Loading ...for that magnificent picture you posted last evening …. I copied it and printed a 10 X 8 print of it today and will be framing it. Should you decide to sue me for copy rights, please wait till at least the end of wave 3 of III ….. or better still near the end of wave 5. BTW …. I unloaded the remainder of NXG on Friday (wife’s RRSP) and bought the equal of ECU on Monday …… hoping that ECU will do better in the long haul.
www.netdania.com/ChartApplet.asp?symbol=XAGUSDOZ|comstock_lite
click on Time Scale-Weekly , move the cursor down to the top of the high’s in 2004 & 2005, Look at the breakout in 2006; Glance up to the blue line across the high’s on this past move and where we are right now, IMHO we have room to rumble.
Because of the time it takes, I have resisted getting involved with different chat forums or boards, so I may or may not benefit from Investors Village. I have to admit though that the first glance at the link you posted revealed a posting about Oilsands Quest Inc., an investment possibility that Cannuckgold and I had mentioned only 24 hours earlier on Goldtent. I appreciate your link and will dip into it as time permits. Best wishes to you and those dear to you.
….You might not have to move……They might just Annex you
You are a good organizer and statesman…why dont you run for Chancellor or Prince or King…..or whatever you guys do over there….
….and are there a lot of Austrian School Economists in Austria ?….or are you the only one left….?….cheers FGC
If Ron Paul wins I’m moving to America 
It has never been more critical to take action in order to combat the crap we have been fed since 1913.
Contribute from the heart to the Ron Paul campaign…it is making news…it is giving him momentum. His words are beginning to be heard.
Contact Lou Dobbs (CNN)…reminding him of the value of what Ron Paul has to contribute to the American way of life which Dobbs shares.
Go with the flow…momentum is growing for both Ron Paul and Lou Dobbs…feed it…it is our only hope of divorce from the 2 dynasties (1 republican…1 democratic)…families which have been directed and elected by the same cretin force for more than a generation.
Time to screw the bastards.
I envy you guys for this once in a lifetime opportunity; Alas it prolly won’t come to fruition as much as hope for it -So go for it!
The EU hasn’t even produced a charismatic politician of Ron Paul’s stature in a generation or two, which is too bad, though I’ll never lose hope.
Thanks frr
Nothing more than a “monkey see, monkey do” rally in the Asia/Pacific Region so far, IMO, but only time will tell, as usual, whether or not the correction/pullback is over. Personally, I doubt it.
finance.yahoo.com/intlindices?e=asia
As for the rally in the DJIA….more 52 week lows than 52 week highs on a day like today? The Semis, Transports, Housing and Financial stocks, among other sectors, tell me this rally, although impressive in some ways, was nothing more than a big hook. I won’t be surprise if it peters out before noon tomorrow.
JBI
The Charlotte-based bank said it will also spend about $600 million to support a group of its money market funds because of “uncertainty around the value” of the funds’ investments. Of specific concern are the funds’ holdings in structured investment vehicles, which use borrowed money to make risky but potentially high-yielding investments.”These are not normal times,” said Bank of America chief financial officer Joe Price, who added the bank is also setting aside more money for potential losses it considers “manageable.”
http://biz.yahoo.com/ap/071113/bank_of_america_writedown.html?.v=9
http://www.youtube.com/watch?v=DKZmIzEMUN8
This one looks like it could far exceed what happened on November 5, 2007.
pgs
Glad you found it of benefit. Now if he could get US Gold moving, I would like him a lot better.
For such an experienced person, and mover and shaker in the world of PM development companies, Bob McEwen comes across as such a calm and knowledgeable presence.
I liked him and I liked Goldcorp when he was there. Our family investments have since parted company with Goldcorp, although at one time I thought Goldcorp should be the very centrepiece core holding of the PM-related portion of our portfolio. We have only recently taken an equity position (actually only a warrant position for the time being) in US Gold, so we do have a vested interest in our high opinion of Mr. McEwen. Best of the evening and trading week to you.
