International Forecaster -- Bob Chapman March '06 US Markets

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Please reference the thread within the Forum addressing Mr. Chapman's background, and bear this in mind should you choose to review the following:

US MARKETS
We have come a long way from the freedom that existed in America in the 19th century. Our freedoms and privacies have been snatched from us – one by one – as we have traversed the past 100 plus years. Since the First World War we have lived in perpetual war, revolution and crisis deliberately made to order for us. We are now told we could leave all this behind if the world was democratized and free trade and globalization were allowed free rein.
Privacy is based upon respect for private property and the law, which protects that right. The recent Supreme Court decision allowing eminent domain for commercial purposes effectively ended that. Government now, for any reason, can take your property. The wealthy and connected can now have what is yours. They have taken part of your privacy and freedom away.
Over the last century the promise of perpetual peace has been deliberately replaced by perpetual war and revolution for perpetual peace.
Today we have laws for laws. We have a totally fiat commercial, economic and financial system that simply doesn’t work. That system will end when other central governments simply can no longer purchase our debt. Gold is the only true money, but we do not expect it to be reaccepted as that.
We have totally immoral government, which is only legitimate because the law says it is. The laws were written to create a condition in which government can do exactly as instructed by those who control it from behind the scenes. As a result of such laws we have become slaves of the state. We are being denied our right to our personal property as we are taxed into oblivion. Part of everything we produce goes to government whether we like it or not. If you do not pay tribute – taxes your private property is confiscated. Your private property is taken from you by law. This brings about the question of legitimacy of government. All that has changed is that your master doesn’t directly control you – he indirectly controls you via taxes and other laws that make you subservient to that state. There is no life, liberty and the pursuit of happiness when you live in a police state as Americans now do. In the bogus pursuit of terrorism all our freedoms have been removed and unless we stop this insidious process now we’ll live forever in chains or revolution.
Our economy and the world economy are out of control and that is the main reason gold is going higher. It’s the only real currency. As we mentioned last week, the word in Geneva and Zurich is that the dollar will fall in value 50%. The only question now is when. In reading this publication you are all well aware of all the reasons for this calamity. Worse yet, in the conventional sense there is no way back. We passed the point of no return five years ago. Our economy continues to amass higher external deficits that are totally unpayable. The foreign central banks are well aware of this, but they are all in varying degrees – part of the great game, which is the deliberate destruction of the world economy from which they expect to build their New World Order. Confidence is beginning to ebb as those running nations begin to realize the enormous ramifications of what is about to occur. These nations are going to be left holding the bag and no one likes to be a goat. The legitimacy of the dollar, the US economy and of the US government is about to collapse.
The quagmire that is Iraq and Afghanistan continues unabated in its loss of money and lives. Congress will approve another $120 billion request and Mr. Bush’s $40 billion war will have become a $440 billion war and occupation with no end in sight. The building of four large airbases around Baghdad can only lead to the conclusion that America plans to be in Iraq for decades to come - a perpetual financial drain on our economy. There is a $600 billion embassy complex being built in Baghdad’s green zone. We are sure that is not for temporary occupancy.
Rep. Jack Murtha has been saying for sometime that Iraq is not about terrorism; it is about civil war.” The bloody events as of late have proven his assessment all too true. Jack is unusual for a politician. He’s a truth seeker and a truth teller. Jack has been giving us the facts, the truth.
The flipside of that is George and the neocons know for sure they have brought democracy to Iraq. Democracy like terrorism is a cover for all the other real reasons we are there. Even Jack Murtha doesn’t get that because he is inside the box. America is now in the midst of a civil war in Iraq and our military is stuck in the middle of it. The civil war is the result of rigging Iraq’s “democratic elections.” The Association of Muslim Scholars, a hard line Sunni group, blamed America for worsening conditions in Iraq and they are right. Hundreds of thousands of Muslims across the country are chanting, “no to the occupation,” and they are right in doing so.
This has made us less safe in America because it could motivate Muslims to retaliate against us in the US and they have every right to do so. How would you feel if you were an Iraqi and your country and people were being torn apart, and you had done nothing wrong? Our troops are in a crossfire and we have helped recruit even more Islamic combatants. History resonates with the enmity and violence between Muslim sects, and our American youth are losing their lives and limbs trying to sort out these centuries of ancient hatreds. Many politicians in both parties want out of Iraq and Afghanistan, but are afraid of bringing up the issue because 45% of dumb Americans still are convinced it is a good idea to be there.
The Chinese are not much for words so when they say something you had best listen. They will cut back their foreign dollar reserves by 50% soon, but over a period of time, in order to increase the value of the yuan. If you had $820 billion you’d want to diversify some of your holdings. It’s an event that has to happen and once it begins it will be unstoppable. That is one of the key reasons the dollar’s value has to go substantially lower.
We also want to remind you again that Syria is exchanging most of its dollar reserves for euros and other currencies that they need in trade. In addition, as we told you last week, Norway wants its own oil bourse to trade oil in euros. The world is starting to move in that direction and the trend will be unstoppable if the Iranian oil bourse opens on March 16, 2006. What is tragic is that Americans do not know any of this because the media has kept them in the dark.
For all intents and purposes we do not have a constitution left. The revised Patriot Act is being fast tracked for approval. This shows you how totally corrupt our Congress is. It places all Americans in the position of legally being spied upon based on the whims of government agents. Citizens are finally realizing that the law is terrorist in nature and in fact the terrorists are within our government. There is no longer use for probable cause – it is any cause they want it to be. Permanent passage of the Patriot Act deflects attention to a bogus enemy that doesn’t exist, it puts us in jeopardy for merely questioning government, and it allows our criminal government to keep their cover by preying on those who dissent.
Iran says if they are attacked they will retaliate with a military strike on Israel’s main nuclear facility Dimona, the port city of Haifa and the Zakhariya area. Our guess is you won’t see sanctions against Iran. The bluff of the US and Israel has been called.
The Army has recommended that seven 82nd Airborne Division Paratroopers be discharged following allegations they engaged in six acts shown on a gay pornographic website. They face court martial on charges of sodomy, pandering and engaging in sex acts for money.
The White House has finally turned over 250 pages of emails they said they didn’t have, from VP Dick Cheney’s office. From 2003 they relate to the leak of the cover of CIA operative Valerie Plame Wilson. The emails are said to be explosive, and may prove Cheney masterminded the caper. It is expected the emails will prove Cheney lied to FBI investigators. Some of the emails turned over to Special Prosecutor Patrick Fitzgerald gave up Plame Wilson’s identity and CIA status.
In a new incursion against freedom of the press, the SEC issued a subpoena to two journalists at Dow Jones and ordered them to provide information about conversations they had with stock traders and analysts. Then the SEC backed off, but they may return. What the SEC was looking for was unpublished communications. If the SEC can access these then the tools of every business reporter in this country becomes fair game for any company that doesn’t like scrutiny and chooses to play the conspiracy card. On the other hand, many brokerage firms, especially the major ones, have been going naked short and the SEC is well aware of it, and has done nothing about it. They have stopped trading in thousands of companies with no explanation and they never trade again, and the shareholders lose all of their money. That doesn’t seem to bother the SEC though. Very often they simply destroy companies.
We now have a government that has been forced to admit that it is tapping our telephones, faxes, emails, opening our mail and accessing our bank and medical records. None of these acts against us has to be covered by a warrant or probable cause. We are told we should not be concerned that our civil and personal liberties are gone because we must all fight terrorism and anyone can be a terrorist. Of course, Dubai Ports and the UAE can run 21 ports because they are our friends and they are part of the New World Order.
Buried very deeply in the supplemental Pentagon budget is $35 million for the Echelon operation in Yorkshire, England, which has been spying on you since 1985.First it was phones, faxes, money wire transfers, and now it includes all electronic communications. This should have been an issue long ago and that is probably why the recent NSA spying came to be an issue so that the elitists could continue to cover their Echelon operation. We bet you didn’t know another $700 million was allocated to the expansion of NSA operations in Augusta, GA, and in Hawaii, so they can better spy upon you via Echelon. The present NSA scandal is to see if the executive office can in fact assume dictatorial power. They want a stamp of approval to spy on you and control you.
