2008 Predictions & Economic Buzz from the Investment Pros

( – promoted by buhdydharma )

What follows are some random snippets from the dozens of private newsletters I receive everyday in the course doing buisness. They are in no particular order, just fragments that jumped out at me that I wanted to share with you guys. Each snippet comes from a different source. Of course, I have my own opinions, but why don’t we listen to the buzz amongst the investment pros, for now:

Lower interest rate cuts don’t revive the DOW anymore. Indeed, the anticipation of rate cuts causes giddy hysteria which, when the actual cuts are discussed, turns sour as investors realize that this nostrum won’t nos or strum…. I also speculate that the rate cuts by the Fed this last 4 months is directly feeding the gold bubble. This is very much like the economy before Volker and Carter forced interest rates up and up and up until it killed inflation and the gold bubble.

The author goes on to note that only Carter (and a few courageous Presidents before him) had a clue about the bigger picture, and bascially saved the American economy from serious harm by taking uncomfortable measures during his own term.





The next writer is atonished that there is a detate on Wall Street about whether or not the US is in a recession. He lists the fundamental “clues” that others cannot seem to put together:



1. Pending, New and Existing Home Sales all continue to miss their estimates. So the housing market isn’t recovering.

2. Many sectors of the stock market are already hitting 52-week lows.

3. Fed’s Plosser and Lockhart and now Rosengren all stated that the economy is getting worse. They also said the Fed may have to cut rates once again this year. Obviously, the Fed’s men wouldn’t even mention cutting rates, if they saw good times ahead for the U.S. economy. These are the guys that get somewhat real time data from all over the United States.

4. Last month, employment dropped significantly. Only 18,000 people were hired nationwide – out of a population of 300 million people.

5. Unemployment edged higher from 4.7% to 5%. This will continue to move higher.

6. Manufacturing in America is in a contraction phase as shown by the ISM manufacturing numbers. The ISM number was much lower than expected at 47.7. A number below 50 is considered in the “bust” category. It means the demand from our manufacturing sector is shrinking.

7. Consumer Confidence continues to fall. The latest reading was 87.3 vs. the expected 91.5. So the consumer continues to lose confidence in the economy for good reason.

8. Durable Goods missed their expected number as well.

The clips, below, seem to be comprised of bitching, convincing, and predicting. That’s the job of an investment advisor, of course, but they all seem to be hitting the same notes.

In years past, ideas were all over the place — stocks, bonds, market sectors — all kinds of investments to create the so-called “balanced” portfolio.

Not any more.

The messages all sound a little shrill and the general theme is fleeing to safety:

For some reason, many analysts are slow to come to grips with the data because they don’t want to believe a recession is coming. By the time they actually call this a “recession,” it could be too late to position yourself and your portfolio.

So take action now. For example, I’ve been saying for a while now that stocks were going to fall and they have. But it’s not over. Make sure you’re not overly exposed to U.S. stocks in this volatile market.

Yesterday, gold rose to a “never seen before” high of US$884 an ounce. Wow!

Why is gold soaring so high? There are several factors involved. The first phase of the rise of gold was due to the falling U.S. dollar since gold is priced in U.S. dollars. So as the dollar falls, it takes more dollars to buy the same amount of gold as before, thus pushing up gold’s price.

However, lately you really can’t blame gold’s high price on the falling dollar. While gold and the dollar do tend to trade inversely…gold made all time highs, yet the U.S. dollar DID NOT take out its 30-year lows that it made recently. So this means there are other factors driving up gold’s price.

Investors see gold as a hedge against inflation. Rising food, oil and energy prices have spurred inflation. When traders want to hedge against inflation, they buy gold. This is one of the additional reasons why gold is rising.

The broad supply of money in the U.S. – formerly known as the M-3 Money Supply – is growing at an annual rate of more than 34%. That’s super inflationary! And, the new highs in gold and oil also reveal the giant cracks that are beginning to appear in the world’s financial system.

