Investors’ Must Read from Jim Willie 7/31/08

Aug.01, 2008 in Investment Opinions, Market Outlook, Mergers and Acquisitions, U.S Hot Stocks

Bank Open Window For Deceit

by Jim Willie, CB. Editor, Hat Trick Letter |July 31, 2008

As vacation season approaches in the Untied States and Canada, the task of reading should give way to looking at pictures to tell a story, or gazing at scenery from a lodge or campground, or lazy afternoons at the beach. Among the many stories out there in the financial ethos, the one that strikes as most important is the bank sector. The selective enforcement of restrictions on shorting bank stocks sticks out like a child suffering acromegaly (Frankenstein disease) in deformity. Its blatant criminality has given the US financial sector its latest (and not last) black eye. This one is a loud banner of corruption waved for the entire world to see, put in the open. In fact, one can easily make the argument that price controls have finally come into the open. More on this in the August Hat Trick Letter. For the financial sector, price controls elevate prices of various securities. The Plunge Protection Team routinely rescues the S&P500 stock index, while JPMorgan routinely lifts the price of USTreasury Bonds of many types. The price controls, now in the open, will gradually find toeholds of political support in the tangible economy, like with gasoline and heating oil, if not natural gas. The issue of survival is critical, for home heating, as shutoffs are not acceptable. The upcoming widespread price control movement is a cinch, a lock, a guarantee to be seen. It ensures grand grotesque shortages to be suffered in the USEconomy, resulting in eventual rationing. The forced ration programs will invite violent response, growing disorder, and eventual chaos. An endless recession is what my forecast calls for, as the nation gradually slides into conditions leading to martial law. The irony in my view is that the US public will beg for martial law in a return for order.

The syndicate in power, widely entrenched in criminal enterprise (both financial and black market trafficking), which has assumed control of the USGovt administration and security organizations and military, might not wish to pass the power baton. Business is too good. They might relish and even salivate at the prospect of martial law. Gold and silver prices will love it, since the banks cannot thrive or even remotely recover in such a limited business opportunity environment. In fact, Wall Street banks have only one business left, managing their demise, as stock and bond issuance has all but vanished. Hatemail continues to my inbox, without much acknowledgement that my forecast in 2006 of a destroyed insolvent US banking system being correct. The bank conditions will lead to growing chaos, a pathogenesis few seem capable to discern.

Few people can also foresee that the many bank bailouts planned for the US national corporate structure make certain a continued decline in the USDollar. With a continued weakening of the USDollar comes greater cost pressures throughout the strained USEconomic landscape. The bankers with their bailouts are buying time before the next US November presidential elections. Whoever wins will have a single agenda: to manage crisis, not to enact new policy. Crisis removes the luxury of an agenda via mandate. A national energy independence program is a great idea. Let’s see if the syndicate in power, which is beholden to military and energy firms, is willing to pursue other energy solutions. The US is dead last among industrial nations for pursuit of unconventional energy apparatus development, with neither nuclear nor natural sources deployed to any meaningful degree. So, the US Federal Reserve encouraged industry to depart our shores and to build an entire economy upon a housing bubble, complete with the reckless insanity of a risk price model in the process of dissolving. So, the Wall Street banks served to destroy the bank system viability, a result of their reckless lending and fraudulent bond package sales on a global basis. So, the big oil firms served to destroy the energy system viability, by preventing almost all efforts to diversify. Thus is the basis of my conclusion that the US is slowly being recognized as a failed state, in a march to Third World status. A puppet government head and compromised Congress enabled the devastation. Even people here in Costa Rica almost daily ask me how the Untied States managed to ruin its country. My experience is that taxicab drivers, shop keepers, and head waiters at restaurants (all eager to discuss matters) in Costa Rica are better informed about the USEconomy, the US banks, and US leaders than the American public!!!

Let’s do a quick survey of various markets and price indexes, in order to gain insight on the conditions. This autumn should be chockfull of volatile events and reactions. One must be prepared. Desperate measures are being put in place. Shocking events lie on the horizon. People can smell something is awry, but they seem hopeless in identifying the problem sources. A very appropriate quote will lead the August Hat Trick Letter in the Macro Economy Report, a quote by French philosopher Voltaire, not the fellow who enjoys golf in Atlanta with his privacy, whose caddy is an angel.

BANKER QUARTERLY OPEN WINDOW

Notice the pattern. For each quarter, reality strikes as the end approaches right through to the actual reporting during the first month of each three-month period. Look at the succession of three-month periods. A bear triangle was crystal clear in the second quarter, identified in my public articles, as the Q2 came to a close, leading to a breakdown in the third month of that quarter. A breakdown occurred also at the end of 3Q2007 last summer. Look for a pennant pause pattern to be revealed this quarter, as more curiosity has entered the room that questions whether the worst in bank loss writedowns has occurred. The pattern to me is clear: each quarter is worse than the previous in terms of stated bank losses. Finally, my summer 2007 forecast of over $1 trillion in bank losses has come to be embraced. The IMF, Bill Gross, and Nouriel Roubini each have cited that lofty figure. The problem is that it is still low. Try $2 trillion. Why, for Lord’s sake, Fannie Mae and Freddie Mac alone will rack up $1.5 trillion in losses by themselves. Look for a truly fierce defense of the bank stock sector, which is facing annihilation and total ruin. As the mortgage giant cesspool continues to gain trucked (honey wagon) relief, gold & silver will thrive. In the business of septic bank service, they call them the Honey Wagons. As banks continue to spiral down, gold & silver will thrive.

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