Senator Lindsay Graham (R-SC) has suggested to Attorney General Alberto Gonzales a new target for the administration’s domestic operations – targeting fifth columnists - those who are disloyal Americans, those who sympathize or collaborate with the enemy. Graham said, “The administration has not only the right, but the duty, in my opinion to pursue fifth column movements, and I do not think you need a warrant to do that.” A. G. Gonzales said, “The President already said we’d be happy to listen to your ideas.” This is the same Graham who is sponsoring trade legislation and tariffs against Japan. You have to know now that legislation is phony inasmuch as these latest pronouncements would allow government to kidnap and imprison anyone who had anything negative to say about the government or the elitists who control government. There is no question that the neocons and elitists are behind Graham’s plans. They want to stop anyone from disseminating information that is critical of what they do or what they intend to do. They want to snuff out insufficiently loyal Americans, those who expose what the elitists are up too. These news informers cannot be allowed to tell the public the truth.
This is why KBR-Halliburton was awarded another no-bid contract for $385 million to construct detention centers throughout the US. They are not for an emergency influx or immigrants; they are to detain you if you say one thing against George and the neocons’ New World Order. We originally thought the centers would be used for you and us when Martial Law was declared, but with this statement by Senator Graham we believe as soon as they are completed, probably in a year or so, they will start collecting unpatriotic citizens who have anything negative to say about our government or the elitists. There will also be an additional roundup after the elitists stage the next 9/11-type of event. It should also be noted that a year ago a revision was made in the Army’s labor program that provides a template for developing agreements between the Army and corrections’ facilities for the use of inmate labor programs and civilian prison camps on Army installations. The document has recently been posted, which is not a coincidence in light of Graham’s statements. There is an urgency for these camps to be constructed – that is why it is referenced “rapid action revision” and KBR’s contract contemplation of “rapid development of new programs” have startled some with its sudden need for urgency. This is right in line with the Bush-neocon policies to involve the Pentagon-Army in “counter-terrorism” operations inside the US.
In spite of Posse Comitatus the Defense Department has secretly been creating new agencies that gather and analyze intelligence within the US, which is illegal. George and the neocons are also moving to expand the power of the Pentagon’s Counterintelligence Field activity, created three years ago to consolidate counterintelligence operations. It is being transformed into an office that has the authority to investigate crimes such as treason, terrorist sabotage or economic espionage.
The Pentagon has also presented legislation in Congress that would create an intelligence exception to the Privacy Act, allowing the FBI and others to share information about US citizens with the Pentagon, CIA and other intelligence agencies. In 2001, Defense said the US Army’s top intelligence officer wrote, “Contrary to popular belief, there is absolutely no ban on military intelligence components collecting US personal information.” NSA has been collecting information on Americans since 9/11 and since 1985 using Echelon. You have no rights – you have no privacy. The National Counter-terrorism Center’s central repository now holds the names of 325,000 terrorist suspects, a four-fold increase since 2003.
Did you take notice when Fatherland Security dispatched heavily armed paramilitary mercenaries from Blackwater, the private security company, to openly patrol the streets of New Orleans? That is just the beginning; next it will be your neighborhood under any pretense.
All government has to do is designate you a potential terrorist and you’ll be picked up and imprisoned. Jose Padilla was imprisoned for possibly being an enemy combatant for three years without charges. Our President tells us he has plenary or unlimited war powers as Commander in Chief for the duration in the war on terror, which could be forever. You have no constitutional rights left – none. If you do not act now to combat this menace you will lose all your freedom forever.
In 2000 a federal judge said Arizona did not provide schools with enough money for English-language learners, children who speak Spanish but very little English. In 2005 voters banned the use of any language except English. Starting in January of 2006 the state was fined $500,000 a day for every day without a funding plan. Two weeks ago the fine was raised by $1 million a day by George and the neocons. It provides state English emersion, only 11% of the children passed, which means 89% failed. That is how our federal government is extorting the state of Arizona to violate state law. It is ridiculous, but that is the way it stands.
Senate Judiciary Chairman Arlen Specter (R-PA) will retire in 2008, and thus he won’t be facing voters again. His payoffs will come after he is out of office. As a result, he is endeavoring to expand immigration numbers as much as possible to satisfy his masters. The bill in judiciary contains the McCain-Kennedy amnesty provisions, challenges the House bill’s enforcement provisions, and increases legal immigration and much more. If this bill passes it will be a disaster for our country.
It is expected that $1 trillion of $7.6 trillion in mortgages written in the first six months of 2005 are likely to default. These mortgages are packaged into pools and bonds are issued against them. The amount of bonds backed by these high-risk loans more than doubled since 2001, to $476 billion, so there are two branching-points feeding the potential housing bubble explosion. First, the home mortgages themselves - second, the bonds issued against the mortgages.
It is expected dollar volume of mortgage loans may fall 25% this year. This is borne out by the monthly housing index, a gauge of builder confidence in the single-family home market, which is at its lowest level since April 2003.
Our President last week told an audience in Milwaukee that the economy was growing at 3.5%; unemployment was down to 4.7%; more than four million new jobs were created in the past 30 months; home ownership was at record levels, and after tax income was up 8% over the past four years.
What he left out was the economy grew 3.5% because money and credit rose over 10% devaluing consumer-buying power; that unemployment was 13% because those who couldn’t get a decent job are not counted anymore. As well, he left out that over the past four years of recovery 10 million jobs should have been created and only three million were created. He did not address the five million jobs we offshored or outsourced. We hear nothing of the 3.3% rate at which sub-prime borrower homeowners are losing their homes, nor that the 8% gain in income was offset by a 40% loss in purchasing power – some recovery. We are not doing fine, we are doing terrible.
Our President says this is due to low taxation. He left out that our fiscal deficit since his tenure has been more than $500 billion annually. He has not engaged in careful government spending. Over $400 billion has been wasted on two needless wars and occupations.
Mr. Bush might look at US poverty figures as he wastes our money in the Middle East. US income grew at only 1.5% between 2001 and 2004, compared with 10.3% between 1998 and 2001. Between 2001 and 2004 real wages fell 6.2%. This was during a period of low unemployment, which does not auger well for the next crisis. We’ll have to send the unemployed to India and China to work.
Savings are minus 0.5% and ownership in mutual funds has fallen 3.3% to 48.6%, the first recorded drop since the survey began in 1989.
Prior to Hurricanes Rita and Katrina, 25 million Americans went to Second Harvest for food and shelter - that is up 9% from 2001. Thirty-eight million Americans live in hungry or food insure households, up 5 million since 2000. We find this to be a dismal track record in a recovery.
Sales of new homes fell 5% in January, the lowest in a year. The number of new homes on the market (inventory) increased 2.5% to a record 5.2 months supply at the January sales pace, the largest inventory in nine years. Sales were 1.233 million and the “experts” forecast 1.27 million sales fell in three of four regions. The West was up 11.3%; the South fell 10.3%; Midwest 10.8% and Northeast 14.9%.
The more we look at the situation that Ben Bernanke is in the more we believe that we’ll have at least two 1/4% interest rate increases and maybe two more before the year is over. He will use them as a cover to convince investors and professionals that he’s an inflation fighter; while he is expanding money and credit at better than a 10% rate. That is the plan and that is why in a few weeks M3 won’t be published anymore. He and his masters want to deceive us.
Ben would have us believe that the economy has absorbed oil sticker shock without inflation spiking. Official inflation cannot spike, because all of the numbers are rigged. They are what the Fed wants them to be. Inflation is not under control; it is more than 10% and ready to accelerate again.
Bernanke says, “The Fed doesn’t really have good instruments for addressing asset price bubbles should they exist, particularly if they are in on particular segment or another.” Yes Ben and we believe the tooth fairy. You don’t want to recognize them because the Fed creates them. Ben says inflation and inflation psychology have remained at bay, so the Fed can pursue a policy of rate hikes that is more gradual and predictable. He must think we are terribly dumb.
Palestinian funds have been cut off so they cannot pay for oil and Israel has cut off their oil. What can Israel be thinking? Israel will not transfer taxes and tariffs on products crossing Palestinian land borders as well. That is $60 million a month and is 60% of Palestinian public funds. That is terrible. That is no way to solve Arab-Israeli problems.
The total notional values in derivates in just US markets last year rose some 12.5% to $100 trillion. That is a tripling since 1999. In 1991, when we first wrote about derivatives, the notional values were $7.3 trillion. Today’s US derivatives are 7.8 times GDP. Systemic risks cannot be totally eliminated and we have to remember that a derivative writer is capable of going under.
The system is being abused when GM has $30 billion in debt and about $200 billion in derivatives. Buyers don’t even know who is on the other side of their trades. Just a 1% default or $1 trillion, would take down the financial system. Derivatives are like all kinds of gambling. If you play long enough you either lose or encounter bankruptcy.
Margin debt is back to where it was at the beginning of 2000, just 2 1/2 to 3 months before the crash. There are some 12 billion shares short.
1,000 companies in the Russell 300 have been designated as eligible under the Reg SHO Pilot program for shorting on downticks – we could see massive shorting and that could bring collapse. The shorting on an uptick rule is a good one. Again, the SEC is only interested in further allowing Wall Street to screw the public. Greed has overtaken Wall Street in the quest for more business and more profits. The more derivatives grow the bigger the chance for an accident. The more shorting the less companies will be worth.
