by Jim Puplava of financialsense.com and Mike Swanson of wallstreetwindow.com, there seems to be a significant pullback developing in gold(and silver).
Long term outlook for these precious metals is bullish but just be aware that there may be some losses in the gold stocks over the short term.
I got a nice email from Rescue Rick, who was a guest on Monster Radio. He enjoyed my book review last Saturday. Thanks, Rick!
The Home Of The Bruce Collins Show
Tuesday, December 13, 2005
Monday, December 05, 2005
Today's Headlines: All point to commodities!
Job Market in U.S., 'Hot and Getting Hotter,' Fueling Inflation
Greenspan Says Budget Gap May Have 'Severe' Effects
Increase in Home Prices Slows
Gold Near 23-Year High
Oil, Natural Gas Rise as Cold Weather Bolsters U.S. Fuel Demand
Gold Shares Outpace Metal, Global Stocks as Bullion Tops $500
Gold Fever Breaks Out Again
Ford to Close More Than 8 Plants: Paper
Record Mergers in 2006 Seen by Morgan Stanley, Lehman Brothers
Checking Survey: ATM Fees Hit a Record High
Price gains slip, part 2
Oil jumps back near $60
Greenspan Says Budget Gap May Have 'Severe' Effects
Increase in Home Prices Slows
Gold Near 23-Year High
Oil, Natural Gas Rise as Cold Weather Bolsters U.S. Fuel Demand
Gold Shares Outpace Metal, Global Stocks as Bullion Tops $500
Gold Fever Breaks Out Again
Ford to Close More Than 8 Plants: Paper
Record Mergers in 2006 Seen by Morgan Stanley, Lehman Brothers
Checking Survey: ATM Fees Hit a Record High
Price gains slip, part 2
Oil jumps back near $60
Three weeks until Christmas...
...four weeks until 2006. Where did 2005 go?
My oldest brother Phil is at Disneyworld this week (50th anniversary of Disneyworld).
Gold is showing strength today.
My oldest brother Phil is at Disneyworld this week (50th anniversary of Disneyworld).
Gold is showing strength today.
Saturday, December 03, 2005
Financial Sense at the San Francisco Gold Show
Jim Puplava's radio program this week was broadcast from the Gold show in San Francisco that I attended.
www.financialsense.com
www.financialsense.com
Friday, December 02, 2005
My Big Decision of the year...
I have decided not to get satellite radio. I figure its another waste of money. Why bother? Radio should be free anyway.
Now, I'm thinking about broadcasting my own radio programs through live365.com.
I'd love to have three different format shows: wrestling, the 'unexplained', book reviews.
The best radio program around is on the internet and that would be Jim Puplava's Financial Sense Newshour: www.financialsense.com
The show is free and Mr. Puplava is brilliant.
Now, I'm thinking about broadcasting my own radio programs through live365.com.
I'd love to have three different format shows: wrestling, the 'unexplained', book reviews.
The best radio program around is on the internet and that would be Jim Puplava's Financial Sense Newshour: www.financialsense.com
The show is free and Mr. Puplava is brilliant.
Gold and silver holding strong
Gold above $500, Silver over $8.50
I try not to worry about the short term but I must confess, I find myself checking my favorite stocks every hour. I shouldn't do that because I'm not in this for the short haul or to make a quick buck. I guess it's a bad habit on my part.
I try not to worry about the short term but I must confess, I find myself checking my favorite stocks every hour. I shouldn't do that because I'm not in this for the short haul or to make a quick buck. I guess it's a bad habit on my part.
Interesting Times
INTERESTING DEVELOPMENTS
by Bill Bryan
MarketPulses.com
December 2, 2005
After eighteen years of stewardship at the Federal Reserve, where we’ve witnessed the purchasing power of the US dollar evaporate by 50%, yes, that figure is correct folks, Chairman Greenspan’s days of tenure are fast approaching the end. “The Maestro”, as many have dubbed the present Chairman, will soon turn over the reigns of the Fed (February 06’) to Ben Bernanke, current senior economic advisor to the White House and former chair of Princeton University’s economics department, provided his successful confirmation in the Senate, where it is widely expected to pass without much fanfare. While the Bernanke nomination came as no surprise, particularly after his comments in November 2002, which tagged him as “Helicopter” Ben, where the then Fed Governor stated that, “The US Government has a technology, called a printing press, that allows it to produce as many U.S. dollars as it wishes at essentially no cost”, we’ve recently learned that the Federal Reserve will no longer publish M-3 (money supply) data as of March 23, 2006.
