flow of funds report estimated the net worth of American households at $55.97 trillion as of March 31, down $1.7 trillion from year-end. That was more than three times the $530-billion drop in the fourth quarter.

More Troubles for the US Dollar? : Trichet Says ECB May Consider Raising Rates in July

June 5 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said officials may raise interest rates next month to combat the fastest inflation in 16 years, sparking a surge in the euro and pushing bond yields to the highest level since 2001.

``It's not excluded that, after having carefully examined the situation, that we could decide to move our rates by a small amount at our next meeting,''

Not really important, but indicative of the times we live in, so I figured I'd post it anyway:

Boxer Holyfield Joins List of Celebrities Facing Foreclosure

June 5 (Bloomberg) -- Evander Holyfield, the former heavyweight boxing champion, faces losing his home to foreclosure, joining fellow athlete Jose Canseco and former ``Tonight Show'' sidekick Ed McMahon among celebrities struggling to pay mortgages.

Holyfield's estate in Fairburn, Georgia, will be put up for auction July 1 to repay a mortgage on the property with an original principal of $10 million, according to a legal notice published yesterday in the Fayette Daily News. Washington Mutual Inc., the biggest U.S. savings and loan, filed the notice, which identifies Holyfield as the property's owner.

Closing:

Very nice "Goldilocks Economy" rally in US Stocks today. Certainly hope all the bad news has been digested.

Regards

Randy

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.

OPEC and the Dollar Peg

As I've pointed out in the past, the 1974 US-Saudi Arabian Joint Commission on Economic Cooperation established the Dollar as the sole Monetary Instrument for the purchase of oil through OPEC and this action reaffirmed the US Dollar as the World's reserve currency after the years of currency turmoil brought about by Nixon yanking the gold-dollar peg in 1971.

This agreement has allowed the US Dollar to flourish for many years, as countries who needed oil had to earn or borrow dollars to buy oil and trillions of these Petrodollars were eventually recycled through New York and London banks -- allowing for the creation of new credit, holding dollar interest rates lower than they would have been otherwise, and helping to expand our credit/debt bubble economy.

I have also pointed out that: (with the exception of IRAN and mainly due to inflation pressures internal to their domestic economies: 1) Vietnam removed their dollar peg; 2) IRAN (an OPEC Nation) no longer accepts US Dollars for oil and opened their own Oil Bourse this year; 3) Kuwait (an OPEC Nation) has pulled their dollar peg; 3) Venezuela (an OPEC Nation) has been very vocal about moving to price oil in other currencies.

Well, the OPEC rhetoric is heating up:

U.A.E., Qatar May Drop Dollar Pegs Within Months

May 26 (Bloomberg) -- The United Arab Emirates and Qatar could abandon their currency pegs to the U.S. dollar in favor of a basket of currencies within months, and Saudi Arabia may follow the move late next year, The National said, citing a Merrill Lynch & Co. report.

Gulf states have been under pressure to drop their dollar pegs after inflation hit record levels. Kuwait dropped its currency's peg to the dollar last May, but others have all kept their links, citing the need to keep currencies fixed until they form a monetary union in 2010, and the limited inflationary impact of the weak dollar.

The heat is on, so today Henry Paulson, US Treasury Secretary and leader of the US Plunge Protection Team, met with Saudi's Finance minister to reiterate his typical B.S. propaganda about supporting a "Strong Dollar" and publicly stated that any dollar-peg transition would be a "sovereign" decision... Yea right! I wonder what is stated behind closed doors?

Paulson says strong dollar in US interest, Saudi peg 'sovereign decision' UPDATE

JEDDAH Saudi Arabia - US Treasury Secretary Henry Paulson reiterated his support for a strong dollar today after meeting with Saudi Arabia's finance minister, but he also said the decision on whether to maintain the Saudi currency's dollar peg is entirely up to that country's government.

Asked about increasing talk that Saudi Arabia and other Persian Gulf countries might decide to remove their currency pegs to the dollar, given the effects of its plunge, Paulson signalled the US would not try to deter them.

'That is a sovereign decision,' Paulson said, adding, 'the dollar peg I think has served this country and this region well.'

On the same question, Saudi Arabia's finance minister Ibrahim al-Assaf said 'We have no intention of de-pegging or revaluation.'

Well folks, as I see it, it's only a matter of time. We have very few barganing chips left and our geopolitical goodwill is completely shot. When the dollar peg is eventually removed and then when oil is priced against a "basket" of currencies vs just the dollar, we'll be praying for the God-send of $4 gal gas.