Gary North’s REALITY CHECK
To subscribe to this letter:
snipurl.com/subscribenow
Issue 702 November 13, 2007
WHEN CREDIT-RATING SERVICES GET BLINDSIDED
The world’s capital markets are in turmoil. The main reason
is never discussed: the inflationary policies of the world’s
central banks, most notably China’s, but also the Federal Reserve
System under Greenspan’s Chairmanship. The central banks receive
universal praise by the media. This provides insight into the
media’s understanding of monetary theory, which is poor, as well
as its understanding of who holds real power in the world, which
is excellent. The editors know where their bread is buttered.
They do not run critical articles on central banking.
The central banks’ perpetual return to fiat money expansion
is the source of the most widespread errors by entrepreneurs
regarding the underlying conditions of cause and effect in the
capital markets. The central banks’ main policy tool is their
manipulation of very short-term interest rates associated with
inter-bank lending. They do this through the creation of credit
and the direct subsidizing of the banking sector. This
manipulation of short-term interest rates fools entrepreneurs
into believing that capital is plentiful and that the boom
conditions will continue.
The problem becomes visible, as it has now taken place in
China, when price inflation creeps higher. This creates a crisis
for central bankers. If they continue to inflate, there will be
a market-disrupting increase in prices. If they cease to
inflate, there will be a credit crunch, where the stock market
falls and bankruptcies increase, especially in the financial
sector.
To this is added the threat of price controls imposed by the
government. The controls always create shortages.
China’s government has followed the third path: price
controls. The Federal Reserve under Bernanke has followed the
second: slower monetary inflation. We see the government of
China imposing price controls, which will create shortages in
every sector so controlled. In contrast, Bernanke’s FED has put
on the monetary brakes. It has lowered the rate of expansion of
the adjusted monetary base to under 2% per annum. The result is
the subprime mortgage crisis and the parallel crisis in asset-
backed securities.
BAD PRICE SIGNALS PRODUCE BAD RATINGS
The investment market’s ratings agencies — Moody’s,
Standard & Poor’s, and Fitch — have come under attack by some
journalists. How could they make such mistakes? Why didn’t they
see this coming? How could they have issued such high ratings on
assets that have in some cases collapsed in value by 50%, due to
selling pressure and the investing public’s unwillingness to buy?
The answer is clear: they assumed that things would be
business as usual in the credit markets. Business usually is
usual. Most of the time, this assumption is accurate. But at
turning points, when central bank monetary policy moves from
loose to tighter, the usual assumption becomes woefully
incorrect. But because the experts are unfamiliar with Austrian
School’s theory of the business cycle, they do not understand
cause and effect in the capital markets. They do not see “it”
coming, because “it” comes because of central bank policy.
The latest headlines about incorrect ratings relate to the
residential real estate appraisal market. The Attorney General
of New York State has filed suit against several real estate
appraising companies. He says that Washington Mutual, a Seattle-
based mortgage company, pressured real estate appraisal firms to
turn in higher appraisals than the market warranted. These
higher appraisals made possible larger loans, which meant a
larger pool of interest-paying debt. He cannot go after
Washington Mutual directly because of Federal laws. So, he is
going after the appraisal firms. Here is how one news report
summarizes the Attorney General’s position.
Citing extensive internal e-mails, the suit charged
that Washington Mutual demanded that eAppraiseIT use
the bank’s own preferred list of appraisers - who
allegedly had demonstrated their willingness to inflate
values - rather than eAppraiseIT’s regular roster of
independent appraisers.
Executives at eAppraiseIT knew that agreeing to
Washington Mutual’s demands would violate federal and
state laws, but they caved rather than lose millions of
dollars worth of business that the bank could shift to
competitors, according to the suit. An e-mail sent to
senior executives by eAppraiseIT’s president last
February and quoted in the complaint said, “We have
agreed to roll over and just do it.”
www.garynorth.com/snip/360.htm
This will now play out in the courts. If the firms are
convicted in New York, or if they settle out of court while
admitting no wrongdoing, they will be prosecuted in lots of other
states. The way that an Attorney General gets to be governor is
by successful prosecutions that make the headlines. The recent
career of New York governor Eliott Spitzer is a classic example.
So, we can be certain that this story is not going to go
away. The problem is, we have entered a declining phase of the
real estate market. Prices are falling. Liquidity is falling.