Why would the Federal Reserve wish to put a halt to the reporting of the M-3 data? Ah, the $6 million dollar question that we’re sure will provoke much debate and controversy in the months and possibly years ahead. Nevertheless, while it’s no secret that more money (debt) has been created in the US during the past four plus years than in the preceding one hundred years combined, a President who has yet to veto one single spending package sent his way, deficits ballooning out of control, consumers strapped with debt up to their eyeballs, record personal bankruptcies and perhaps soon to be foreclosures, horrific forces of mother nature, is the picture starting to become a bit clearer? The fact of the matter dear readers is that the “Master of Disaster” (Chairman Greenspan), has essentially created some of the world’s greatest asset bubbles (stock, bond and housing ring a bell) and in order to keep the punchbowl spiked and the partygoers feeling woozy, the powers that be have decided that the surest way to continue the affair into the late hours is to keep the printing presses running in overdrive.
And how does one determine how many dollars are flowing through the financial spectrum? Well, you guessed it, the M-3 data, which no longer will be published for public eyes. One may ask, “Why would the Fed be reluctant to disclose such information”? Well, let’s take a look at some other economic proxies that flow from our government bodies. For instance, the CPI (consumer price index), which measures the prices of consumer goods and services and is a measure of the pace of US inflation, continues to suggest that inflation remains tame and under control, at least from the “core” perspective. However, when examining the numbers closely, the government likes to “exclude” food and energy from the index, thus a “core” reading. Therefore, in simplistic terms, if you take out food and energy, not to mention healthcare, education tuition, and utilities, which for some reason the Fed does not perceive as necessary daily expenditures, you ultimately end up with a much lower reading than actuality. Therefore, while the general public is exposed to such daily expenses, perhaps the Fed is living in another world, whereby it is not necessary to eat, fuel their vehicles, turn on the lights, pay for their children’s education, receive hospital assistance when required nor heat their homes. Anyways, we think you’re starting to get the picture.
Furthermore, the BLS (Bureau of Labor Statistics), which provides employment data, appears to have their very own formulas for concocting desirous results. For example, when the BLS announces new jobs, they do so with a little creature called the “birth/death ratio”. What this vehicle does is determine how many jobs will be created based on the assumption of the number of births and deaths in any one given year. Thus for example, when the BLS reports that 200k jobs were created in a particular month, it’s not as though 200 thousand John and Jane Q public individuals were hired by the likes of IBM, Microsoft, Boeing, Johnson & Johnson etc. They are merely assumptions. Therefore, when dissecting economic data from governmental bodies, one much dig beneath the surface to determine the viability of such reports.
What does all of this have to do with the discontinuance of the M-3 data? From our perch, the answer is simple. When our government releases and reports economic data, it is with the hope that such statistics portray a healthy, vibrant and prosperous economy, whereby its citizenry participate (consume) in order to continue and expand its economic boundaries. Yet, although things may appear to be fine on the surface, which the public generally absorbs, it is the mechanisms beneath the surface, which are rife with rule changes, hedonics and replacement vehicles, which when tinkered with, produce the desired results. And although the general public may be mislead from such action, the financial markets seldom are. Hence, when viewing the charts below, of both the gold and silver markets, there undoubtedly seems to be some concern with respect to both the nomination of Mr. Bernanke as Fed Chairman, as well as the termination of the M-3 data.
It’s quite obvious when examining the charts of both gold and silver above, they are clearly in a strong up-trend. What are these pictures potentially foretelling? Well, as the old saying goes, “A picture is worth 1,000 words”, INFLATION!! The “smart money”, institutions, pension funds, and wealthy investors appear to be taking Mr. Bernanke’s remarks of November 02’ literally and in doing so, are acting with their money. Furthermore, it is our belief that should Mr. Bernanke’s confirmation hearings proceed without trouble, as we suspect such, the printing presses will remain in overdrive, as they have with “The Master”.
With inflationary pressures heating-up worldwide, due to massive credit expansion via Central Banks, is it any wonder why the Fed no longer is willing to share their crystal ball (M-3 money supply)? Is M-3 just the beginning of further economic data to be sandbagged by the powers that be? Who knows? Nevertheless, we would not be surprised one bit should the ocean of liquidity eventually engulf us all throughout the globe. Since the inception of the Federal Reserve in 1913, which by the way, we can find no such reference in the US Constitution, the purchasing power of the US dollar has evaporated by 97%, thus today’s .03cent value. Furthermore, since Mr. Greenspan took chair in 1987, you can cut your dollar in half, because that’s exactly what has occurred. We’re not sure about how our readers feel, but our view is that it seems as though the “confiscation” continues. Is the US dollars status as the world’s reserve currency in jeopardy?? Only in time will we know. Interesting developments for interesting times.