We are now facing another scandal that had to happen on Wall Street even with the SEC’s protection and that is Overstock’s lawsuit versus Rocker Partners, Gradient Analytics. It’s a $4.6 billion lawsuit on New Jersey state statues under RICO who will award triple damages. This hedge fund empire of Steven Cohen could collapse if naked shorting, fraud and conspiracy are proven. Abuses on Wall Street today are worse than ever, and the SEC and the NASD will do nothing about it. They only go after the little guys and little brokers. They also try to shut up newsletter writers as part of the administration’s corporatist fascist agenda. We have been writing about naked shorting for 15 years, and all we have gotten for it is harassment from the SEC and NASD. We know the SEC fully understands the pervasive nature of crime and looks the other way when big hitters are involved. In the case of Steven Cohen it’s $150 million in commissions annually to Wall Street.
On Monday, the Fed added $2 billion in repurchase agreements causing the repo pool to again rise to $110.625 billion. That gives the Fed’s agents about $170 billion to use to manipulate markets.
Halliburton has again been paid disputed costs of $262 million. That is only $10 million short of what they had asked for – for the cost of delivering fuel and to repair oil equipment in Iraq. This was part of a $2.4 billion no-bid contract. KBR-Halliburton has reported $15.4 billion in revenues from its operations in Iraq since the US invasion in 2003.
Influential economics professor Xiao Zhuoji told China Securities News that China should reduce the dollar share of its foreign exchange reserves because of the risks posed by the instability of the dollar.
The next step is to allow companies to hold more foreign exchange, instead of being required to sell it to the central bank, and the Chinese could be permitted to invest in foreign currencies. China could also cut its trade surplus by reducing resource-intensive exports and importing more high tech products. We believe both are in process.
A major transition is underway in the US mortgage lending industry with consolidations and layoffs at the forefront as companies try to deal with lessdemand for home loans. As the year progresses these efforts will accelerate.
Employment in the real estate and mortgage industry peaked at 504,000 in October of last year, but fell to 501,000 in December. Employment was 283,000 in March 2001. As the market narrows over the next three years we probably will revisit those 2001 figures.
The Fed tells us that from 2001-2004, during Bush’s first term, the net worth of renters that is 31% of Americans, fell by a staggering 22%. For the 69% that owned homes, their net worth only gained 1%, yet during that period home prices soared 28%. This is a reflection of home values being cashed out in order to continue their lifestyle while their wages moved up 6% less than inflation. As house prices decline so will disposable income and if homeowners come up short, which they will, then the economy will enter a major crisis of confidence in the country’s economic and political system. Impoverishment will not be silent.
The rats are leaving the sinking ship. Four of seven Fed board members have resigned in less than a year. We have a majority, plus Ben Bernanke, who are inexperienced at a very alarming time in monetary policy. We are entering no man’s land where no Fed has ever gone before. If the Iranian Oil Bourse opens and trades oil in euros, the dollar will again begin its decent and the Fed will find it impossible to continue the practice of printing unlimited amounts of fresh dollars.
This is one of the reasons M3 will no longer be published. It’s to obscure the fact that the Fed cannot stop printing dollars and issuing credit. We are going to move into hyperinflation. It’s no wonder all the governors are fleeing their posts.
The NY Times tells us that two German intelligence agents in Baghdad obtained a copy of Saddam Hussein’s plan to defend the Iraqi capital, which a German official passed on to American commanders a month before the invasion. This was a key to the invasion and now that the Muslim world knows we are sure it will cost Germany lots of business.
The German role is not the only instance in which nations that publicly cautioned against the war privately facilitated it. Egypt and Saudi Arabia did the same. Egypt refueled our planes and Saudi allowed special operations forces to initiate attacks from its territory. Three million Turks in Germany won’t be happy to learn of German duplicity. German ships guarded the sea lanes near the Horn of Africa as part of Task Force 150, an effort to deter terrorist attacks in the Red Sea and the Gulf of Aden, for example. The patrols helped safeguard the waterways the US used to build up its force in the Persian Gulf for the invasion of Iraq. That also protected Kuwaitis in Doha from Chinese attack if it was necessary. German personnel also guarded American military bases in Germany, freeing US soldiers to go to Iraq. Germany provided the missiles for the Patriot batteries sent to Turkey and we thought “Perfidious Albion” was duplicitous.
Under the Bush administration the payoffs flourish. It seems investors from the UAE helped fund the $23 million Neil Bush raised from Ignite, the learning systems company that holds lucrative No-Child-Left-Behind contracts in Florida and Texas (where else). This is a portable computer designed to work in a classroom, providing interactive instruction aimed at improving students’ scores on standard tests. Neil Bush is connected in Dubai, along with fellow elitists Al Gore, Sandy Berger, Howard Dean and John Sununu. Thus, we have bipartisan hands in the trough.
Neil Bush as you remember was a director of Silverado S&L that cost taxpayers $1 billion. He was personally fined and permanently banned from any further activities in banking. During his divorce he admitted to multiple sex romps with prostitutes in Asia. Neil set up this Dubai deal, which has been in the works for months, but shut out of the media.
Neil has been hob-knobbing with Russian mafia criminal Boris Berezovsky now of London and has been spotted in Asia at the side of Sun Myung Moon. He also has business deals with Jiang Mianheng, the son of former Chinese President Jiang Zemin. We are following the money as the Dubai scandal widens. It may yet be labeled Neil-gate.
You saw January new home sales off 5% with a record inventory of 5.2-months. That was followed by a 2.8% fall in home re-sales, at an annualized rate of 6.56 million, the lowest rate in two years. The median price rose 11.6% y-o-y to $211,000 in January. That moved the inventory in unsold homes up to 5.3-months supply. The increase in inventories portends a deceleration in home price appreciation. Nearly half the new homes put up by builders aren’t being sold as expected. The slowdown that began last June and accelerated in September has now been confirmed by economists to be a permanent end to the five-year boom in soaring prices. The question now is, how deep will the correction be?
The strength in the Japanese yen has in a small way negatively affected the purchase of physical gold in Japan. That is an important event, but even more important is the strength of the yen versus the yen carry trade. The appreciation of the yen means a stampede out of dollars and into yen before it appreciates further. The most important aspect is not the losses on the yen, which the speculators borrowed, but the unwinding of enormous speculative positions in other markets, notably in the US stock market. This could be the event that cracks the market and sends the Dow down to test its old lows. Weakness will come not only in the US stock market, but also in other markets. An example was last week’s material weakness in the Icelandic currency and other currencies from the second and third worlds. This is just the beginning of the unwinding and we believe hedge funds will be quick to act – a condition that the Fed and the Working Group on Financial markets won’t be able to handle. The end of Japanese zero interest rates are upon us. The party is over and there will be a big hangover.
Twenty percent of US information technology workers say they are dissatisfied in their jobs and 33% are planning to find a new job in 2006. IT workers site unmanageable workloads, low pay and lack of effective leadership as the leading factors influencing their decisions to look for new opportunities. Sixty-one percent said their workloads have increased over the last six months and 50% said their workload is unmanageable. Thirty-three percent are dissatisfied with their balance between work and home.
The real reason Larry Summers was dumped as President of Harvard was the Harvard-Russia caper. Financial improprieties by those in charge of Harvard’s Russia project, led by Andavi Shleifer, a professor of economics, and friend and protégé of Dr. Summers and Jonathan Hay. They made personal investments in Russia at a time when they were working under contract to establish capitalism in the former Soviet Union.
Harvard paid a $26.5 million fine; Hay paid a fine based on future earnings and Shleifer paid a $2 million fine without admitting guilt. Harvard did not discipline Shleifer.
On Tuesday, the fed added $3.5 billion in repurchase agreements plus a $1.2 billion permanent open market operation. This took the repo pool to $113.325 billion. There is obviously a rising need for market manipulation.
A growing number of governors, along the border and beyond, are sharpening their complaints about the flood of immigrants pouring into their states, pushing the Bush administration and Congress for action. This problem will be discussed with the President this week.
John Williams is an econometric forecaster, and we believe he is among the top five in his field in America and he may be #1. He is the fellow that for some time has been tearing government statistics apart and exposing them as we have, to be bogus. John says that today the U6 unemployment is running around 9%, but if you take out all the funny games they’ve played with it, unemployment is really 12%. We have pegged it at 12 1/2 to 13 1/2% for the past five years, so we are close to agreement.
Mr. Williams says, “There are two types of manipulation of the data. You have systemic manipulations, where methodologies are changed. Again, the methodologies almost always have an upward bias in growth and a downward bias in inflation and that is not coincidental. The other type of manipulation is when someone does something to the numbers to make them come out a certain way at a certain time.” Political types go to businesses that are major factors in their industries and ask them to goose sales before elections. As all this transpires our President tells Americans the economy is booming. Our President is lying because he knows the figures are bogus.
