This morning, I saw reports in the media of a large contingency of Americans that were furious at Congress for not passing the Wall Street bailout plan that is now being spun as a “rescue” plan. Yet I am almost sure that if you polled one thousand of these Americans that were angry at Congress, that zero out of those 1,000 people have actually read the actual legislation, and thus, have no idea that Congress is protecting them from the greatest robbery of the 21st century. I have seen many journalists act more like a PR agent for the US government and Wall Street, stating that this plan should immediately be approved because the US Federal Reserve and the US Treasury have claimed that delaying its passage would threaten the stability of the entire global financial system. I have also read articles where journalists stated that this bailout plan is no place for bi-partisan politics.
What a bunch of nonsense. This bailout plan has nothing to do with political bickering or an immediate threat to a global financial meltdown. Americans that are angry at Congress should start by reading the legislation and then formulating an intelligent opinion about whether or not they truly want a quick fix that will sacrifice not only their future but their children’s futures as well.
From the debates I’ve been hearing about the largest bailout in U.S. history, I’m starting to believe that less than 1/10th of 1% of all Americans have actually read the actual piece of legislation that governs this bailout. And since the bailout will be the greatest robbery of this century if passed in its original form, every single person should read the actual law. So here it is, in its form at the end of last week. Earlier last week, I stated that this bailout plan would eventually be spun as something positive even though the taxpayers would get reamed. It finally appears as though this is happening because Congressmen are claiming that the legislation is no longer a bailout, but a “rescue” of American taxpayers. To know whether our Congressmen are telling us the truth, let’s take a look at the original piece of legislation and when the text of the “amended” legislation is released, let’s see how much really constitutes a rescue v. a bailout or let’s see if the rescue is still funded by American taxpayers, which would still constitute a bailout. Normally, the articles on my blog are of a serious nature, but today, I’m taking a break from my normal format to produce a satire. Since the exact text of the amended legislation has not yet been released as of the writing of this satire, unless Congress completely trashed, not amended, the original legislation as I recommended below, this will be no “rescue” and still a “bailout”. Read more …
Since I know this story will be spun into a positive news story on Monday, I thought it imperative to really tell you the honest headline of this massive government planned $700 billion bailout before the press releases their version. According to MarketWatch: “The plan allows the government to buy the bad debt of U.S. financial institutions for the next two years, according to a draft of the proposed legislation. It gives the Treasury secretary the authority to buy $700 billion in mortgage-related assets, in a bid to address the root cause of the turmoil that swept through markets this past week and resulted in the filing for bankruptcy by and government takeovers of some of the biggest U.S. financial companies.” However, Senator Schumer of New York noted that the plan “includes no visible protection for taxpayers.”
Of course not, because given the actions of the past several weeks, I can only guess that the American taxpayer is the designated sucker in this bailout plan as well. Read more …
Today, before market open, the SEC announced that all short selling on U.S. financial stocks will be illegal for an indefinite and unqualified period of time (Update: actually the SEC has now qualified the period as ending on October 2, 2008 since I first wrote this article, though they have declared that they may extend this date beyond October 2nd if necessary. I believe that there is a strong possibility that the SEC will extend this expiration date at least one more time after October 2nd until at least after the U.S. Presidential election passes.- editor’s note). In a nutshell, the Securities Exchange Commission, because the free market is not cooperating with their wish of having the U.S. stock market rally, has forced all short sellers to immediately cover all short positions on all U.S. financial stocks.
The inconvenient truth of the U.S. economy has created one of the best buying opportunities for gold and silver bullion and associated stocks of this entire bull run right now. Anyone that believes that this U.S. dollar rally is sustainable will be in for a huge shock in the coming year. Sure, like many of us that still believe the current bull in gold and silver is intact despite the shocking recent selloff, the steepness of the sell off was still surprising to most of us.
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If you’ve suffered stock losses this year, this will be the most important article you will read. Back on April 23, 2008, I wrote an article called “Will the U.S. Markets Crash Now – Or Later?” and I opened the article with the statement: “Every time I’ve written about the imminent disaster that awaits U.S. stock markets, and subsequently global markets, the response has been overwhelmingly negative.” In that article, I further stated, “People seem to forget one central and critical point. Most people seem to believe that they have to lose a great deal of money when crises materialize and forget that it is absolutely possible to prosper during crises as well.
There’s a saying “Fool me once, shame on you. Fool me twice, shame on me.” Our motto at SmartKnowledgeU is to never be fooled. We are at a crossroads today where things are going to get a lot better or they are going to get a lot worse. As the permabull sales culture of the commercial investment industry dictates, the practical deluge from the commercial investment industry about the worst of the crisis being over has been almost non-stop for the past several weeks. Here is just a sample of numerous recent headlines that have crossed my desk in the past several months that proclaim or support that now as the best time to buy stocks in a long time.
“Are You Ready for Dow 20,000?”
“IMF Chief Says Worst of Financial Crisis is Over”
“Paulson Says Worst of Financial Crisis is Over”
“Citigroup Chief Says Worst of Credit Crunch Crisis is Over”
“Financial Crisis Mostly Over, [JP Morgan CEO] Dimon Says”
Astonishingly, the person that inspired the Dow 20,000 headline, James Finucane, was predicting this mark within a timeframe of just one year and called today’s markets, in his words, the “perfect” setup, implying that this is about as risk-free opportunity as you will ever receive in your lifetime to make a fortune by investing in the U.S. DJIA index. Numerous other journalists seem to agree as evidenced by the latest headline I read just four days ago in the New York Times that boldly announced:
” An Alarm is Blaring: TIME TO BUY” (emphasis mine).