© 2005 William Bryan
by Bill Bryan
MarketPulses.com
December 2, 2005
After eighteen years of stewardship at the Federal Reserve, where we’ve witnessed the purchasing power of the US dollar evaporate by 50%, yes, that figure is correct folks, Chairman Greenspan’s days of tenure are fast approaching the end. “The Maestro”, as many have dubbed the present Chairman, will soon turn over the reigns of the Fed (February 06’) to Ben Bernanke, current senior economic advisor to the White House and former chair of Princeton University’s economics department, provided his successful confirmation in the Senate, where it is widely expected to pass without much fanfare. While the Bernanke nomination came as no surprise, particularly after his comments in November 2002, which tagged him as “Helicopter” Ben, where the then Fed Governor stated that, “The US Government has a technology, called a printing press, that allows it to produce as many U.S. dollars as it wishes at essentially no cost”, we’ve recently learned that the Federal Reserve will no longer publish M-3 (money supply) data as of March 23, 2006.
Why would the Federal Reserve wish to put a halt to the reporting of the M-3 data? Ah, the $6 million dollar question that we’re sure will provoke much debate and controversy in the months and possibly years ahead. Nevertheless, while it’s no secret that more money (debt) has been created in the US during the past four plus years than in the preceding one hundred years combined, a President who has yet to veto one single spending package sent his way, deficits ballooning out of control, consumers strapped with debt up to their eyeballs, record personal bankruptcies and perhaps soon to be foreclosures, horrific forces of mother nature, is the picture starting to become a bit clearer? The fact of the matter dear readers is that the “Master of Disaster” (Chairman Greenspan), has essentially created some of the world’s greatest asset bubbles (stock, bond and housing ring a bell) and in order to keep the punchbowl spiked and the partygoers feeling woozy, the powers that be have decided that the surest way to continue the affair into the late hours is to keep the printing presses running in overdrive.
And how does one determine how many dollars are flowing through the financial spectrum? Well, you guessed it, the M-3 data, which no longer will be published for public eyes. One may ask, “Why would the Fed be reluctant to disclose such information”? Well, let’s take a look at some other economic proxies that flow from our government bodies. For instance, the CPI (consumer price index), which measures the prices of consumer goods and services and is a measure of the pace of US inflation, continues to suggest that inflation remains tame and under control, at least from the “core” perspective. However, when examining the numbers closely, the government likes to “exclude” food and energy from the index, thus a “core” reading. Therefore, in simplistic terms, if you take out food and energy, not to mention healthcare, education tuition, and utilities, which for some reason the Fed does not perceive as necessary daily expenditures, you ultimately end up with a much lower reading than actuality. Therefore, while the general public is exposed to such daily expenses, perhaps the Fed is living in another world, whereby it is not necessary to eat, fuel their vehicles, turn on the lights, pay for their children’s education, receive hospital assistance when required nor heat their homes. Anyways, we think you’re starting to get the picture.
Furthermore, the BLS (Bureau of Labor Statistics), which provides employment data, appears to have their very own formulas for concocting desirous results. For example, when the BLS announces new jobs, they do so with a little creature called the “birth/death ratio”. What this vehicle does is determine how many jobs will be created based on the assumption of the number of births and deaths in any one given year. Thus for example, when the BLS reports that 200k jobs were created in a particular month, it’s not as though 200 thousand John and Jane Q public individuals were hired by the likes of IBM, Microsoft, Boeing, Johnson & Johnson etc. They are merely assumptions. Therefore, when dissecting economic data from governmental bodies, one much dig beneath the surface to determine the viability of such reports.
What does all of this have to do with the discontinuance of the M-3 data? From our perch, the answer is simple. When our government releases and reports economic data, it is with the hope that such statistics portray a healthy, vibrant and prosperous economy, whereby its citizenry participate (consume) in order to continue and expand its economic boundaries. Yet, although things may appear to be fine on the surface, which the public generally absorbs, it is the mechanisms beneath the surface, which are rife with rule changes, hedonics and replacement vehicles, which when tinkered with, produce the desired results. And although the general public may be mislead from such action, the financial markets seldom are. Hence, when viewing the charts below, of both the gold and silver markets, there undoubtedly seems to be some concern with respect to both the nomination of Mr. Bernanke as Fed Chairman, as well as the termination of the M-3 data.