In the early 1990s, Michael Boskin and Alan Greenspan fixed the CPI. They said the CPI was overstating inflation, which was untrue. Thus, they introduced hedonics. That is when you go to buy a steak and it’s too expensive so you buy hamburger instead. That in turn is disinflationary. That has to be one of the most moronic arguments we’ve ever heard. This is called substitution and if you use that the problem is you distort the very reason for the CPI. These distortions in the CPI don’t allow for a fair adjustment in Social Security, government pensions and other indexes. These people are plainly getting screwed and I happen to be one of them and I don’t like it. Substitution or hedonics is so unscientific it can be compared to witchcraft. If you strip back all the garbage from the Carter administration 25 years ago you’d have inflation 4% higher than it is now reported. That’s 4% plus 4% or 8% says, John Williams. We say 10%, but no matter who is right it is a long way from the adjustments in Social Security and pensions that we have received. It is robbery. Those retirement checks should be 70% to 80% higher than they presently are.
The BLS says the price really isn’t going up, as long as the product is improved in the interim, because you are getting greater benefit from it – what rubbish. Tell that to people who get $500 in Social Security and should be getting $900 and live like beasts.
Bill Clinton and his advisors led by Robert Reich found in their polling that if you could overstate economic growth, understate inflation, tell people things were really better than they were, it would help you win a tight election. That’s how politicians and elitists run our country screwing everybody.
Wall Street analysts and economics, as well as those in industry and government, don’t dare tell the truth about the statistics - they’ll lose their jobs and that is part of the reason they are right only 33% of the time.
Mr. Williams says the official federal deficit in 2004 was $412 but the GAAP-based deficit was $616 billion. In 2005 the official deficit was $319 billion, but the Treasury report said it was $760 billion and they don’t consider the inclusion of revenues of Social Security and Medicare. If you added in the net present volume of the under funding of Social Security and Medicare, the one-year deficit in 2004 was $11.1 trillion. That includes a one-time payment of $8 trillion for the Medicare drug benefit. Even if you don’t include that you are still offside $3.1 trillion in 2004. We are now at the point where we cannot cover the deficit by raising taxes. Our deficits are ten times higher than we are being told and they are totally unpayable. The situation is so out of control that the Bush administration is cutting taxes. We report these lies and discrepancies and that make us very unpopular in Washington.
In order to stay solvent massive amounts of liquidity has to be created. The problem is it brings on hyperinflation, a falling dollar and rising interest rates and gold and silver prices. Just one unexpected, untoward event, and the financial edifice will collapse. We believe the Fed has already begun monetizing debt. Once the world realizes it, interest rates will move higher. Ben Bernanke will pump in liquidity until he can’t anymore. Once the selling starts for whatever reason, they’ll be an avalanche as everyone tries to get out the door at the same time. Hyperinflation will scream and gold and silver will go berserk as we slide into depression. At that point they’ll be devaluation and a return to the gold standard. That is why some central banks have again become buyers of gold and that trend will accelerate.
Due to manipulation of GDP its results have been overstated by 3% and according to IRS reports, income is dropping. About a month ago consumer debt started to moderate as interest rates rose. The wealth effect is dying. Mortgage payments are rising as are minimum credit card payments. Income is falling. Watch the ten-year Treasury market, the dollar and gold. If ten-year yields spike up, the dollar spikes down and gold and silver spike up, you will know the game is on. This year corporate profits will fall and no matter what the Fed and the Working Group on Financial Markets do, the stock market and real estate are going to fall. Be fully invested in gold and silver related assets.
In the new Zogby Poll when US troops currently serving in Iraq were asked, “How long should US troops stay in Iraq? Only 23% backed Mr. Bush’s position that they should stay as long as necessary. In contrast 72% said that US troops should be pulled out within one year. Of those, 29% said we should withdraw immediately.
The CBS News Poll, which has always tried to show President Bush in the best light just released its latest poll. His job approval rating hit its lowest level ever at 34%. VP Dick Cheney is doing even worse. Only 18% approved of his job performance. Thirty percent approve of Bush’s handling of the war in Iraq; 27% approve of his energy policy; 32% approve of his handling of the economy and 5% of Americans are please with the way the rebuilding of the Gulf Coast is going. Worse yet, his ratings are headed lower. Congress should impeach him. Seventy percent oppose, including 58% of Republicans of a Dubai company taking over 21 ports.
The NAPM Chicago said its Regional Index fell to 54.9 this month from 58.5 in January. Manufacturing activity in the region appears to have cooled off. The Chicago area accounts for 40% of the nation’s auto production. The Employment Index rose to 54.9 this month, the highest since May, from 50.2 in January. The index of prices paid for raw materials fell to 71.6, the lowest since August, from 75.3. The Production Index fell to 56 from 60.6. The New Orders Index dropped to 54.9 from 63.7. The Inventories Index rose to 56 from 53.9. The index of orders backlog increased to 50.6 from 48.3. The measure of delivery times rose to 59.2 from 57.8.
The Conference Board’s Consumer Confidence Index fell to 101.7 from 106.8 in January. The Present Situation Index rose to 129.3, the highest since August 2001, from 128.8 in January. The gauge of expectations for the next six months fell to 83.3, the lowest since October, from 92.1. The share of consumers that said jobs were plentiful rose to 27.3% in February, the highest since August 2001 at 27%. The share of people who expect better employment opportunities in the next six months fell to 13.4% from 13.6%.
Our President is offering states no help in paying for Congressionally ordered changes to driver’s licenses and would foist new costs to provide food for low-income pregnant women, while slashing money to revitalize poor neighborhoods. Most additional cuts are for the poor that would curtail $6.7 billion in state and local grants next year.
Although efforts to crack down on illegal immigration are gaining momentum across the country, Bush’s budget would do away with reimbursements to state and local governments for jailing illegal aliens. Jailing is causing huge budget problems in Arizona. In 2004, the state spent $77 million incarcerating more than 4,000 illegal immigrants.
States are going to lose $31 billion in cost shifts from the federal budget to state budgets.
Medicaid was cut $6.9 billion last week by Congress and Bush has proposed a second round of cuts to entitlement programs that provide assistance to the poor, elderly and disabled, while hundreds of billions of dollars are thrown down a rat hole in Iraq.
The cuts are appalling: $15 billion in savings by consolidating or eliminating 141 federal programs with a 20%, $3.5 billion cut in education.
Bush wants permanent tax cuts almost all of which benefit the wealthy.
He would increase the National Guard by 350,000 for personnel for future wars.
Homeland Security grants to cities and states would be cut $400 million.
He would add 1,500 border patrol agents.
He would cut $91 million from state grants to help low-income citizens make their homes more energy-efficient, a 29% reduction.
A $66 million increase for solar technology, $41 million for development of hydrogen fuel and fuel cells, and $29 million more for bio-fuel research. $23 million for geothermal energy would be eliminated along with $35 million less for clean air programs.
He has proposed a $100 million program in five states for toll roads. Citizens would pay for upkeep rather than use federal gas tax funds.
This is about as bad as it gets.
Seventy-nine percent of would-be bankruptcy filers said their financial problems were caused by circumstances outside their control, such as loss of jobs, catastrophic medical expenses or the death of a spouse. Only 3.3% were candidates for debt repayment under a debt management plan.
Fourth quarter fixed-income trading revenue plunged 65% from the third quarter. The business accounted for 10% of the bank’s revenue in 2005. At JP Morgan Chase, CEO Dimon said, “Several of our trading books were on the wrong side of interest rates. A bunch of positions didn’t work out.” This tells us the Fed, of which Morgan is an appendage, is losing control of the bond market.
A bank created to provide emergency backup for the Treasury market will be ready to operate in the next 18 months. The so-called “New Bank” will be on standby, so it can spring into action to stabilize the government securities market if a legal or financial disaster strikes.
This should give all of us pause. This bank is supposed to be for clearing operations only. That means the Fed believes JP Morgan Chase and/or Bank of New York could fail to clear trades for whatever reason. Is this bank going to supply liquidity and where will that liquidity come from? This operation is being set up to handle a run on Treasuries and a failure to process trades. It would also include an absence of market makers, which makes the New Bank specialist of last resort.
Presently the two banks clear and process more than $1.9 trillion of very short-term trades each day between investors and dealers. The Fed and other private banks see a future run on Treasuries and that would include a run on the dollar as well. It could also be the Fed is preparing for another planned 9/11-type of event. Last time trade-processing operations were troubled for days, causing problems across the banking system. It took months to correct the problems. They also envision the possibility of a credit downgrade that could force one or both of the clearing agents to cease operations. This New Bank, a quasi-government entity, would perform emergency functions for the entire Treasury market.
The New Bank will have no physical location, and no full-time employees. It will be funded with $500 million from 24 banking industry shareholders - probably the banks that privately own the Fed. The New Bank would take over any troubled bank’s existing operations. The elitists are expecting big trouble. Get out of dollars and into gold and silver related assets.
Personal incomes rose 0.7% in January only to be devoured by official inflation of 0.5%, which in actuality was double that. Officially real disposable incomes are up 2.2% in the past 12 months. We show a loss in buying power of 6%. Consumer spending increased 0.4% in January.
 