Hold on to your hats!

Randy

US Economic Outlook 2008-11+

All is not what it seems, and our US economic troubles are far from over!

Note: If it's hard to see/read the briefing below, please click on this link and view the updated briefing in full-screen

| View | Upload your own

Best regards

Randy

Energy Expert: Gas could reach $15 gal

Robert Hirsch says that gas could reach $15/gallon within a few years because it is “essentially certain” the world has reached the maximum levels of oil production.

“The problem is that there’s not that much oil left in the ground,” Hirsch says. “What we’ve done is been very fortunate to have oil production increase as our economies have developed over the past decades. And now we’re reaching a point where we’re about to get, or we may be, at the maximum world oil production. After that, oil production will then decline and prices, of course, will continue to do what they’ve been doing recently. So what we’ve got today may be the ‘good old days.’”

Hirsch addressed the timeframe in which the US could see $15/gallon gas: “It could happen within a matter of months. It could happen within a matter of a few years. But it’s essentially certain that we are at the maximum of world oil production. And after that, we’ll go into decline, and when there’s much less oil available, then, of course, the price of oil is going to increase dramatically.”

Fuels, heating oil, and consumer products that rely on petroleum will all be impacted by the decline in world oil production. Hirsch estimates the world GDP declining at the same rate as oil production.

This video is from MSNBC’s News Live, broadcast May 24, 2008.

Watch Out Below!

Very good Forbes article confirming much of what I've been saying: "We ain't anywhere near done yet."

Watch Out Below

Oil prices continue to surge to new records. Gold prices climb. Stocks retreat in the U.S., Europe and Asia. The dollar goes south. Housing prices continue to fall. Consumer confidence erodes. The banking crisis has not hit bottom. Fed action is not enough. Congressional intervention is necessary.

So says Thomas J. Barrack Jr., chairman and chief executive officer of Colony Capital, a California-based hedge fund, in his April letter to Colony partners.

It may come as a shock--but Croesus believes we are only a third of the way through the credit crisis, and investors should get ready to experience more pain. As Barrack put it to Croesus quite directly this week: "The denial is beyond belief--at every level."

No one wants to deal with the losses on Alt A mortgages, which are greater than subprime. Or the prime mortgages which in total dollar terms represent twice as many dollars as subprime. What about the regional banks wasted by lousy real estate loans? Then there's the unwillingness of European banks to lend to each other, or the vast amount of assets running from troubled institutions like UBS, not to mention the Swiss investors demanding delivery of gold bullion rather than gold certificates. Still, the recession deniers are everywhere.

Croesus has some advice for everyone. Buy yourself two recently published books that will explain how we got to this fragile place and what public policy steps have to be taken to make sure the financial system doesn't still implode--on a step-by-step basis.

Charles Morris' The Trillion Dollar Meltdown, Easy Money, High Rollers, and the Great Credit Crash explains in clear narrative style how the credit bubble developed and had to burst. We owe a debt to Morris for underscoring how the power of vastly deregulated financial markets--and the development of mortgage-backed securities markets was eventually going to lead to the "great unwinding" that is only partly over. For all of you who have been bewildered by reading about CMOs, CDOs, CLOs and the other toxic waste of 21st century finance, here's your handbook to comprehend the fallout.

Morris makes sense of the process by which the stock market crash of 1987 and the failure of hedge fund Long Term Capital, cured by the easy money policies of Alan Greenspan, led eventually to excess leverage and massive losses in the financial system. Listen up. Morris' prickly definition of the so-called "Greenspan put" explains the mystique that kept the markets from massively tumbling--"No matter what goes wrong, the Fed will rescue you by creating enough cheap money to buy you out of your troubles."

Morris calls all this folderol "the last gaspings of the raw-market Chicago school brand of financial capitalism that moved into the vacuum created by the 1970s collapse of the Keynesian liberal paradigm."

And fabled investor/speculator George Soros has neatly carried this theme forward in his brilliant analysis of the crisis, which he warns everyone and everywhere is deepening into a more serious matter. Soros' The New Paradigm for Financial Markets, The Credit Crisis of 2008 and What It Means is a clever explanation of why "financial markets are always wrong."

Soros made his fortune by understanding how to take advantage of how markets overshoot on the upside and then on the downside. He goes short when we're in bubble mode, bidding shares or commodities to unrealistic prices. And he buys when prices are unrealistically low. Investors, Soros proves, "base their decisions on incomplete, biased and misconceived interpretations of reality, not on knowledge."