It’s quite obvious when examining the charts of both gold and silver above, they are clearly in a strong up-trend. What are these pictures potentially foretelling? Well, as the old saying goes, “A picture is worth 1,000 words”, INFLATION!! The “smart money”, institutions, pension funds, and wealthy investors appear to be taking Mr. Bernanke’s remarks of November 02’ literally and in doing so, are acting with their money. Furthermore, it is our belief that should Mr. Bernanke’s confirmation hearings proceed without trouble, as we suspect such, the printing presses will remain in overdrive, as they have with “The Master”.
With inflationary pressures heating-up worldwide, due to massive credit expansion via Central Banks, is it any wonder why the Fed no longer is willing to share their crystal ball (M-3 money supply)? Is M-3 just the beginning of further economic data to be sandbagged by the powers that be? Who knows? Nevertheless, we would not be surprised one bit should the ocean of liquidity eventually engulf us all throughout the globe. Since the inception of the Federal Reserve in 1913, which by the way, we can find no such reference in the US Constitution, the purchasing power of the US dollar has evaporated by 97%, thus today’s .03cent value. Furthermore, since Mr. Greenspan took chair in 1987, you can cut your dollar in half, because that’s exactly what has occurred. We’re not sure about how our readers feel, but our view is that it seems as though the “confiscation” continues. Is the US dollars status as the world’s reserve currency in jeopardy?? Only in time will we know. Interesting developments for interesting times.
© 2005 William Bryan
Thursday, December 01, 2005
Gold tops $500
"Morning Call" on CNBC featured a debate on gold. A lot of people are bearish on gold and while I could see a pullback in the near future, it seems to me that more and more investors are jumping on the bandwagon.
So, the dips should be less and less severe because less gold bugs are traders and are converting to long term investing. As the value increases, the less desire to bail out for immediate cash.
This causes foundational strength in the metals. This is starting to happen, in my opinion.
Besides, how can anyone argue that inflation isn't and won't be a problem in the near future?
Also, the new housing numbers were impressive... until you read that housing prices are going down and incentives are going up. So, let's see where this takes us.
So, the dips should be less and less severe because less gold bugs are traders and are converting to long term investing. As the value increases, the less desire to bail out for immediate cash.
This causes foundational strength in the metals. This is starting to happen, in my opinion.
Besides, how can anyone argue that inflation isn't and won't be a problem in the near future?
Also, the new housing numbers were impressive... until you read that housing prices are going down and incentives are going up. So, let's see where this takes us.
Tuesday, November 29, 2005
Book Review on Monster Radio, December 10th
I am scheduled to return to Monster Radio on December 10th to review two books. Martha Stewart's "The Martha Rules" and "Tough Guy" by Eddie Maloney.
Weird weather...
in the financial markets.
New Home sales hit a record while gold hits a high of $500. I guess one segment of the population is going in one direction and the other is heading the other way.
On top of that mixed signal was the data that consumers are more optimistic and that retail sales are down and studies conclude that for most of us, our salaries will not keep up with inflation in '06. Like I said, weird 'weather'.
The fundamentals seem to be all there for a higher gold climb (in some undetermined point in the future) based on scarcity and demand overseas.
I don't know about you..but I was thinking today that 1929 must have felt a lot like this.
New Home sales hit a record while gold hits a high of $500. I guess one segment of the population is going in one direction and the other is heading the other way.
On top of that mixed signal was the data that consumers are more optimistic and that retail sales are down and studies conclude that for most of us, our salaries will not keep up with inflation in '06. Like I said, weird 'weather'.
The fundamentals seem to be all there for a higher gold climb (in some undetermined point in the future) based on scarcity and demand overseas.
I don't know about you..but I was thinking today that 1929 must have felt a lot like this.
Monday, November 28, 2005
Post Thanksgiving Thoughts
Hello All,
Did you see the crowds at Wal-Mart? Man!
Now, there is nothing funny about seeing people getting trampled but I have to say, that the video of the lady taking her time to pick up her wig off the floor and adjust it on her head- was pretty close to hysterical!
I attended my first Gold Show at the Marriott on 4th Street in San Francisco on Sunday. What a great event! I will make sure to be there every year, if I can.
A lot of well respected 'money experts' were there. Granted, they are all of the opinion that there will be a huge metals boom but it was interesting that all of them arrive at different conclusions as to how we will get there.