Part II

The eurozone, the Swedes, the Swiss and now the Japanese are turning off the tap on cheap credit, that has kept the global financial system afloat for the past ten years. The carry-trade is coming to an end as Sir Alan Greenspan warned it would eight months ago. This is part of what has prolonged the asset-bubble and now the plug is being pulled. Markets are going to shrink and values are going to fall. The BIS estimated last year that the turnover in exchange and interest rate derivatives markets was at $2.4 trillion a day. The derivative market has undermined our entire financial system like termites. The end of the carry-trades will come throughout the year, but by yearend the results will be very ugly. As carry-trades are unwound, due to unprofitability, there will be some spectacular effects creating huge volatility. This means interest rates will rise everywhere at least 1/2% and perhaps 1% in the US. The creation of artificial demand via very low interest rates, carry-trade and derivatives is coming to an end. Monetary discipline is about to be reasserted. Over the next two years financial and monetary dislocation will be enormous. No more massive speculation in currencies, real estate and stocks. We will return to a more traditional market as the system is purged of its excesses. No more artificial demand and over speculation.
The number of single-family homes sold in Massachusetts in January fell 21%, the largest year-to-year decrease in monthly home sales. Since April 1995, another sign that the red-hot housing market is cooling. The median selling price for a home fell to $345,500 from $346,000 y-o-y. More significantly, single-family home prices in January fell 0.1%, breaking a 114-month streak of rising prices. Massachusetts is falling much faster than the national market, although condo sales rose 2.5% and the median condo rose 1.9% to $270,000 y-o-y.
The Factory Index accelerated in February says ISM. It rose to 56.7% from 54.8% in January. New orders rose to 61.9% from 58.0%. The Employment Index rose to 55.0% from 51.3%. The Price Index fell to 62.5% from 65.0%.
The London Times says, “The spectacular investment returns of the hedge fund industry were thrown into doubt yesterday as Barclays Capital said that the figures were being exaggerated by as much as 6% a year.” Wait until the derivative positions are unwound.
The monthly interest rates on ARMS jumped 34% in the past 24 months.
In January, the inventory of unsold homes reached a record high of 528,000.
The ACT isolated reading complexity is a critical factor by analyzing the results of the 1.2 million high-school seniors in 2005 who took the ACT college entrance test. Based on that test, only 51% of students showed they were ready to handle the reading requirements of a typical first-year college course.
During a Senate panel hearing on the proposed buyout of US port operations by Dubai Port World, information was introduced by Maine Senator Susan Collins. The Coast Guard revealed that Dubai Port is not fit to run our ports, and they have connections to the nastiest of terrorists. We notice that the media has said nothing about Neil Bush’s involvement. He is a frequent visitor to Dubai and paid speaker.
Our President on the V.A: “My 2007 budget will increase VA’s medical care budget by 69% since 2001. Our increased funding has given almost a million more veterans access to the VA medical care system.” That is a lie. There has been little change in veteran’s accessing the system. In fact, disability claims have actually decreased. The time for claims has moved from six months to three years to keep people out of the system. They are confronted with intentionally manufactured bottlenecks. In fact, in one-year claims increased by 33%, yet those treated fell. In the meantime the number of Fed employees has been cut over the past five years. That, of course, helps deny access to the system. These suppressed claims that have been in the system three years now are beginning to be processed. Thus, George and the neocons now tell us that the vet’s records were destroyed by fire; thus, the claim is dead. The other scam is falsely denying claims. They arbitrarily kick out 15% of claims, which is staggering. We see this VA-veterans situation getting worse and perhaps getting very nasty. They are being screwed by George and the neocons who don’t care a bit about them. The backlash has begun; just look at Bush’s approval ratings.
On Wednesday, the Fed added $6.75 billion in repurchase agreements taking the repo pool to $109.575 billion.
The MBA Purchase Mortgage Index decreased 1.9%. The 30-year fixed rate mortgage was 6.18%, down 4 BP from the previous week. The 15’s were 5.84%, down from 5.87% and the one-year ARM was 5.64%, up from 5.60%. Refi apps rose 0.1%.
As we predicted, California’s housing market is slowing as sales of single-family detached homes fell 24.1% y-o-y and 5.9% from December. California is the key to the housing market and it has finally broken. That will affect every mortgage in all of the 30 hot markets. The median price was $551,300 in January, up 13.8% y-o-y and 0.5% from December.
All over the country, but particularly in California, speculators are selling. This makes selling a new home more difficult with all these near new houses for sale as well. Standard Pacific Corp. said new home orders dropped 13.4% in the first two months of the year and blamed it in part on slowing investor (speculator) demand. Last year in California some 35% of sales were to speculators.
Army Vet Mike Woods developed bizarre symptoms after serving in the first Gulf War when undergoing medical treatment he was given placebos – or sugar pills. They called it Obecalp or Placebo spelt backwards. Woods recently shared his experience with members of Congress investigating complaints about how the government is caring for patients with Gulf War Syndrome. This is a good example of how our veterans are treated.
January consumer spending rose 0.9% and as a result we have a minus 0.7% savings rate. This is the third straight month Americans used savings to spend. That is due to low wage gains and high inflation.
Outlays on construction projects increased 0.2% in January after increasing 1% in December.
Ford says sales fell 4% and production will be cut from 890,000 to 906,000 vehicles. GM sales fell 2.5% driven by a 13.3% slide in car sales.
We have millions of Americans out of work, hundreds of thousands homeless, whole industries moving offshore leaving idled factories in America, the states of Louisiana and Mississippi still looking like a war zone, Americans living in tents and cars, abandoned house, they are being evicted illegally from hotels and we are importing thousands of Muslims from Russia. They are guaranteed housing, furniture, and medical and lifetime pensions. We have millions with no jobs, housing, health care or a way to survive.
7,000 Muslims are being settled in Pennsylvania, which has the largest job losses of any state in the country. What kind of government do we have? They are totally insane.
Along with Neil Bush, the power behind the Dubai Ports deal is James A. Baker III, senior partner at Baker Botts and senior counsel to the Carlyle group. The group has made even more money than Halliburton on the Iraq War. Halliburton is a Baker client as well.
It’s about time the state, county and city tax incentives to big business came to an end. Former CEO of Alcoa and Secretary of the Treasury says, “As a businessman I never made an investment decision based on the tax code. If you give money away I’ll take it, but good business people don’t do things because of inducements.” Today there is an accelerating competition to offer ever-larger tax breaks to big businesses. Tax incentives have a minimal impact on businesses’ decisions about where to locate their facilities. Taxes are only 1 to 2% of costs.
The real effect of these tax breaks is a dramatic loss of state and local revenues, probably some $75 billion that individual taxpayers and small businesses have to pay. That payout to that rich major corporation cuts funds for education, infrastructure and other government services. States are caught in a vicious cycle of proliferating business incentives.
The test comes surprisingly to the US Supreme Court in Daimler Chrysler versus Cuno, in which a lower court struck down Ohio’s investment tax credit, one of the most common incentive devices because it discriminatorily favors in-state business activity. Maybe the vicious cycle has come to an end.
Bill Clinton advised the UAE on how to reduce opposition to its takeover of NY Port operations. He recommended a 45-day delay to allow an investigation, and of course, to pay off Congress. He also pushed Dubai Ports to hire Joe Lockhart, but he wanted too much. In 2002, Clinton was paid $300,000 for making a speech in Dubai. It was payback time. It goes to show you there is little difference in politicians. The elitists control almost all of them. We call it bipartisan thievery.
Five Philadelphia high school students built, and displayed at the Philly Auto Show, a soybean oil-powered car that can accelerate from 0 to 60 in 4 seconds and travel 50 miles on a gallon of gas.
We could see some back-off in the outsourcing of IT support. Two-thirds of the companies that responded to a survey reported either no change in customer retention or a worsening in customer satisfaction as a result of business-process outsourcing. Seventy-five percent said they’d leave their current providers if they experienced bad customer service.
A 2005 Garner study predicts that 60% of organizations that outsource customer-facing processes will see significant numbers of frustrated customers switching to competitors. It was also found that 80% of companies that outsource customer-service functions fail to meet their cost savings targets. Dell, Capital One and J P Morgan Chase recently brought some of their customer support operations back in-house.
Foreign workers and even local contractors do not identify with the organization on whose behalf they’re working and their performance typically suffers. The same is true of temporary workers. In other words, you get what you pay for. In-house employees are far more interested in nurturing a good reputation among clients and customers.
The backlash against customer-service outsourcing is upon us and it is gathering steam. You can do your part by complaining about foreign service and help retain American jobs. Competing solely on price is a fool’s game. Customers thrive on perceived value – what consumers think they’ll get for their money. It is time for us to help our fellow American workers.
In discussing the increased return from education, highly educated workers have done better than those with less education, but a college education has hardly been a ticket to big income gains. Real earnings of college graduates have fallen.
Freddie Mac says this week’s 30-year fixed rate mortgage was 6.24%, down from 6.26%. The 15’s were 5.89% unchanged and the one-year ARMS were up slightly from 5.32% to 5.34% as 2-year Treasury note yields soar.
In a letter to Congressman Hoekstra, Ray McGovern has as a matter of conscience returned the Intelligence Commendation Award medallion given to him for especially commendable service during his 27 years in the CIA. The issue is torture, which inhabits the same category as rape and slavery – intrinsically evil. “I do not want to be associated, however remotely, with an agency engaged in torture.”
The obeisance of CIA Directors, George Tenet and Porter Goss in heeding illegal White House directives has done irreparable harm to the CIA and the country - not to mention those tortured and killed. That you, as Chair of the House Permanent Select Committee on Intelligence, show more deference to the White House than dedication to your oversight responsibilities under the Constitution is another profound disappointment. How can you and your counterpart Sen. Pat Roberts, turn a blind eye to torture, letting some people get away, literally with murder, and square that with your conscience?
Our lawmakers say when they increase the nation’s borrowing limit shortly all of our obligations of debt will top $46 trillion.
The South Florida Sun-Sentinel says, “South Florida’s five-year housing boom is over.” The number of used home sales fell 38% to 586 in Palm Beach County. The median price for January was $393,700, up just 9% from January 2005, but down from December’s $408,200. Existing condo sales fell 32% y-o-y. The median price rose 31% to $209,100. Prices on homes are being reduced 5% to 15% to move them. Sales fell 36% in Broward and 28% in Dade County. Their prices were up 19% and 26% respectively y-o-y.
George and the neocons and many, many Republicans are more than lame ducks, they are going to be destroyed in November’s election. No one recovers from a 34% rating and as we told you it is headed lower. This is political quicksand. These people have done more damage to this country than any presidency or Congress in history. Can you believe Cheney has an 18% rating? It might just as well be zero.
The Internet’s governing body is caught in a web of controversy after approving a deal that extends VeriSign’s monopoly over “com” addresses and lets it raise fees registrars pay to resell them. The deal which must be approved by the Commerce Department, has drain fire from ICANN, the Net’s ruling body who claims it amounts to a giveaway. VeriSign maintains control of “com” domain names until 2012, after which it has a presumptive right to renewal, which critics charge amounts to a perpetual monopoly.
Free trade and globalization are still in their very early stages, as they are only now beginning to spread into the vast services sector. Secular forces in place will continue to cover up cyclical pressures for some time to come. The elitists all want more profit, but fail to admit how deflationary offshoring and outsourcing is. They cannot create more money and credit in perpetuity to offset the deflationary drag. The system will simply collapse. This is an enormous macro risk we do not believe they foresaw. Inflation is growing and will continue to do so as we progress along this road and as a result interest rates have to rise to tame inflation and compensate foreigners for taking the risk of buying our Treasury and Agency paper. The problem is the elitists can raise rates, but they cannot stop creating excess liquidity to offset deflation thus, they are at the helm of a runaway train. On top of that, after 17 years of major monetary and fiscal excesses the system badly needs to be purged. That is why the dollar is doomed to fall and gold will again become the only real hard currency.