People are living in houses that are worth less than they were a
year ago. They sense that what is touted as Americans’ main
investment, their homes, is in trouble.
Because the Federal government removed interest payment
deductibility from gross income for income tax purposes, except
for mortgage interest, this has subsidized the extension of home
equity loans. These loans are floating-rate loans, unlike
conventional mortgages. Americans have used their home equity as
a substitute for careful budgeting and belt-tightening. They
have borrowed against their homes’ equity.
This was great for the lending agencies. Under normal
circumstances, a home loan is secure from default. People will
not normally walk away from their homes. They stay current with
home-related debt service.
But we are no longer in normal times. The squeeze has
begun. The stories of defaults and repossessed homes are
becoming common.
DOMINOES IN THE NEIGHBORHOOD
When only one house is repossessed, the homes on both sides
may not be affected. But when foreclosure For Sale signs go up
on more than one front lawn, housing values fall on the block.
Buyers see that there are foreclosures. They accurately
conclude, “I’ll wait to buy. This is becoming a buyers’ market.”
This is a rational response. Also, people don’t want to buy in
neighborhoods where housing prices are declining.
This is now becoming a reality in ghetto neighborhoods.
Detroit is today one gigantic foreclosure zone. This cancer in
Detroit has been common for over a decade. It is increasing. It
is also spreading to other cities.
This is not yet perceived as a threat to white, middle-class
home owners. They think this process is contained inside the
poor neighborhoods in town. They are wrong. The fallout from
the inner city neighborhoods is challenging the solvency of the
entire mortgage loan industry. Money is getting tight for all
prospective homebuyers because investors are unwilling to pour
good short-term money after bad into this sector of the economy,
which is lent long to marginal buyers. The cancer of insolvency
is moving uptown.
The fallout from the New York lawsuits will add to
investors’ fears. Washington Mutual (WaMu) is the nation’s
largest savings & loan association. It has served as a model for
the residential real estate industry. Now its policies are
becoming headline news.
This is the worst nightmare of any S&L, as most of them
learned two decades ago. They are the original carry-trade
organizations. They are borrowed short and lent long. Bad
publicity produces a crisis. Depositors switch to a different
company or different sector. The institution can’t make new
loans. Its source of growth immediately ends. When depositors
withdraw funds, the S&L cannot meet its legal capital
requirements. Withdrawals force mortgage liquidations.
Liquidity is reduced. Insolvency looms.
This affects new homebuilders. On November 9, Levitt & Sons
filed for bankruptcy. The senior Levitt invented the modern
subdivision. Levittown, built in New Jersey in the immediate
post World War II era on land that had been farm land, pioneered
the industry. Now its homebuilding division has gone belly-up.
The company’s financial difficulties became
particularly acute in August 2007, when disruption in
the credit markets further paralyzed buyers and
increased cancellation rates. In September and October,
Levitt and Sons engaged in negotiations with its
secured lenders regarding the status of development and
its near-term cash needs. Levitt and Sons requested
that the lenders provide advances to pay outstanding
liabilities to contractors, suppliers and other third
parties at the projects that serve as collateral for
each lender. These negotiations are continuing.
Levitt and Sons commenced its Chapter 11 proceedings in
order to facilitate an orderly negotiation process with
its creditors and facilitate an orderly wind-down or
sale of the enterprise or its assets.
www.garynorth.com/snip/361.htm
This was not a subprime mortgage-funded company. This
company has been selling new homes to solvent buyers for sixty
years. Yet it could not survive in the crisis created by the
subprime mortgage market. This crisis is not being contained.
It is spreading.
Long Island is a high-price New York City suburb. Homes
there are very big ticket items — California style. The
mortgage crisis has hit Long Island like a sledgehammer. In a
long story in “Newsday,” we read about a threat to local real
estate equity. It is a long story, which indicates that the
editor believed there would be a lot of reader interest.
The key to understanding this phenomenon is the definition
of “subprime.” This is not just a loan to a poor person in the
ghetto. It is a loan given to anyone who is at the limit of his
borrowing capacity. This can be a yuppie in a high-priced New
York City suburb. And so it is.