By cracks, I mean financial insecurity … geopolitical worries … and outright FEAR.

On the surface, everyone is blaming the subprime mortgage crisis. And to be sure, the subprime crisis is a big factor. But the subprime disaster is symptomatic of a much bigger, deeper problem – the near bankruptcy of the entire United States.

Lest you forget, the U.S. is $55 TRILLION in debt …

~ $9 trillion of Federal government debt.

~ $3.9 trillion owed to foreign interests.

~ More than $42 trillion owed by municipal governments, trust funds, households, businesses and financial companies.

All told, our debts have now reached 460% of national income – an all-time high – with no end in sight. There is absolutely no way those debts can ever be repaid without continuing to systematically devalue the U.S. dollar.

Gold will ultimately reach at least $2,200 an ounce. Oil will reach $150 a barrel this year; $200 within three years.

Sound crazy? There’s absolutely no doubt in my mind that we will see those prices, sooner rather than later.

Remember, gold at $890 an ounce is undervalued when adjusted for inflation. In fact, $890 in today’s dollars is the equivalent of just $332 in 1980 dollars (when gold hit its previous record high of $877).

Oil, at $100 a barrel in today’s dollars, is the equivalent of just $37.35 in 1980 dollars. And back then we had nowhere near the shortages and tight demand/supply fundamentals that we have now in the oil market.

I estimate the dollar will fall as much as another 40% over the next two to three years before its bear market comes anywhere close to an end.

That’s not to say there won’t be rallies in the greenback. In fact, a good bounce is way overdue. But long-term, the dollar has virtually nowhere to go but down. It’s the only hope the U.S. has to get out of the financial mess it’s in.

In 2008, we’re going to hit an important milestone: This year is when the world is going to start using oil at a rate of more than 1,000 barrels PER SECOND.

According to the International Energy Agency (IEA), global oil demand will average 87.8 million barrels per day (bpd) in 2008, up from 85.7 million bpd in 2007. At 87.8 million bpd, we’ll use 1,016 barrels per second – a sonic boom of energy use.

The head of the IEA recently said that demand growth just from China and India alone could drive the price of crude oil to $150 per barrel!

And that target may be too low. The fastest-growing bet in the oil market these days is that the price of crude will double to $200 a barrel by the end of this year. How do I know? Because the interest in $200-oil call options is surging.

These last two snippets offer intriguing overviews of the market dynamics, and what is going on as the largest corporations sell off America’s assets to far wealthier foreign nations.

The implications of this define the future of our people.

America’s biggest financial institutions jet-setting around the world in a frantic search for capital to offset their mammoth – and rising – losses.

Merrill Lynch (MER) recently announced it would raise as much as $6.2 billion from Singapore’s government-backed investment fund Temasek Holdings. But Merrill reportedly needs another $3 billion to $4 billion. Why? It’s reportedly on the verge of announcing another staggering write-down – as much as $11.5 billion.

Citigroup (C) got $7.5 billion from the sovereign wealth fund in Abu Dhabi. It’s now looking for as much as ANOTHER $10 billion from foreign investors. Why? For the same reason as Merrill Lynch – more write-downs. We’re talking as much as $18.7 billion in one lousy quarter! That’s almost as much as the company earned in all of 2006.

Morgan Stanley (MS) sought out a $5-billion infusion from China Investment Corp and Bear Stearns (BSC) sold a stake of 6% to China Securities.

Rapidly, the Chinese and Arabs buy up our ‘experts’ who happen to be influential people who are also traitors. Greenspan will happily advise them as to how to fleece us. This talent is all about amoral exploitation and the thing the Chinese and Arabs intend to exploit is the US people. Think, ‘sheering sheep’ and ‘cows in slaughter house.’

The people handing out massive bonuses to pirates and traitors also hand out huge bonuses to politicians and others who are supposed to be owned by the American people….. Voters are trying to overturn this and it is why the top corporate candidates are floundering despite the media flogging us for them.

Deep within the US is a large number of people who have an idea that they have been betrayed.