Under the new paradigm, investors will have to base their decisions on less leverage. In fact, Soros, like others, is calling for the regulation of limits on the use of leverage by investment banks and hedge funds. Come the revolution, Croesus thinks this will only happen on a voluntary basis. But Soros is adamant that "credit creation has to be a regulated business. The financial industry was allowed to get far too profitable and far too big." Avoiding asset bubbles should be a priority, Soros suggests.

Croesus scoffs at this nonsense as Wall Street's political power and influence in Washington is too strong. Even if Obama gets in the White House, his hedge fund buddies will tell him the score. Don't mess with Wall Street.

Be clear, though. The asset bubble that is still bursting will be severe enough to cause a serious recession, Soros believes. He is negative about the economy and the stock market. He has more vision and understanding than your run of the mill Wall Street expert who thinks every capital raising is the turning point for the market to improve.

You may find Soros' public policy solutions to be anathema. But you can learn one invaluable investment lesson from this book. He proves that "reflexivity" is an intellectual insight that can be a framework for successful investing. All you have to know is when prices get too high (out of whack with reality) or when they get too low (out of whack with reality). Reflevity signaled Soros when to sell the conglomerates in the late 60s, when to sell the REITs in the 1980s--because they got up to crazy unrealistic levels. Soros knows how to take advantage of the crowd's wishful thinking. And let him be a philosophe about it. Why not.

This super bubble took 25 years to develop, Soros writes. It can't be over in one year. Expect home prices to drop another 20%. Expect credit contraction to continue. Expect new bubbles to develop like in the commodity area. Soros wants to bet gold, oil and other commodities will fall in price. It's just that his "reflexivity" button hasn't lit up.

Regards
Randy

Daily Economic News

It's been a long day and there is so much I want to say, but there just isn't enough time.

I just got in... Attended my son's H.S. Graduation Awards Ceremony tonight and I'm proud to report that he's graduating with High Honors (4.2GPA).

One wonders, with the economic situation being what it is, what opportunities will be available to him 4 years from now when he has a B.S. Degree in hand. Scary to even contemplate...

Anyway, much happening in the markets of late. The US Dollar index is plummeting again. Will it make another historic "all-time low" this time around? I think it's quite possible, though 70 will provide very tough downside resistance.

And how about that Oil? Holy Crap--Light Sweet Crude Oil just broke through $135 in Asian Trading tonight! The Chart below hasn't even had a chance to catch up yet.... Anyway, with that said, I want you to note the severely overbought condition in Oil. Don't be surprised to see a pullback sometime soon, but I honestly don't think it will fall below $110 and when it does, it won't stay down for very long. Expect $150 tops before a nice correction.

Gold, as I've been forecasting for weeks now, is rebounding nicely. It has cut back through the 50DMA and the MACD has decidedly turned upwards. I still stand by my earlier comment: $1,200 gold by end of 2008.

The DOW on the other hand is looking pretty ugly -- it sliced back through its 50DMA and the MACD is also turning down. I don't think we'll test the March lows just yet, but think it's inevitable over the longer run -- and when we finally do: look out below!

I expect tomorrow to be a very interesting day also... All the Asian Indexes are currently in the red on inflation concerns, and existing home sales data gets released tomorrow at 10:00 EST. Consensus expects the numbers to come in at 4.85 Million (annualized) sales -- keep your eye on market reactions.

With that, I'm going to have to call it a night (told you I didn't have much time). I hope all of you have a great evening.

Regards

Randy

Oil, credit crisis & the wider economy

Alan Blinder, an economics professor at Princeton University and former Federal Reserve vice chairman, talks with Bloomberg's Kathleen Hays from Princeton, New Jersey, about the impact of record oil prices and home foreclosures on the U.S. economy, the outlook for growth and Federal Reserve monetary policy.

As a Fed insider Professor Blinder can't admit that we're actually in a recession, but he certainly admits we are dealing with major, major problems.

"Goldilocks economy" news roundup

Citigroup to shed nearly $500 billion in assets

Citigroup aims to shed between $400 billion and $500 billion of its $2.2 trillion in assets and grow revenue by 9 percent over the next few years as it tries to rebound from massive losses tied to deterioration in the credit markets.

The $500 billion in so-called "legacy assets" the bank intends to sell off or allow to mature include yet-to-be-named noncore businesses, as well as assets in Citigroup's securities and consumer banking segments. That includes mortgages and other real estate-related holdings.