Tom O'Brien of TFNN believes there will be no "dollar armaggaedon' and that the Dow will actually spike up to 13,000 in 2006. His point was that even if the government inflates the currency here, all the world's currency is phony money and ours will still be the most respected. Hope he is right. He is also bullish on gold, believe it or not. He showed some charts that compared gold strength in Euros, Australian currency, Yen, Canadian currency, USD, etc and the amazing thing is that gold is showing almost identical strength to ALL currencies. That means there is worldwide demand (a good sign). He believes that gold is about 9 months behind commodities such as oil (we saw the oil spike this year, imagine what a gold spike will bring!).
I listened to Paul Van Eeden for a few moments (www.paulvaneeden.com), someone asked him if the inverted yield curve was the only evidence of an impending recession. Paul stated that actually the credit expansion that has propelled the economy is the real thing to be worried about.
I heard from one of the Aden sisters (who write a forecast newsletter). She was talking about gold fundamentals and how we would see a rise in the value of gold next year.
Finally, I listened to John Doody who had a list of the ten best gold stocks. At the top of his list was Yamana, followed by Goldcorp, Barrick Gold, Golden Queen, and a host of small caps. Doody was the most lively speaker.
There were approximately sixty booths of gold mining producers, lots of freebies and the best news of all: the whole thing is free.
Unfortunately, some of the people I really wanted to see (James Turk, Jim Puplava) are at TODAY'S event in SF. I don't know why they held the second day of the event on a workday!
I noticed that most of the investors that attended are senior citizens who are, no doubt, concerned about protecting their current stash. It seems that gold and silver investing has not trickled down to younger people. I think I was the youngest person there among the hundreds of investors (seriously!).
It's still an investment angle that the majority of people are not yet looking into.
By the way, gold, silver and the gold mining stocks are trading up today. There may be a pullback in about three months or so (as the Fed continues tightening) but once the government reflates, it should be the beginning of a long season of reaping.
Got gold?
Bruce
Did you see the crowds at Wal-Mart? Man!
Now, there is nothing funny about seeing people getting trampled but I have to say, that the video of the lady taking her time to pick up her wig off the floor and adjust it on her head- was pretty close to hysterical!
I attended my first Gold Show at the Marriott on 4th Street in San Francisco on Sunday. What a great event! I will make sure to be there every year, if I can.
A lot of well respected 'money experts' were there. Granted, they are all of the opinion that there will be a huge metals boom but it was interesting that all of them arrive at different conclusions as to how we will get there.
Tom O'Brien of TFNN believes there will be no "dollar armaggaedon' and that the Dow will actually spike up to 13,000 in 2006. His point was that even if the government inflates the currency here, all the world's currency is phony money and ours will still be the most respected. Hope he is right. He is also bullish on gold, believe it or not. He showed some charts that compared gold strength in Euros, Australian currency, Yen, Canadian currency, USD, etc and the amazing thing is that gold is showing almost identical strength to ALL currencies. That means there is worldwide demand (a good sign). He believes that gold is about 9 months behind commodities such as oil (we saw the oil spike this year, imagine what a gold spike will bring!).
I listened to Paul Van Eeden for a few moments (www.paulvaneeden.com), someone asked him if the inverted yield curve was the only evidence of an impending recession. Paul stated that actually the credit expansion that has propelled the economy is the real thing to be worried about.
I heard from one of the Aden sisters (who write a forecast newsletter). She was talking about gold fundamentals and how we would see a rise in the value of gold next year.
Finally, I listened to John Doody who had a list of the ten best gold stocks. At the top of his list was Yamana, followed by Goldcorp, Barrick Gold, Golden Queen, and a host of small caps. Doody was the most lively speaker.
There were approximately sixty booths of gold mining producers, lots of freebies and the best news of all: the whole thing is free.
Unfortunately, some of the people I really wanted to see (James Turk, Jim Puplava) are at TODAY'S event in SF. I don't know why they held the second day of the event on a workday!
I noticed that most of the investors that attended are senior citizens who are, no doubt, concerned about protecting their current stash. It seems that gold and silver investing has not trickled down to younger people. I think I was the youngest person there among the hundreds of investors (seriously!).
It's still an investment angle that the majority of people are not yet looking into.
By the way, gold, silver and the gold mining stocks are trading up today. There may be a pullback in about three months or so (as the Fed continues tightening) but once the government reflates, it should be the beginning of a long season of reaping.
Got gold?
Bruce
Wednesday, November 23, 2005
The future of the Dollar
This seems to sum it up for the next couple of years. It wouldn't be prudent for anyone to keep all your money in paper currency. Inflation will rise in '06 and eventually, (probably sooner than later) the interest rate raising cycle will have to cease.