Besides the fact that the commercial investment industry will always utilize any rally to inform their clients that a massive bull run is coming and to stick their clients with the “better invest now if you don’t want to miss out” sales approach, perhaps some of these extremely giddy predictions about the imminent future of stock markets are also based upon a look back at history.
Just a couple of days ago, the financial media rejoiced over a prediction made by the Omaha oracle, Warren Buffet that “The worst of the crisis in Wall Street is over,” disseminating this declaration across the world in the hopes that it could continue to fuel what will go down as one of the most foolish stock market rallies in history. However, in all the articles I read that covered his declaration (and there were many), I couldn’t find one that actually discussed in detail any of the reasons why Mr. Buffet believes that recent actions taken by the U.S. Federal Reserve are sustainable. It seemed that most journalists were quite content with applying the logic of “if Mr. Buffet said it, it must be true.”
Those of you that are SmartKnowledgeU™ Platinum Members know that Mr. Buffet’s declarations of the fallout that likely would have ensued had the U.S. Federal Reserve not bailed out Bear Stearns could have been lifted almost verbatim from my bulletin I had sent to you over a month ago. Recently, Mr. Buffet reiterated exactly what I had told all of my Platinum Members in that month-old bulletin, that if Bear Stearns had gone bankrupt, other Wall Street firms and banks would have failed within a matter of days and the Dow would easily have shed another 1,000 points also in a matter of days. But here’s where I believe Mr. Buffet is wrong. At his annual meeting of his Berkshire Hathaway company, he stated, “ I think the Fed did the right thing in stepping in on Bear Stearns.” So why do I think he’s wrong if I think Bear’s collapse would have created much sharper pain in the U.S. stock markets and the collapse of other financial institutions?
Every time I’ve written about the imminent disaster that awaits U.S. stock markets, and subsequently global markets, the response has been overwhelmingly negative. In 2007, when I warned of steep declines in U.S. markets that were on the way in 2008, I was called everything from unpatriotic, to un-American, to even unholy. When steep declines indeed hit the markets to begin 2008 and gold soared to $850, (fulfilling my September 2007 prediction of $850 gold by January 1, 2008), the name-callers merely disappeared. It’s not that I revel in markets struggling and the still very real possibility of it shedding great value. In fact, I’d be ecstatic if the U.S. markets looked healthy and an imminent rise to a 16,000 Dow was realistic, with an upward surge taking all global markets along for the ride. Good money can be made in great markets or terrible markets so it doesn’t really matter either way. It’s amazing that people think I have an agenda for wanting markets to crash, oddly connecting my market sentiments to arguments about patriotism or religion. It’s just that I feel obliged to report what I see, because so few nuggets of reality trickle through the mainstream information filters and reach larger audiences.
People seem to forget one central and critical point. Most people seem to believe that they have to lose a great deal of money when crises materialize and forget that it is absolutely possible to prosper during crises as well. Thus, because they feel they must suffer during a crisis, the “shoot the messenger of bad news” syndrome commences. That said, I’m still going to state my utter lack of faith in this mini-rally that the U.S. markets are currently experiencing. Due to the huge levels of unaddressed and unsolved risk that still simmers quite potently beneath the surface, with the current “solutions” being implemented today, I honestly can only see two outcomes. Crash now or crash later.
Should an extended rally of the Dow above 13,000 occur, it will serve no purpose other than to create the illusion of wealth, as opposed to the creation of real tangible wealth. The higher U.S. markets rise in today’s environment, the more likely it is that they will fall even harder in the future. Here’s why.
On April 15th, the U.S. markets rallied, with the DJIA adding more than 250 points (2.08%) and the S&P 500 adding more than 30 points (2.27%). Of course, this brought out the mandatory Wall Street cheerleaders and numerous stories that FINALLY, it appears that the U.S. markets are starting to turn the corner. As could be expected, other major global markets with close ties to the U.S. markets followed suit the following day as they also rallied by about 2% or more. Numerous stories appeared in the media extolling the resiliency of global stock markets and the “upbeat” earnings of U.S. companies that propelled this big one-day rally. Stories soon followed of “super-cycle” bull markets in the U.S. still being intact, and that this one-day rally is the impetus that would propel the U.S. DJIA to 14,000 or possibly even 16,000 points and take the rest of the global stock markets along for the ride. My response? Don’t believe the hype.
If we take a closer look at the headlines that sung the praises of “upbeat” earnings of U.S. companies such as J.P. Morgan, Intel, and Wells Fargo, we’ll discover that the word “upbeat” has been changed in meaning. “Upbeat” in the financial world does not conform to the Webster dictionary definition of “cheerful”, and “optimistic”, but instead has been distorted to mean “bad, but not as bad as the expectations that have been carefully created and molded by CEOs just prior to earnings releases so that earnings can beat expectations”. Even then, this modified definition of upbeat for the expediency of the financial industry may not stand the test of time as most companies still seem to be less than forthcoming about the problems that continue to plague their companies and the overarching economy. Read more …
Consider this. If you owned a prime piece of real estate in 2001 that was valued at $1.8 million that cost 7,200 ounces of gold to buy it back then (at a price of about $250 an ounce), and if you could now sell that same property and receive $2.6 million for it, even at this inflated price, it would now require less than 2,800 ounces of gold (at about $930 an ounce). So while you may have become richer in the paper currency of U.S. dollars, this increase in paper dollars does not mean much if this increase in paper will enable you to buy less “stuff” today. Certainly, despite the inflated price of this property in paper dollars, you have become much poorer in ounces of gold (real currency). Thus, Central Banks, by inflating money, create the illusion of growing wealth when in fact they are stealing wealt