Citigroup has already begun its winding-down process by writing down about $38 billion in soured debt since last summer, and setting plans to reduce its residential mortgage assets by $45 billion over the coming year. It has also sold businesses including CitiCapital, CitiStreet and Diners Club.

These moves arrived on top of huge stock sales to outside investors, including government funds in Singapore and the United Arab Emirates.

While others agreed that Citi had to sell assets, not everyone was certain how easy such a sale would be.

"I'm not sure they have half a trillion in good assets that someone wants to buy. But they're doing the obvious — they have no choice," said R. Christopher Whalen, managing director of consulting firm Institutional Risk Analytics.


A.I.G.’s Quarterly Loss Depresses Dow

The insurer American International Group helped send the Dow Jones industrial average down about 120 points after posting a $7.8 billion first-quarter loss that rekindled anxiety about the strained state of the global financial system.

“The news came as something of a surprise to some and a wake-up call to most that the financial service companies are not yet out of the woods,” said Philip J. Orlando, chief equity market strategist at Federated Investors


Delphi Corp. Reports 1st-Quarter Loss of $589 Million

Delphi Corp., the bankrupt former auto-parts subsidiary of General Motors Corp. said its first- quarter loss widened to $589 million as sales to its former parent declined.

The supplier, which failed to leave court protection as planned last month when an investor group pulled out, said shipments to GM fell 18 percent. The automaker's output in North America has been curtailed by a strike at supplier American Axle & Manufacturing Holdings Inc. that began on Feb. 26.

Delphi last month cut its 2008 earnings forecast because of falling U.S. vehicle sales. The supplier said today it will seek to increase the limit on its debtor-in-possession credit facility to $4.35 billion from $4.1 billion, subject to court approval


Gas jumps above $3.67, oil passes $126 on Venezuela concerns

Oil rose above $126 a barrel for the first time Friday, bringing its advance this week to nearly $10, as investors questioned whether a possible confrontation between the U.S. and Venezuela could cut exports from the OPEC member. Gas prices, meanwhile, rose above an average $3.67 a gallon at the pump, following oil's recent path higher.

On Friday, The Wall Street Journal published a report that suggested closer ties between Venezuelan President Hugo Chavez and rebels attempting to overthrow Colombia's government. Chavez has been linked to Colombian rebels previously, but the paper reported it had reviewed computer files indicating concrete offers by Venezuela's leader to arm guerillas. That appears to heighten the chances that the U.S. could impose sanctions on one of its biggest oil suppliers.

Oil prices also were boosted Friday by the dollar, which declined against the euro. The European Central Bank said it was unlikely to consider interest rate cuts to cool the strong euro against the slumping dollar.


FedEx Lowers Profit Outlook on Higher Fuel Costs, Lower Demand

FedEx Corp., the second-largest U.S. package-shipping company, said fourth-quarter profit will miss its forecast after surging fuel prices raised costs by at least $100 million more than estimated.

Yesterday's forecast marked the second time FedEx pared its outlook this fiscal year under the strain of the rising price of oil, which set records each day this week, and a possible U.S. recession. United Parcel Service Inc., the largest U.S. shipper, last month lowered its forecast as well.


High fuel prices hurting airlines more than 9/11:

"The world has changed dramatically for the airline industry," said Scott Dickson, senior vice president and chief marketing officer at Oak Creek, Wis.-based Midwest Air Group Inc. (NYSE: MEH), which operates Midwest Airlines.

"This is probably a bigger shock to the airlines' systems than what happened after 9/11. This is going to bring some very fundamental change in the industry in terms of its size, its shape and its character, especially if these phenomenally high fuel prices continue for any length of time."

Fuel prices for airlines have risen 200 percent since 2000 and more than 60 percent over the last year, said Dickson, who spoke Thursday at the Public Policy Forum's Viewpoint luncheon at the Hilton Milwaukee City Center.

Eight airlines recently have gone out of business, in large part because of fuel costs, according to Dickson.

"There are carriers that have had aggressive growth plans that are now announcing zero or negative growth plans," he said. "I don't think any carrier in the industry has a growth plan for the next 18 months."


Housing Bailout Bill Seems to Be on Shaky Ground

Even as the housing foreclosure crisis deepens, legislation to rescue homeowners and their lenders appears to be in significant political jeopardy.

