Investment Rarities Incorporated
History |  Q & A  |  Endorsements  |  Portfolios  | Flatware | Gold Coins  |  Silver Coins  |  Contact |  Home

Products

Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

..Read More »

The Best of Jim Cook Archive

 
Best of Bill Buckler
June15, 2011
archive print

On Wednesday, June 8, President Obama fronted the US media (mainly mainstream, of course) at what was billed as a “personal finance summit” in Washington DC. His “top tip” to the assembled ink-stained wretches gathered there? “Don’t spend all your money - save some of your earnings”.

Mr Obama could have added - “we’ll spend it for you” - but he didn’t. This is the latest in a long line of advisory messages from the man who leads an administration which is better at spending other peoples’ money than most all of its predecessors put together. But that’s “different”. That’s the government investing in economic “growth”. When Mr Obama coined his famous “yes we can!” slogan during the 2008 election campaign, most Americans (and most foreigners) thought he was talking about the American people. Sadly, he was talking about the American government. Today, he is facing the stark fact that rapidly growing numbers of Americans have awakened to this simple fact.

Endangering The US “Recovery”:

The latest tactic being used by Mr Obama is actually a very old one but it is being dressed up to suit the occasion. No sooner had the official unemployment numbers for May come out on June 2 than Mr Obama was front and centre pointing away from Washington DC to almost any part of the world which could serve his purpose. First of all it was the catastrophe in Japan which could not be “allowed” to detract from the US “recovery”. Shortly after that, Mr Obama took the opportunity of a visit by German Chancellor Angela Merkel to urge her - and her colleagues - to resolve the European debt crisis quickly so that it would not endanger the “world economy”.

The message could not have been clearer. If it were not for the Japanese earthquake and the Greek debacle, the US economy would not have hit the “headwinds” that have beset it over the past month. The Japanese must keep pumping out money and so must the Europeans so that the “world” recovery can continue to go forward. Listening to this, one is reminded of the old phrase used by soldiers returning to the US from Vietnam - “we are going back to the world”.

By the time that US stock markets had registered their sixth straight day of falls on June 8, Mr Obama had pulled out all the stops. He assured the American people that he had no fears of a “double dip recession” and told them that “our task is to not panic”. When a politician comes out with any variation on the term “DON’T PANIC!” - you can be very sure that the situation is deteriorating rapidly. In all cases, the speed of the deterioration is directly proportional to the status of the politician making the statement. Mr Obama is the US head of state.

When it comes from the Wall Street Journal (WSJ), it’s official. A headline from June 1 puts the
problem succinctly: “Wall Street Baffled by Slowing Economy”. A quote from the article makes for even more daunting reading: “What you’ve got right now is almost near panic going on with money managers....They cannot find a yield and you just don’t want to be putting your money into commodities or things that are punts that might work out or they might not depending on what happens with the economy.”

A situation of “almost near panic”!? We can only assume that to mean that they’re not “near panic” yet but they are - “almost”. Hmmm. The entire tone of the quote is highly revealing, though. Wall Street is tearing its hair out because it can’t make any money on anything that is not (explicitly or implicitly) government guaranteed. And they don’t want to take a “punt” on anything that depends on the economy.

Here is the problem - for Wall Street and all the other “streets” in all the financial capitals throughout the world. For more than two years - since the global stock market nadir of March 2009 - the “recovery” has been fuelled almost exclusively by government money printing and government guarantees. In return, the financial managers have recycled this “liquidity” back into the same paper which brought on the great swoon of late 2008 while totally ignoring the “economy”. Now, they can see the markets for financial “assets” sputtering everywhere despite their best efforts. They are staring at the horrible prospect of having to venture forth into the “economy”, an area which they have been avoiding at all costs for years.

For Wall Street, that is taking a punt. They know that a “recovery” here takes more than a printing press. . .

The Fed published the latest edition of its “Beige Book”, formerly called the “Summary of Commentary on Current Economic Conditions”, on June 8. It spoke of “softer” economic conditions which itsummarily put down to higher gas (petrol) prices and the disruption caused by the Japanese earthquake.The implication could not have been clearer: “Any economic slowdown is not our fault!”

The fact that foreign governments everywhere are slowing down or stopping their purchases of Treasury debt has been well documented. In some cases, their holdings are actually decreasing. But another seller has entered the scenes according to the latest edition of the “Beige Book”. In a breakdown of the figures contained in the Fed’s latest report, Goldman Sachs has pointed out that the biggest sellers of US Treasury debt over the first quarter of 2011 were - in order - US households, the foreign sector and banks”! Their sales were proceeding at an annualised rate of $US 1.1 TRILLION. Please note that Goldman Sachs’ version of US households includes US hedge funds, hardly a staple of Main Street.

We don’t know why Goldman Sachs includes hedge funds in their “US households” sector. What is interesting here is the list of net US Treasury SELLERS. If this list is genuinely headed by Americans themselves, then the “full faith and credit” of the US government is on very shaky ground indeed.

And so is the entire global financial system which is based on and underpinned by this make believe. . .

The closer we get to the official end of QE2 and the deadline for the US Treasury’s debt limit just over a month later, the more potential there is for the “almost near panic” now being bemoaned on Wall Street to turn into the real thing. All the paper markets know this, that is what is putting them on edge.

The FOMC next meets on June 21-22. There is no scheduled press conference by Mr Bernanke after this meeting. That is scheduled for the next meeting - on August 9. Even so, this FOMC meeting comes just over a week before the scheduled end of QE2. The press release will be worriedly scanned for ANY indication of what (if anything) the Fed is likely to do next.

 

.Ó 2009 – The Privateer

http://www.the-privateer.com

capt@the-privateer.com

(reproduced with permission)

SUBSCRIPTIONS:

Delivery via email

Trial: 5 issues (once only)

Six-Month: 12 issues

Annual: 25 issues

Two-Year: 50 issues

Subscribe at www.the-privateer.com/sub.html