The Fed isn’t alone in creating enormous liquidity; many other central banks have done the same. The end of massive liquidity creation is being attempted in Europe and Japan as well as China, but as yet we see no signs of that course being followed by the Fed. Once the Fed cuts liquidity we will have the granddaddy of all recessions and in all probability a depression. If they do not stop the money and credit creation we’ll have a hyperinflationary depression. Only time will tell which course will be taken. We believe it will be hyperinflation if we take Ben Bernanke at his word. It could be an expensive experiment. In addition we have a President that might be impeached, political and social chaos looming, religious wars in their infancy, an economy driven by military spending and a phony war on terrorism that the elitists could regenerate again.
It could be economics and finance could take a back seat to an increasingly fractured world and all the blame thrown upon external forces. Then there is the strain of globalization in that cross-border integration that has unmasked cross-cultural frictions, not only with foreign trading nations, but also with the 20 million illegal aliens in our country.
Anyone who interprets open macro, or unbridled free trade and globalization as bullish, has to have their head examined. The present system cannot endure because by its very nature it is deflationary and Keynesian policies cannot endure deflation. The Fed’s cannot stop liquidity expansion. If they do the system goes under.
Housing prices are simply totally out of whack. Rents are 50% of mortgage payments. Income cannot cover mortgage payments, which to a great extent are being paid out of equity. Mortgage rates are up 1 1/4% to 1 1/2% and they’ll soon go 1/2% to 1% higher. In Los Angeles and San Francisco more than 80% of loans are adjustable and that market began to crack in January. Many of these borrowers could see a 50% jump in interest payments. Since 2000 we have lost more than 700,000 jobs. In the Bay area alone 300,000. A lot worse then that of the auto industry because they were very high paying jobs. Salaries and wages are declining and in terms of inflation are declining even more. Outsourcing is killing our high tech jobs, most of which are high paying and many of which are professional. This has caused massive migration. The problem is relocation isn’t going to help. It doesn’t treat the source of the problem, which is free trade and globalization. All of these factors affect housing prices. Due to high prices only 14% of Californians qualify for a 30-year fixed rate mortgage. Fannie Mae and Freddie Mac are rightly under siege. Who is going to buy all those loans that should have never been written? Nationally 25% of homes purchased were for speculation. You can still buy with 103% financing so you don’t have to put money down, but that will soon end. Remember, statistically it is cheaper to rent than buy. House renters take no risk at all, but money renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc. If you own property and rent it the average net return is 2.5%. All you can hope for is appreciation. That is why you sell now and rent perhaps to buyback later at the bottom. Presently owners are facing major losses. They are still building houses at a record clip as we face a record 5.2-months of inventory. Plus, some cities are losing population fast. Baby boomers will be sellers to afford retirement. Our population is shrinking except for illegal aliens who are at the bottom of the financial totem pole and most of whom are illiterate. You can walk away from a house that has lost its equity provided you didn’t refinance or take out a home equity loan. These new loans are probably recourse loans. Even if you walk away you are still liable to gains with the IRS. Today, most buyers have non-recourse loans - they can walk away. When that happens prices collapse. A safe banking rule of thumb is to allow the purchase of a home that is three times income. If you make $100,000 a year you buy a $300,000 home. Today it is 10 to 1, that $100,000 income allows a $1 million house. That is truly in a danger zone. Remember, houses don’t produce anything; they are places to live in.
Hillary Clinton’s GOP challenger for the Senate from the Republican Party seems to be Kathleen Troia McFarland, 54, a protégée of Henry Kissinger. What a great choice. She hasn’t been in public life since she was a spokesperson for Ronald Reagan. She was under guidance from the Rockefeller group. She’s been at home with her children for 20 years. She is a guaranteed loser; Hillary is a guaranteed winner. The conspiracy again controls both candidates.
Creditors of Refco are taking aim at Goldman Sachs, J P Morgan Chase, Merrill Lynch, Credit Suisse, First Boston, deutsche Bank, BofA, HSBC and Sandler O’Neill Partners, for breaching their fiduciary duty to shareholders by failing to uncover the fraud that plunged the company into bankruptcy. The creditors demanded the judge force the banks to turnover documents detailing their involvement in the buyout of Refco in 2004.
The Senate has voted overwhelmingly to renew the Patriot Act. Those 89 Senators should all be thrown out of office and it’s up to you to see to that.
We now find the UAE is in process of trying to take over military-parts factories in the US. They have made a $1.2 billion offer to takeover Doncasters Group. The British-owned firm makes tank engines and aircraft parts in Connecticut and Georgia. Anyone who can’t see what is going on is dumb.
Christian broadcaster, Pat Robertson, who said Venezuelan President Hugo Chavez Frias should be assassinated, has lost his bid for reelection to the National Religious Broadcasters’ board of directors.
Maricopa County, Arizona deputies jailed 54 people on suspicion of conspiring with a coyote or human smuggler, to sneak them into the US. It was the first time local authorities have applied a new Arizona statute on human smuggling to illegal aliens. They are charged with a felony and face 2 1/2 years in one of the worst jails in the country. This will be a hard case to prosecute, but it is worthwhile.
In Arizona, a measure goes on the November ballot that would use 2003 property valuations as the basis for future tax bills, negating any potential effect from this year’s higher levels. Taxes would be limited to 1% of the property’s assessed valuation. The Arizona Tax Revolt is motivated by an 80% increase in home tax valuations in Mohave County. The measure will be similar to California’s Prop 13 that Howard Jarvis got passed in 1978 and saved us a small fortune.
The Bush review panel that approved the Dubai Ports deal involving the UAE has informed Israeli-owned Check Point Software Technologies that wants to buy Sourcefire Inc. that there will be a full blown investigation regarding its plans.
The FBI and the Pentagon fear the transaction could endanger some of the government’s most sensitive computer systems, especially “SNORT”, which guards some classified US military and intelligence computers. Our position is no foreign government should be allowed to own anything sensitive to our government within the US and that includes Israel and England.
The word is out in Canada, but not in the US or Mexico. Harper, Fox and Bush will meet on March 31st in Mexico to plan the amalgamation of all three countries. They want an autocrat to rule all three countries. It will never happen.
The US Army has quietly placed an order for $38 million in depleted uranium rounds last week bringing the total order with Alliant Technologies of W. Virginia to 477 million. These are the weapons that will have result in fallout for years to come, besides killing thousands of military personnel and civilians. DU remains active for 4.5 billion years. A destroyed Iraqi tank in Basra registered 2,500 times normal background radiation.
It’s our opinion that recent bombings at the holy shrines in Iraq were designed to ignite civil war and to give the US, UK and Israel an excuse to draw Iran into the conflict. Just as the Danish cartoons were designed to increase the anti-Islamic climate in Europe, provoke clashes and draw European troops into the region. This is all intended to stop the Iranian oil bourse from opening and trading oil in euros. That will weaken the dollar considerably, pose a serious threat to the US economy and threaten the US superpower status.
Ten percent of all births and 40% of all indigent births in the US are to illegal aliens. We spend $70 billion a year for their education, health care, welfare and incarceration. Over the past 10 years we’ve spent $376 million in aid to Mexico’s military and police to stop coyotes, drug smugglers and to intercept terrorists. The result of 20 million illegals is that our citizens earn 11% less in similar skills, and for each 10% increase in this illegal workforce wages decrease by 3.5%.
Florida home sales plunged in January at the top of the high season. In fact the Sarasota-Bradenton market had the dubious distinction of having the biggest decline at 48%. They also posted a 23% increase in median sales price to $353,500. Charlotte County-North Port saw sales fall 18%.
Meanwhile, Naples had a median price of $511,400.
Sarasota had an inventory of 1,626 listings in early July; it is over 6,000 presently. Prices over that period are off 5-10%. Condo sales fell 41% as well, and their prices are up 29% to $305,400 y-o-y.
In Charlotte Country-North Port condo sales fell 92% as prices fell 18% to $165,000. As in Sarasota-Bradenton, listings of single-family homes in Port Charlotte and Punta Gorda are stacking up, more than doubling from a year ago to 2,658. Real estate agents are predicting a 10% to 15% fall. Before this is over you are talking 40% to 50%.
California homebuilder’s acquired 10% fewer permits in January y-o-y, another sign that construction will slow amid softening demand for new homes. The industry expects to see 11% fewer permits on the year. We believe that will be adjusted upward.
Building permits issued last month fell 8% from December.
Harvey Pitt, former Chairman of the SEC, solidly blasted new SEC Chairman Christopher Cox who intends to adapt a formal policy on the use of subpoenas against journalists based on “past practices.” The Bush neocon administration is determined to destroy the First Amendment. What puppy dog Cox is, doing for the elitists is preparing an onslaught on anyone who is negative on the market, economy, finances or the Bush government.
The University of Michigan February Consumer Sentiment Index dropped 0.7% points late in February to 86.7 from 87.4 earlier in the month and down from 91.2 in January. The current Conditions Index fell to 105.6 from 107.7 earlier in the month. It was 110.3 in January. The Expectations Index improved to 74.5 from 74.4, but was down from 78.9 in January. Consumer sentiment was down from 96.5 before Katrina and Rita, which means there has been no recovery in American confidence.
The ISM Index of sentiment in the non-manufacturing industries rose to 60.1% in February from 56.8% in January. The Employment Index rose to 58.2% from 51.1%.
The Dana Corp., an auto supplier, has filed for Chapter 11 bankruptcy protection. They follow Delphi, Collins & Aikman and Tower Automotive to oblivion costing creditors billions of dollars and millions of jobs as our Congress and President push offshoring and outsourcing.
Rep. Katherine Harris (R-FL) from Sarasota and a member of the CFR said she did not knowingly do anything wrong in her associations with a defense contractor, MZM Inc., who prosecutors say illegally funneled thousands of dollars to her campaign in 2004. Harris was the Florida Secretary of State who helped arrange the Florida 2000 vote that put George and the neocons into office. US representative Randy Cunningham just got 8 1/2 years for his part in the bribes. Randy was not a CFR elitist; Katherine is. She’ll not go to prison because only the un-anointed go to jail. The elitists carry on.
The Minnesota Commerce Department fined a gas station chain, Midwest Oil $140,000 for selling gas below the state’s legal minimum price. The law passed to keep large oil companies from driving small ones out of business also fails to protect Americans. Only in America.
George Barisich was cited by a group of Homeland Secretary officers for selling a T-shirt on federal property. The shirt said, “Flooded by Katrina! Forgotten by FEMA. What’s next Mr. Bush.” Barisich said he gave the shirt away. The madness continues. You cannot say anything critical of the government. That is why the neocons are building concentration camps. For people like Barisich and us.
For this week two-year Treasury yields added 3 BP to 4.75%. The 5’s rose 7 BP to 4.71% and the 10’s jumped 10 BP to 4.68%. The inverted yield curve holds for another week.
MBA mortgage applications fell last week 1.9%. Purchase apps fell 2.6% y-o-y with dollar volume 2.4% lower. Refi apps were unchanged. The average new purchase mortgage jumped to $230,000, while the average ARM was little changed at $337,900.
M3 surged $54.1 billion, (it’s no wonder they want to hide it) to a record $10.335 trillion. Year-to-date M3 has expanded at an 8% annual rate. Y-O-Y it’s up 8.5%, with M3 less money funds it’s up 8.8%.
Bank credit expanded $4.8 billion to a record $7,636 trillion with a y-t-d gain of $129 billion, or 11.2% annualized. Y-O-Y it’s up 9.5%. Securities credit increased $10.4 billion. Loans and leases were up 11.6% y-o-y. Real estate loans are up 12.0% y-t-d, and 13.8% y-o-y. Consumer loans fell $2 billion, while securities loans fell $18.8 billion.
The California Association of Realtors Inventory Index for existing single-family detached homes in January was six months compared with 3.2 months y-o-y. Home sales fell 24%. The median house price was $551,300, down from the record $568,370 in August. Y-O-Y prices rose 13.8% or $66,720, with a 2-year gain of 36% or $146,840. Condo prices were up 14.6% or $54,810 y-o-y to $430,610, with a 2-year gain of 42% or $127,550.
The average US home price increased 12.95% from the fourth quarter of 2004 through the fourth quarter of 2005. The fourth quarter was up 2.86% or 11.4% annualized.
Company earnings rose 15% in the fourth quarter, the 14th consecutive quarter up over 10%, matching a streak that ended in 1996. Energy company earnings rose 49%.
Another meeting was held regarding $270 trillion in derivatives by Goldman Sachs and J P Morgan Chase for the second time in eight months to resolve a backlog of unconfirmed trades and settlement problems in derivatives. This was an urgent meeting to improve controls in the ever-expanding market in credit derivatives, contracts based on debt. This is a system waiting to implode and when it does the financial system will fly apart.
Higher net worth individuals are putting more money in unregulated hedge funds, private equity and real estate, seeking higher returns. They are shying away from the stock market. Seventy percent are already in that area. Millionaires under 35 have 27% of portfolios in hedge funds.
Federated Department Stores is firing 595 workers in their headquarters in Virginia, 582 at Feline’s in Boston, 367 in Robinson-May in Los Angeles, 265 at Foley’s in Houston. More than 5,100 jobs will be lost.
 
