October 25th, The Day of Doom…

I have been reading this all over the internet over the past couple of days mostly from folks who receive the Webbot Prediction alert, or whatever it is called. Essentially, this program scans the internet for predictions of the future based on some algorithmic method. It was first developed in the 1990’s to find hot stocks, but then was used for such useful things as finding out the end of the world.

Now, do I believe such predictions? No. Basically, the creator even says its accuracy is as about as good as flipping a coin, so I guess we are all just as good as this multimillion dollar program if we just have a mere quarter in our pocket. Could something happen on October 25, 2009? Sure, who knows. Certainly the news today is not encouraging and the DXY is in dangerous territory again, but a complete collapse is not really likely in the near-term. There is simply too much liquidity in the market right now.

However, the value of that liquidity is a completely different question and issue. The value of the USD can fall to zero in one tick, we know that to be a fact, but even that is unlikely. As stated before, I believe we are in more danger of a bank run than a collapse of the currency in the near-term, but even that seems to have sorted itself out. In fact, what has saved all the currencies of the world, including the USD, is the fact that they all printed their way out of this mess almost equally debasing their own currencies. Even though that is a true statement it is also true that the US is definitely guilty of printing more money than most other countries and it is also true that we have poor leadership and dismal fiscal policies which is why the USD is the poster child of a weak currency.

Super power or not, we are in the last throws of glory days thanks to decades of selfishness and political indifference to fiscal sensibility. You cannot borrow and spend your way to prosperity, regardless of what Ben Bernanke, Barney Frank, Nancy Pelosi and Obama thinks. This means that we will eventually suffer the decay of currency collapse, perhaps “soon” and that depends on your definition of soon, but it is unlikely on October 25, 2009.

I would encourage you to be prepared for currency devaluation, because we are experiencing it now in a very small way, by investing in hard assets such as gold, silver, palladium, and platinum. I believe that silver and palladium represent the best value at this time, silver is at $17 when gold just made a fresh high, the last time gold was at $1030 silver was at $20/oz. Palladium could easily be trading higher given the green push we are in and the rarity of the metal. Either way, if you won it and things do get worse and the headlines are true, you will have your wealth preserved and protected.

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The FDIC is Broke

It is funny that we are not hearing about this on the evening news or CNBC, but nothing really surprises me anymore. Those who read my work regularly know I speculated that the FDIC was basically broke, well, today they announced just that. As of September 30th, tomorrow, the FDIC is broke. This is why they are trying to raise money through making banks pay 3 years worth of premiums all at once.

Considering there are 416 banks on the FDIC “troubled” list I am sure we will see tens of billions more in failures. This leads me to believe that even the amount of money that the FDIC raises from its member banks will probably not be enough to cover the additional losses it will suffer. One also has to remember the infamous loss-share agreements which mean the acquiring bank has relatively no risk when it takes a failed bank over. I am sure these loss-share agreements will cost way more than the FDIC expects.

There is also the issue of the debt ceiling that we have to deal with as well. If we raise the debt ceiling we condemn our children and grandchildren to a life of indebtedness and if we do not we have to suffer the pain, I can handle the pain, can you? The economy is not getting better which also means another stimulus package is on its way as well, which is adding more debt to our problem. David Rosenberg it the nail on the head today when je said; “No one build more bridges, cemented more river beds, built more roads than Japan, but they could not break the deflationary spiral.” Bingo, we won’t break it that way either. In fact, the way we are going it will jump from inflation to rapid dollar devaluation, nice job Mr. Obama and Ms. Pelosi!

Here is the FDIC Document:
Sept 29 No 1

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This Market is Eerie

I know I have stated this many times before, but I am not the only one that feels this way. With the situation over China, the potential trade war which it definitely could be in the near future, and the fact that we are trading at 130 time’s current earnings I firmly believe we are way overbought. Not only are stocks rising, but treasuries have done pretty well over the past couple of months, they both can’t be right.

In my view, the only thing holding the market up is a very weak dollar and if one looks at the intraday charts or the charts over the past 6 months you will see that the dollar’s decline has continued while stocks go up. This was the path over the previous few years until the crisis exploded last year and people ran to the dollar for safety and, more importantly, liquidity. Even during those times you could see the dollar’s strength led to weaker markets, along with the obvious.

This trend will decouple eventually, but it is clear that the dollar is the whipping post for the world right now. In my opinion, the only thing buoying the dollar is the fact that every other country is printing money right along with us. At the end of the day I do believe that we will be left holding the bag as other countries are still plagued with problems, but I see way more problems with the US versus other countries, with the exception of the UK. I also see no feasible way for Ben to defend the dollar as the Fed has a history of market appeasement versus strong monetary policy.

All this hoopla about the recession may be over, that might be true, but the recovery will still feel like a recession or even a depression. Frankly, if you exclude government spending GDP would have declined between -3 or -6% last quarter. It is also important to note that the politicians are taking full blame for the recovery, but our democratic Congress refuses to acknowledge that they are to blame for the collapse to begin with. Frankly, the President, Barney Frank and Pelosi have just as much responsibility as former President Bush and the republican Congress as they rubber stamped Bush’s policies as they came across for a vote. They also took large sums of money from the firms they were supposed to regulate, so enough with the “we inherited this mess” because you helped create it.

The stimulus package will run its course and we will see negative growth again. I am sure of this because Ben said we are likely out of the recession and based on his track record, well things could get much worse. In the mean time we have a President who must think he is not getting enough camera time because instead of fixing our problems he is on tour again and on the TV right now giving a speech to the AFL-CIO. Why not have speeches in Utah instead of in front of unions and known friend of Obama? I know, no Politian does that, but he is the great uniter, so he says, but Joe Wilson disagrees as do I.

For all of these political “we saved the world” speeches we have heard I do not see the proof. In fact, contrary to campaign promises, the administration is ready and willing to bail banks out again. The greatest threat America has right now is itself, period. We are in a predicament with the economy and deficit spending and the last thing we need is more spending. At this current rate the national debt will weigh down production to a standstill in just a few years. Being a debtor nation is not a sign of prosperity, contrary to popular belief.

The market cannot maintain this upward momentum based on less bad news. If earnings disappoint, which they will, then there is sure to be trouble. Even Art Cashin believes this market is overbought and acting funny, especially at 3:30 everyday.

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Nancy Pelosi

What one person thinks of Nancy Pelosi. I suggest you share with others so that she will indeed read this letter. Compliments of ZeroHedge.

Letter to Pelosi

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See who got what From Fannie/Freddie

Below is a list of campaign contributions that the GSE’s made as of September 2008. So, now do you know why Dodd and Frank liked the GSE’s so much? Are you really going to trust these people, who take from the very people we bailout, to run health care? Have you noticed that insurers are loving the new government plan so far, makes you wonder how they will cash in on it, doesn’t it?

It is time to vote out incumbents as they have a vested interest in corporate America instead of Americans.
All Recipients of Fannie Mae and Freddie Mac Campaign Contributions, 1989-2008

Includes contributions from PACs and individuals. 2008 cycle totals based on data released electronically by the Federal Election Commission on Sept. 2, 2008.

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