As Long Island’s economy and housing market boomed,
tens of thousands of area residents saddled themselves
with expensive mortgages, borrowing billions of dollars
and counting on the equity in their homes to help pay
their bills and build their wealth for them.
Now, that foundation of home ownership for many is
crumbling — and the Long Island economy could pay the
price.
Nearly a third of the 107,000 mortgages given to Long
Islanders in 2006 were high-cost loans, which charge
higher interest rates, fees and points and are far more
likely to go into foreclosure than their conventional
counterparts, a Newsday analysis of loan and
foreclosure data has shown. This universe of loans
includes those that are considered subprime — more
expensive mortgages given to borrowers with less than
perfect credit. For many of those borrowers, these
readily available loans were their only way to own a
home. For banks, they were a rich source of fees.
The mania to buy a home was not contained to the poor
segments of the buying public. The mania hit everyone except the
super-rich, who pay cash. The reverberations will be felt across
all five income quintiles, excluding only the underclass and the
super-rich.
In the coming months and years, experts say,
foreclosure rates may worsen considerably, as borrowers
find themselves unable to make their monthly payments
and unable to find a way out. And even when they can
make their payments, subprime borrowers are spending
thousands of dollars more on interest than their prime
rate counterparts — dollars they could have used to
pay bills, buy a new car or remodel their homes, all of
which help fuel the local economy.
Those factors could damage the Long Island economy,
which rode the housing wave up for so long and depends
extensively on healthy consumer spending, high home
prices and a stable housing market. Experts estimate
that as much as a third of the region’s economy is tied
to housing. On top of that, these experts say that Long
Islanders — and homeowners nationally — have used
their residences as piggy banks to pay for everything
from cars to education.
www.garynorth.com/snip/362.htm
The price-bidding mania has been widespread. So has the
equity loan addiction. Why does any rational person believe that
the subprime loan sector of the economy can be contained? It
affects all communities. It affects the equity in homes in every
community except the super-rich — and maybe even there.
FROM GRADE INFLATION TO GRADE DEFLATION
Ever since the G.I. Bill after World War II, collegiate
grading has suffered from inflation. Classes got larger. Money
got better. Salaries zoomed. To keep the game going, grades
went up. Since about 1963, the grade inflation has been double-
digit.
This same inflation affected the marketing of higher
education. Normal schools — teacher training institutions –
became colleges. Colleges became universities.
This grade inflation has become universal. It is not
confined to academic institutions. It affected the credit-
ratings industry.
In August, 2007, things changed without warning. What had
been highly rated commercial paper turned out to be illiquid junk
paper. This is what the credit crunch is all about. No one saw
it coming outside of the hard-money newsletter and website
industry.
The credit-rating services are now under a lot of scrutiny.
They have become donkeys on which the media will try to pin
subprime tails. Yet it was not their fault so much as the
Federal Reserve’s fault. How can ratings be accurate when the
monetary system is in the hands of arrogant men who believe that
fiat money is better than gold and that their judgment of
interest rates is superior to the free market’s?
We are about to enter into a time of grade deflation in the
credit-rating industry: lower ratings for similar asset classes.
The rating services do not want to be caught flat-footed again.
They have always graded on a curve. Now that curve is going to
move lower.
This is going to create problems for all existing holders of
assets. The more leveraged they are, the more problems this will
cause. When your credit asset is downgraded, your interest rate
goes up. When your interest rate goes up, the interest rate-
discount gets higher. When the discount rate goes up, the
present market value of your hoped-for stream of income falls.
If this is your house, too bad.
CONCLUSION
The subprime mortgage crisis cannot be contained. The
credit-rating deflation will affect asset categories across the
boards. Standard will be hiked. Like the bar in a high jump, a
lot of competitors will be eliminated. So far, over 180 mortgage
companies have not cleared the rising bar. This many have gone
under or disappeared since last December. More are added every
week.
There will be enormous political pressure placed on the FED
to return to Greenspan’s policy of rate cuts. The FED will
resist, but it will conform. But, just as in 2000-2003, the
stock market fell despite rate cuts. The FED can cut its target
rate for overnight bank loans to other banks. The subprime
credit crunch will not be alleviated until the FED is clearly
inflating and has been for a couple of years.
There will be bargains galore before the great reversal.