The bill, which passed the House on Thursday, is quickly becoming a casualty in a battle between the Bush administration, which says it opposes any taxpayer bailout that would only further encourage risky lending practices, and Democrats who say that homeowner assistance is the only way to contain the damage to the broader economy.

The Bush administration on Friday said it would only support legislation that did not require taxpayer funds. The Congressional Budget Office estimates that the House-passed measure would refinance as many as 500,000 homes over the next five years, at a cost to taxpayers of about $2.7 billion.

“Taxpayers shouldn’t be taking on the risk of foreclosure,” said Tony Fratto, a White House spokesman.

Under the voluntary plan that was approved by the House, borrowers at risk of default would be able to refinance their loans at a more affordable 30-year fixed-rate mortgage insured by the Federal Housing Administration.

In exchange for avoiding foreclosure, lenders would have to agree to reduce the principal balance. The borrowers would pay a monthly insurance fee that would go to a fund to protect taxpayers from losses. A consensus was emerging on Friday that if Congress adopted a measure, it would likely be far more modest than the one passed by the House, which itself has been criticized by housing groups for being too small.


Fannie to Aid Underwater Loans

Fannie Mae is preparing to introduce by midyear a program of refinancing mortgages for people who owe more than the current value of their homes, a situation known as being "underwater."

The plan is the latest twist in efforts to contain the surge in foreclosures on homes in much of the U.S. It differs from a bill approved by the House on Thursday that would authorize the Federal Housing Administration to insure loans for distressed borrowers only after the lender has written down the principal -- something many lenders are reluctant to do. Fannie's refinance plan would result in new loans of equivalent size, leaving the borrower underwater but giving him or her a lower monthly payment or at least a fixed rate.

We're saying to the consumer, 'You're not trapped any more,'" said Jeff Hayward, a senior vice president at Fannie.

The program will allow refinancing loans of as much as 120% of the property value. Fannie officials project that 150,000 households could qualify for such refinancings.

Rather than reducing the principal due on the loan and taking an immediate loss, Fannie is betting that these people will be able to keep up on their new loans and prices will recover.


The Ticking Credit Card Time Bomb

My guess is that many Americas continue to run up massive credit card debt because they have little intention of every paying it off. Since many who are underwater on the home loans, and behind on the auto and student loans see bankruptcy as a foregone conclusion, they see no downside to pilling on as much debt as possible while the taps remain open.

Those choking on credit card debt may also be taking cheer from the gathering government campaign to bail out over-leveraged homeowners. The sheer numbers of who are afflicted with spiraling monthly payments will make credit card relief a potent political issue for crusading Congressman and Presidential candidates. After all, there are few fundamental differences between those who borrowed too much to buy houses and those who made the same mistake with consumer goods. If the government bails out the former why not the latter? In fact, one reason some homeowners have such large mortgages is that they consolidated their credit card debts into their mortgages each time they refinanced. Why should renters be forced to pay off their credit card debts while homeowners have theirs forgiven?

Soon, as credit card delinquencies rise and losses on pools of securitized credit card debt mount, those supplying the credit will finally get wise to the fact they will never get their money back. As a result the market for such debt will dry up even more quickly than did the market for subprime mortgages. Cards will therefore be much harder to come by and will have much lower limits then they do today. Limited to only the cash in their wallets, Americans will finally be forced to dramatically curtail their spending, and the recession will finally gather serious momentum.



Randy

Iran -- New Military Rhetoric

US Rhetoric is increasing over: 1) Iran's military involvement in IRAQ and 2) their Nuclear ambition.

However, the bigger (unspoken) issues are the IRAN-PAKISTAN-INDA GAS PIPELINE and the US Dollar (USD):

America continues to lose clout/controlling power in the region 1) as these countries work to create their own interdependent energy region, and 2) as IRAN eliminates all US dollar holdings and then refuses to accept new dollars in all of its foreign energy transactions.

As stated previously, oil replaced gold in the mid 70's as the peg for the USD and until Iran's recent actions (note: Saddam/IRAQ previously did the same for a short while) all oil transactions around the globe had to be made in USD's. For three decades now, oil has provided the underlying foundation for the World's reserve currency, but the USD foundation is starting to crack...

Dollar: Faltering Foundation of US Economic Strength

Iran’s Oil Bourse Set to Open this Sunday

OPEC May Drop Dollar for Euro

The End of Dollar Hegemony

$300 Oil?

The Ultimate Energy Insider: Simmons on Oil -- Going to $300