Just a thought...
I look at a lot of blogs out there and people have some interesting things to say but most of them are diary in nature from people that nobody has ever heard of.
Is this Blog thing really the rage or is it basically millions of people just writing to themselves?
Makes ya wonder.
Is this Blog thing really the rage or is it basically millions of people just writing to themselves?
Makes ya wonder.
Happy Thanksgiving!
I hope everyone finds a reason to give thanks this Thursday. We are so fortunate.
I'm thinking about getting satellite radio. I'm starting to lean toward XM, seems like they have a better selection of music.
I know Sirius will have Howard Stern shortly but that's not really a selling point for me. I can live without him.
Tuesday, November 15, 2005
Bernanke (On The Hill)
Bernanke will have an 'inflation target' range as opposed to Greenspan's ambiguous approach. Yet, with no M3 reporting and 'hedonics' in the CPI numbers, how can we be sure of the truth in his pursuit?
Monday, November 14, 2005
The Blog is back...
The blog is back. The funny thing is, I haven't posted to this for about a year and things are pretty much the same... notwithstanding a huge increase in oil and some catastrophic events.
The talk about a housing bubble has only increased in that time.
We'll see how this goes for the next few months...
Bruce
The talk about a housing bubble has only increased in that time.
We'll see how this goes for the next few months...
Bruce
Monday, November 15, 2004
Sorry
I've been busy lately so it's been a good month since I even checked this website.
Bush won the election. Oil went up past $50 but has tapered back a bit.
Gold is at a 16 year high and the dollar has dropped.
Bush won the election. Oil went up past $50 but has tapered back a bit.
Gold is at a 16 year high and the dollar has dropped.
Tuesday, September 21, 2004
Oil Up to $47.00
http://money.cnn.com/2004/09/21/markets/oil.reut/index.htm
I don't fully understand the oil market as I've begun to learn that most of the pricing that gets factored in has a lot to do with speculation...
I don't fully understand the oil market as I've begun to learn that most of the pricing that gets factored in has a lot to do with speculation...
Monday, September 20, 2004
Greenspan Grumblings...
Complacency and the Rain Dance for Money
By: Richard Benson, SFGroup
September 16, 2004
One has to appreciate, in theory and in practice, Alan Greenspan’s genius, at least in the Machiavellian sense, and how it has been used in the financial markets to drive the real economy. Indeed, many notable economists, financial market participants and the press, are now acknowledging how the Fed has used asset bubbles in stocks, bonds, and housing to facilitate the continued household spending of borrowed money. This has created a false sense of wealth and has kept the economy rolling with no savings.
What is becoming crystal clear is that if the United States’ bond and stock markets suddenly “re-priced to fair value”, the world would witness a crash in stocks, bonds, housing prices and the dollar. This inevitable re-pricing, caused by unsustainable Treasury and Trade deficits, will be fiercely and politically delayed, at all costs, until after the November election. Also, the extent to which the Treasury and Fed can use legal but undisclosed Exchange Stabilization Policies is not widely understood by the financial markets.
More importantly, while the magnitude of aid – amounting to $1.3 Trillion – given to America’s financial markets by foreign central banks has been disclosed, it is not appreciated that these holdings will most likely keep US Treasury rates 3% lower than they would be if the Treasury needed to fund its deficits within the US.
Evidence of the government’s “active hands” in the markets continues to grow. First, there is the manipulation of the gold market that has been solidly documented but not widely disseminated in the press. Beginning under the Clinton Administration, the dollar has been made to look strong by holding down the price of gold. This legal and logical market manipulation has been accomplished by central bank gold sales and by lending gold to bullion banks that could, in turn, sell the gold to earn carry trade profits. You might wonder why our government is so actively involved in keeping the price of gold down. Well, a logical reason would be that when the price of gold takes off, even the investment masses will focus attention on the real problems of massive trade and federal deficits and world-wide money creation. For investors with a long-term view, the price of gold is being subsidized and held well below market. If you like government subsidies, you can get one by buying gold.
Second, evidence also appears in the stock market’s strange but predictable behavior. Whenever the markets look like they are about to crash, major buying suddenly appears at the regular scheduled times during the day to keep the stock indexes from breaking down below major psychological barriers. It always looks like a major player has stepped in with an unlimited checkbook. In reality, the checkbook is a printing press owned by the Fed that can flood the market with REPO funds, and allocate a few billion to have market agents buy stock futures to smooth the market out.