Part III

CANADA
It could be one of the reasons the Canadian dollar is so strong. The current account surplus widened to a record C$13.3 billion in the fourth quarter. That was higher than the previous record of $11 billion in the first quarter of 2001. The Canadian dollar is not overvalued; it is undervalued. All of you who are in the US and own Canadian securities on Canadian exchanges will pick up another 10% before the year is out.
Rod Vienneau is fighting the Canadian and US governments for horrendous crimes committed against his wife. This was government sanctioned torture and abuse of more than 50,000 children involved in an illegal psychiatric government experimentation program. They used mind-altering drugs, physical beatings, and torture with whips and chains while being collared like a dog, ice cold baths, sleep deprivation and other shocking crimes. These cases are called the Duplessis Orphans cases until 1992. Clarina, the victim, came from a poor family and was turned over to a Catholic orphanage when she was nine years gold. She was sent to a psychiatric torture clinic at 12 and escaped at 17. Her sister was also a victim. Thousands of children were killed in these experiments. The cases are sealed and few attorneys are willing to stand up against the government. Investigators claim 2,000 child victims are buried in mass graves. There is a move to try to exhume the bodies, but no court will touch the case. The perps are the Canadian and US governments and Big Pharma. The program has been traced to illegal CIA-funded mind control and drug experimentation programs performed by unscrupulous doctors, some with former Nazi party affiliations, essentially using the children as guinea pigs. All mainstream media has refused the story and it was published in Freedom Magazine. The program lasted from 1935 to 1975 in Canada. This is another example of how evil our governments have been.


EUROPE
Positive business and consumer sentiment may be rising in Germany, but over the past few months the economy has really slowed down. The economy was flat in the fourth quarter. Foreign sales fell in December, and nearly halted in the fourth quarter, and that is in spite of a low value on the euro. It looks like the prosperity generated by massive US consumer spending is coming to an end. American ability to borrow against home equity is coming to an end. German export orders are no longer coming in, which is happening internationally and is reflected in global shipping rates for bulk goods. There is a global economic slowdown. America and other big spenders are tapped out.
A virulently anti-Semitic film about the Iraq was has provoked a storm of protest in Germany after it sold out to cheering audiences from the country’s 2.5 million strong Turkish community. The “Valley of the Wolves” shows crazed American soldiers massacring innocent guests at a wedding party and scenes in which a Jewish surgeon removes organs from Iraqi prisoners in a style reminiscent of the Nazi death camp doctor, Dr. Joseph Mengele.
The $10 million film, the most expensive Turkish film ever made, was a major box office hit in Turkey and more than 130,000, mostly young male Muslims, saw it in Germany in just the first days of showing.
Needless to say, Germans’ are shocked, but should they be? They have laws that put you behind bars for what you think if it deviates from the norm. This film is an invitation to insurrection, yet they let it be shown. We do not get it. Are they attempting to fuel a civil war in Germany? Is this the antithesis to the Danish cartoon insults of Muslims? Fortunately, Cinemax is withdrawing the film, but the damage is done. And, how about copies to be shown all over Germany and the world? The film is wrong and the cartoons are wrong, but that’s what a prelude to terror is all about.
Spain’s January PPI was up 1.5% from December and up 6.3% y-o-y.
Italy’s December big company employment was up 0.1% y-o-y.
Euro area January M3 was up 7.6% y-o-y versus 7.3% in December.
The ECB meets next week and we believe interest rates will rise 1/4%.
German January wholesales were down 2.3% from December and up 3% y-o-y.
Finnish January industrial output was unchanged from December and up 0.9% y-o-y.
French January unemployment rose 9.6%.
German February unemployment was 11.3% unchanged from January with the jobless rate up 36,000.
Italy’s January PPI was up 1.1% from December and up 4.7% y-o-y.
Swedish January retail sales were up 7.7% y-o-y and their PPI was up 0.4% from December and up 6.0% y-o-y.
Spain’s February HICP was up 4.1% y-o-y.
Italy’s February Services Business Confidence Index was 20 versus 21 in January.
January French PPI was up 0.8% from December and up 3.7% y-o-y.
The French February consumer confidence indicator was –24 versus –27 in January.
Slovakia’s central bank raised key interest rates 50 basis points.
Hungary’s January industrial producer prices rose 4.5% y-o-y.
Spain’s public budget surplus was 10.0 billion euros or 1.1% of GDP.
The eurozone February economic sentiment indicator was 102.7 versus 101.5 in January.
Eurozone January HICP was up 2.4% y-o-y.
Croatia’s foreign debt reached 84% of GDP.
Slovakia’s February CPI was up 0.4% from January and up 2.2% y-o-y.
The Polish central bank cut interest rates by 25 BP again.
An index of economic sentiment in the 12 nations sharing the euro rose to 102.7 from 101.5 in January.
Italy’s February new car registrations were up 6.04% y-o-y.
German steel producers see 2006 production up 3.5% to 45.7 million tons.
Lithuanian 2005 GDP growth was revised to 7.5% from 7.3%.
Eurozone unemployment was steady at 8.3%.
Serbia’s February inflation rose 1.4% from January.
Italy’s public deficit rose to 4.1% of GDP.
Greek fourth quarter growth was 3.7%.
Eurozone February provisional HICP is up 2.3% versus 2.4% in January.
Swiss February PMI 60.0 points versus 57.6.
Spain’s February manufacturing PMI was 52.7 versus 52.6 in January; Germany’s was 55.8 versus 55.0, France’s was 52.2 versus 50.7, Italy’s was 55.1 versus 53.5 and Sweden’s was 58.5 versus 57.8.
Finnish 2005 GDP rose 2.1% y-o-y.
Swedish new car registrations rose 5.6% y-o-y.
Hungary’s 2005 GDP growth was 4.1% versus 4.6%.
Dutch February PMI was 57.0 versus 56.2 in January.
The Central Bank of Russia announced gold and currency reserves on February 17, 2006 were $195.4 billion versus $194.2 billion on February 10th.
The NTC Research Index based on a survey of 3,000 eurozone purchasing managers rose to 54.5, the highest since July 2004 from 53.5 in January. It shows European manufacturing picking up, but we are skeptical – we want to see two more good months to go with this one.
The ECB, the European Central Bank, raised interest rates as we predicted they would, 1/4% to 2.25%. ECB president Jean-Claude Trichet indicated there would be higher rates during the rest of 2006.
Germany’s 10-year bond yield rose 6 BP to 3.57%.
Italy expects zero growth in 2005. Anything under 2% is a recession. Zero borders on depression. That is down from 1.1% in 2004.
German retail sales rose 2.7% in January. That won’t last long.
The Danish Central Bank raised its discount rate from 2.25% to 2.50%.
Russian Economic Development and Trade Minister German Gref has warned that record growth in the local stock market threatens to raise equity prices to unfounded levels. It has grown 30.5% in the first two months of the year, and by 83% in 2005 as foreign emerging market funds and local investors poured money into stocks against the backdrop of oil-driven economic growth. We believe part of the money flow comes from the yen carry-trade, which is in the process of ending and that could adversely effect that market and many others.
Gref said we are very worried about a so-called bubble forming. He also said consumer prices rose 4% in November and December so he has called for urgent measures to reduce inflation and implement structural reforms, or else the economy would struggle to achieve a growth rate of 5% for the year, after increasing to 6.4% in 2005.
Eurozone fourth quarter GDP growth was confirmed at 0.3% versus 1.7% in the third quarter.
Eurozone February services PMI was 58.1; the Germany PMI was 57.8 versus 58.1 in January, Italy was 57.8 versus 56.0 and Spain was 55.0 versus 53.4 in January.
The Finnish December final trade surplus was 526 million euros versus 1.076 billion y-o-y.
Lending to eurozone consumers and to businesses is growing at the fastest rate since 2000, supporting a European central bank interest rate rise this week. Loans to households grew at a 9.4% rate, the fastest since the first quarter of 2000. Lending for house purchases grew 11.7%. Lending to businesses or non-financial corporations also accelerated increasing at an annual rate of 8.5%, the fastest since the second quarter of 2001.
Money supply growth in the eurozone accelerated in January for the first month in four as the ECB raised rates. M3 rose 7.6% y-o-y, up from 7.3% in December.
It’s estimated the EU economy will grow at the fastest rate since 2000 in the first three quarters of the year.
Manufacturing in the eurozone expanded at the fasted rate in 19 months.
Manufacturing in Switzerland grew at the fastest rate in 2 years in February.
Irish mortgage lending growth accelerated in January at a record 28.8% annual rate.
As Norway expresses its desire to sell oil in euros, credit growth for households, companies and municipalities grew at an annual 13.4% rate from 13.2% in December. Unemployment fell to 3% in February, down from 3.3% in January.