And that brings us to the present.

Do you think American voters actually have any idea what’s really happened to their nation?

More importantly, it’s happening fast. Every day big sell offs are occuring and wealth is leaving the US.

Do you think this can be turned around? How?

_____________________________________

Crossposted at Daily Kos — although I don’t know why I bother.

24 comments

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    • Pluto on January 12, 2008 at 11:59 pm
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    • pfiore8 on January 13, 2008 at 12:11 am

    The author goes on to note that only Carter (and a few courageous Presidents before him) had a clue about the bigger picture, and bascially saved the American economy from serious harm by taking uncomfortable measures during his own term.

    although i’m sure we are at the point where uncomfortable will be replaced with painful…

    hey Pluto!!!!

  1. aggregation and scale are reaching a very metastable locale……….

  2. financial planner I know is going for the gold.  I think that says it all.

    Common voters do not know, hell it took me about two years of very diverse research to find out and I had been deprogrammed by an expat assignment.

    While the Ron Paul phenomena and the small percentage of “in the know” people of other persuasions is increasing it’s not fast enough.  I would like to think internet activism and blogs have had an effect in slowing the destruction of America themes down but the big boys just don’t want a seat on the Titanic.  It is every man for himself even if they have to step on the kids getting into the lifeboat.

    We need an American Ghandi, but we are simply too diverse.

    • nocatz on January 13, 2008 at 1:05 am

    I know there are many that never left ’em, and some that have no idea.

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    http://history1900s.about.com/

    http://lcweb2.loc.gov/fsowhome

  3. Some Fear Economic Stimulus Is Already Too Late

    By PETER S. GOODMAN and FLOYD NORRIS

    Published: January 13, 2008

    As leaders in Washington turn their attention to efforts to avert a looming downturn, many economists suggest that it may already be too late to change the course of the economy over the first half of the year, if not longer.

    With a wave of negative signs gathering force, economists, policy makers and investors are debating just how much the economy could be damaged in 2008. Huge and complex, the American economy has in recent years been aided by a global web of finance so elaborate that no one seems capable of fully comprehending it. That makes it all but impossible to predict how much the economy can be expected to fall before it stabilizes.

    — snip —

    “The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”

    And the measures are not guarenteed to work, of course, anyway.

    But some economists fear that lower rates will simply provide a short-lived boost at the expense of the economy’s longer-term health: Cheap money encourages foolish investments, they say, which is precisely how Americans came to experience the evaporation of wealth in the Internet era, followed by housing prices rising beyond any reasonable connection to incomes.

    “This appears to be a panic on the part of the Fed,” said Michael T. Darda, chief economist at MKM Partners, a research and trading firm. “The housing bubble was a reaction from the effort to protect us from the collapse of the tech bubble. What’s the next bubble going to be as a consequence of trying to protect us against this?”

    I don’t know about this stuff, but the fear seems to be spreading . . . and the people saying we’re “not in a recession yet” are beginning to sound more and more wistful about it.

    • banger on January 14, 2008 at 3:59 pm

    dramatically…which means a growth in demand. You also predict a continuation of the slow-freefall of the dollar–all this implies that the U.S. will be in relative decline compared to the rest of the world. The rest of the world, I believe is making somewhat sane adjustments.

    My sense is that even the Power Elites in other countries have similar pressures but because their own populations are generally better informed they are, institutionally, better positioned to make changes.

    Our own society has been in a phase of massive collective hallucinations (i.e., the “war” on “terror”) which reminds me of Caligula going to War with the sea. We seem to collectively believe that there is, literally, no tomorrow, and that we were actually all born yesterday so we will swallow any batch of hokum that comes down the pike. Of course, there is actually no tomorrow and only the present moment (in fact) if the truth be known so maybe there is hope.

    • OPOL on January 14, 2008 at 4:50 pm

    a lot of important info here.

    Deep within the US is a large number of people who have an idea that they have been betrayed.

    No kiddin’.

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