We do know that Greenspan understands and uses psychology to try and create a self-fulfilling prophecy when it comes to the markets. He understands that if he is telling the world one day that the economic recovery has “traction” and the next day the stock market goes south, any economic recovery would suddenly be history. So, what must the Fed hope for and encourage? From their perspective, the best thing would be for a massive stock market rally to occur in anticipation of a Bush re-election. However, with rising interest rates and a slowing economy - the peak having already passed in the corporate earnings cycle – a stock market rally is unlikely with stock and bond prices currently at record levels. So, the best outcome is boredom and complacency in the bond, stock, and currency markets. The key to engendering complacency is engineering low volatility - the Fed’s gift to the White House. With low volatility and high complacency, the stock market looks just as safe as an insured FDIC bank CD.
Keeping volatility low is neither difficult nor expensive. Now that there is no clear market trend, it will pay for major funds and banks to “sell volatility”. These institutions sell puts and calls, take in premiums, and hope that the options will expire “out of the money”. For experienced traders, it is no surprise that close to or on key expiration dates for options, market prices of the index the option is based on are temporarily brought into line so that as many options as possible expire worthless. Just like Las Vegas where small speculators take option bets, the markets spin and, surprise, they lose! (When it comes to “efficient market theory”, all that can be said is that the large financial institutions and commercial market players are very efficient at “skinning the small speculators.)
Finally, you might wonder where the really big market manipulation is. Simply look at the Federal Reserve’s Foreign Custodial Account. Since 2001, it has risen by $700 billion to $1.3 Trillion today. This is a record! All this money has been printed up out of thin air by foreign central banks to buy United States’ Treasury debt and support the dollar at a far higher level, and hold US longer term interest rates at a lower level than they would be without this direct and unprecedented market manipulation. (When it comes to central banks, the polite word for manipulation is intervention). This intervention, which holds the value of the dollar up and interest rates down, also makes bond and stock prices artificially high. In turn, artificially high asset prices encourage consumers to spend and not save. Indeed, with over $1,300 Billion of reported central bank intervention currency what does it matter if a few billion dollars spill over into the stock market?
From the perspective of a prudent investor who is interested in the preservation of capital, two choices seem obvious. The first choice is to use the foreign central bank intervention as a window to get out of US stocks, bonds and the dollar. The second choice is to study with Navajo Indians to learn the secrets of their “rain dance for money” and perform it for the foreign central banks. Hopefully, they will then keep printing up money to buy $300 - $400 billion of dollar assets forever. Perhaps complacency, as a long-term investment policy, is becoming over-rated.
-- Posted Thursday, September 16 2004
- Richard Benson, SFGroup, is a widely published author on securitization and specialty finance, and a sought after speaker at financing conferences on raising equity for mid-market companies.
Prior to founding the Specialty Finance Group in 1989, Mr. Benson acted as a trading desk economist for Chase Manhattan Bank in the early 1980's and started in the securitization business in 1983 at Bear Stearns, and helped build the early securitization businesses at Citibank and E.F. Hutton.
Mr. Benson graduated from the University of Wisconsin in 1970 in the Honors Program in Math, and did his doctoral work in Economics at Harvard University. Mr. Benson is a member of the Harvard Club of New York and Palm Beach.
The Specialty Finance Group, LLC is a Florida Limited Liability Company and is registered with the NASD/SIPC as a Broker/Dealer.
By: Richard Benson, SFGroup
September 16, 2004
One has to appreciate, in theory and in practice, Alan Greenspan’s genius, at least in the Machiavellian sense, and how it has been used in the financial markets to drive the real economy. Indeed, many notable economists, financial market participants and the press, are now acknowledging how the Fed has used asset bubbles in stocks, bonds, and housing to facilitate the continued household spending of borrowed money. This has created a false sense of wealth and has kept the economy rolling with no savings.
What is becoming crystal clear is that if the United States’ bond and stock markets suddenly “re-priced to fair value”, the world would witness a crash in stocks, bonds, housing prices and the dollar. This inevitable re-pricing, caused by unsustainable Treasury and Trade deficits, will be fiercely and politically delayed, at all costs, until after the November election. Also, the extent to which the Treasury and Fed can use legal but undisclosed Exchange Stabilization Policies is not widely understood by the financial markets.
More importantly, while the magnitude of aid – amounting to $1.3 Trillion – given to America’s financial markets by foreign central banks has been disclosed, it is not appreciated that these holdings will most likely keep US Treasury rates 3% lower than they would be if the Treasury needed to fund its deficits within the US.