ENGLAND
Did the use of uranium weapons in Iraq result in contamination in Europe? Evidence from the measurements of the Atomic Weapons Establishment shows the highest levels of depleted uranium ever measured in the atmosphere in Britain were transported on air currents from the Middle East and Central Asia.
The British facility was taken over by Halliburton three years ago, which refused at first to release air monitoring data, as required by law. Halliburton who clearly recognized that it was a serious enough matter to justify a government interpretation of the results stonewalled AWE. After shock and awe in Iraq in 2003, very fine particles of DU traveled in seven to nine days from Iraq battlefields as far as 2,400 miles away. Radiation in the atmosphere quadrupled within a few weeks. In addition, there is irrefutable evidence that the US has unethically and illegally used DU munitions on cities and other civilian populations. That contamination is not going to go away for thousands of years in England, Iraq, and Afghanistan and in many other parts of the world. We should be prepared for many new deaths and deformed children on an ongoing basis for centuries to come. Where is the media? Where is the truth? Write to all representatives and ask them to stop the insanity emanating from our White House. The National Academy of Sciences reported in their new Beir VII report on low-level radiation, that there is no safe level of exposure. It is estimated that the atomicity equivalent of at least 400,000 Nagasaki bombs has been released into the global atmosphere since 1991, from US use of DU munitions.
Who is producing this uranium nightmare? It’s none other than the firm of Rio Tinto in which the head of Europe’s Black Nobility, the British Royal Family has a $6 billion investment. The company was formed in the 1950s by arch thief Tiny Rowlands in behalf of the European oligarchy. We met Tiny in Rhodesia in the early 70s. He was an ardent Nazi, arrogant and a nasty piece of work. He reminds us of George W. Bush in many ways. Rio Tinto is one facet of the uranium business. The other is the Rothschilds who control uranium suppliers and prices globally. The Queen’s direct contacts in the US are David Rockefeller, Dick Cheney, Halliburton and the Bush crime family. The House of Windsor has not only looted the world via colonialism, but its biggest fortunes were made in the white, black, and Asian slave trade, prostitution and above all in illegal drugs. They and Carlyle are turning the earth into a death star.
January mortgage approvals fell to 45,039 from 51,233 in December.
House prices in February fell 0.2% from January.
Retail unemployment fell at the sharpest rate in 22 years.
February consumer confidence was –4 versus –3 in January.
The IPSOS-Mari Poll says only 28% of respondents are satisfied with PM Tony Blair’s performance, down 9 points since November. Sixty percent were dissatisfied, 31% were satisfied with the government and 60% were dissatisfied.
The February CIPS manufacturing PMI falls to 51.7 from 51.8 in January.
Final M4 was up 0.6% versus December. M4 lending rose 9.2 billion pounds.
CIPS February services PMI rose to 58.9, the highest since April 2004.
The main Business Activity Index for services, published by the Chartered Institute of Purchasing and Supply and the Royal Bank of Scotland rose to 58.9 in February from 57 in January. The survey covers all private sector services, excluding wholesale, retail and distribution, representing about 40% of the economy. This is the highest figure since last April.
Home loans approved by banks rose 32% in January y-o-y.

LATIN AMERICA
A mission of failure and disappointment. That is what America’s foreign policy has been and will continue to be in Latin America over the next several years. The mission of Secretary of State Rice to inoculate Latin America against Venezuela’s President Hugo Chavez Frias has to be the stupidest foreign policy ever hatched in Washington. There are only a few countries that will really listen to the message.
There is no coalition of the willing in Latin America. These nations are tired of playing second fiddle to America’s interest, or should we say, to the interests of elitist transnational conglomerates. The move to the left in most of these countries is simply a reaction to the years of plundering by US corporations. We see it as a natural course of events. As far as Latin America is concerned America has isolated itself. Election after election, south of the Rio Grande, bears that out. The final affront will be the election of Andres Manuel Lopez Obrador as president of Mexico. Mexico does not want a president that fronts for US interests.
Venezuela didn’t create the problem, American greed did. Mr. Chavez is but one player in the play. He just happens to be the most outspoken, the most undiplomatic. He is not the problem. American foreign policy is the problem. Mr. Chavez and others like him couldn’t get elected if the American elitists hadn’t laid the groundwork that forced the electorate into his arms. American foreign policy created the socialist governments of South and Central America and in all probability in Mexico. Washington has no political capital left in Latin America. Their arrogant and ill-conceived campaigns against President Chavez and others perceived, “communists” is delusionary. If you then add free trade to the exploitation mix you have a super loser. Latin America knows free trade is an attempt to steal not only their sovereignty and freedom, but also any national wealth that hasn’t already been looted. The elitists are learning that Latin America is not a group of American colonies. America needs a new approach and a new foreign policy with its Southern neighbors and until that happens the US will have little influence in the region. You cannot succeed with a policy based on dementia, which unfortunately pervades all American elitist foreign policy. Getting and stopping Chavez isn’t the answer. The answer is listening to the people of Latin America and shaping a policy that works for both sides. Until that is done the left will continue to rule Latin America.
Brazil continues to do well. S&P upgraded Brazilian debt to BB, which is only two levels below investment grade, which is excellent.

ASIA
Singapore’s January manufacturing output was up 1.3% y-o-y.
Hong Kong January exports were up 4.2% y-o-y by value versus 6.7% in December.
India’s economic growth slowed to 7.6% in the fourth quarter. The 2005/06 fiscal deficit is seen at 4.1% of GDP versus an estimate of 4.3%.
Hong Kong’s January M1 money supply was up 2.0% versus December, but down 17.2% y-o-y.

CHINA
First quarter GDP is seen up 9.6% y-o-y and CPI up about 2.2%.
China’s oil dependency was 45% in 2004 and it could be as high as 83% in 2030. That means China will develop every possible domestic source and push as hard as it can for rights to develop foreign energy sources.
They have completed the 2,400-mile pipeline for oil and gas from Yinjang to the east coast. They are also planning a 6,250-mile buried pipeline across the country by 2015.
China is drilling in the East China Sea near the Japanese boundary and is in a quest to find natural gas and develop it in the Chunxio field. It has also discovered its largest undersea oil and gas resources in the Bo Hai Gulf, which will raise production 15% annually.
They have spent $2.3 billion to buy 45% of the rights to the Akpo Oil Corp. in Nigeria. They have bought Petro Kazakhstan and rights to exploit oil resources in Venezuela, Sudan, Algeria, Iraq, Iran and Indonesia. Since 1993, they have bought 34 oil companies in 19 countries.
The February Purchasing Manager’s Index was 50.7 points versus 50.2 in January.

JAPAN
Japan like everyone else is paying 42% more for commodities then they did a year ago. Producer prices are soaring at the fastest pace in 16 years. Final goods costs for raw materials have risen 33.1% from a year earlier, the biggest increase since July 1980. This means profits get cut or the increased costs are passed on in the form of higher prices and inflation. One way to cut import costs is to let the value of the yen rise and that is what the Bank of Japan is about to do. They’ll abandon their deflation plan by cutting spending and credit and by increasing interest rates. That should send the yen to 100 to 110 to the US dollar. It also means if Japan is going to re-capitalize then domestic savings cannot be lent out to borrowers such as the US Treasury. Japan will have to sell some US paper. That means Japan and China will be dollar asset sellers at the same time for different reasons. That could be the worst of all worlds. China is at the same time as Japan, turning away from exports and tending to internal consumption. They’ll earn less from exports, internal savings will be consumed and dollar balances will be reduced to pay for projects. Like Japan, China will retool and that will absorb savings and forex balances. In both cases they will not be buying US dollar assets they will be liquidating them. The US does not have these options; they have no savings and enormous debt.
January commercial sales rose 5.4% y-o-y and retail sales were down 0.2%. Industrial output was up 0.3% from December.
February new vehicle sales were off 1.2% y-o-y.
Industrial production rose for a sixth month in January up 0.3% in December to a record.
Bond yields climbed to an 18-month high on Thursday.
After five years of flooding the financial market with money in an unprecedented measure to try to curb inflation and handle all that yen returning from the carry-trade, the Bank of Japan will remove currency from circulation and raise interest rates. They believe the 15-year deflationary spiral is over. It is, but only as long as hyperinflation persists, which is probably two to three years away and then it is back into depression.
January CPI and Core CPI increased 0.5%. Core saw its biggest jump in eight years. These figures are phony because Japan has included substitution and hedonics – the same as the US has. Wages increased for the fifth consecutive month in January, the longest string of wage gains since 1997. Household spending fell 1.5% m-o-m and unemployment rose to 4.5% from 4.4%.


AUSTRALIA AND NEW ZEALAND
Australia’s January private sector credit was up 1.3% and the fourth quarter current account deficit was 14.447 billion AUD versus 13.674 AUD in the third quarter.
The Australian current account deficit blew up in the fourth quarter to a deficit of $14.4 billion, a 6% deterioration from the third quarter. The largest drain was increased dividend payments to offshore investors and a higher interest bill on foreign debt. In the quarter debt ballooned to $473 billion. We’d call this out of control.
Twenty-two percent of NZ companies expect sales will improve in the coming year and 26% say they will decline. Forty-seven percent expect no change. This is the lowest level of business confidence in 15 years.
New Zealand consumers borrowed 15.1% more in January for housing and consumption year-on-year.

AFRICA
Last October the Zimbabwe dollar was $12,500 for a rand. In February it was Zim $27,850 for one rand. Inflation is more than 3% a day.
The profitable farms that have been seized have been taken over by the top communists in the Mugabe government. All this as the UK, US and South Africa stand by and do nothing.
 
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