Evidence of the government’s “active hands” in the markets continues to grow. First, there is the manipulation of the gold market that has been solidly documented but not widely disseminated in the press. Beginning under the Clinton Administration, the dollar has been made to look strong by holding down the price of gold. This legal and logical market manipulation has been accomplished by central bank gold sales and by lending gold to bullion banks that could, in turn, sell the gold to earn carry trade profits. You might wonder why our government is so actively involved in keeping the price of gold down. Well, a logical reason would be that when the price of gold takes off, even the investment masses will focus attention on the real problems of massive trade and federal deficits and world-wide money creation. For investors with a long-term view, the price of gold is being subsidized and held well below market. If you like government subsidies, you can get one by buying gold.
Second, evidence also appears in the stock market’s strange but predictable behavior. Whenever the markets look like they are about to crash, major buying suddenly appears at the regular scheduled times during the day to keep the stock indexes from breaking down below major psychological barriers. It always looks like a major player has stepped in with an unlimited checkbook. In reality, the checkbook is a printing press owned by the Fed that can flood the market with REPO funds, and allocate a few billion to have market agents buy stock futures to smooth the market out.
We do know that Greenspan understands and uses psychology to try and create a self-fulfilling prophecy when it comes to the markets. He understands that if he is telling the world one day that the economic recovery has “traction” and the next day the stock market goes south, any economic recovery would suddenly be history. So, what must the Fed hope for and encourage? From their perspective, the best thing would be for a massive stock market rally to occur in anticipation of a Bush re-election. However, with rising interest rates and a slowing economy - the peak having already passed in the corporate earnings cycle – a stock market rally is unlikely with stock and bond prices currently at record levels. So, the best outcome is boredom and complacency in the bond, stock, and currency markets. The key to engendering complacency is engineering low volatility - the Fed’s gift to the White House. With low volatility and high complacency, the stock market looks just as safe as an insured FDIC bank CD.
Keeping volatility low is neither difficult nor expensive. Now that there is no clear market trend, it will pay for major funds and banks to “sell volatility”. These institutions sell puts and calls, take in premiums, and hope that the options will expire “out of the money”. For experienced traders, it is no surprise that close to or on key expiration dates for options, market prices of the index the option is based on are temporarily brought into line so that as many options as possible expire worthless. Just like Las Vegas where small speculators take option bets, the markets spin and, surprise, they lose! (When it comes to “efficient market theory”, all that can be said is that the large financial institutions and commercial market players are very efficient at “skinning the small speculators.)
Finally, you might wonder where the really big market manipulation is. Simply look at the Federal Reserve’s Foreign Custodial Account. Since 2001, it has risen by $700 billion to $1.3 Trillion today. This is a record! All this money has been printed up out of thin air by foreign central banks to buy United States’ Treasury debt and support the dollar at a far higher level, and hold US longer term interest rates at a lower level than they would be without this direct and unprecedented market manipulation. (When it comes to central banks, the polite word for manipulation is intervention). This intervention, which holds the value of the dollar up and interest rates down, also makes bond and stock prices artificially high. In turn, artificially high asset prices encourage consumers to spend and not save. Indeed, with over $1,300 Billion of reported central bank intervention currency what does it matter if a few billion dollars spill over into the stock market?
From the perspective of a prudent investor who is interested in the preservation of capital, two choices seem obvious. The first choice is to use the foreign central bank intervention as a window to get out of US stocks, bonds and the dollar. The second choice is to study with Navajo Indians to learn the secrets of their “rain dance for money” and perform it for the foreign central banks. Hopefully, they will then keep printing up money to buy $300 - $400 billion of dollar assets forever. Perhaps complacency, as a long-term investment policy, is becoming over-rated.
-- Posted Thursday, September 16 2004
- Richard Benson, SFGroup, is a widely published author on securitization and specialty finance, and a sought after speaker at financing conferences on raising equity for mid-market companies.
Prior to founding the Specialty Finance Group in 1989, Mr. Benson acted as a trading desk economist for Chase Manhattan Bank in the early 1980's and started in the securitization business in 1983 at Bear Stearns, and helped build the early securitization businesses at Citibank and E.F. Hutton.
Mr. Benson graduated from the University of Wisconsin in 1970 in the Honors Program in Math, and did his doctoral work in Economics at Harvard University. Mr. Benson is a member of the Harvard Club of New York and Palm Beach.
The Specialty Finance Group, LLC is a Florida Limited Liability Company and is registered with the NASD/SIPC as a Broker/Dealer.
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